Bangladesh solar incentives may not be for smaller consumers

* Bangladesh announces tax reductions on solar projects

Solar energy companies could benefit from incentives

Some households in rural areas may not be eligible for the program

Tahmid Zami Tahmid Zami

According to the National Board of Revenue, these measures were introduced on July 1, in the 'latest national budget.' They include the removal of customs duties on?solar?equipment, and the exemption of solar-power suppliers and producers from paying taxes on income derived from?solar?energy. The National Board of Revenue has announced that institutions using solar energy will receive a tax credit amounting to 5% on their electricity bill over the next 5 years.

The main goal of the effort is to encourage construction companies, such as garment manufacturers that account for 11% or Bangladesh's economy, to build solar power projects.

Some advocates say that additional reforms will be needed to reach more people. This is especially true for those who live in smaller towns and villages, where the installation of household systems might not prove profitable.

Syeda Rizwana hasan, CEO, Bangladesh Environmental Lawyers Association, said that the tax reforms included in the budget had triggered hope among the people. However, the problem is much deeper. Electricity outages are severe outside Dhaka, and rural consumers need to reap the benefits of any reforms.

QatarEnergy - Bangladesh's largest supplier - has halved its scheduled shipments this year due to disruptions caused by the Strait of Hormuz following the attack on Iran by the United States and Israel in February.

Rural areas have already experienced frequent power outages lasting up to 10 hours.

Mahmud Hasan, President of the Bangladesh Garment Manufacturers and Exporters Association said in April that the power shortage, exacerbated by Iran's war, has reduced industrial production by 25 to 30 percent.

The Asian Development Bank said on July 9 that rising global energy prices may cause Bangladesh's inflation to worsen and limit the annual economic growth of Bangladesh to only 4.5%.

MISSED TARGETS

Bangladesh's renewable-energy drive has been accelerated by the fuel shortage. Previous targets have not been met, such as the pledge to produce 10% of its electricity from "renewable" sources by 2020.

According to the Sustainable and Renewable Energy Development Authority, Bangladesh's installed renewable energy capacity accounts for approximately?5% (or?5%) of its power generation.

The new incentives are designed to encourage the use of rooftop solar, large-scale solar installations, energy storage, and upgrades to the national grid.

Hasan Mehedi is the chief executive officer of Coastal Livelihood and Environmental Action Network, a climate and environment advocacy organization.

He said: "This reform represents a strategic investment for Bangladesh's future energy security, resilience in the economy and climate."

The installed solar capacity in Bangladesh is only 1,515 megawatts. The Institute for Energy Economics and Financial Analysis (IEEFA), a think tank, estimated that adding rooftop capacity of 2,000MW could reduce fossil fuel imports by $476 million to $1 billion per year.

Iqbal Hassan Mahmood Tuku said that rooftop solar power systems were being installed at government offices and schools, as well as healthcare facilities.

Small Households

Rural areas are often overlooked in the rush to industrialize Bangladesh, which is a shame because they house 70% of its population.

Shafiqul alam, an energy analyst from Bangladesh at IEEFA, explained that private developers might not consider?systems which generate only a few Kilowatts per house as profitable. He said that communities could combine the demand of several households into "a single project" to make it more viable.

He said that this would enable small rural consumers get the benefits from the tax reform.

According to IEEFA, the country must add around 760MW of renewable energy capacity each year until 2030 in order to achieve its 20% renewables goal. The International Renewable Energy Agency data shows that the country has added an average of 228 MW per year over the last three years.

Shamsul Arefeen Shohel is the CEO of Suntech a renewable energy consulting firm. He said that Bangladesh could install 5,000 MW solar systems in rural homes.

Shohel said that "public investment at a large scale and low interest loans for solar project are needed to achieve this."

Only 2% of the government's budget for the "power and energy" sector ($1.40 billion), which is a total of 171.93 billion Taka ($1.40billion), has been allocated to renewable energy.

The current level of public and private investment is $238 million per year. IEEFA stated that this figure needs to increase to between $933 and $980 millions a year by 2030 in order to reach the target.

Mehedi, of CLEAN, called for the creation of a fund to finance renewable energy, on top of tax reductions, to be provided by commercial banks to individuals, entrepreneurs, farmers, and renewable energy developers.

(source: Reuters)