Industry Specific Study On Sustainable Energy Finance .
Public Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedIndustry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in BangladeshSouthAsia Enterprise Development Facility (SEDF)in partnership with DFID and NORADIndustry Specific Study onSustainable Energy Finance Market Potentialfor Financial Institutions in BangladeshIFC Advisory Services in South Asia
SouthAsia Enterprise Development Facility (SEDF)About SEDFin partnership with DFID and NORADSouthAsia Enterprise Development Facility (SEDF) aims to create opportunities andimprove lives. SEDF is managed by IFC, in partnership with the UK's Department forInternational Development and the Norwegian Agency for Development Co-operation.SEDF facilitates the growth of small and medium enterprises by helping improve theiraccess to finance through a supportive financial infrastructure, financial productsdevelopment and strengthening of financial institutions; providing quality business servicestowards strengthening value chains; and helps businesses adapt to the impacts of climatechange. SEDF operates in Bangladesh, Bhutan, northeast India and Nepal.Industry Specific Study onSustainable Energy Finance Market Potentialfor Financial Institutions in BangladeshJanuary 2012International Finance CorporationIFC, a member of the World Bank Group, is the largest global development institutionfocused exclusively on the private sector. We help developing countries achieve sustainablegrowth by financing investment, providing advisory services to businesses andgovernments, and mobilizing capital in the international financial markets. In fiscal 2011,amid economic uncertainty across the globe, we helped our clients create jobs, strengthenenvironmental performance, and contribute to their local communities—all while drivingour investments to an all-time high of nearly 19 billion. For more information, visitwww.ifc.org.Standard DisclaimerThe Industry Specific Study on Sustainable Energy Finance Market Potential for FinancialInstitutions in Bangladesh is produced by Frankfurt School of Finance & Management forInternational Finance Corporation, a member of the World Bank Group. The judgmentsand conclusions contained herein should not be attributed to, and do not necessarily reflectthe views of IFC or its Board of Directors or the World Bank or its Executive Directors, orthe countries they represent. The material in this market study is set out in good faith forgeneral guidance, but IFC and the World Bank do not guarantee the accuracy of the dataand accept no responsibility for any consequence of its use.United House, 10 Gulshan AvenueGulshan-1, Dhaka-1212, BangladeshPhone: 880 2 88337-52 up to 66Fax: 880 2 8833495www.ifc.org/southasiaThe material in this work is protected by copyright. Copying and/or transmitting portionsor all of this work may be a violation of applicable law. IFC encourages dissemination ofthis publication and hereby grants permission to the user of this work to copy portions ofit for the user’s personal, noncommercial use, without any right to resell, redistribute, orcreate derivative works herefrom. Any other copying or use of this work requires theexpress written permission of IFC.
Industry Specific Study on Sustainable Energy Finance MarketPotential for Financial Institutions in BangladeshIndustry Specific Study on Sustainable Energy Finance MarketPotential for Financial Institutions in BangladeshForewordContentTowards Bangladesh’s sustainable future1. IntroductionThe reality and severity of climate change impacts has resulted in new thinking around how businessshould be conducted. Private sector has emerged as an important ally in combating climate changeimpacts – by taking initiatives to evolve and adapt– and is now seen as the provider of innovativesolutions. To fully appreciate the scope of possibilities, a shift in mindsets is needed. To be fullycompetitive, companies must fully integrate climate change related issues into day to day business.1.132 Approach and .53.6Leading financial institutions are equipping themselves to take advantage of this market trend – aclear direction towards supporting new projects that are climate-friendly or ‘green’. Another termfor this is Sustainable Energy Finance.Global investments in renewable energy jumped 32% in 2010 to a record 211 billion dollars. Toremain competitive, financial Institutions have proactively complemented this transition by offeringcutting-edge Sustainable Energy Finance products to energy intensive industries. The move hasresulted in responsible and profitable business opportunities related to sustainability andinclusiveness.The concept of sustainability is just emerging in Bangladesh, but it is fast becoming a business need.Financial institutions in Bangladesh can take advantage of the untapped potential in the drive forrenewable energy and energy efficiency. While addressing financing needs of this transfer oftechnology and energy source, they help reduce energy stress and climate change impacts