Sun, Feb 16 2025 16 February, 2025

More than 30 Bangladesh renewables projects stall at BPDB signing stage

Bangladesh’s over-reliance on fossil fuel imports will escalate further if dozens of renewable project PPAs are not signed quickly with the BPDB, sources say.

Aerial view of a Bangladeshi solar facility, photographed in August 2023 (Photo: Wiki commons/Ronitsunny)

Nearly three dozen renewable energy projects with around 3,287 MW of generation capacity remain stalled in Bangladesh at the final stage of inking power purchase agreements with state-run Bangladesh Power Development Board (BPDB), market insiders said.

With initial government consent before the August interim government changeover, the private entrepreneurs were about to enter into power purchase agreements (PPAs) with the BPDB, market sources said.

But now the process faces delays, stoking fear of investment loss with the shifting away of their foreign lenders and investors, they added.

Bangladesh’s over-reliance on imports of fossil fuels will escalate further if these projects do not get approval for a quick start, they fear.

Once implemented, they will help the country to ease ever-escalating capacity-payment burdens as all these renewables projects will be implemented under a ‘no electricity, no payment’ mechanism with no capacity payment provisions, the sources said.

The bunch of projects are aimed at keeping in check Bangladesh’s growing over-dependence on the import of expensive fossil fuels like liquefied natural gas (LNG), petroleum products and coal, to ensure the country’s future energy security, a senior Power Division official under the Ministry of Power, Energy and Mineral Resources (MPEMR) told Gas Outlook.

The initial works of these renewable projects got momentum a couple of years back against the backdrop of scarcity of conventional fuels like petroleum products, natural gas, and LNG and their soaring prices on the international market after the outbreak of the Russia-Ukraine War,” he said.

The ongoing Russia-Ukraine war exposed a new dimension of the primary-energy situation across the globe, prompting Bangladesh to expedite the move to increase its share of renewable energy in the overall electricity-output basket, he added.

Bangladesh had to stop purchasing LNG from the spot market and reduce imports of diesel, furnace oil and coal under an austerity measure, resulting in enforcement of load-shedding even every alternate hour, paradoxically in the same year that the government said it had reached 100% electricity connectivity, to cope with the crisis.  

“With the implementation of these new renewable energy plants, Bangladesh will be able to generate electricity from these plants without purchasing any fossil fuel,” he said.

The country is already struggling to foot mounting energy-import bills worth around US$2.20 billion and has sought budgetary support from multilateral donor agencies, including the World Bank, to get fiscal support.

“Foreign direct investments worth around US$4.5 billion will be at risk and initial investments worth around US$200 million will go down the drain with further delaying of these project works,” Tofael Ahmed,the general secretary of the Bangladesh Sustainable and Renewable Energy Association (BSREA), told Gas Outlook.

He said these renewable energy projects were initiated during the previous government and most of the project sponsors obtained letters of intent (LOI) from the Power Division under the MPEMR several months back and were waiting to ink PPAs with the BPDB and implementation agreements with the government.

But the fall of the deposed Sheikh Hasina regime on August 5th pushed these projects into uncertainty as the interim government has decided to halt further negotiations over the projects that were in the process of final approval under the Quick Enhancement of Electricity and Energy Supply (Special Provision) Act 2010.

“We are yet to get any formal letter from the government over the halting of the renewable energy projects that are in the pipeline of implementation,” said Mostafa Al Mahmud,the senior vice president of BSREA.

“But if the government decides to scrap these LOIs, it will be suicidal,” he warned.

The issuance of LOIs to these renewable power plants meant the government intended and agreed to ink final deals with the project sponsors to move forward with these projects, he said.

During the process of obtaining LOIs, private sector entrepreneurs invested around US$200 million from foreign lenders through banking channels, he added.

For full implementation of these projects, foreign direct investments worth around US$4.5 billion from different countries, including China, France, Malaysia, Singapore, South Korea, Germany, Japan, the U.S., the UAE and Saudi Arabia, are in the pipeline, he said.

The renewable energy sponsors also purchased and acquired necessary lands, constituted respective special purpose vehicles, carried out feasibility studies and were at the final stage of financial closures, Mahmud said.

