The creation of a renewable energy fund worth Tk 100 crore in the proposed for the 2024-25 fiscal is a timely move on the part of the government. With fiscal challenges eroding the country's capacity to clear its payments in full against imported fossil fuels and electricity produced by private power producers in the last one or two years, investment in clean energy is the need of the hour.

High and volatile fossil fuel prices in the international market and concerns about energy security tempted the government to sign several contracts with private investors for renewable energy projects in the last two years. However, the experience has not been a happy one. Although some new renewable energy projects have come online in the last two years, the pace and scale have been far too slow and inadequate to make a noticeable difference. Complications over procuring the land for such projects, especially in areas where ownership is fragmented, limit the country's ability to deploy renewable energy at a fast pace. Private project developers are also burdened with shouldering the cost of long transmission lines, increasing the overall project cost.

Against this backdrop, the renewable energy fund will look to accelerate the development of the renewable energy sector amid the country's heightened exposure to the international fossil fuel market. According to the Institution for Energy Economics and Financial Analysis, it may cover the transmission costs of selected renewable energy projects. Likewise, it may allocate land to some renewable energy projects. The renewable energy fund may support the land acquisition cost. Shouldering such costs, the government may introduce reverse auctions in carefully selected projects to reduce tariffs, according to the IEEFA. The government can also utilise the fund to pilot renewable energy projects with battery energy storage systems.

Bangladesh has traditionally allocated the lion's share of its energy and power sector allocation to the power sector. The Power Division, which takes care of the power sector's development, received around 90% of the total budget allocated for Energy and Power Divisions from FY2017-18 to FY2022-23. In 2023-24, it received a massive 97.1% of the allocated Tk 348.2 billion, leaving the Energy Division with a paltry Tk 9.9 billion. This time around, although the overall allocation for Energy and Power has come down Tk 303.2 billion, the cut has mostly been felt in the allocation for the Power Division. The Energy Division has actually seen its allocation rise.

Allocations of hefty budgets to the power sector on a yearly basis have already thrown up several challenges for the energy sector, which has become increasingly import-dependent.

It is hoped that rebalancing the outlay towards the energy sector can go towards strengthening the Bangladesh Petroleum and Exploration Company (BAPEX) as well, to enhance its ongoing gas exploration efforts and limit the growing reliance on imported LNG. It could go a long way towards taking the pressure off many budgets in the years to come.