Energy experts have said that the interim government plans to scrap 31 Letters of Intent (LOIs) issued for renewable energy (RE) projects may slow down the energy transition process and will adversely affect foreign investments in the country.
They urged the interim government to prepare short term, mid- term and long term policy to continue the development and implement of utility scale Renewable Energy (RE) projects through private sector investment.
They also urged the government to establish an active monitoring cell to review the progress of utility scale RE projects implementation plan so that government could fulfill its commitment regarding carbon emission issue.
"The interim government has decided to cancel letters of intent (LOIs) of several renewable power projects," said Power Division Senior Secretary Habibur Rahman last week.
Following the announcement, the investors raised their voice over the issue and claimed that the future of foreign direct investment (FDI) in renewable energy projects involving nearly $5 billion has been facing uncertainty with recent talks of interim governments' probable decision to cancel a number of letters of intent.
"It is not a good idea to scrape all RE projects randomly, we need to expedite the energy transition and protect the investment of the investors and, at the same time, to tighten our belt to stop corruption in power and energy sector," energy expert Dr. Ijaz Hossain said while analyzing the interim government's decision in this regard.
"So far I know there is no scope of gross violation of rule in RE sector like coal based or gas based power projects, these projects are also "under capacity" projects and investors need to invest huge amount here for long term as per Bangladesh Renewable Energy Policy…so my suggestion is to be very cautious to take any decision here as it should not be a story of wrong doing in future," he said.
According to the Power Division it has so far processed 133 renewable power projects having combined capacity to generate 13,494.22MW under special power acts.
"More than 50 foreign project developers from various countries such as China, France, Malaysia, Singapore, south Korea, Germany, Norway, Japan, the USA and the UAE are actively engaged in the development and implementation of various utility-scale renewable power projects," Bangladesh Sustainable and Renewable Energy Association (BSREA) senior vice president Mostafa Al Mahmud told the Daily Observer on Sunday.
He said they have already invested USD$200 million to purchase land and maintain other procedures to implement 31 renewable power projects after getting Letter of Intent (LoI) from power division.
He, on behalf of the BSREA, suggested the interim government should continue the procurement process for projects with the already issued LoIs as land acquisition expenses, technical studies, paid-up capital for opening new companies, daily operation and logistic expenses and so on.
"Many investors have already made partial investments on the basis of the LOIs. If implemented, these projects will generate 2,678 MW of electricity per day, which will help reduce the electricity shortage in the coming years," he said.
The project tariffs were approved through negotiations based on competitive market price and on a "no electricity, no payment" basis. The procedure of issuing LOIs for the same projects can take at least a year or more if it is started all over again. As a result, investors will feel discouraged and frustrated, said the BSREA senior vice-president.
Mostafa also said adding 2,678 MW of electricity from renewable sources to the national grid can accelerate the process of phasing out fossil fuels, which is important for combating climate change effects and reducing the country's dependence on non-renewable sources.
These renewable power plants will also enable the government to save $820 million (Tk 9,700 crore) per year, according to BSREA.
BSREA also recommended that the interim government continue development and implementation of utility-scale renewable power projects with private sector investment on "build-own-operate (BOO)" basis.
"We need a vision to increase the use of renewable energy, monitor the progress of the sector and take appropriate measures. If government lands can be leased for some renewable projects and the cost of transmission is borne by the government, then the cost can be further reduced through competitive arrangements. This will further reduce the tariff, and cut the risk for the investors," Dr Ijaz said.
BSREA senior vice-president said Bangladesh can receive USD$4.5 billion foreign direct investment within the next five years from the private sector to develop and implement from renewable projects.
Bangladesh government has set a target of producing 10 per cent of its total locally generated electricity from renewable sources by 2021, but failed to do that due to lack of policy guideline.
In a fresh move, it prepared an integrated power and energy sector master plan and suggested producing 40 per cent of electricity from RE sources. It also aims to raise the share of electricity produced from renewable sources at a significant portion by 2030.