andpromote sustainable economic growth.Energy ScenarioOverview of Industrial Policy, EE and RE policiesIndustrial policyNational Energy Policy (NEP)Renewable Energy (RE) PolicyEnergy Efficiency (EE) PolicyEnvironment PolicyBrief overview of development programmes and plansResearch Institutions in the EE/RE sectorNon-Government Organizations in the EE/RE sectorVendors/Manufacturers/Importers4 Overview of Selected Industry Sectors4.1 Industry Sectors in Bangladesh4.1.1 Food Processing Industries4.1.2 Cement4.1.3 Steel Re-rolling Mills4.1.4 Light Engineering4.1.5 Sugar4.1.6 Pulp and Paper4.1.7 Poultry4.1.8 Textiles4.1.9 Readymade Garments (RMG)4.1.10 Chemicals processing4.1.11 Plastics Processing Sector4.2 Energy Demand and Consumption in Industries4.3 Important Stakeholders in the Industry SectorThere is a strong demand from financial institutions in Bangladesh for a market study on the energyefficiency and renewable energy potential of key industries and their corresponding financingneeds. In response to this, SEDF, managed by IFC, in partnership with the Norwegian Agency forDevelopment Cooperation and the U.K. Department for International Developmentcommissioned this study.This study, focused on ten key industries of Bangladesh, will help financial institutions makestrategic decisions on product development, market approaches to be adopted and resourceallocation to be made. The study will also raise awareness amongst industries covered and as wellas with key stakeholders.We trust this contribution will add value to the efforts of those interested in creating anenvironment conducive to promoting sustainable energy in Bangladesh and help private sector takethe lead towards clean and sustainable economic development.Anil SinhaRegional Head of Advisory Services, South AsiaInternational Finance CorporationiiiExecutive Summary3 Energy Scenario and Policy and Regulatory EnvironmentForward looking companies, at the forefront of this ‘green’ revolution, recognize that adoption ofrenewable energy and energy efficiency has great business advantages. This results in a change in thenature of new projects, and the related financing needs are 23333343636373842
Industry Specific Study on Sustainable Energy Finance MarketPotential for Financial Institutions in BangladeshIndustry Specific Study on Sustainable Energy Finance MarketPotential for Financial Institutions in BangladeshAnnexes5 EE/ RE Potential in Selected Industry Sectors5.1 Energy Consumption Pattern in Selected Industry Sectors5.2 Possible EE and RE options in Selected Industry Sector5.2.1 Cement5.2.2 Steel Re-Rolling5.2.3 Light Engineering5.2.4 Sugar5.2.5 Pulp and paper5.2.6 Poultry5.2.7 Textile5.2.8 Readymade Garments (RMG)5.2.9 Chemicals5.2.10 Plastics Processing5.2.11 Food Processing:6 Mapping of Financial Industry6.16.2Overview of Financing Sector in BangladeshOverview of Present Policies for Industrial Finance7 Investment Potential and Barriers7.17.2Investment Potential and Financing NeedsBarriers to Financing EE and RE8 Proposed Financing Mechanisms and Approaches8.18.28.3Existing Financing Products and MechanismsProposed Financing MechanismTechnical Assistance Needs and Advisory Services9 Recommendations and Conclusion45Annex 1 List of Meetings conducted during Study45485356606566717477828487Annex 2 Industry Manufacturing ProcessesAnnex 3 Details of EE improvement measuresAnnex 4 QuestionnairesAnnex 5 Cluster FinanceAnnex 6 Use of Biomass as Sustainable EnergyAnnex 7 Bangladesh Bank’s Circular on Solar Energy, Bio-gas and ETP ActorRefinancing SchemeAnnex 8 Overall Finding of the Survey on Banks and FIs in Financing EE/RE919199102102105109109115120126vvi
Industry Specific Study on Sustainable Energy Finance MarketPotential for Financial Institutions in BangladeshIndustry Specific Study on Sustainable Energy Finance MarketPotential for Financial Institutions in BMPEIAEMPEPZESCOFBFIFSFYGDPGIZGoBGRIGSCGWhICTAsian Development BankBangladesh BankBangladesh Chemical Industries CorporationBangladesh Council for Scientific & Industrial ResearchBangladeshi TakaBangladesh Jute Mills CorporationBalancing, Modernization, Replacement and ExpansionBangladesh Power Development BoardBangladesh Small and Cottage Industries CorporationBangladesh Steel and Engineering CorporationBangladesh Sugar and Food Industries CorporationBangladesh Standard and Testing InstitutionBangladesh Textile Mills CorporationBangladesh University of Engineering and TechnologyClean Development MechanismCertified Emission ReductionCompact Fluorescent LampDepartment of EnvironmentEnvironment Conservation ActEnergy EfficiencyEquity and Entrepreneurship FundEnterprises Growth and Bank Modernization ProjectEnvironmental Impact AssessmentEnvironmental Management PlanExport Processing ZoneEnergy Services CompanyForeign BankFinancial InstitutionFrankfurt School of Finance & ManagementFiscal YearGross Domestic ProductGesellschaft für Internationale ZusammenarbeitGovernment of the People’s Republic of BangladeshGlobal Reporting InitiativesGovernment Savings CertificateGiga