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(Bloomberg) — Bangladesh requires as a lot as $1.71 billion yearly over the following 18 years to maneuver away from costly fossil-fuel imports and generate 40% of its electrical energy from renewable sources, in response to the Institute for Vitality Economics and Monetary Evaluation.

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The funding required for enhancing renewable vitality capability is decrease than the facility sector’s rising $2.82 billion authorities subsidy within the 2021-22 fiscal yr, which is sort of 152% greater than the earlier yr, in response to a report launched on Wednesday by the US-based assume tank. 

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A quicker transition to renewable sources will unencumber monetary assets that in any other case find yourself as subsidy funds, IEEFA stated. That is likely to be essential to defend Bangladesh from future international vitality shocks. Prior to now 14 years, the South Asian nation has quickly ramped up its electrical energy era capability greater than fourfold because it sought to fill rising demand and keep away from energy blackouts. 

However that has left the nation reliant on imported fossil fuels and fewer than 5% of its vitality comes from renewable sources. In consequence, Bangladesh final yr requested the Worldwide Financial Fund for a $4.7 billion mortgage bundle whereas the nation grappled with an vitality disaster as commodity costs soared following Russia’s invasion of Ukraine. Rising import prices widened the nation’s commerce deficit, inflicting the native forex to weaken and overseas reserves plunge. 

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“Bangladesh’s electrical energy era mannequin seems unsustainable with out a clear transition pathway,” stated Shafiqul Alam, an IEEFA analyst who authored the report. “Policymakers ought to elevate their renewable vitality targets.” 

Whereas greater subsidies are finally handed on to customers, Bangladesh’s energy sector subsidy burden within the present fiscal yr ending June will nonetheless doubtless be greater than the earlier yr, Alam stated. 

Evaluation by IEEFA reveals that the present energy system can instantly incorporate 1,700 megawatts to three,400 megawatts of solar energy through the day and a pair of,500 megawatts to 4,000 megawatts of wind energy at night time, decreasing using pricey furnace oil-based energy era. 

The transfer may even assist decrease common electrical energy era prices, in response to the assume tank’s report. IEEFA estimates present that the levelized value of electrical energy from rooftop and utility-scale photo voltaic is round $0.05 per unit and $0.072 per unit respectively, in comparison with the present common of $0.084 quoted by the Bangladesh Energy Improvement Board.