Instead of abandoning the letters of intent for 31 renewable energy projects totaling 2,678 MW of capacity, the government can renegotiate the electricity tariffs of these projects and conclude the most cost-effective deals as soon as possible .

Industry insiders said the tariff offered by these solar projects is between 9.7 US cents and 10.6 US cents per kilowatt hour. These offers were made over a year ago – and during this period, the price of solar modules has seen a significant drop of 20%. Solar modules represent 35% of project costs.

This allowed the government to renegotiate the price down by at least 1 cent and a maximum of 1.5 cents. This would put the price of solar energy at an all-time high for Bangladesh.

The government decided last month to abandon letters of intent for these renewable projects because they were based on unsolicited negotiations. The energy adviser told TBS the government would opt for a new open tender. This is done to ensure fairness and competition.

Even though this reason for cancellation is fair, the truth is that holding competitive and fair tenders in Bangladesh’s infrastructure sector is extremely difficult and time consuming, especially when a project requires the purchase of land.

Furthermore, when the government issued letters of intent (LOIs), power companies started investing in the projects by purchasing land.

The purchase of the land and its development contribute to more than 12% of the project cost. “But it can be much higher,” said a solar project manager.

“Once the authorities declare where they want to build a power project, local goons and politicians will immediately take steps to make it difficult to purchase land by increasing the price of land several times,” he said. underlines.

This makes purchasing project land several times more expensive and very difficult.

If the main objective is to ensure a fair and cheaper electricity tariff, an open tender for such projects, given current social behavior, may not succeed, said an investor.

Bangladesh is already well behind its green goals. The country spends about $5 billion importing primary fuel to run its gas, coal and oil power plants. With the dollar crisis still hitting the economy, the government has huge arrears in the energy sector.

But once we build a solar or wind power project, the country can produce electricity without depending on any fuel imports. According to solar energy producers, the 31 energy projects in question can replace $820 million worth of fossil fuel imports while creating direct jobs for 10,000 people.

Furthermore, most of these projects are expected to be built on barren lands or lands suitable for cultivation located mainly on the banks of rivers which need to be significantly developed. Such activities would have an immediate positive impact on local economies.

Another positive aspect is that some of these energy projects have partial electricity storage capacity. Typically, solar power projects operate in daylight. New technology allows large-scale batteries to store daytime energy to provide it at night.

Unlike in the past, new solar power plants encourage growing one crop in one year. Land use is therefore more productive than before.

Like the rest of the world, Bangladesh has set a goal of ensuring that 15% of its electricity comes from renewable resources by 2030 and 40% by 2040.

But so far, the achievements are around only 3% – this is also the reason why the government should look at the ongoing projects from another perspective.

In the long term, as part of the climate goal, all countries in the world should switch to renewable energy and abandon fossil fuels.

Why is solar energy in Bangladesh so expensive?

While Indian solar costs around 3 cents, Bangladesh’s costs between 11 and 15 cents. Bangladeshi solar energy costs much more than energy from gas, coal or sour oil.

For India and China, solar power generation is much cheaper because these countries have their own technology and low-cost financing system. The average time to complete a 50 MW solar power project in India and China is between nine and 12 months.

However, in Bangladesh, similar projects usually take three to four years. These delays are mainly caused by difficulties in land acquisition. The process involves finding suitable land, obtaining the necessary permissions from the deputy commissioner’s (DC) office – which can sometimes involve bribes – and then transferring ownership of the land to the power company , which takes a lot of time.

Until the land is insured, the power company cannot sign the power purchase agreement (PPA) as per its letter of intent. And without all this, the company cannot organize its finances.

Such obstacles are absent in India or China, where they own a lot of barren land and have different types of lease agreements for land use.

Again, the lands of the Bangladeshi projects are located on low-lying river banks – which have to be developed using imported raw materials. While India and China have adequate locally produced stones and other civil construction materials.

In Bangladesh, power developers use high poles to elevate solar modules to avoid flood damage. This also adds additional costs.

This year, the government also introduced a 5% tax on solar equipment. Additionally, there is a 6% withholding tax on solar projects, which is withheld by the power buyer (the power development company) when paying for the purchased electricity.

Although such initiatives should ideally be supported by zero taxation, these measures ultimately increase the overall cost of electricity production.