Watt HourInformation and Communication l Development AssociationInitial Environmental ExaminationInternational Finance Corporation-South Asia Enterprise Development FacilityInitial Public OfferingIndependent Power ProducerInformation TechnologyJapan International Cooperation AgencyKreditanstalt für WiederaufbauKilo Watt hourOne Thousand Cubic FeetMillennial Development GoalsMicrofinance InstitutionMillion Cubic Feet Per DayMinistry of Environment and ForestMinistry of Power, Energy and Mineral ResourcesMicro-credit Regulatory AuthorityMetric TonMillion Tonnes Per AnnumMegawattNon-bank Financial InstitutionNational Energy PolicyNon-Government OrganizationNational Industry PolicyPrivate Commercial BankRenewable EnergyReadymade GarmentRental Power PlantSpecialized BankState-owned Commercial BankSecurities and Exchange CommissionSustainable Energy Development AgencyStatutory Liquidity RatioSmall and Medium EnterpriseTrillion Cubic FeetUnited Nations Development ProgrammeUS-DollarThe World Bank
Introduction
Industry Specific Study on Sustainable Energy Finance MarketPotential for Financial Institutions in Bangladesh1 IntroductionThe International Finance Corporation-South Asia Enterprise Development Facility (IFC-SEDF),managed by IFC, is supporting the establishment and growth of private Small and MediumEnterprises (SMEs) in Bangladesh, Bhutan, Nepal, Northeast India, Sri Lanka and Maldives.The industry sectors in Bangladesh are one of the major sources of pollution and inefficient energyuse. Therefore IFC-SEDF has taken initiative to conduct a concrete Market Study to understand thecurrent Energy Efficiency (EE) and Renewable Energy (RE) potential of Bangladesh whereFinancial Institutions (FIs) can invest. Bangladesh suffers from inadequate investment in the energyefficiency improvement and renewable energy in the industrial sector. Literatures suggest that thekey barriers to the implementation of energy efficiency are lack of awareness, and access to finance.The banks as the financing institutions also have limited knowledge of EE projects and there is aneed to improve awareness.Hence, the main objective of this study is to estimate the investment potential for EE and REprojects as well as energy savings and renewable energy potential in selected sectors. The estimationprocess has two distinct components: The first component is to estimate energy savings and RE potential The second component is to estimate investment required to achieve this potential.The consultant team has reviewed 10 industrial sectors and analysed specific energy consumptionand pattern of use. This study report is based on the data collected from the secondary sources ofinformation (such as published reports and data as well as research papers) and visits to industrialestablishments, in person (primary) interviews with stakeholder organisations. The data gaps, if any,were closed by making follow up calls to respondents who were interviewed. The sectors studiedinclude food and beverages, cement, steel re-rolling, light engineering, sugar, pulp and paper,poultry, textile, readymade garments, chemicals and plastics.This report provides detailed discussion on the approach and methodology in the beginning. Thisstudy report analyses policy and regulatory aspects related to industry and energy sector inBangladesh. Detailed overview of sectors under study has been elaborated in the section 4. Energyconsumption patterns and estimates of the potential to save energy were arrived at with the help ofdata collected from the industrial units and analysis of the same. The report also provides anoverview of the financial sector in Bangladesh. Besides, policies and regulations related to financialsector have been reviewed. Potential for investment in EE and RE projects related to industrialsectors under study has also been estimated.The study has recommended appropriate mechanisms for providing financial assistance to EE andRE projects as also recommended certain technical assistance and advisory services that IFC couldprovide to stakeholder organisations. The report concludes with broad based recommendations.2Industry Specific Study on Sustainable Energy Finance MarketPotential for Financial Institutions in Bangladesh11.1Executive SummaryThis study has covered analysis of present government policies related to industries, energy andfinance through secondary sources of information. The estimation of energy savings possiblethrough use of EE improvements and use of RE sources has been based on the detailed primaryinterviews with broad cross section of stakeholder organisations with back up of secondary sourcesof information.Government of Peoples’ Republic of Bangladesh (GoB) has supportive policy framework foroverall industrial growth, better use of energy and natural resources and effective financial system.National Industrial Policy has targets to achieve higher GDP growth e.g. 8% by 2013. Private sectorhas been considered the main driver to boost industrialisation. The policy has also provided infrastructure development