Home ›› 21 Mar 2023 ›› Editorial
The Fashion Industry Charter for Climate Action established on November 2021 convened by the UN Climate Change (UNCC) Global Climate Action, desired to drive the fashion industry towards a 1.5oC future , including net-zero GHG emissions in the second half of the twenty-first century. The Charter provides a framework for fashion companies to take action on climate change, including reducing greenhouse gas emissions, using sustainable materials and promoting circularity.
So far signatories are 100, where three (3) along with BGMEA are member from Bangladesh. The signatories are committed to bring changes in their own operations and engage with their global supply chains in support of the broader goals of the Paris Agreement. A dialogue was held in Dhaka recently in February where a number of speakers highlighted the importance of use of renewable energy to reach the goal. It was also mentioned that the transition needs to be quicker and at the same time cheaper while only seven years stay behind to achieve Sustainable Development Goals (SDGs).
The dialogue brought a number of experiences and case studies on how countries has transformed to cleaner energy to reduce emission and able to report to COP 28 to be held in UAE and emphasized on the need for powerful collaboration and experts support.
It was informed that in Australia total number of EV is almost doubled in 2022, growing from 11, 000 it now reached to 83,000. Highest rooftop capacity and PV installation reached about 30,000 MW within in fifteen years. They framed good policies for renewable transformed to Power Purchase Agreement (PPA). The dialogue discussed experiences of other countries on how can corporations use PPA mechanisms and learn about available best practices in the world.
Presently, bilateral PPAs in Bangladesh are signed between the Independent Power Producer (IPP) and consumer; on the other hand, it can bring in competitive tariffs and increase private sector interest to help reach their 25 per cent RE goals in the country.
Bangladesh aims to achieve 30 per cent renewable energy by 2030 and at least 40 per cent by 2041, but currently has only 3.1 per cent RE in its energy mix (2020 targets were not met). While about 70 per cent of the RE capacity comes from solar. Potentials of other solar energy sources can be explored further for scaling up RE production in Bangladesh. Currently, all the power produced in Bangladesh are sold to distribution utility namely Bangladesh Power Development Board (BPDB) and hence no PPAs for large scale solar projects between the power producer and consumer are in existence in the country.
Bangladesh has set a goal of generating more than 8,080 MW of electricity from renewable energy sources by 2030. Present production of Solar (Solar Park, Rooftop, Solar Irrigation) energy is 958.49 MW, so Bangladesh needs to drive a long way to achieve 2030 target. In that respect along with a number of issues financing is one of the constraints. Government is planning to move forward with a number of good projects, however, so far financing remains as one of the central issues.
Bangladesh Bank has a number of financial schemes announced for RE, one of them is BDT 2 billion refinancing scheme started in 2009, increased to BDT 4 billion for 68 green products (SFD Circular no.- 04, 24th July 2022). Around 39 Banks and 19 Financial Institutions (FI) signed agreements with Bangladesh Bank. Total disbursement is 4.00 b Taka (Bank's- 2.70 b, NBFIs- 1.30 b) as per Bangladesh Bank report, however among the category-wise green finance, only 5 per cent has been allocated for RE in FY 22 . There are eleven specific categories for green financing of which renewable energy is one.
Another important financing instrument is Green Transformation Fund (GTF) for Renewable Energy with revolving amount of USD 200 m & Euro 200m for all E/O sectors (2019). Bangladesh Bank signed agreements with 16 banks for the GTF. The disbursement up to FY22 was USD 138.75 million in 43 projects and Euro 61.72 million in 26 projects. A new GTF ( Dec 2022) of Taka 5000 crore (revolving) has been announced for 5-10 years as term loan/ working capital with 6 per cent interest (PFI 1per cent- customer level not more than 5 per cent). Concerned businesses feel that this time GTF could be helpful for them if proper importance is given to investment for renewable energy.
GTF has some limitations also, the fund is meant for buying machineries only, business entrepreneurs expects extending the scope of loan to cover not only machinery but also other aspects of sustainable industries. For example, cost of capital machinery for a green project is only 20 per cent to 25per cent of total project cost. Considering the reality, Banks may partly waive or reduce the due diligence requirements for small borrowers while applying for green finance including GTF. Allowing GTF to be integrated into the composite term loans could be helpful, also joint processing should be allowed so that a borrower can apply for a term loan of which one part would qualify for GTF.
The idea of solar park has not been flourished yet in the country. The solar park is a concentrated zone of development of solar power generation projects and provides developers an area that is well characterized, with proper infrastructure and access to amenities and where the risk of the projects can be minimized. India has the largest Solar Park in Jodhpur covering 14000-acre area. Bangladesh has a plan for 8 solar parks which are still at a planning stage.
Net-metering within the EPZ is not allowed for transfer of power to the grid. EPC developers will not be interested in setting up rooftop solar power plants under the OPEX model. In terms of export and import from the grid, adjustment of balances is not clear. Widening Net-metering initiatives across EPZs in Bangladesh through BEPZA and BEZA can be helpful. Some of the EPZs such as Uttara EPZ at Nilphamari and Cumilla EPZ have come under the net metering facility, so there are examples in the EPZ, can be incorporated in other EPZs also.
Concerned stakeholders suggest that a complete separate authority with Budget need to be ensured for encouraging investment in RE. Presently, Power Division, Ministry of Power, Energy & Mineral Resources is looking after the issue. About 6 Acts, 5 Rules, 1 Regulations, 10 Policies regulate the RE issues. There is a need for coordination among the approving and supporting organisations so that a single place can take care of relevant issues. There should be specific/identified bodies/institutions for certification of environment-friendly products/machineries.
Incentives should be available for R&D for improving RE technology, such as solar panels, wind turbines etc. Import of Technology from other countries will be costly gradually unless we develop our capacity to produce these materials. Delta Plan 2100 of Bangladesh has a plan for R&D of RE Technology in Universities & Research Institutions and builds capacity of its utilization. Emphasis would need to be given on R&D from now through universities.
A number of countries developed different type’s strategies for rewarding clean energy producers; one of them is providing digital currency called NRGcoin based on Block chain and AI. Tax incentives and regulatory simplification for green certification, power purchase legislation and regional co-operation, incentives for market development, awarding projects based on the merits, GRID infrastructure development, tariff incentives, updating net metering guideline, exploring alternatives of Carbon Taxation etc, are some other options for encouraging clean energy production.
The financial schemes announced by the Bangladesh Bank has usually contain stringent conditionalities for Banks, allowing banks and financial institution to set their own annual green finance disbursement targets following preparation of annual demand analysis for green finance by different sectors can also be helpful.
Export-oriented firm procuring capital machineries or accessories from local manufacturing firms may be considered for availing GTF. Credit guarantee schemes (CGS) could be extended to cover all types of CMSME loans. Currently the coverage is limited only to CMSME stimulus package loans.
It came up from the dialogue that innovative financial schemes can promote and accelerate transformation, it is true every transition involves costs, however price of the products it is not in commensuration, investors will not be encouraged. A collaborative approach for bringing changes in the policy mechanisms and proper kind of technology acquisition is a must.
The writer is CEO of BUILD a Public Private Dialogue Platform. She can be contacted at ceo@buildbd.org
