Renewable energy sector lags far behind

For more than a decade, the government has been talking about prioritising electricity generation from renewable energy. Targets have been increased under different plans, but power generation has not increased accordingly. As a result, targets have repeatedly been pushed back. The goal was to generate 10 per cent of electricity from renewable energy by 2021, which was not achieved. Another target was set up to 2025. So far, the achievement stands at 4.62 per cent.

According to data from the Power Division, current power generation capacity stands at 28,616 megawatts. Of this, power generation capacity from renewable energy is 1,314 megawatts. Not all of this is connected to the national grid; 93 megawatts remain off-grid. Of the total renewable capacity, 78 per cent comes from solar power, nearly 5 per cent from wind power, and 17 per cent from hydropower.

Sector stakeholders say that solar power is essentially the main pillar of renewable electricity generation. Investment constraints and land scarcity are cited as reasons for failing to meet targets, even though there is scope to increase solar power generation using rooftops alone. Although targets are set, there has been little visible initiative in implementation. As a result, green energy-based power generation is progressing slowly.

Bangladesh Power Development Board (BPDB) data show that renewable energy accounted for 2.58 per cent of power generation capacity in 2012–13. From that time onward, overall power generation capacity increased every year, while renewable energy-based generation declined until the 2019–20 fiscal year. It rose to 2 per cent in FY 2021–22 and increased to 4 per cent in FY 2024–25. Over the past 12 years, renewable energy-based power generation capacity has increased by only 2.16 per cent. Between 2010 and 2023, around USD 30 billion was invested in the power sector, of which only 3.3 per cent went into renewable energy.

Relying on fossil fuels, the previous Awami League government constructed power plants one after another. The power sector advanced under master plans. Over one and a half decades of that government, power generation capacity increased more than fivefold. According to the 2016 master plan, renewable energy was supposed to account for 10 per cent of total power generation capacity by 2021. However, a new master plan prepared in 2023 set targets of 10 per cent by 2030 and 40 per cent by 2050. Yet, different documents show inconsistencies in renewable energy targets.

The government’s Eighth Five-Year Plan stated that renewable energy-based power generation capacity would reach 10 per cent by 2025. The Bangladesh Climate Prosperity Plan prepared in 2022 set targets of 30 per cent by 2030 and 100 per cent by 2050. Experts had described these plans of the previous government as ambitious.

However, the interim government has made changes to these plans. It has cancelled the power purchase agreements for 37 power plants approved by the previous government. Of these, 31 were private-sector projects involving foreign investment. A renewable energy policy was formulated last year, setting a target of 30 per cent renewable energy-based power generation by 2041 and 20 per cent by 2030. However, uncertainty remains.

The private research organisation Centre for Policy Dialogue (CPD) conducted a survey on 105 companies involved in renewable energy-based power generation. Its research report, published on 1 December, states that tenders were invited in four phases to build 55 solar power plants. Of these, 22 received only one bid each, while 13 tenders received no bids at all. Overall, the average number of bids per tender was 1.4, indicating a lack of competition.

Power, Energy and Mineral Resources Adviser Muhammad Fouzul Kabir Khan told Prothom Alo that during the previous government’s tenure, fossil fuel capacity was increased by paying capacity charges, while little interest was shown in small-scale renewable energy. Now, standards have been fixed for determining solar power generation costs, leaving no scope for extra profit or corruption. As a result, engineers in the power division are not encouraged, and investors also hold back. Businesspeople who signed high-priced power plant contracts during the previous government have also obstructed the process. There are obstacles at every step. Despite this, maximum efforts have been made to develop renewable energy within a short time. Gradually, renewable energy use will increase.

Renewable electricity generation in Bangladesh began with hydropower at Kaptai. The construction of the hydropower plant started in 1957 in Kaptai, Rangamati, marking the beginning of renewable energy use in the country. The plant’s capacity was expanded in 1988. However, despite a capacity of 210 megawatts, current production is less than 100 megawatts.

In 1996, a solar home system installation programme began. Solar equipment was installed in homes in areas without electricity access. The Sustainable and Renewable Energy Development Authority (SREDA) claims that nearly six million solar home systems have been installed so far. However, as the government has since achieved nationwide electrification, a large portion of these systems has become unused and non-functional. No agency has accurate data on this.

Research on wind power generation has been conducted in 13 locations. Two wind power plants have been built in Cox’s Bazar. The first wind power plant was constructed in Feni in 2005, with a capacity of less than 1 megawatt; it has been permanently shut down for several years. In 2008, a 1-megawatt wind power plant was built in Cox’s Bazar. Another 60-megawatt wind power plant in the same area began production last year. In addition, a 2-megawatt wind power plant has been built in Sirajganj. However, experts see greater potential for solar power than hydropower and wind power in Bangladesh.

Power Division officials say that India and other countries have multiple renewable energy sources. They maintain grid balance using solar power during the day and hydropower and wind power after evening. In Bangladesh, solar power is the main viable option, but land scarcity is a major problem.

One of the key components of solar power generation is the solar panel, which absorbs sunlight and heat to produce electricity. These panels are imported, though limited domestic production has begun. Solar power is a natural source of electricity and is therefore environmentally friendly, with increasing global use. Once installed, there is no additional fuel cost. Experts believe solar power could be a key tool in mitigating climate change.

BPDB data show that contracts were signed to build 136 power plants during the previous Awami League government. Of these, 25 were for renewable energy-based generation, with a combined capacity of 1,104 megawatts. Currently, 18 renewable energy-based power plants are operational, with a total capacity of 1,059 megawatts. In addition, 12 power plants with a combined capacity of 358 megawatts are under construction.

