The central bank of Bangladesh issued a new policy on green bond financing this week for banks and financial institutions that provide low-cost, long-term loans for renewable energy.
Bangladesh’s new policy prioritizes the channeling of funds for the construction and operation of solar facilities, including solar minigrids, solar microgrids, solar nanogrids, solar picogrids, solar parks, rooftop solar systems, and solar irrigation systems.
The central bank said it also aims to support hybrid renewable-powered electricity, heating and cooling systems, and the production of renewable energy technologies.
“(The) policy on green bond financing for banks and financial institutions has been formulated with a view to facilitating green focused sustainable investment on climate change mitigation and adaptation,” said the central bank.
The policy will support the development of the emerging green bond market in Bangladesh and facilitate financial flows between banks and financial institutions. It will therefore support the country’s plan to transition to a low-carbon, climate resilient, environmentally sound economy, said Bangladesh Bank. Officials have said that the nation’s bond market has yet to grow, but recently green sukuk bonds have been used to raise funds to set up 230 MW of solar in the northern part of the country.
Renewable energy sector stakeholders have praised the green bond financing policy, as they have been demanding such an initiative for a long time. Dipal C Barua, president of the Bangladesh Solar and Renewable Energy Association, said that entrepreneurs prefer the bond market to source funds, as it long-term loans are available at low interest rates.
“When we interact with members they say they won’t be able to run business with short-term loans,” said Barua.
Barua said solar panels can now be expected to remain efficient for around 20 years, and that is set to gradually grow to 30 years. “If long-term cost effective loan from green bond markets is available, it will help boost renewable energy generation,” he said.
Bangladesh currently has the capacity to generate 911 MW of green power, mainly from solar. By 2041, the country wants to generate 40% of its electricity from renewable sources.
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Source: pv magazine