Energy & Power

Interview
“Bangladesh Needs to Find Right Mix of Energy Resources”
Rachel Kyte

Bangladesh needs to revisit its energy regulations and priorities to encourage exploration of alternative options to find out a right mix of sources and secure the country’s energy future. This will help the country reduces its dependence on gas for producing electricity and encourage the private sector to go for renewable energy sources. Efforts should be made to exploit natural resources, particularly coal, in the 'cleanest way' as danger of climate change looms large. Banks can find energy efficiency as a sustainable business product if they understand the market and lure the private sector into it.

This is how Rachel Kyte, International Finance Corporation (IFC) Director for Environment & Social Development, looks at Bangladesh’s energy prospects.

The executive of the World Bank Group’s private lending arm visited Dhaka on February 3-4 to help banks understand and explore energy efficiency market in Bangladesh. During her brief stay, she elaborated on her ideas and plans in an interview with Energy and Power Editor Mollah Amzad Hossain at IFC’s Dhaka office on February 3. Here are the excerpts:

EP: Which one of the two — gas and coal — you feel will be better and safer for Bangladesh as a reliable energy source?

Kyte: It's a difficult trade-off. It depends on feasibility issues… social, environmental, financial and energy-efficiency issues. Bangladesh needs to reduce its dependence on natural gas. It will have to explore coal in the cleanest possible way. The country needs to have a right mix of energy sources like gas and coal.

Ensuring efficient use of energy resources and limiting environmental and social risks during exploration and mine development are among the IFC’s interests in developing countries including Bangladesh. Environmental regulations are already there. This government is committed to ensure environmental standards.

But compliances and risk mitigations involve costs. The deltaic Bangladesh is to be one of early victims of climate change. Local businesses should value the adaptation, given the risks of environmental hazards. Bangladesh stands to get funds to defray the costs of adaptation once the Climate Investment Fund is financed by rich nations.

In the United Nations-sponsored Bali conference, the G-8 nations pledged to provide fund to the poorer nations to adopt green technology and stimulate low-carbon growth.

Hopefully, that money will be available soon. And our job is to build mechanism and facilitate flow of funds into countries like Bangladesh.

EP: You know there are debates about coal exploration methods at Phulbari. There are environmental and social concerns. How can IFC help Bangladesh overcome those concerns and debates, and get coal explored?

Kyte: I won’t comment on Phulbari. What I would stress that Bangladesh should exploit its natural resources, particularly coal, in the cleanest way to generate electricity. The country faces the looming danger of climate change.

EP: Did you have a chance to visit Phulbari site?
Kyte: Yes, I had been there a year back.

EP: About 70 percent of the country remains out of national grid coverage. How do you look at the prospects of renewable energy in Bangladesh to widen electricity coverage?

Kyte: I don’t believe renewable energy will be a magical solution. But Bangladesh should opt for it. Some regulatory changes are needed.

Look at India. They are successfully exploring renewable energy sources, particularly wind power, through some changes in regulatory policies. You can create a condition for exploring other energy options through some regulatory changes. Then the private sector will also come up in a big way.

I think solar energy will have a good market in Bangladesh in near future. It will be a booming business. Renewable energy is important for development. The country needs to look to distributed energy solutions and not just putting everything through a national power grid.

EP: How can Bangladesh’s energy needs and environmental concerns be balanced?
Kyte: It is a matter for the government and that social and environmental issues have to be considered along with the energy needs of the country. Bangladesh will be part of a pilot project undertaken by the IFC to help companies adapt to the risks posed to their business and assets by climate change. Companies need to understand the financial advantages of energy efficiency.

There is clear evidence that companies that prioritized fuel efficiency are more sustainable and a better risk for lenders. This government has a number of commitments to protect environment and at the same time ensure energy security and development.

EP: IFC has a strong presence in Bangladesh’s energy sector, especially in private sector power generation. What will your current visit focus on?

Kyte: IFC wants to support banks to promote energy efficiency as a new business and investment product in Bangladesh.

We are now in talks with a number of private commercial banks. We are telling them to understand the energy efficiency market here. We want them to develop energy efficiency as a viable market for the private sector and for banks as well. We will support them to attract new investment and create new clients in the area.

IFC will also give banks consulting expertise to introduce new technologies for efficient use of energy resources and encourage private sector ventures in the area.

We are still in a planning stage. We will talk to the Bangladesh Bank about our plan. We're talking to our local partner banks so that they lend to companies for energy efficiency projects. There is a good business. Today's banks need to understand energy efficiency and sustainable development for the sake of their businesses.

IFC has partnerships with 12 local banks and financial institutions, including Islami Bank Bangladesh Ltd, Dhaka Bank, BRAC Bank, Prime Bank and United Leasing Company Limited. These banks are likely to receive IFC loans aimed at developing energy efficiency financing for private sector.

It is not that Bangladesh is apart from the global economy. You can be at the back of the bus or the front of the bus. I'm sure Bangladeshi bankers would want to be at the front.