Yunus govt’s ‘wrong policies’ caused power sector crisis

The power crisis reached a critical point last month amid an energy shortage, with load-shedding averaging 2,000-3,000MW during both the day and night.

Solar power, however, provided little relief during the crisis. Renewable sources supplied a maximum of only 650MW to the national grid during the daytime, according to sources.

At the same time, the interim government cancelled licences for renewable energy-based power plants with a combined capacity of more than 3,000MW.

According to sources, the licences were cancelled within a month of the interim government taking office on the grounds that the plants had been approved under the indemnity law. The decision was taken by then Adviser to the Ministry of Power, Energy and Mineral Resources Fouzul Kabir Khan at a meeting of the Power Division.

As a result, 37 renewable energy-based power projects involving government, private and joint ventures and having a combined generation capacity of 3,287MW were cancelled while they were in the pipeline.

Domestic and foreign investors whose private-sector projects had already received letters of intent (LoIs) or preliminary approvals repeatedly approached the authorities seeking restoration of the licences, but to no avail.

Instead, the interim government invited fresh tenders for 55 grid-connected solar power plants with a combined capacity of 5,238MW. However, the tender received little response, with bids submitted for only 11 plants with a combined capacity of 900MW.

Industry insiders believe the lack of a sovereign guarantee was a key reason behind investors’ reluctance.

They said such a guarantee is crucial for securing international financing and ensuring the reliability of projects. As the interim government did not provide sovereign guarantees, private-sector entrepreneurs remained cautious about the new tenders.

The current government has also invited fresh tenders for grid-connected solar power plants after taking office, although it is too early to say how successful the process will be.

According to Bangladesh Power Development Board (BPDB) data, the LoIs for the renewable energy projects cancelled during the interim government’s tenure had been issued at different times between February 2019 and May 2024.

Of the 37 projects, 27 were solar power plants, three were wind power projects and one was a waste-to-energy project. The projects had been scheduled for completion between 2025 and 2026, with land acquisition underway for some of them.

The 27 solar power plants had a combined generation capacity of 2,404MW. Most were planned for construction in Rangpur, Chattogram and Mymensingh divisions.

The three wind power plants were planned in Sonagazi of Feni, Ashashuni of Satkhira and Chakaria of Cox’s Bazar, with capacities of 30MW, 100MW and 220MW respectively.

The 11MW waste-to-energy plant was planned in Brahmanbaria.

Meanwhile, three BPDB renewable energy projects with capacities of 7.6MW, 20MW and 50MW respectively were under tender evaluation. The first was planned beside the Kaptai Hydroelectric Power Station, the second in Barapukuria and the third in Rangunia.

A tender for a 160MW solar power plant to be developed through a joint venture in Maheshkhali was also under evaluation.

In the private sector, tenders for 50MW wind power plants in Inani of Cox’s Bazar and Chandpur had been cancelled after being invited. The approvals for the two projects, which were in the process of inviting fresh tenders, were also cancelled.

A senior BPDB official said all 37 cancelled power plants were being processed under the indemnity law.

“Although those projects were cancelled, other power plants under the same law were given legal status. This was essentially a dual policy of the government,” the official said.

Had the projects not been cancelled at the time, several of the plants would have started generating electricity by now, he said, adding that this could have significantly eased the daytime power shortage.

Meanwhile, private research organisation Centre for Policy Dialogue (CPD) has recommended reassessing the 37 solar power projects that had received LoIs but were cancelled under the special law for the power and energy sector, commonly known as the indemnity law.

The projects were expected to attract $6 billion in investment. The organisation also urged the authorities to reconsider the decision to cancel the projects and ensure adequate facilities to attract more foreign investment in the sector.

The CPD made the recommendations at a recent discussion titled “Recent Challenges of Chinese Foreign Investment in Bangladesh’s Renewable Energy Sector: Way Forward” at a hotel in the capital.

Speakers at the event said the interim government had cancelled 37 solar power projects with a combined capacity of more than 3,287MW, which had been taken up during the previous Awami League government, citing political considerations and allegations of irregularities.

The projects involved financing from 14 countries, including four from China, seven from Singapore, and one each from India and the United States.

Of the 37 renewable energy projects cancelled by the interim government, 15 companies had already purchased land and paid taxes to the government, according to the report. They had also made substantial investments, with around $300 million already invested in the projects.