During the previous government, preliminary approval was given for another 31 power plants in the private sector with a combined capacity of 2,595 megawatts. These approvals were granted without tenders under the Quick Enhancement of Electricity and Energy Supply (Special Provisions) Act, known as the indemnity law. The interim government repealed this law and invited fresh tenders. In the first week of December, the Cabinet Committee approved bid proposals for 12 power plants. These are now awaiting power purchase agreements with BPDB. Government sources say high-cost power projects were cancelled, and the prices obtained through tenders are on average 21 per cent lower than before.

A research report published in March 2024 by the Institute for Energy Economics and Financial Analysis (IEEFA) states that 56 megawatts of rooftop solar power were generated between 2012 and January 2020. This has now increased to 160 megawatts. There is significant potential for large-scale rooftop solar generation in Bangladesh. If implemented, it could allow the government to shut down oil-fired power plants and save several millions of taka annually. Other countries have demonstrated such examples.

Experts say high import duties on solar equipment are a major obstacle. In addition, funds allocated by the central bank for investment in this sector are insufficient. However, global prices of solar equipment are declining, which could encourage investment.

The government has set a target of generating 2,000 to 3,000 megawatts of electricity using rooftops of all government installations nationwide. In the first phase, six departments under three ministries have joined to generate around 1,500 megawatts. Rooftops of educational institutions and hospitals will be used for this purpose. On 21 October, the Power Division of the Ministry of Power, Energy and Mineral Resources signed separate memorandums of understanding with six departments: the Secondary and Higher Education Division, Technical and Madrasah Education Division, Primary and Mass Education Division, Health Services Division, and Health Education and Family Welfare Division.

Six power distribution companies will implement the rooftop solar project. Tenders have been invited to generate 1,454.61 megawatts at 46,854 institutions, but progress has been limited. Contracts were supposed to be signed by 10 December after completing the tender process.

The Rural Electrification Board (REB), the largest distribution entity, is expected to implement over 1,000 megawatts. A senior REB official said 20 megawatts would be generated using REB and cooperative-owned buildings nationwide. In the first phase, work has begun on tenders for eight packages, while evaluations are underway for six more. In addition, seven more development project proposals (DPPs) have been approved, and tenders will be invited soon. Separate tender processes are also underway for rooftop solar generation on other government buildings.

Power division sources say that some amendments were made to the Public Procurement Rules, necessitating tender revisions. As a result, rooftop solar implementation has been delayed, and the timeline has been extended until June.

In Sri Lanka, 75 per cent of electricity comes from renewable energy, while in India it is 40 per cent. Bangladesh has failed to keep pace. Solar power generation costs in Bangladesh are four times higher than in neighbouring countries.

A 10-year tax exemption for renewable energy-based power generation was announced last November. In addition, a notification was issued exempting a 5 per cent advance VAT on imported materials based on certification from the power division. Companies whose commercial production starts between 1 July 2025 and 30 June 2030 will receive these benefits. Instead of five years, they will receive a 100 per cent tax exemption for 10 years after starting commercial production, followed by 50 per cent tax for the next three years and 25 per cent for the subsequent two years.

Demand for solar power is rising in homes, offices, and factories as people seek to reduce recurring costs. Some are now manufacturing solar equipment domestically. Stakeholders say the solar equipment market in Bangladesh is currently worth Tk 12 billion annually, with projected growth of 40 per cent by 2030. Domestic companies supply 30 per cent of the market, while the rest is imported. There are also allegations of low-quality equipment being sold.

Experts believe the expansion of solar power is hindered by the lack of a business-friendly environment and high import duties. Initially, duties and taxes ranged from 37 to 56 per cent, later reduced in phases. Currently, duties and taxes stand at 28 to 29 per cent, according to the Bangladesh Sustainable and Renewable Energy Association (BSREA). Its members say achieving renewable energy targets requires USD 3 billion in annual investment, which is not possible without foreign investment. Cancelling investment in 31 power plants has reduced foreign interest.

BSREA President Mostafa Mahmud told Prothom Alo that tax exemptions apply only after production begins, but the government is not allowing businesses to start. Renewable energy targets exist only on paper and are not implementation-oriented. Without safeguards, investment will not come, and renewable energy will not increase; instead, it could decline. He added that cancelling power plants and retendering did not reduce costs, as global panel prices have already fallen, and some plants could have begun production if not cancelled.

A research report published on 24 December by Transparency International Bangladesh (TIB) revealed corruption and irregularities in the solar power sector. TIB said excess costs of Tk 29.27 billion were incurred in six solar power projects during the previous government. Irregularities were found in land purchase, leasing, and acquisition. No international standards were followed in price determination, and power purchase agreements were signed in dollars, increasing financial pressure due to exchange rate hikes.

TIB’s research also found delays in approving renewable energy project proposals. Due to failure to implement projects on time, deadlines were extended repeatedly—on average by 908 days, with a maximum extension of 1,402 days. During the current government’s tenure, tender deadlines for each package were extended one to five times, and several packages will need to be retendered.

CPD says that countries which successfully developed renewable energy took dedicated initiatives, prioritising the sector, whereas in Bangladesh renewable planning was embedded within a fossil fuel-based framework. For energy security, cheaper fuels were prioritised, leading to reliance on gas, furnace oil, and coal. Power generation capacity has now exceeded demand by 40 per cent, reducing interest in higher-cost renewable energy. Although renewable energy costs have now fallen, expanding renewables amid excess capacity risks further overcapacity.

CPD Research Director Khondaker Golam Moazzem Hossain told Prothom Alo that merely setting targets does not ensure implementation. Renewable energy has lagged due to several factors: lack of policy support to meet targets, prioritisation of cheap fuels for energy security, high import duties and taxes, and the absence of dedicated government initiatives. He said the current government has begun creating incentives, indicating that expansion could have started much earlier.