Over the past months, we have done work in Bangladesh, including due diligences of distributed, renewable energy projects (solar, battery, on/off grid). We assessed individual customers of potential industrial and commercial off-takers, analysed the regulatory environment and built a market model. Here are some highlights.
Where we are now
Based on our analysis, we believe that Bangladesh already offers attractive investment opportunities in distributed energy to entrepreneurial players who seek to establish size and track-record. The market is at a point where the Indian market was about 3-4 years ago, but with a better economic case and (we believe) a faster ramp-up prospect due to the maturing of the environment, globally.
Today, the market is still nascent. A number of government buildings have installed solar rooftop systems and feed power into the grid at individually determined prices. There is as yet no existing policy framework to either incentivize renewable energy generation or to determine grid-interaction. As a result, the market will initially concentrate on own-consumption, where distributed renewables can compete with fairly high industrial tariffs and very high diesel tariffs, thus reducing the cost of energy while at the same time increasing supply security.
At this stage, solutions on offer in the market are still low tech: i.e. there is no “smart” component, such as optimized interaction of different energy sources (e.g. renewables, grid, storage and diesel) or even demand management. The discussions are currently at the “solar rooftop”-stage. And even this straightforward option still requires some market-building communication efforts.
The fundamentals of the Bangladeshi market can make it very attractive for distributed renewable energy solutions – both for capex (consumer owns the equipment) and opex (third party financed) models. The market for distributed solutions is driven by Bangladesh’s rapidly growing energy demand, by its industrial growth (especially for export), by the high population density and very constrained land availability, by the good resource availability and by the globally and locally falling costs of distributed energy solutions. In addition, frequent flooding makes resilient, local energy supply solutions a priority for consumers and government alike.
The government’s view
In our interactions, the government has shown a keen interest in supporting the spread of distributed energy solutions. Such support is likely to go in the direction of net-metering and other regulatory changes that make grid interconnection easier, rather then direct incentives. This is in line with trends in other markets. Figuring out the details of this regulatory change will be tricky and take some time. However, given the current structure of the Bangladeshi electricity market, we expect less opposition from utilities than in e.g. India. And there are more and more international best-practices to draw from.
The Bangladeshi infrastructure development bank IDCOL is interested in offering finance to both customers and third-party solution providers for industrial-scale distributed renewable energy solutions.
It is difficult to assess market growth at this early stage. We have modeled a market opportunity in the GW range and are confident to see several 100s of MW installed in the next five years (in the absence of adverse policy decisions, even if there is no policy support).
During the project, we have assessed 20 specific off-takers interested in either procuring distributed renewable power or investing into their own solution. Systems would mostly be built around solar with sizes between 150kW and 2MW (solar PV).
Many customers come from the textile industry, usually, export focussed. Some of them are bankable. Their load patterns (running three shifts for most days) and high power demand offer a solid off-take. Building/rooftop age and structure differ.
This project is in line with a number of similar assignments in other markets, including India, Myanmar, Kenya and South Africa.
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