Solar power cheaper than oil and coal, focus shifts to solar
Mohiuddin
Dhaka
Solar panels installed on the roof of Jorargonj Bouddha High School in Mirsarai, Chattogram Prothom Alo
A 100-megawatt solar power plant was commissioned in Bhabanipur, Pabna, in 2024. The plant was built on 400 acres of land on the vast sandy char of the Padma River. During the day, the plant supplies solar-generated electricity to the national grid.
As rising global prices of fuel oil and gas and supply shortages have made it increasingly difficult and costly to operate the country’s fossil fuel-based power plants, the solar power plant on the Padma char is supplying electricity to people. Solar power does not require fuel imports using foreign currency, nor does it cause air pollution. It is also relatively cheaper.
The Bhabanipur solar power plant was developed by Paramount Group. Under a 20-year power purchase agreement signed with the company in 2021, the price of electricity is 11.5 US cents per unit, equivalent to around Tk 13 at present. By contrast, the cost of electricity from furnace oil-fired power plants is more than Tk 28 per unit. The cost of coal-fired power is around Tk 15 per unit. Coal also carries the risk of environmental pollution.
On the other hand, during the tenure of the Awami League government, which was ousted in the July mass uprising, approvals for solar power plants were granted without competitive tenders. Equipment for solar power plants was also more expensive at the time.
As a result, electricity prices were higher. After the fall of the Awami League government, the interim government invited tenders and was able to sign contracts for solar power at less than Tk 8 per unit. This shows that solar power is cheaper than electricity generated from coal and oil.
Despite these advantages, Bangladesh remains behind in renewable energy. During the Awami League government’s 15-and-a-half-year rule, one power plant after another was built relying on fossil fuels.
Renewable energy, however, did not receive sufficient attention. Towards the end of the Awami League government’s tenure, some greater emphasis was placed on solar power amid growing difficulties in the sector.
Between 2010 and 2023, around $30 billion was invested in the power sector, equivalent to Tk 3.7 trillion at current prices. Only 3.3 per cent of that investment went to renewable energy.
According to data from the Bangladesh Power Development Board (PDB), contracts were signed for the construction of a total of 136 power plants during the Awami League government’s tenure, most of them based on fossil fuels.
The country’s total power generation capacity now stands at 28,347 megawatts.
Of this, 19 power plants based on renewable energy sources—solar, hydro and wind—have a combined generation capacity of 1,089 megawatts.
Only 4 per cent of the total electricity connected to the grid comes from renewable sources. PDB data show that renewable energy accounted for 2.58 per cent of power generation capacity in fiscal year 2012–13.
However, according to data from the Sustainable and Renewable Energy Development Authority (SREDA), many companies and organisations generate electricity from rooftop solar systems and feed it into the grid.
As a result, a total of 1,492 megawatts of electricity from renewable sources is currently connected to the grid. Even taking this figure into account, renewable energy accounts for only 5 per cent of total power generation capacity.
The target was to generate 10 per cent of the country’s total electricity from renewable sources by 2021. That target was not achieved. The deadline was later extended to 2025, but that target was also missed because of inadequate investment in the sector.
Between 2010 and 2023, around $30 billion was invested in the power sector, equivalent to Tk 3.7 trillion at current prices. Only 3.3 per cent of that investment went to renewable energy.
The new BNP government is stepping up efforts to increase solar power generation and is offering various incentives to the sector.
State Minister for Power, Energy and Mineral Resources Anindya Islam Amit told Prothom Alo that the government is giving the highest priority to renewable energy. He said rooftop solar was being prioritised to rapidly increase power generation before next summer, so that people would not face the kind of hardship they experienced last summer.
Alongside rooftop solar, initiatives have been taken to build power plants on government land through partnerships. He said there is strong interest among both domestic and foreign investors. The government has already approved a 442-megawatt solar power plant at the site designated for a coal-fired power plant in Rampal, Bagerhat.
