Like many rapidly growing developing nations, Bangladesh faces an energy crisis, with energy demand rising rapidly at a rate of 400 MW a year. In addition to population growth, demand is being boosted by the increasingly industrialised nature of the economy, the wider use of modern electrical appliances and the ever-rising number of grid connections.
According to the central bank, this new fund aims to help tackle these issues by offering maximum 100% refinance facilities will to commercial banks against their lending for solar projects, bio-gas plants in rural and urban areas, and effluent treatment plants for industries.
Under the new scheme, the central bank would provide loans to banks at 5% (bank rate) interest rate, which will then charge up to 9% interest on such lending to their clients. If banks channelled the fund through non-government organisations (NGOs) linkage under credit wholesaling, the rate of interest will be 10%.
World Bank support
Meanwhile, the World Bank has awarded a $130 million (€91 million) loan to a micro-renewables project in Bangladesh that provides tiny loans for solar arrays, biogas plants, mini grids and solar-powered water pumps for irrigation.
The loan went to the Rural Electrification and Renewable Energy Development project, which has been operating in Bangladesh since 2003. Bangladesh currently has only 40% grid connection and the group’s primary focus has been helping to connect Bangladeshi communities to the existing electricity grid. Previous rounds of the project have helped connect 600,000 consumers to the electricity grid, constructed about 8,500 km of new distribution, and provided 320,000 consumers with solar systems since 2003.
According to Robert Floyd, the World Bank’s country director for Bangladesh, a greater emphasis will now be put on building renewable-energy generation devices: “Investing in grid electricity alone will not realise the Government of Bangladesh’s goal of universal access to electricity by 2020. This additional financing will be used to provide electricity to 300,000 households through solar home systems. Many of these households in poor areas are too remote to connect to the electricity grid and would never receive electricity through conventional electrification methods.”
Part of the financing will also be used to purchase and install about 10 million energy efficient compact fluorescent lamps in densely populated areas in the country. These will replace an equivalent number of incandescent lamps.
The credit from the IDA, the World Bank’s concessionary arm, has 40 years to maturity with a 10-year grace period and carries a service charge of 0.75%.
The Bangladesh government has devised a power generation plan with the objective of adding 7,000 MW of new power by 2014. The present effective generating capacity is 3,800 MW against a demand of 5,500 MW. Every year a further 400 MW of demand is added, so by 2014 power demand may grow to 7,500 MW. Even if only 60% of what the government plans can be implemented, 4,200 MW can be added to the national grid by 2014, offering Bangladesh a total effective generating capacity of 8,000 MW.
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