Overview
The global energy crisis and the impact of climate change require a shift towards renewable and sustainable energy sources. Bangladesh is vulnerable to the impacts of climate change and needs to mitigate its effect by reducing fossil fuel reliance and developing renewable energy sources. Currently, only 3.75% of Bangladesh’s total electricity generation capacity is from renewable sources (as per SREDA), falling short of the policy target of 10% of energy sourced from renewable sources by 2020. According to the NDC, updated in 2021, Bangladesh will face significant losses in its GDP and displacement of people due to climate change. The country needs climate finance to mitigate it and develop renewable energy. The IPCC reported that Bangladesh will face significant losses in its GDP and displacement of people due to climate change.
The energy crisis triggered by the Ukraine-Russia conflict and economic slowdown due to the COVID-19 pandemic has brought the concern of energy security to the forefront. BPDB is not in a position to mobilize foreign currency for importing any fossil-fuels for power generation. Fossil-fuel based power generation and consumption have posed the BPDB into huge financial risks due to growing loses, it was around 1439.06 Crore BDT in FY2021-22 (BPDB report, 2021-22, page, 98). Idle power plants elicited an increase of USD 270.80 million in a year between fiscal years 2018-19 and 2019-20 (Mehedi & Ali, 2022). Capacity charges paid by BPDB have been a huge financial burden and it is getting worse every year (Hossain, 2022). If even a portion of the capacity charge that is given to inactive power plants were diverted to renewable energy creation, it could contribute significantly to the cause.
A 2018 paper analyzes how much welfare is gained or lost by subsidizing fossil fuel; it is found that complete removal of fossil fuel subsidy would increase household welfare by 1.89%. The paper argues that these subsidies benefitting fossil fuels act as a hindrance to the development of the renewable energy market (Amin, Marsiliani, & Renstrom, 2018).
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