2,000MW new rooftop solar can help BPDB save $1b a year: IEEFA

While rooftop solar has struggled to gain traction in Bangladesh, a renewed focus and adding 2,000MW can help the Bangladesh Power Development Board (BPDB) save up to $1 billion annually, a new report from the Institute for Energy Economics and Financial Analysis (IEEFA) finds.

The report highlights that the economic benefits of rooftop solar are more compelling now than ever for the country, which has suffered energy price spikes, supply disruptions, and deteriorating fiscal conditions since Russia invaded Ukraine in 2022.

"Bangladesh must tap the low-hanging fruit of rooftop solar to stave off the challenges of the energy sector and reduce colossal imports of fossil fuels. The delay in steering the sector in the right direction could result in a missed opportunity," said Shafiqul Alam, the report's author and lead analyst, Bangladesh Energy, IEEFA.

Based on interviews by the IEEFA – whose mission is to accelerate the transition to a diverse, sustainable, and profitable energy economy – with select experts and stakeholders in the sector, the report recommends pulling six key levers to accelerate the widespread deployment of rooftop solar.

These are raising awareness, streamlining finance, policy and regulatory intervention, quality assurance, business models for utilities, and capacity development for key stakeholders.

"While investors want to quickly assimilate information on interest rates, net metering guidelines, and policy changes, there is information asymmetry within the sector. Another key hindrance to the wider adoption of rooftop solar is the lack of capacity among stakeholders in terms of personnel, quality assurance, and project appraisal," added Alam.

Therefore, the Sustainable and Renewable Energy Development Authority (Sreda) should design and conduct targeted capacity development and awareness programmes, as well as exposure visits to successful projects for stakeholders.

Although the solar helpdesk, hosted by Sreda, shares information on request, stakeholders feel a performance assessment of the helpdesk is essential to upgrading services based on need and relevance.

The report further highlights that a credit risk guarantee scheme can minimise the perceived risks of financial institutions and increase fund flows to projects.

Similarly, a first-loss guarantee can address engineering, procurement, and construction companies' challenges linked to repayment from industries and building owners.

"While the Bangladesh Bank's green refinancing scheme is the least-cost financing vehicle, all eligible rooftop solar projects will not receive the refinance due to its limited funds of $36.4 million and the competition with 69 other environment-friendly projects," said Alam.

"Therefore, the Bangladesh Bank may pre-approve financing for rooftop solar based on an assessment at the initial stage to eliminate any uncertainty about availing of the low-cost scheme," he added.

The Infrastructure Development Company Limited also has a rooftop solar financing facility, but it will not meet the sector's demand. The report recommends that local financial institutions explore multilateral agencies, international climate finance, and the local bond market to enhance funds in the foreseeable future.

To incentivise the sector, the report calls on the government to waive prevailing import duties on solar panels and four accessories, ranging from 11.2% to 58.6%, at least for a limited period. It also recommends fixing the rooftop solar installation capacity to 100% of the sanctioned load.

"Further, as rooftop solar accessories are usually imported, the Bangladesh Bank and the National Board of Revenue should declare rooftop solar a top priority and ease their Letter of Credit opening process. For a rapid expansion, the Bangladesh Bank may give financial institutions an annual disbursement target on renewable energy, including rooftop solar," said the report's author.

The report also highlights the important role utilities can play in expanding the deployment of rooftop solar. Both the utility- and third-party-owned business models can be a source of revenue for utilities, incentivising them to multiply their efforts in the rooftop solar sector. Different utilities can also combine the rooftop solar potential of their respective zones and conclude on the national rooftop solar market size, providing a signal to financial institutions on the aggregate investment the sector will require.

As interest in rooftop solar increases, the report recommends setting up enough testing labs and increasing market monitoring by the Bangladesh Standards and Testing Institute. Further, Sreda can include a consumer feedback mechanism for engineering, procurement, and construction companies and solar equipment suppliers to ensure quality project implementation and initiate certification for service providers.

"Policymakers do not need to start afresh and reinvent the wheel. They should enhance the effectiveness of existing measures and incorporate successful schemes implemented elsewhere," Alam further said.