Strategic policy reforms are needed to tackle the global energy price shocks and meet the green goals, said the South Asian Network on Economic Modelling (SANEM).
The think-tank held a national-Level Dialogue titled “Exploring a Sustainable Pathway for Bangladesh’s Energy Transformation Towards Green and Clean Energy” on Saturday (23 November) at the BRAC Centre Inn, Dhaka.
During the event, findings from three pivotal studies were presented, outlining the challenges and prospects of Bangladesh’s energy transition.
Md Tuhin Ahmed, Senior Research Associate at SANEM, presented the study titled “Macroeconomic Effects of Energy Price Fluctuations: Evidence from Bangladesh”.
It investigated the ramifications of global fossil fuel price shocks on Bangladesh’s economy.
Key findings for the research show that a 10% increase in coal prices raises CPI inflation by 0.3%, while LNG price increases by the same percentage add 0.2%.
Crude oil and coal price shocks depreciate the exchange rate by 0.16% and 0.15%, respectively.
Energy price fluctuations adversely affect net exports, reducing GDP contribution by up to 0.25 percentage points per 10% price rise.
Energy shocks historically correlated with macroeconomic instability during crises such as the 2008 financial meltdown and the 2022 Russia-Ukraine conflict.
The study advocates diversifying energy sources, fostering renewable energy, and establishing dynamic price mechanisms.
Suggestions include strategic energy reserves, improved infrastructure, technology adoption, and incentivising foreign direct investment (FDI) in renewables.
Another study, also presented by Md. Tuhin Ahmed, assessed the institutional framework and political economy of Bangladesh’s energy sector.
Legislative weaknesses, including amendments to the Quick Enhancement of Electricity and Energy Supply Act (2010) and the Bangladesh Energy Regulatory Commission Act (2023), have led to reduced transparency and policy inefficiencies.
Monopoly in energy distribution and reliance on state-owned enterprises stifle private sector involvement.
Subsidies disproportionately benefit capacity charges (Tk 32,000 crore out of Tk 40,000 crore for FY25), reflecting vested interests.
Proposals include abolishing non-transparent legislation, empowering regulatory bodies, and creating incentives for renewable energy investments.
Transparent tender processes and performance-based subsidies are also deemed crucial.
Ekramul Hasan, Research Associate at SANEM, presented the study, “Assessing Investment Needs for Renewable Energy Transition in Bangladesh by 2041”.
It found that Bangladesh’s renewable energy capacity, at 1,219 MW (4.16% of total output), is far below targets.
Investment requirements range from $36.3 billion to $64.8 billion, depending on scenarios and costs.
Fixed operating costs and upfront expenses, particularly for energy storage, remain significant barriers.
The study urges public-private partnerships, green bonds, and concessional financing from international institutions.
It also advocates for a renewable energy fund and tax incentives to mobilise investment.
SANEM’s findings underline the critical need for cohesive policy reforms, institutional strengthening, and robust investment mechanisms to realise Bangladesh’s renewable energy ambitions by 2041.
