Availability of finance for renewable energy may be considered a main barrier in Bangladesh due to the recent rating downgrade, said a new report published by EY Singapore on Thursday.
The report finds that there are still ways to overcome this issue and that focusing on overcoming non-financial barriers will also help increase financing viability for renewable energy projects in Bangladesh.
Non-financial barriers identified by the report include lengthy permit processes, difficulties in land acquisition, lack of local supply chains, and content requirements which are difficult to meet.
These factors all have a knock-on impact on project risks, timelines, costs and overall bankability which affects terms of financing, and makes borrowing more expensive. Depending on the severity of risk, these factors may even limit access to available finance.
The report identified specific barriers to renewable energy include underdeveloped local supply chain for equipment that drive up project costs, PPA bankability affected by declining creditworthiness of electricity off-take and challenging macroeconomic conditions that have made investment difficult.
SY Singapore has recommended addressing these issues including developing renewable energy procurement frameworks with year-wise action plans to cut reliance on imported fossil fuels, support from international development agencies in the form of risk insurance and grant/subsidies to enable renewable energy financing.
Bangladesh has huge solar and wind potential, according to Bloomberg NEF data. These technologies are set to become the cheapest form of energy source in the years to come.
The opportunity is immense as deploying these renewable energy resources can bring a range of energy security, economic growth, and emissions reduction benefits.
As countries gather at COP28 to discuss a potential target to reach 3x renewables installed capacity by 2030, the Indonesian economy should consider how they can create an enabling policy and regulatory environment to unlock the billions of dollars of waiting investment and turbocharge their progress toward their renewable energy goals, said EY Singapore.
The report mentioned that Gilles Pascual, Ernst & Young Energy Transition and Climate Partner, noted, “While Bangladesh needs to resolve the broader macroeconomic challenges, renewable energy plays an important role in reducing the reliance on imports of fossil fuel.”
“Working with development finance institutions and investors willing to invest in projects, the government can play a lead role in identifying suitable plots of land to accelerate the deployment of renewable energy.”