Solar power gets a boost amid crisis
The Awami League government built one power plant after another, relying on imported gas, coal and fuel oil. After the Russia-Ukraine war began in 2022, energy prices in the global market rose sharply.
The target was to generate 10 per cent of the country’s total electricity from renewable sources by 2021. That target was not achieved. The deadline was later extended to 2025, but that target was also missed because of inadequate investment in the sector.
Foreign exchange reserves continued to decline as the country spent more to import fuel. The price of the dollar rose, as did the prices of electricity, gas and fuel oil in Bangladesh.
Despite having many power plants, people then had to endure load-shedding. In such circumstances, the government of the time was forced to place greater emphasis on renewable energy. Towards the end of the Awami League government’s tenure, consent letters were issued for 37 solar power plants.
In the process of building power plants, the government first issues a consent letter to an investor, followed by a power purchase agreement. The consent given to the 37 power plants towards the end of the Awami League government’s tenure was cancelled during the interim government’s term.
The stated reason was that the Awami League government had issued the consent letters without inviting tenders under the Special Provisions Act for the Quick Enhancement of Electricity and Energy Supply. The High Court repealed the special powers law on 14 November 2024. As a result, there was no scope to sign agreements with those plants.
On 18 November 2024, the Bangladesh Power Development Board (PDB) informed 31 companies by letter that it would not purchase any electricity from them. Between December and January, 15 companies filed 11 writ petitions with the High Court challenging the government decision. Meanwhile, the interim government invited tenders in several rounds and signed agreements for 11 solar power plants—seven on 25 January and four on 29 January. These plants have a combined generation capacity of 818 megawatts.
Since the new BNP government took office, tenders have so far been invited for the construction of 10 solar power plants. However, the deadline for submitting bids has been extended several times. As a result, it is not known how many bids have been submitted or which companies have expressed interest.
During the Awami League government’s tenure, sovereign guarantees were provided for foreign loans taken for power plants. The interim government scrapped the practice. Sources at the PDB and private power plants say foreign lenders are reluctant to provide loans without sovereign guarantees. There have also been difficulties in purchasing land for the past two years. The companies that have recently secured power plant projects have limited experience.
In addition, imports of power plant equipment have been disrupted by the war in the Middle East. Taken together, these factors mean there is little prospect of obtaining electricity from the newly contracted solar power plants within the next year or two.
Confidence Group won contracts to build three solar power plants after participating in tenders during the interim government’s tenure. Group Chairman Imran Karim told Prothom Alo that some problems had arisen over land purchases and bank financing. It could take until mid-2028 to begin generation. However, he said the new government was providing certain assurances for the projects, which would make financing easier.
According to PDB data, work is currently under way on 19 renewable energy-based power plants in the private sector, with a combined generation capacity of 1,042 megawatts. Six solar power plants are under construction in the public sector, with a combined capacity of 110 megawatts.
An agreement for one of these plants, with a capacity of 100 megawatts, was signed in 2023. During the interim government’s tenure, agreements were signed for five publicly owned plants with a combined solar generation capacity of 10 megawatts. In addition, a consent letter has been issued for a 100-megawatt solar power plant in Cox’s Bazar, and the agreement is under process.
Investors left in a difficult position
A report published by the Centre for Policy Dialogue (CPD) in April said that if the 31 solar power plants whose consent letters were cancelled in the private sector had been implemented, they would have generated 3,287 megawatts of electricity and attracted $6 billion in investment. Fifteen of the companies had already purchased land. However, there were questions over the price at which electricity from those plants would be sold.
Sources in the Power Division said the average price of solar power under the 10 tenders conducted during the interim government’s tenure was 21 per cent lower than that of the power plants whose consent letters were cancelled.
The average price had previously been 10.47 US cents per unit, or around Tk 13. Following the tenders, it fell to an average of 8.27 cents, or slightly more than Tk 10. One agreement was signed at as low as 7.49 cents per unit, or slightly more than Tk 9.
After the consent letters were cancelled, Chinese companies also proposed renegotiating the price of electricity. The government, however, has yet to consider the proposal. The Ministry of Power did form a committee in May to review the claims of the cancelled solar and renewable energy projects. Little progress has been made by the committee so far.
