Govt offer of Tk 10.50 for per kWh not encouraging

Recently, the government launched an initiative to purchase electricity generated from rooftop solar systems at a rate of 10.50 Taka per kWh. To qualify for this offering, the new policy clearly states that all producers�"whether from residential, commercial or industrial buildings�"must operate under the net metering system and must install battery storage. Moreover, all equipment, including solar panels, inverters and batteries, must meet the technical standards set by Bangladesh Standards and Testing Institution (BSTI) and (Sustainable and Renewable Energy Development Authority) SREDA.

Undeniably, rooftop solar is a crucial tool for ensuring energy security and expanding renewable energy in Bangladesh.  The fundamental question is whether this proposed incentive package will bring any positive results. Will roof owners feel encouraged to produce solar power, or will they find the existing net-metering system more profitable? At first glance, this government initiative seems to promote renewable energy. However, an economic and practical analysis reveals that it is not encouraging for investors at the ground level. In many ways, it is actually contradictory and deeply flawed.

Why would a family that buys electricity from the national grid at Tk 14 sell their own solar power to the government for Tk 10.50? 

Let us first look at the residential sector. In large cities like Dhaka or Chattogram, and even in smaller towns, it is rare to find a single family living in a large house with a massive roof. In this age of urbanization, most buildings are multi-storied or flat-based. While many families live in one building, the roof size does not increase. Roof space on high-rise buildings is already very limited. After making room for lift rooms, generators, or other mechanical setups, the remaining space is often used for roof gardens or kept open for walking. Therefore, the chance of generating megawatt-scale electricity from flat-based residential areas is extremely slim.

Even if we assume for the sake of argument that a wealthy family lives alone in a large house, this 10.50 Taka rate will not act as an incentive for them. Modern, well-off families have a massive demand for electricity. A house might have central air conditioning or 8 to 10 split ACs running. Along with this, they use multiple washing machines, electric cookers, microwave ovens, irons, and other heavy electronic devices. As a result, their monthly electricity usage easily reaches 1,500 to 2,000 units.

Under the current tariff, if residential usage exceeds 600 units, each additional unit costs 17.35 Taka. So, for a family using 1,500 to 2,000 units per month, their average cost is 14 Taka or more per unit. What does basic economics say here? Why would a family that buys electricity from the grid at 14 Taka sell their own solar power to the government for 10.50 Taka? If they use the generated electricity themselves and adjust their bill through existing net metering guidelines, they save over 14 Taka per unit. Therefore, the policy of selling power at a lower price, while missing the chance to save on expensive grid power, will fail to attract wealthy residential customers to rooftop solar.

Currently, the average price of electricity bought from the grid by commercial or industrial institutions is over 12 Taka per unit, and it can be higher depending on peak and off-peak hours. Why would an industrial owner make a huge investment just to sell electricity to the government at 10.50 Taka? They profit much more from the existing net metering system.

The second major barrier is the mandatory requirement for a battery storage system. Adding a battery almost doubles the initial capital expenditure compared to a standard on-grid system without batteries. The investment payback period for a regular solar project is 4 to 5 years, but adding a battery pushes this to 8 to 10 years.

The government notification calculated that the maximum production cost of rooftop solar with batteries is 8 Taka per unit, based on current market rates. They set the 10.50 Taka price by adding a 20% profit and an 11.25% premium to this base cost. However, this 8 Taka calculation has shocked industry insiders. Considering international market prices and local import duties, it is practically impossible to keep the production cost under 8 Taka per unit with a lithium-ion battery system, which proves the government is detached from market realities.

An effective and sustainable energy policy must be profitable for both the producer and the government. To make rooftop solar popular, the existing unit-to-unit net metering system must be made more accessible and unconditional.