A new report by EY Singapore highlights the need to address policy and regulatory barriers in Bangladesh to unlock huge volumes of renewable energy finance for utility-scale wind and solar projects.
Asia, one of the fastest developing regions in the world, is expected to see overall energy demand grow by about 80% by 2050, says a press release issued on Thursday.
The International Energy Agency (IEA) estimates that 75% of this additional demand will be met by fossil fuels, adding 35% to the region’s CO2 emissions compared to 2020 levels.
Renewable energy is therefore key to tackling climate change and reducing emissions in Asia. Yet, of the total energy financing Asia received in the past six years, renewable energy investments accounted for only an average of 14%.
Investments in renewable energy are an opportunity waiting to be unlocked, according to a new study published by EY Singapore.
The report, which analyses barriers to renewable energy financing for utility-scale solar and wind energy projects in Asia, has drawn on data from 170 consultations with developers, lenders, investors, industry associations, and DFIs to gain insights on nine Asian geographies, namely Bangladesh, Indonesia, Malaysia, Thailand, the Philippines, Vietnam, Japan, South Korea, and Pakistan.
According to the study, the availability of finance for renewables may be considered a main barrier in Bangladesh due to the recent rating downgrade.
However, 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.
The non-financial barriers identified by the report include lengthy permit processes, difficulties in land acquisition, lack of local supply chains, and content requirements that 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 the risk, these factors may even limit access to available finance.
Specific barriers identified for Bangladesh include:
- Underdeveloped local supply chain for equipment that drive up project costs
- PPA bankability affected by declining creditworthiness of electricity off-take
- Challenging macroeconomic conditions that have made investment difficult
Recommendations to address these include:
- Develop RE 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 grants/subsidies to enable RE financing
Bangladesh has huge solar and wind potential, according to BloombergNEF 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.
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.”
