Energizing Bangladesh: EU’s €395 Million Investment Sparks a Renewable Revolution Amid Global Challenges

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In an era marked by global turbulence, the European Union’s groundbreaking €395 million funding initiative takes center stage as it propels Bangladesh into a profound era of renewable energy transformation. At this pivotal juncture, with the shadows of the Ukraine war casting uncertainty over the world and supply chain disruptions entwined with rising fossil fuel prices, the significance of Bangladesh’s commitment to renewable energy reaches new heights. As nations grapple with geopolitical intricacies and economic volatility, Bangladesh’s unwavering path to cleaner, greener energy is a beacon of hope and resilience. Against the backdrop of these challenges, the EU’s generous €395 million loan, complemented by a €45 million grant, serves as a testament to the urgent need for sustainable solutions. This monumental investment, which was signed on Oct. 25 in Belgium by Prime Minister Sheikh Hasina, resonates as a resounding call to action. It underscores the inescapable truth that the transition to renewable energy is not just an environmental imperative but also a strategic and economic necessity. In an age where the world’s stability and prosperity hang in the balance, Bangladesh’s vision for a cleaner and more sustainable future is a ray of hope that illuminates the path forward.

Paving the Path to a Green Future

Bangladesh, like many nations worldwide, has crafted a comprehensive roadmap for renewable energy. With an ambitious target of securing over 4,100MW of renewable energy capacity by 2030, the government has demonstrated unwavering commitment. Beyond conventional fossil fuel-based power generation, the master plan envisions harnessing the power of renewable sources and fostering cross-border electricity trade. Additionally, in January 2023, Bangladesh announced its intention to derive 40% of its power from clean energy by 2041, while also planning to import approximately 9,000MW through regional cooperation. At present, Bangladesh boasts a power generation capacity of 27,361MW, which includes captive and renewable sources, surpassing the peak-season demand of 15,500-16,000MW. Furthermore, the country has pledged a substantial reduction of 89.47 million tonnes in carbon emissions by 2030 as part of its comprehensive renewable energy, energy efficiency, and conservation strategy.

An Evolving Landscape of Clean Energy Generation

Bangladesh’s clean energy generation capacity is on the rise, with data from the Sustainable and Renewable Energy Development Authority showcasing an impressive 1,194.63MW of electricity generated from renewable sources, combining on-grid and off-grid solutions. Notably, solar power accounts for the majority at 960.64MW, followed by 2.9MW from wind and 230MW from hydro sources. Despite these promising developments, the International Renewable Energy Agency’s report indicates that only 2.9% of Bangladesh’s total power generated in the last decade has been sourced from renewables. However, this is a remarkable increase from 2013 when the nation had the capacity to generate 329MW of renewable power, compared to the current 775MW.

A Beacon of Progress in Renewable Energy

Bangladesh has been actively embracing renewable energy solutions, attracting foreign investments and fostering sustainable growth. Just this year, a Saudi-led joint venture, accompanied by local firms, committed a massive $430 million to establish Bangladesh’s largest solar power plant in Bagerhat’s Rampal upazila. This significant investment demonstrates the international community’s growing confidence in Bangladesh’s renewable energy sector. In another promising development, US Ambassador to Bangladesh, Peter Haas, revealed that American investment firm Blackstone is actively exploring opportunities in Bangladesh’s solar energy domain. This wave of interest from global investors underscores the nation’s emerging leadership in clean energy. The €395 million loan represents the largest financing agreement to date between the EIB and Bangladesh, pushing the EIB’s total support to the nation to €800 million. Notably, during the pandemic, the EIB extended €250 million as budget support, playing a pivotal role in funding railway projects and the Dhaka Environmentally Sustainable Water Supply Project.

Multilateral Lenders and Interest Rates: A Path to Bangladesh’s Cleaner Energy Vision

Among Bangladesh’s key lenders, the World Bank takes the lead, followed by the Asian Development Bank (ADB), the Japan International Cooperation Agency (JICA), and the Asian Infrastructure Investment Bank (AIIB). The interest rate for EIB loans is tied to the six-month Euribor (Euro Interbank Offer Rate), which currently stands at 4.13%. In contrast, the World Bank and ADB offer fixed-rate loans at 2%, with the option of tying them to the Secured Overnight Financing Rate (SOFR), which presently stands at 5.3%. It shows the assertive technicality of Bangladesh pursued over the year to ensure a cleaner energy domain.

Looking Ahead: Shaping a Greener Tomorrow

Bangladesh’s focus on renewable energy is intensifying, with the EU’s funding poised to be a game-changer in advancing the nation’s renewable energy endeavors. While the specific projects to be funded are yet to be finalized, the Sustainable and Renewable Energy Development Authority is actively working on project selection. It is noteworthy that the EIB typically allows Bangladesh to determine the terms and conditions of such loans, including installment amounts and interest rates, which can be either fixed or variable, depending on market dynamics.

New Horizons in Renewable Energy

These recent milestones represent a remarkable leap forward in Bangladesh’s journey towards sustainable, renewable energy and have profound implications for the nation and the world. Prime Minister Sheikh Hasina’s inauguration of the Teesta Solar Plant, boasting an impressive 200MW capacity, marks a monumental achievement in Bangladesh’s pursuit of clean energy. This is a significant milestone as it stands as the largest solar plant in the country, signaling Bangladesh’s commitment to harnessing the power of the sun to meet its energy needs. This endeavor, spearheaded by Beximco Power Limited in Gaibandha’s Sundarganj upazila, not only demonstrates Bangladesh’s technical capabilities but also its ambition to reduce its carbon footprint and reliance on fossil fuels.

Furthermore, the establishment of a sprawling solar park across 350 acres in Rampal by Energy Renewables, an associate company of Orion Group, is a testament to the nation’s dedication to cleaner, greener energy. With this park contributing a substantial 134.3MW of peak electricity to the national grid, Bangladesh takes a monumental step towards fostering a more sustainable and environmentally friendly future. The rapid growth of solar power generation in the country, as exemplified by these projects, is a clear indication of the nation’s ability to adapt to changing energy dynamics and harness the potential of renewable resources.

As Bangladesh forges ahead on its path to cleaner energy, the generous support of the European Union, represented by the €395 million funding initiative, is an invaluable cornerstone in this transformative journey. This landmark agreement not only ensures the sustainability of these projects but also paves the way for further innovation and expansion in the renewable energy sector. It underlines the EU’s commitment to global climate action and the importance of international collaboration in addressing pressing environmental challenges.

In a world where the future balance of stability, prosperity, and ecological well-being hangs in the balance, Bangladesh’s commitment to cleaner energy sources and the EU’s support offer a ray of hope. This visionary and pragmatic approach ensures that Bangladesh is well-positioned to meet the energy needs of its growing population while safeguarding the environment and mitigating the impacts of climate change. These initiatives are, indeed, pivotal steps towards a brighter, greener tomorrow, not only for Bangladesh but for the entire planet.

– Syed Raiyan Amir is a Research Associate at the KRF Center for Bangladesh and Global Affairs (CBGA).

Published in The Geopolitics [Link]