By Vandana Gombar, BloombergNEF. This article first appeared on the Bloomberg Terminal.
Bangladesh will reach the 1GW renewables mark in 2021, with solar in the lead. Solar photovoltaics, notably the rooftop variety, are also likely to dominate the country’s next wave of green power plants.
“At the end of the day, it is the economics which determine the expansion of any technology,” Mohammad Alauddin, chairman of the Sustainable and Renewable Energy Development Authority or Sreda, said in an interview.
Solar is one of the most cost-competitive sources of power in the country. For industrial users, rooftop solar costs a third or less than the grid tariff, which can be as high as 12 U.S. cents per unit.
“We believe, in the short run, it is possible to generate at least 500 megawatts from rooftop solar,” said Alauddin.
Utility-scale solar is constrained by land availability in the densely populated country. The option of floating solar is being explored, as well as that of other technologies like wind, and waste-to-energy. Hydro potential is limited – the one plant of 230MW is counted in the renewables category.
Bangladesh aimed for 10% generation from renewables by 2020 originally, but is only likely to reach that target by 2025. The current share is about 3%.
There may be a change in the targets, and ambition, as the Power Sector Master Plan of 2016 is revised. According to local media reports, Power Minister Nasrul Hamid recently said that the country is reviewing its substantial coal pipeline.
The total installed capacity of the country is nearing 21GW, with gas being the key fuel (55%), followed by oil (heavy fuel oil 26%; high-speed diesel 9%). Dwindling domestic gas supplies mean that the country’s imports of LNG will increase substantially.
Bangladesh’s first nuclear plant – Rooppur – is under construction, in partnership with Russia, and comprises two reactors of 1.2GW each.
The country has also been importing power from India.
China is one of the biggest investors in the renewables sector in Bangladesh.
Read the Q&A below.
Q: Covid-19 has globally led to dips in power demand, and in GDP. Does that trigger a rethinking of the renewable energy strategy for Bangladesh?
A: Our total renewable energy installed capacity is 700MW today. Bangladesh’s renewable energy policy of 2008 set a target to generate 10% of the total electricity from renewable sources. Right now, the share of renewable energy in the electricity generation mix is around 3% and we are making all-out efforts to increase the share of renewables.
In our NDC [nationally determined contributions], we are committed to reduce greenhouse gas emissions by 5% below ‘business as usual’ by 2030. We have around 1,000MW of utility-scale solar PV projects in the pipeline, but there are also challenges. The main challenge of solar PV projects is the requirement of huge land: for 1MW, you need at least 3-plus acres of land. That is very difficult to procure in a densely populated country like Bangladesh. To manage the land challenge, we are looking at options like rooftop solar and floating solar.
At the end of the day, it is the economics which determine the expansion of any technology. At Sreda, we have calculated that the price of electricity generated from rooftop solar now is in the range of $0.03 to $0.04 per kWh. We believe, in the short run, it is possible to generate at least 500MW from rooftop solar.
We are now conducting feasibility studies on floating solar. You know Bangladesh is a riverine country with huge water bodies – rivers and lakes – so floating solar may be a suitable option.
Q: When you say 500MW of rooftop solar is possible in the short run, do you mean in the next 1-2 years?
A: Yes. The government of Bangladesh launched net metering guidelines in 2018 to incentivize rooftop solar. As of October 2020, a total of 1,074 net-metered rooftop solar systems had been installed throughout the country, with a cumulative capacity of around 17MW. The tariff for commercial and industrial users is higher compared to that for residential consumers. For example, industrial consumers’ tariff is in the range of 7.61-10.24 taka ($0.09-$0.12) per kWh depending on voltage level and time of use. There is a clear business case here, and that is why I assume it is possible to achieve the expansion of rooftop solar in the near term.
Q: How soon do you see the 1,000MW pipeline of large solar projects being constructed? What is the largest project there?
A: Our largest operational solar plant is 50MW. The largest in the pipeline is 200MW. Most of these projects are by independent power producers from the private sector.
The remaining pipeline is mainly wind, since these two technologies have demonstrated the most potential to date in Bangladesh for utility-scale development.
