Photo: Bonik Barta In March last year, tenders were invited for a
2,000-megawatt solar power plant project in India. The state-owned Solar Energy
Corporation of India (SECI) issued the tender. Six companies won the contract
to build the power plant by participating in the tender. The approved price for
electricity from the plant is set at 3 cents per kilowatt-hour, which amounts
to 2.60 in Indian currency. With the exchange rate at BDT 119.48 per dollar,
the electricity tariff translates to BDT 3.58. The low price of the electricity
purchase contract has sparked considerable discussion in the country. SECI will
buy electricity from this power plant for 25 years based on a 'build-own-operate'
model. Recently approved power plants in the country have also set tariffs
ranging from 3 to 4.5 cents per kilowatt-hour.
This year, Pakistan, a neighboring country of India, has
announced incentives to reduce the tariff for solar power in the private
sector. The benchmark proposed for solar electricity is set at 5 cents per
kilowatt-hour. This decision aims to alleviate pressure on coal-based power
plants that rely on imports. An analysis of the tariffs for several recently
approved power plants in Pakistan revealed that purchase agreements for solar
power plants ranging from 500 to 2,500 megawatts have been made at prices
between a maximum of 7 cents and a minimum of 3.5 cents. In Bangladeshi
currency, the minimum price for each kilowatt of electricity is BDT 3.82
against the dollar. Pakistan aims to reduce the cost of solar power further in
the coming days to create a competitive market, provide incentives, and move
away from import-dependent energy sources.
China currently holds the top position in electricity
generation using solar power. As of August this year, the country has developed
610,000 megawatts of solar power capacity, which accounts for 42 percent of the
total solar capacity in the world. The United States ranks second on this list.
China leads in the production capacity of solar panels, inverters, and battery
storage compared to other countries. It has even surpassed the U.S. in the
global competition for solar technology. By reducing the costs of technology
and raw materials in the solar sector, the average price of producing
electricity is about 4.5 cents per kilowatt, which is approximately BDT 5.38.
However, experts point out that China is significantly ahead of South Asian
countries in terms of solar capacity, technology, workforce, and economic
capability.
In Bangladesh, contracts for electricity purchases are
being made at 9 to 10 cents per kilowatt. The minimum price in Bangladeshi
currency is BDT 10.75. However, due to variations in power purchase agreements
with different companies, prices fluctuate, ranging from a minimum of BDT 10.75
to a maximum of BDT 13 per kilowatt.
On February 29 this year, the Cabinet Committee on Public
Procurement approved a proposal to construct a 50-megawatt power plant in the
private sector. This plant will be built in the Bil Sulangi area of the
Chhollisha Union in Netrokona district. Paragon Bangladesh, Raizen Energy U.K.,
and the Center for Renewable Energy will construct this power plant jointly.
Over 20 years, the cost to purchase electricity from the plant will be 9 cents
per kilowatt-hour, which amounts to BDT 10.75 in Bangladeshi currency at the
current exchange rate.
On March 14 of this year, approvals were granted for the
establishment of three solar power plants with capacities of 100 megawatts
(A.C.) each: one in Rupsa Upazila of Khulna district, one in Rajnagar Upazila
of Moulvibazar district, and one in Goalanda Upazila of Rajbari district.
Electricity from these three plants will be purchased at BDT 10.92 per
kilowatt-hour on a "no electricity, no payment" basis for 20 years.
For solar power plants approved last year, the Bangladesh
Power Development Board (BPDB) will incur costs ranging from a minimum of BDT
11 to a maximum of BDT 14 per kilowatt. Despite having no fuel costs, the
prices for these power plants have been set primarily based on negotiations
between private companies and the BPDB. Industry stakeholders have raised
concerns about the high costs associated with these power plants, built under
special legislation for the rapid supply of electricity and fuel.
According to them, while neighboring countries have
reduced the production costs of solar electricity, Bangladesh is still signing
power purchase agreements with private power plants at prices several times
higher. This cost should be brought down. To achieve this, government
incentives, a competitive market for power plant construction, support for
transmission infrastructure development, and assistance with land acquisition
are essential. If these measures are taken, the price of solar electricity can
be halved compared to the current rates.
Shafiqul Alam, the chief energy analyst at the Institute
for Energy Economics and Financial Analysis (IEEFA), told Bonik Barta,
"The government can establish a benchmark for costs in grid-scale
renewable electricity, which would allow the BPDB to negotiate and reduce the
tariff for renewable energy. A competitive market should also be created in the
power purchase agreements for constructing power plants. If this is done, it
will create a significant opportunity for tariff reduction. The government can
also facilitate land acquisition for renewable energy projects. By setting up
renewable energy plants based on district-level allocation rather than
confining them to a specific area, significant advantages in tariff rates could
be achieved."
Energy experts have identified several reasons why the
price of solar electricity in Bangladesh is higher than in neighboring
countries. According to their arguments, several factors contribute to the
potential reduction of solar electricity prices. Among these are variations in
solar radiation, exemptions from tariffs and taxes on solar energy, land costs,
availability, and the challenges related to transmission infrastructure.
Neighboring country India has made significant progress in these areas, which
has led to lower solar electricity prices there. If similar opportunities can
be created in Bangladesh, bringing the cost of solar electricity down to a more
reasonable level would be possible.
In 2021, a roadmap for obtaining electricity from
renewable energy, including solar power, was created. This roadmap, funded by
UNDP, has a draft submitted to the Ministry of Power, Energy, and Mineral
Resources. It outlines which regions in the country would incur lower costs for
constructing solar power plants and identifies areas with the greatest
potential for solar energy. However, this plan has not yet been approved.
The state-owned Sustainable and Renewable Energy
Development Authority (SREDA) is engaged in various research, development,
training, and promotion activities in the renewable energy sector. When
inquiring about solar electricity production costs, a senior official from
SREDA, speaking anonymously, told Bonik Barta, "The primary obstacle to
establishing solar power in the country is the lack of available land. Where
land is available, there are often various complexities with paperwork.
Additionally, in abandoned areas, there is a lack of transmission
infrastructure. A significant portion of solar projects in India has been
constructed in Rajasthan or desert regions.
Moreover, India produces a lot of its solar equipment, whereas Bangladesh depends entirely on imports. There is also much more government support for investment in this sector in India. Although Bangladesh is progressing in this regard, the path is still not smooth. When these factors are combined, it results in higher production costs in Bangladesh. However, these costs have been significantly reduced over the past decade."