Although these renewable energy projects attained approval during the previous government, due diligence was followed during the process of selecting sponsors, he said.

“The interim government can scrutinise further the selection process to ensure transparency and accountability,” said the BSREA leader, adding that the tariff rates of all the solar power plants are very competitive and below 10 US cents/unit (1 kilowatt-hour).

Besides, half a dozen project sponsors have already completed 100% purchase of required lands as they got the ‘go ahead’ from the previous government.

Mahmud said that all sorts of renewable energy projects are among those that obtained LOIs, adding that 2,942 MW are solar plants, 320 MW are wind-based power plants and the remaining 25 MW are waste-to-energy projects.

Foreign investors have already invested a portion of their committed investments to carry out initial works. They will pour in further funds after the inking of the PPAs and Implementation Agreements, he said.

He notes that if the interim government decides to scrap LOIs, it will send a negative message to foreign investors.

“If new tenders are floated, the foreign investors might not come up again due to erosion of confidence and loss of their invested money,” the BSREA top brass fears. And it will be time-consuming, too.

“To avoid controversy the government can cancel some projects that were awarded on political grounds, including those of former foreign minister Hasan Mahmud, former state minister for shipping Khalid Mahmud Chowdhury and former religion minister Faridul Haque Khan Dulal,” Mahmud suggested.

Once the interim government gives the go-ahead to these projects, most of the project sponsors will be able to implement these within the next two years.

“The interim government can provide a fixed timeframe to the project sponsors to implement these projects with rigorous penalty of their failures to ensure timely implementation of the project works,” he said.

Currently, Bangladesh’s renewable energy generation capacity stands at around 1,379 MW, with 596 MW coming from utility-scale, on-grid projects.

The BSREA already sent a letter to the government’s power and energy adviser seeking his intervention in the issue, saying that if implemented, the renewable power plants could save the government nearly $820 million annually in energy bills.

Energy sector experts also suggest that instead of outright cancellation, the interim government should review the renewable energy projects on a case-by-case basis.

Energy sector experts, however, expressed mixed reactions over the issue.

“As the interim government has already suspended the special law, under which the sponsors of renewable energy projects got LOIs, there should be no scope of going ahead with it and ink deals,” Professor Shamsul Alam, the energy adviser of the Consumers’ Association of Bangladesh, told Gas Outlook.

An open tender should be floated soon to ensure competitiveness and transparency, he said.

“Foreign investors should have been cautious in investing [in] unsolicited projects,” Alam said.

The government can have a second thought over whether to go ahead with the projects after giving them a strict timeframe with subsequent penalties, so that only the genuine ones can move forward, Dr Ijaz Hossain, professor and former dean of engineering at Bangladesh University of Engineering and Technology, said.

“As local sponsors have to arrange land ahead of obtaining LOIs, the government can auction renewable energy projects instead of tendering,” he said

“We know only 6-7 sponsors, among the three dozen, will be able to implement renewable energy projects given the complexities of such projects,” said Hossain.

“Renewable energy projects are already lagging behind in Bangladesh as it has a track record of subsequent failures in the past,” he said, adding: “any negative impression to foreign investors will only push the sector behind.”

“Currently we are suffering from load shedding of around 2,000-3,000 MW during day time, which can be mitigated through solar power plants easily,” he suggested.

Currently, the government has been running ‘expensive’ furnace-oil fired power plants to ease daytime load-shedding at the cost of around BDT 20/ unit (1 kilowatt-hour). But easing the crisis with solar power plants will cost around BDT 12/ unit given the current tariff structures, he added.

“It is high time Bangladesh accelerated renewable energy capacity to develop an energy mix that will be economical, less import-dependent, and less fragile,” said the lead energy analyst for Bangladesh at the Institute for Energy Economics and Financial Analysis, Shafiqul Alam.

To expand renewable energy, the government should provide a timeline to implement projects that investors can follow.

It will also help to rectify a target of ensuring 10% of overall electricity generation from renewable energy by 2022, which was set under Bangladesh’s Renewable Energy Policy 2008.

Bangladesh will further be able to go green and achieve the target of generating 40% of its power from clean energy by 2041 as set in the country’s Integrated Energy and Power Master Plan 2023.

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