Instead of giving up the letters of intent for 31 renewable energy projects with a total capacity of 2,678 MW, the government can renegotiate the power tariff of these projects and secure the most cost-effective offers in the shortest possible time.

Industry experts said the tariff offered by these solar projects ranges between 9.7 cents and 10.6 cents per kilowatt hour. These offers were made more than a year ago – and in that time the price of solar modules has marked a significant drop of 20%. Solar modules account for 35% of project costs.

This created the possibility for the government to renegotiate the price down by a minimum of 1 cent and a maximum of 1.5 cents. This would bring the price of solar power to a record low for Bangladesh.

The government decided last month to scrap the letters of intent of these renewable projects because they were based on unsolicited negotiations. The energy advisor told TBS that the government will opt for fresh and open bidding. This is done to ensure fairness and competition.

While this reason for cancellation is fair – the truth is that holding competitive and fair tenders in the infrastructure sector in Bangladesh is extremely difficult and time-consuming, especially when a project requires the acquisition of land.

In addition, when the government issued Letters of Intent (LOI), power companies started investing in projects by acquiring land.

Land acquisition and development contribute more than 12% of the project cost. “But it can be significantly higher,” said one solar project manager.

“Once the authorities declare where they want to build a power project, local people and politicians will instantly move to make any land acquisition difficult by increasing land prices several times,” he pointed out.

This makes the acquisition of project land many times more expensive and very difficult.

If the main aim is to ensure fair and cheaper electricity tariff, open bidding for such projects in the prevailing social behavior may not succeed, an investor said.

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

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

In addition, most of these projects are to be built on barren land or on land that is suitable for a culture located mostly on the banks of rivers that need to be significantly developed. Such activities would have an immediate positive impact on local economies.

Another good thing is that some of these energy projects have a partial ability to store energy. Typically, solar power projects operate during daylight hours. The new technology allows large-scale batteries to store energy during the day to be supplied at night.

Unlike in the past, the new solar plants encourage growing a crop in a year. Therefore, land use is more productive than before.

In line with the rest of the world, Bangladesh has set a target of providing 15% of its energy from renewable resources by 2030 and 40% by 2040.

But so far, the achievements are only around 3% – which is why the government should look at the ongoing projects in a different light.

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

Why is solar energy so expensive in Bangladesh?

When solar power in India costs only around 3 cents, the existing ones in Bangladesh cost between 11 and 15 cents. Solar energy in Bangladesh costs much more than gas, coal or sulfur-based oil.

For India and China, generating solar power is much cheaper because they have their own technology and a 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 primarily caused by challenges in acquiring land. The process involves finding suitable land, obtaining necessary permissions from the Deputy Commissioner’s (DC) office – which can sometimes involve bribery – and then transferring ownership of the land to the power company, all of which consume significant time.

Until the land is secured, the power company cannot sign the power purchase agreement (PPA) under the LOI. And without all this, the company cannot arrange the finances.

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

Again, the project lands in Bangladesh are located on low-lying riverbanks – which must be developed using imported raw materials. While India and China have suitable stones and other civil construction materials produced locally.

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

This year, the government also introduced a 5% tax on solar energy equipment. In addition, there is a 6% withholding tax on solar projects, deducted at source by the power buyer (power development corporation) when making payments for the purchased electricity.

While such initiatives should ideally be supported with zero taxation, these measures ultimately increase the overall cost of energy production.