as a significant strategy option to promote industrial growth. NationalEnergy Policy (NEP) has provided appropriate thrust to rational use of total energy use. NEP hasalso underlined the need for energy conservation and Bangladesh Energy Regulatory Commissionhas been provided specific functions towards this. On the other hand, government has commencedproviding incentives such as waiver of import duty and exemption of value added tax for certainitems such as solar pv modules and compact fluorescent lamps. More such items need to beincluded in this list. It is now proposed to form Sustainable Energy Development Agency (SEDA)to promote efficiency and sustainable energy technologies. Research institutions also contribute toenergy sector through work on policy aspects.Industrial sectors contribute significantly in the economic development of Bangladesh. Textile andready made garments (RMG), steel re-rolling, food, cement, pulp and paper are among the majorcontributors to GDP. Textile and RMG sector is the largest contributor to exports from Bangladesh.This sector has large base of SME industrial units and majority of these have average age of lessthan 10 years. Export growth targeted in the coming years is expected to result into significantcapacity addition in this sector. Guidance to such new upcoming units to plan for appropriate sizeof equipments and to incorporate EE at the design stage can save energy to the extent of 20% to30% as compared to units operating today. On the other hand older industrial units such as thosefrom steel re-rolling mills, cement, sugar and paper will need to renovate and modernise their existing facilities. Better EE improvement measures and new efficient equipment can save up to 25 -30%energy as compared to their present consumption.Among the industrial sectors Textile sector contributes significantly to the exports and hence to theeconomy Bangladesh. Energy intensive sectors such as steel, cement, textiles, pulp and paper, andother were analysed from the perspective of the overall sector characteristics and from the energyconsumption. The study observed the following significant findings:1. Almost all the industrial units have captive generation facilities to support its operations and toensure uninterrupted production. The generation facilities have good quality engines such as(GE, Caterpillar, etc.). Units requiring steam and compressed air, have boilers and compressors.Generators and boilers use natural gas as it is available at lower price. However, there isconspicuous absence of co-generation systems, barring a few exceptions.3
Industry Specific Study on Sustainable Energy Finance MarketPotential for Financial Institutions in Bangladesh12. Most the equipment are utilised much below their rated capacities as these are over-specified.Hence there could be possibility of achieving energy savings by conducting load profile analysisand / or energy audits.3. Energy audit services are available sparsely and need to enhance its wide spread availability. Thiscould be achieved through proper quality training to senior plant personnel and graduateengineers with good experience.The study has estimated energy saving potential in each of the industrial sectors under study. Sectorssuch as cement, steel, pulp and paper, textile and RMG indicate higher potential to save energy.Poultry has relatively lower potential to save energy. Based on these findings, the following threebroad categories of EE and RE measures / approaches have been recommended:Industry Specific Study on Sustainable Energy Finance MarketPotential for Financial Institutions in Bangladesh1The study also includes suggestions for technical assistance (TA) and advisory services. The teamhas suggested loan officers’ training as significant TA measure. The training will primarily focus onrisk analysis and risk mitigation framework. The training module are expected to be brief and ofshort duration. Information dissemination to end user industrial units and banks will include generalinformation such as energy saving tips to comprehensive manuals and data books containing EEtechnology options, case studies and vendor data. It is also recommended to have a manual on EEand RE which could be used by end user industries with information on relevant equipments andtechnology description.Training in energy audit is an important assis
Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh The International Finance Corporation-South Asia Enterprise Development Facility (IFC-SEDF), managed by IFC, is supporting the establishment and growth of private Small and Medium
1.2.2 building climate resilience 9 1.2.3 relevant council policies and strategies 10 1.3 aims objectives 11 1.3.1 sustainable design aims 11 1.3.2 sustainable design objectives 11 2 sustainable design policy 12 3 implementing a sustainable urban environment 13 3.1 defining the scope of eligible applications 14 3.2 sustainable design assessment in the planning process (sdapp) 15 3.3 .
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