THE transition to renewable energy in Bangladesh has been suffering due to an unfavourable investment environment. The Bangladesh Power Development Board has recently extended its deadline for the submission of proposals to tender calls for solar power plants because no investor has submitted any proposal. The BPDB floated three tenders for solar power plants with the capacity to produce 10-100 MW in phases starting from December 2024 but received no response from the investors so far. The BPDB officials are now planning to relax the eligibility criterion to encourage investors to take on the government’s renewable energy projects. Energy experts, however, do not think that flexible eligibility criteria are enough; there are other structural concerns. They believe that the interim government’s decision to cancel the projects, which were just a step away from signing the power purchase agreement, eroded investors’ trust. In August 2024, all 31 renewable energy projects worth over 2,600 MW were cancelled as they were unsolicited. It is true that a purchase agreement based on an unsolicited proposal carries risks of corruption, but the hasty decision to cancel the agreement also negatively influences the investment climate.

Energy experts and investors initially described that the tenders were designed to favour past Awami-era investors, big companies and foreign investors with their discriminatory eligibility criteria. However, the amendment to the eligibility criterion for the tender applicant made under the interim government is not friendly towards local investors. There are other policy concerns that discourage local and foreign investors from taking on renewable energy projects in Bangladesh. The main factor that the interested investors mention is the exorbitant import duty on imported items for renewable infrastructure. Import duty on solar panels was increased to 26 per cent from 11 per cent in the financial year 2021–22. Local renewable investors struggle to mobilise capital as banks and non-bank financial institutions are reluctant to lend to the renewable sector. The major renewable capital source has been the government-owned Infrastructure Development Company Limited, but it lends at a high rate and operates mostly with profit-seeking interest.

The interim government has repeatedly announced their commitment to environmentally friendly energy policy, but the country’s energy policy is still heavily dependent on fossil fuels. Two main power plants, the Rampal Power Plant and Roopoor Nuclear Power Plant taken under the deposed Awami Legaue regime and faced public opposition for environmental risks, has not been reviewed. The government must strategically and financially incentivise small renewable projects. In doing so, it must review existing financing schemes and its loan provisions for the renewable sector. Import duties must also be reviewed for steady growth of the sectors and to encourage investors.

News Link: Disinclination to renewable energy deplorable