People familiar with the matter say some of the cancelled power plants could be contracted after negotiating lower prices. This would make it possible to obtain solar power quickly.
For example, two plants—a 50-megawatt facility in Dimla, Nilphamari, and a 100-megawatt facility in Dinajpur—could begin commercial generation within next year if necessary. Everything needed for the two plants had already been completed, and even draft power purchase agreements had been prepared. However, work came to a halt after their consent letters were cancelled.
Sources said the cancelled power plants involved investment from several countries. One of the investors was among China’s top five power companies. It had received consent for two power plants with a combined capacity of 150 megawatts. In addition, agreements for several more plants with a combined capacity of 600 megawatts were at an advanced stage of negotiation, including a 200-megawatt floating solar power plant. Some companies, unable to invest in Bangladesh, have instead invested in the Philippines and Vietnam over the past two years. The Chinese company is also working on a $7 billion investment plan in Indonesia.
Several officials associated with the cancelled power plants told Prothom Alo on condition of anonymity that if fresh tenders were invited, the plants would not begin generation for another five years.
Instead, they said, the government could quickly scrutinise the cancelled projects and allow genuine investors whose plants had made sufficient progress to proceed.
On the matter, State Minister Anindya Islam Amit said some of the projects whose consent letters had been cancelled had already made progress. He said the government was reviewing which power plants had genuinely secured projects in compliance with the rules and made investments, with a view to bringing them into generation.
Experiences of Three Countries
In 2006, neighbouring India brought renewable energy under a separate institutional framework by establishing the Ministry of New and Renewable Energy.
According to a statement issued by the country’s Press Information Bureau (PIB) on 8 April, renewable energy meets 51.5 per cent of India’s 203 gigawatts of electricity demand.
Vietnam had only 86 megawatts of solar power capacity in 2018. By the end of 2025, that figure had risen to more than 19,000 megawatts. Pakistan has also made significant progress in solar power. As electricity prices rose sharply in the country, many people began installing rooftop solar systems.
Grid-connected rooftop solar capacity has surpassed 6,000 megawatts. Various sources, however, say the actual amount of rooftop solar power is several times higher, as much of it is not connected to the grid and is used directly by consumers.
Potential in Bangladesh
The current government has announced a target of generating 10,000 megawatts of electricity from renewable energy by 2030. People familiar with the sector say the target is achievable. Import duties on equipment for solar power plants have already been reduced to 1 per cent.
The government has also introduced substantial incentives for rooftop solar power. It will purchase rooftop electricity at Tk 10.50 per unit, creating considerable interest in the market. Alongside rooftop systems, the government now needs to accelerate the construction of large-scale solar power plants on land. It has planned to allocate government land for solar power plants through public-private partnerships.
Experts say electricity can be generated from renewable sources at a lower cost than from nuclear power plants. Building a nuclear power plant can take 10 to 12 years, whereas a solar power plant can be built within one and a half years.
Land acquisition, however, remains a major challenge. Bangladesh has around 3.6 million acres of khas land and 1.8 million acres of non-agricultural land. Of this land, there is an opportunity to use 30,000 acres of char land to generate 10,000 megawatts of solar power. The PDB also owns around 6,000 acres of land that could be used to build solar power plants.
The cost of generating solar power is also declining. An investment of around $35 million is required to build a 50-megawatt power plant. The investment can be recovered within six to seven years.
Khondaker Golam Moazzem, president of the Knowledge Hub Institute, told Prothom Alo that the government’s efforts to promote small-scale solar power generation, starting with rooftop systems, were encouraging.
Some private-sector companies are also generating solar power on the rooftops of industrial facilities. However, he said, the construction of large-scale solar power plants needs to be accelerated.
He said the government should quickly submit the report of the committee formed to evaluate the power plants cancelled by the interim government. If necessary, he added, appropriate foreign companies could be given an opportunity to proceed after negotiating an agreement on electricity prices.
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