The government has earmarked Tk1,500 crore from its existing green financing resources to support rooftop solar installations, offering entrepreneurs loans at a maximum interest rate of 6% with a repayment period of 12 years.
The fund will come from the Green Transformation Fund (GTF) of the central bank and the financing will be channelled through three institutions – Infrastructure Development Company Limited (Idcol), Bangladesh Infrastructure Finance Fund Limited (BIFFL), and Palli Karma-Sahayak Foundation (PKSF) – as the government seeks to accelerate rooftop solar adoption without directly financing individual projects.
Of the initial allocation, Tk500 crore has been provided to Idcol, while the BIFFL and the PKSF will also receive funding to facilitate investments in rooftop solar projects.
Talking with the Business Standard yesterday about the financing framework, Power Secretary Mirana Mahrukh said the government had initially mobilised Tk1,500 crore from existing green funds and resources originally intended for low-carbon activities, rather than allocating fresh money directly from the government treasury.
She said the government could provide further funding in phases, potentially releasing another Tk500 crore as the initial allocation is utilised.
The private investor will mobilise 20% of the total investment, the rooftop owner will contribute another 20%, and the remaining 60% will be provided as a loan through the designated financing institutions, as outlined by Power Division.
The arrangement is designed to ensure that rooftop owners have a financial stake in the installations, creating a sense of ownership and encouraging them to maintain the systems properly.
In the face of persistent load shedding in summer, Power Division is ramping up efforts to bring 3000-4000MW of rooftop solar by next February in a bid to lessen dependence on fossil fuel-based power plants as fuel price gets costlier in the face of Iran-US war.
As part of the process, the Power Division and Idcol are organising a two-day solar expo on 3-4 November which will be inaugurated by Prime Minister Tarique Rahman today.
Imran Karim, chairman of Confidence Power and Energy PLC, welcomed the government’s low-interest financing initiative for rooftop solar entrepreneurs, saying Bangladesh needs greater solar investment to strengthen energy security alongside grid-scale and sub-grid-scale projects.
“The 12-year instalment facility was a positive move. But proper fund recovery, transparent utilisation and mechanisms to ensure consumer benefit is imperative,” he said.
He also called for stakeholder consultations to develop a clear standard operating procedure (SOP) for effective implementation.
Global and local lenders shows interest in solar financing
The government is also working to mobilise additional financing from international development partners and commercial banks to expand the programme.
The World Bank has made a commitment of $500 million for the initiative, which the government expects to receive by March, subject to the ongoing process.
The proposed financing involves a combination of several funding sources, including climate and green financing facilities.
The Asian Infrastructure Investment Bank (AIIB) has also made an initial commitment of $500 million, which is currently under process.
Power Division officials said, financing from those institutions could be relatively costly, prompting the government to explore a combination of funding sources to bring down the overall cost.
The government is also in discussions with international and local commercial banks, including HSBC, Citi and BRAC Bank, which have shown interest in offering relatively affordable financing products for rooftop solar projects.
According to the Power Division, private banks are considering financing at around 5%, which could help mobilise additional resources from the domestic financial market.
The Asian Development Bank (ADB) has also initiated discussions with Bangladesh to develop a platform involving multiple development partners.
The bank is considering an initial contribution of $250 million to the proposed platform, which could eventually be expanded to mobilise financing worth billions of dollars.
The power secretary said, said “The government is working to combine financing from different sources, including those offering relatively cheaper funds, to develop affordable loan products for different categories of rooftop solar users.”
Idcol has also been instructed to design financing products based on the nature of the installations.
Quality control and equipment standards
Alongside financing, the government is working to ensure that imported solar panels, batteries and other equipment meet specified quality standards, amid concerns about substandard products entering the market.
To ensure the quality of the solar panel, Bangladesh Standards and Testing Institution (BSTI) had been brought into the initiative and had been given specific technical specifications for solar equipment.
Idcol has also issued specifications, which financing institutions will have to follow before approving loans.
Importers will be required to provide undertakings regarding the products they bring into the country.
The National Board of Revenue (NBR) has also been engaged to monitor imports and ensure that imported equipment meets the required specifications during customs clearance.
Power Division said due to the legal bar on prescribing certain brands and countries of origin on solar panel and battery storage, a tight technical requirements for solar modules has been set including specifications based on the quality standards of high-end manufacturers such as Jinko Solar and LONGi.
The division has also attached six engineers from the Bangladesh Power Development Board to BSTI to strengthen its technical capacity.
The engineers have received specialised seven-day training to help oversee the implementation of equipment standards.
To safeguard the solar panel from natural disaster, Power Division has also started working on insurance arrangements for solar installations against natural disasters, although responsibility for theft-related losses will remain with the rooftop owners.
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