Q: What does 10% share of renewables generation mean in terms of megawatts?
A: This roughly means 2,400MW of renewables installation by 2025.
Q: Is Bangladesh also moving toward competitive auctions to award projects?
A: We are moving towards competitive auctions, but, side by side, the negotiation option is also in place under the Quick Enhancement of Electricity & Energy Supply (Special Provisions) Act 2010. If there is a good entrepreneur applying to the government – if they have their own land – their case may be considered under the special act. If the government can procure and develop the land, then we can go for auction. Feed-in tariffs are required at the take-off stage, and I think we have crossed that.
Q: Will Bangladesh cross the 1GW renewables mark in 2021?
A: I think so. It is likely.
Q: What are the prospects for wind power in Bangladesh?
A: We cannot reach our target relying solely on solar, so we have to look at other renewables also. We have conducted a study with the help of the U.S. Department of Energy’s National Renewable Energy Laboratory (NREL) to estimate the potential of wind power. Indications are that 5,000MW of wind are possible. In the long run, we can generate power from offshore wind also, given our coastal belt of more than 700km. We are also working on other options, like waste-to-energy. We have 230MW of hydro. Being a flat terrain country, we don’t see much prospect for additional hydro power.
Q: How soon do you see the jump from 1GW renewables to 2GW?
A: It is very challenging to comment precisely on the future because technology is moving so fast. We are still studying the potential of different renewable energy sources. However, I guess 2GW is achievable by 2025 and even before if technological advancement takes place.
Q: Bangladesh minister Nasrul Hamid said that the country is reviewing its coal pipeline. Do you expect to see a stronger swing towards renewables, simply because of the economics?
A: Yes. If you compare Power System Master Plan (PSMP) 2010 and PSMP 2016, you will find that the share of coal is decreasing. I believe the share of coal will be even less in the days to come because the price of coal cannot compete with renewables. The Power Sector Master Plan of 2016 is set to be revised. Ultimately, things will be decided taking into consideration both the local and global context.
There is, however, the issue of the variability of renewables, and the need to address it for grid stability. The cost of storage has come down substantially, but I am not sure it is yet affordable for a country like Bangladesh.
Q: What are you hearing from your overseas investors? What is their biggest concern?
A: The investor interest in Bangladesh is high. Our power purchase and implementation agreements are of international standard. The payment record of BPDB [Bangladesh Power Development Board] is good. We regularly meet utilities and IPPs [independent power producers] to facilitate their progress. The biggest constraint for renewable energy in Bangladesh is land availability. Also, the availability of bankable projects for development is limited.
Idcol [Infrastructure Development Company], the government-owned non-bank financial institution, provides long-term funding for renewables at about a 6% interest rate. BIFFL [Bangladesh Infrastructure Finance Fund] is another government-backed financier. The multilateral banks are active too.
Q: What are the energy efficiency initiatives that Bangladesh is taking?
A: We have formulated an Energy Efficiency and Conservation Master Plan up to2030. It aims to reduce primary energy consumption per unit of GDP by 15% by FY2020-21 and 20% by FY 2029-30, as compared to the base year FY2013-14. As of now, we are on track to achieve that target. We are implementing five programs for that:
- energy management program for designated large consumers
- energy efficiency labeling program for appliances
- energy-efficient building program
- energy efficiency finance program, aimed at providing long-term (40 years) soft loans, as per an agreement with JICA [Japan International Cooperation Agency]. Industry gets 1 billion taka each, routed through Idcol. Sreda is the technology approver.
- awareness program for changing habits
Q: You have taken on this role of chairman fairly recently. How do you plan to shake things up?
A: My first priority is to facilitate expansion of renewables through promoting rooftop solar in a big way, and introducing floating solar technology among other things. A few exceptions apart, normally industry owners don’t take risks to invest in an area beyond their main business. This is why net metering guidelines were revised in 2019 to include an opex model, allowing a third party to invest in an industry owner’s roof spaces. We expect efficient and capable energy service companies to come up to provide this service. This will help in the quick expansion of rooftop solar technology. I am planning to hold a workshop soon with industry owners to share the compelling economics of rooftop solar.