How to support the renewable energy drive in Bangladesh
Recently I wrote about how Bangladesh's RMG industry needs to move towards renewable energy in order to gain a global competitive advantage in garment production. Here I want to look at some of the challenges our industry faces in its shift to renewable and cleaner energy, and how to overcome these challenges.
While we, as garment manufacturers, are keen to see a move towards renewable energy, we are—to a large extent—dependent on wider infrastructure issues in Bangladesh around the energy mix and the transition from traditional and renewable energy. That is what this piece will focus on.
At present, for Bangladesh as a whole, the main source of energy is natural gas. But this source is getting depleted quickly, while other fossil fuel resources such as oil and coal have a finite supply.
According to the United States Agency for International Development (USAID), there are around 10.63 trillion cubic feet of natural gas reserves in Bangladesh, with annual production of 0.961 trillion cubic feet in 2019. Indigenous gas reserves will go dry soon, given the yearly production and growth rate. In short, the clock is ticking.
At present, our government is importing liquefied natural gas as an alternative. Bangladesh set out targets for renewable energy generation capacity in its 2016 Power Sector Master Plan: 2,470 MW by 2021 and 3,864 MW by 2041.
Given that only 369.81 MW—including 230 MW of large hydropower—of renewables have been connected to the grid to date, it is clear that the target for 2021 will not be achieved.
What is holding us back in our shift to renewable energy, and what solutions can we look to moving forward?
Most experts agree that Bangladesh has excellent potential for harnessing renewable energy sources, such as solar, biomass, wind, and mini hydropower—these are all areas where we as a country are blessed with an excellent supply.
The investment costs of renewable energy technologies are generally higher compared to fossil fuel alternatives, with high start-up costs. However, it is widely acknowledged that the return on this investment is large once externalities such as health and environmental hazards are factored in. Long-term operating costs for renewable energy are also less.
Renewable energy is the obvious long-term option for a developing country like Bangladesh, which will soon graduate from the LDC status. It is a huge investment in our future as an economic player on the global stage.
So what are the key challenges in our shift to renewable energy? In my research, a number of issues became apparent. Firstly, the land availability for renewable projects is limited in Bangladesh at present as most land here is designated as agricultural, and cannot be used for renewable energy projects—at present in any case.
Secondly, the existing policy tools and incentives may not always be applicable to renewable energy in the same way as they are to natural gas projects.
The third issue is a lack of synchronisation, in the sense that the targets that are being set for renewable energy plants are not in tandem with future plans for power transmission infrastructure, in the same way as they are for conventional power plants.
The fourth issue is a reluctance on the part of banking, finance and investment institutions around renewable energy due to a lack of experience and understanding relating to large-scale renewable energy projects. Added to that is the fact that there is a limited amount of knowledge of renewable energy technologies—in Bangladesh, we lack experts with the know-how and understanding of large-scale renewable energy projects. Such expertise may need to be brought in from other countries leading in this area.
These points are particularly important. It is widely recognised that private sector investment will be needed to plug the investment gap caused by a shortfall of public sector financing capabilities. The government cannot do this alone.
So what needs to happen? The first issue is finance. We all now recognise that investment into the renewable energy sector investment is required—and this money will have to be shifted away from the development of conventional power plants, and to solar, wind and other renewables projects. There needs to be a clear direction shift around national policy.
Foreign Direct Investment (FDI) could play an important role here, as domestic capital will likely not cover the infrastructure costs associated with the shift to renewable energy.
Secondly, I believe we need to learn from other countries where agricultural land is now simultaneously being used for solar power generation. If we could make use of more agricultural land, this would take the pressure off roof-top space for solar panels, which is a challenge in our cramped cities. To facilitate this transition, new laws and policies will be needed.
Thirdly, we need to adjust planning regulations so that developers can build projects which have less infrastructure and land risks. This will attract more investment and reduce barriers to entry into the sector.
Fourthly, Bangladesh needs to develop and present a clear and detailed renewable energy plan, which offers a medium and long-term direction for private energy stakeholders. This could be shared widely and also act as a signal to the investment community.
Following on from this, our government now needs to map out the current renewable energy potential of Bangladesh, addressing technical issues and identifying suitable project locations. This could also see the creation, where possible, of special renewable energy development zones. We need a plan and to identify potential blockages.
Which actors need to be involved in this process? There are organisations such as the Sustainable and Renewable Energy Development Authority (SREDA) or Bangladesh Power Development Board (BPDB). which will be responsible for identifying land to site renewable energy projects.
Other relevant organisations include relevant private sector stakeholders—the RMG sector should certainly be consulted—NGOs, academic and research institutions, and energy experts.
Bangladesh's shift to renewable energy is no small undertaking and will require heavy investment. But for our RMG industry, which aims to lead the world in sustainability and use of renewable energy, the rewards will be plentiful and long-lasting.
Mostafiz Uddin is the managing director of Denim Expert Limited. He is also the founder and CEO of Bangladesh Denim Expo and Bangladesh Apparel Exchange (BAE).