Solar power investors seek lower tariff to boost investment

Solar power investors have called for a lower open access tariff for the first five years to encourage private investment in merchant power plants and accelerate the development of renewable energy in Bangladesh.

The Bangladesh Sustainable and Renewable Energy Association (BSREA), representing solar power plant owners, made the proposal at a public hearing on merchant power plant guidelines and tariffs organised by the Bangladesh Energy Regulatory Commission (BERC) in Dhaka on Sunday.

The association proposed setting the open access tariff at 0.50 for the first five years, arguing that the merchant power plant sector is still at an early stage of development and requires policy support to attract new private investment.

BSREA President Mostafa Al Mahmud presented the association’s written proposals at the hearing, which was attended by BERC Chairman Jalal Ahmed, commission members, renewable energy entrepreneurs and their representatives.

According to BSREA, a lower tariff during the initial years would encourage fresh investment in the renewable energy sector while increasing the use of clean energy.

The association also sought compensation for deemed generation when electricity cannot be supplied to the grid because of faults or failures in distribution company infrastructure.

It proposed that investors should be guaranteed a minimum 20-year operating period before any merchant power plant is closed or its agreement terminated.

BSREA also called for renewable electricity to receive priority in grid dispatch over other secondary sources.

At the hearing, BERC’s technical evaluation committee recommended a tariff of Tk6.48 per unit for electricity generated by private merchant solar power plants.

Under the committee’s recommendation, up to 20% of electricity generated by a solar-based merchant power plant could be sold to distribution companies.

The committee calculated the net fixed asset value of the relevant power plant at Tk326.08 crore. Adding Tk44.72 crore as regulatory working capital, it estimated the total rate base at Tk370.08 crore.

A proposed return on the rate base of 8.96% would generate Tk33.22 crore in profit. The committee estimated personnel, repair and maintenance, administrative and general expenses at Tk11.21 crore, while depreciation was estimated at Tk15.33 crore.

The total revenue requirement was calculated at Tk59.57 crore. After deducting Tk98 lakh in other income, the net revenue requirement stood at Tk59.47 crore.

Based on estimated net generation of 91.84 million units, the technical committee recommended a generation tariff of Tk6.48 per unit.

The committee also proposed installing battery energy storage systems equivalent to 10 to 20% of the generation capacity of private solar power plants.

Such storage would allow electricity generated during daylight hours to be stored and supplied at night according to customer demand, improving the reliability of solar power and supporting greater use of renewable energy.

BSREA further proposed that customers pay the open access tariff on a quarterly post-paid basis.

It also called for surplus electricity generated by merchant power plants to be made available to public-sector utility companies, with payments based on the average rate determined by BERC.

To strengthen investment protection, the association proposed a tripartite service legal agreement involving the Ministry of Power, Energy and Mineral Resources, project developers and investors.

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It also proposed sharing transmission losses between the Bangladesh Power Development Board and the government and introducing fixed charges for electricity transmission at different voltage levels.

On taxation, BSREA sought equal customs and tax exemptions for merchant power plants, independent power producers and corporate or industrial solar power users importing solar equipment and grid-connected infrastructure.

It also proposed introducing SRO 400 to make the tariff zero.

The association further called for government intervention if an off-taker fails to pay a merchant power plant for electricity supplied.

BSREA said the new open access tariff regime had created both challenges and opportunities for the electricity and renewable energy sectors. A stable, investment-friendly and long-term policy framework could enable merchant power plants to contribute significantly to Bangladesh’s energy security, industrial competitiveness and renewable energy targets for 2030 and 2041.