Bangladesh struggles to keep energy transition on track

• Bangladesh's renewable investments have slowed down
• New policy aims to multiply renewable energy in five years
• Next elected government may set policy direction

DHAKA - In the wake of student uprisings that toppled Sheikh Hasina's Bangladesh government last July, an interim government vowed to bring reform to the country's energy sector that is responsible for three-quarters of its planet-heating emissions.

The government led by Muhammad Yunus inherited energy subsidies for consumers which make up more than 1% of the country's economy and large outstanding payments for power imports as well, according to government figures.

Bangladesh relies heavily on natural gas, coal and oil, and the fluctuating prices of fuel imports put heavy pressure on the treasury and underscore the need to decarbonise the power supply.

To accelerate reform of the energy sector, the administration has taken such steps as asking China to relocate solar panel production to Bangladesh and pushing for more rooftop solar plants in government buildings.

But growth in renewable energy has slowed - with investors holding back from building solar plants citing business risks.

Economists say more significant investments may wait until after elections next February, when a government with a five-year mandate will take over.

What has the interim government achieved in the energy transition?

Despite its renewable energy aims, the interim government quickly cancelled 31 solar projects that had been approved by the previous government without competitive bidding and were worth $6 billion in foreign investment, according to Dhaka-based think tank Centre for Policy Dialogue (CPD).

Since then, investment in new solar plants has stalled.

The Bangladesh Power Development Board (BPDB) launched several tenders for building 55 solar plants across the country with total capacity of more than 5,000 megawatts (MW) - but many investors held back from submitting proposals citing risks and uncertainty, according to local media.  

Bangladesh's fossil fuel-dependent power sector has a large surplus of installed capacity, but the share of renewable energy remains just 4% of the energy mix, according to the International Renewable Energy Agency (IRENA).

In June, the interim government set a goal of generating 20% power from renewable sources by 2030, and 40% by 2040, which would require raising the renewable capacity from just above 1,000 MW today to 17,470 MW by 2040.

Achieving this ambitious goal would require a large annual investment flow of $980 million in renewable energy projects until 2030, said the Institute for Energy Economics and Financial Analysis (IEEFA).

Meanwhile, the interim government revived the plan for a 1,200 MW coal-fired power plant in the coastal district of Cox's Bazar, which had been cancelled by the previous government after pressure from climate activists.  

What are the major challenges to Bangladesh's renewable energy target?    

Unpredictable changes in government policies are a major risk for renewable energy companies.

Investors whose solar project plans were cancelled by the government last year had already spent money to buy land for the plants, the CPD said in its study.  

Acquiring land for setting up solar parks - or selling the plot when a project is cancelled - is also not easy as there is competition with alternative uses of scarce land such as growing food, building cities and protecting the environment in a densely populated country.  

Other major bottlenecks include a shortage of affordable long-term loans, devaluation of Bangladesh's currency against the U.S. dollar and removal of a clause in the tender document that would assure investors of payment for the generated power, said the IEEFA.

What is the outlook for the near future?

The winner in the upcoming national election early next year will be able to decide how to take energy sector reforms forward.

Tarique Rahman, leader of the Bangladesh Nationalist Party (BNP), a leading contender in the election, has promised to promote renewable energy if his party comes to power. 

A similar promise was made by the National Citizen Party (NCP), formed by some of the young leaders of last year's uprising.  

But concrete plans on climate and energy transition have not been charted out by the political parties yet.

($1 = 121.2000 taka)

(Reporting by Md. Tahmid Zami; Editing by Jack Graham and Ellen Wulfhorst.)