Bangladesh Opens Up Small, But Profitable Opportunity Next Door For Indian Developers

Of late, Bangladesh, powered mostly by thermal power and blessed with an unfavourable location for hydropower, has made a serious effort to ramp up its renewable capacity. The country, which has a deficit of power supply that forces it to import from India, hopes that by 2041, 40 per cent of its total power requirements will come through clean energy sources. In FY 2022, the country reported about 1 GW of renewable energy capacity.

For Indian developers this has created a lucrative market opportunity, both from within India and in Bangladesh, thanks to a robust transmission network connecting the two grids.

Higher energy rates than India mark power tariffs in Bangladesh, providing developers the scope to rake in good margins, explains Vaibhav Rungta, Chief Business Officer, Rays Power Infra, a solar EPC Company that recently commissioned a 275 MW (DC) solar plant in Sundarganj, Gaibandha in Bangladesh. He adds that in India, the tariff is between Rs 2 to 3 per unit, but in Bangladesh, it is almost twice this number.

WindStream, a Telangana-based firm, has chosen Bangladesh as a destination for its renewable energy projects. It has set up a TowerMill (12 to 14Kw per tower) in the country- a hybrid renewable solution for telecoms, boat mills- another hybrid renewable project for fishing boats ) (1.5 to 4 Kw for boats) and rooftop solar solutions ranging from 2.5 Kw to 5 Kw.

Venkat Tangirala, Managing Director at Windstream, says there are several reasons why Indian players are capitalizing on the Bangladesh market to establish projects. “The proximity of India and Bangladesh allows for cross-border power trade. Indian solar developers can export excess solar power generated in their projects to Bangladesh, thereby enhancing their revenue potential. In addition, cross-border power trade can support the integration of renewable energy sources and strengthen energy cooperation between the two countries,” is one reason, he says. 

He adds that Bangladesh’s topography is ideal for solar projects, “Bangladesh is located in a region with abundant solar irradiation. It receives ample sunlight throughout the year, making it a suitable location for solar power generation. Indian solar developers, who have experience in harnessing solar energy in their own country, recognize the potential of Bangladesh’s solar resources and the feasibility of developing solar projects.”

Tangirala believes that Bangladesh has several gaps when it comes to connectivity to the grid, and it is this vacuum that Indian solar developers have identified and are working towards channelizing the potential market that this ends up creating.

“Bangladesh, particularly in rural areas, faces challenges in grid connectivity and poor grid infrastructure. This situation allows Indian solar developers to implement off-grid and mini-grid solar solutions. By leveraging their expertise in designing and implementing such systems, Indian developers can help bridge the electricity access gap and provide reliable power to remote areas,” Tangirala said.

Supportive Policy Structure

While these are just some of the reasons that attract solar developers to Bangladesh from India, another major reason has helped catalyze renewable energy projects here. That is the regulatory framework and supportive policy structure.

“The Bangladeshi government has implemented supportive policies and incentives to promote renewable energy, including solar power. These policies provide a favorable regulatory framework, long-term power purchase agreements (PPAs), and incentives such as tax breaks and duty exemptions. These measures attract Indian solar developers who seek stable and predictable investment returns,” he said. 

In 2020, Bangladesh gave a major reason to solar developers to rejoice when it announced that all power generation firms would enjoy 100% tax exemption. This incentive will be available to all power generation companies who will start operation before 31st December 2022, it said. 

Power generation companies are to get the advantage of full tax exemption on income from their power generation business from the commencement of operation till 2034- a significant pulling factor for Indian developers looking to help develop assets in Bangladesh.

There are a series of other exemptions for foreign developers should they choose to invest in Bangladesh. Tangirala credits the Sustainable and Renewable Energy Development Authority (SREDA) and the Solar Home System Program to promote renewable energy too to giving a push to solar projects in the country. 

He reveals, “The country has made significant progress in deploying solar home systems, particularly in rural areas where grid connectivity is limited. The government’s ‘Solar Home System Program’ has been successful in providing clean energy access to millions of people. Additionally, utility-scale solar projects and solar mini-grids are being implemented to further harness the country’s solar potential.” In fact, local firms like SolShare have won numerous international accolades for innovations in the space, including a peer to peer network for sharing power.

Surmounting the challenges

While Rays Power Infra successfully established its key project in Bangladesh, which boasts over 500,000 solar PV modules, it came with challenges. The project was commissioned within 14 months. In the past, claims the firm, many large Indian and international solar EPC firms attempted to take up the project over the last seven years, but the challenging site conditions made it challenging. 

Rays Power says it surmounted the challenge under difficult circumstances and the entire project has been executed by the in-house engineering, procurement and construction (EPC) team.

Rungta informs, “Executing projects in Bangladesh is extremely challenging given its terrain, shortage of land, heavy rains and water logging and flood-like conditions in most areas.”

But this is just the tip of the iceberg.

Indian firm Fourth Partner Energy, which recently accomplished a 250 Kwp rooftop project for a major textile firm based in Bangladesh, revealed that making the project completion was far from easy. One of the major hurdles encountered was the maintenance and servicing of the project, which requires large amounts of water. Bangladesh, unfortunately, confronts the challenge of water scarcity. Nevertheless, 4PE found the answer through dry cleaning of the solar modules and employing robotic cleaning, which employs much less water when compared to traditional methods.

Bridging the socio-economic gaps

Another major hurdle during the commissioning of the project was that the local EPC contractors lacked knowledge about international best practices for installation and project 1 commissioning. Tangirala seconds this viewpoint.

However, this could prove to be an opportunity for Indian developers to employ their skilled workforce in the country and provide training sessions, just like Fourth Partner Energy deployed select Indian employees to Bangladesh temporarily to guide the local team and ensure that the project was executed well.

“Additionally, capacity-building programs for local communities and stakeholders can empower them to participate in renewable energy initiatives. It is important to ensure that the benefits of renewable energy reach all segments of society. In Bangladesh, there may be challenges related to the affordability and accessibility of renewable energy solutions for low-income households. Policies and initiatives should be designed to promote social equity and inclusivity, ensuring that vulnerable communities can access and benefit from renewable energy technologies.”

Financing is expectedly to be another major bottleneck as the country recovers from the COVID impact on its economy. Rungta states, “The regulatory requirements for plant commissioning are stringent. Further, the depreciating currency and high-interest costs impact costs and, thus, costs.” 

Tangirala concludes, “Access to financing is a major hurdle for renewable energy projects in Bangladesh. The high upfront costs associated with renewable energy installations make it difficult for individuals and businesses to invest in these technologies.”

Tangirala is hopeful yet pragmatic, “Wind energy is another area with potential in Bangladesh, particularly in coastal regions. However, wind power development has been relatively slow compared to solar energy. The government has initiated some projects to explore wind energy, but it still has a limited contribution to the overall renewable energy market.”

With the country sitting on massive gas reserves, there is always the temptation, now and in the future, for Bangladesh to plump for gas, citing the need to provide cheap power over sustainability. However, the fact that it is one of the countries at the forefront of possible impact from climate change, at least on this front, one can be hopeful that the country will stay the course on renewables.