Merchant power plant policy overthrows indemnified IPP regime

A newly devised mechanism styled merchant power plant policy (MPPP) provides for business-to-business electricity trade to replace the indemnified Independent Power Producers (IPPs) law that allows only private-to-public electricity business.

Power, energy and mineral resources adviser of the interim government Muhammad Fouzul Kabir Khan Saturday unveiled power-sector overhaul plans that include this transition.

Explaining the new policy features, he said the power producers will have to find their own customers while the government will purchase a maximum 10-20 per cent of power from such plants and will provide transmission facilities in exchange for rent.

The adviser made the declaration while addressing as chief guest a seminar titled 'Rapid Transition to Renewables: Role of Domestic Financial Institutions', organised by Economic Reporters Forum (ERF) at its auditorium.

The programme was jointly sponsored by the ERF, Centre for Environment and Participatory Research (CERP) and Coastal Livelihood and Environmental Action Network (CLEAN).

Fouzul Kabir Khan said there are some wrong concepts that shortage of lands and funds hindered the potential of renewable energy in Bangladesh, though there are huge unused lands even under state agencies and the aggregate amount of default loans reached about Tk3 trillion.

"Most defaulted loans are tied to balance sheet-dependent financing, which dominates the lending practices of banks. Loan approvals are often decided informally, during lunches or dinners, rather than through rigorous evaluation," he told the meet.

He also explains that there is no chance to receive dinner offer from the entrepreneurs of the renewable energy and that is why the sector being deprived of bank loans.

He painted a stark picture of big-business lending, saying that the institutions like Beximco and S Alam are now struggling to pay salaries, yet banks granted them large loans based solely on their balance sheets, without thoroughly assessing their assets.

Upon closer examination, these balance sheets reveal a troubling void. "How rational is it to lend under such conditions?" questioned Mr Khan.

He emphasized the critical need for renewable-energy development, noting that banks show little interest in financing this sector.

To address this, the current government aims to introduce policies that not only facilitate funding for renewable projects but also provide necessary infrastructure, such as solar -installation sites and connections to transmission lines.

He said the government is working to produce a new renewable-energy policy keeping the option of providing land and grid connection to the government, so that the renewable-energy generation can flourish.

The private renewable energy producers could use these facilities by providing a minimum charge for land and grid uses. As a result, the renewable-energy produce would flourish vastly and the target could be achieved 20 percent instead of 10 per cent, said Fouzul Kabir.

He said as the special act on power production passed by the past government has now been cancelled by the court, all the contracts in the power sector will be held under the Public Procurement Rule (PPR) within a sphere of competition.

"Following PPR in a recent deal of LNG import, the government has given an order at 35-percent less price than previous," he said.

In renewable-power generation the entire contract will be given through open tender, so real businessmen will get opportunity without persuading the government high-ups, he added.

He also said the government just creates opportunities for businessmen by simplifying policy so syndicating business and tender would be stopped. The entire citizens will get the equal opportunity for business, if capable.

In a keynote presentation, Gouranga Nandi, chairperson, CEPR, highlighted that for the survival of humankind on this earth, reducing carbon emission has no alternative to renewable energy transformation from fossil fuel.

Instead of 10 per cent, Bangladesh achieved only 893MW or 3.2-percent installed capacity, and 1.8-percent generation capacity of renewable energy has been achieved so far.

"It means that achieving 10-percent renewable energy by 2025 is quite impossible in this situation," he said in the presentation.

He also said shifting the renewable energy-generation target by 30 per cent in 2030 would require a total investment worth Tk876.57 billion in the next 6 years.

"A comprehensive mechanism is required to mobilize finance, including budget allocation, subsidy, tax exemption, import -policy rationalization, feed-in tariff and long-term soft loans from public and private financial institutions," he highlighted in the presentation.

Khandaker Golam Moazzem, research director at the Centre for Policy Dialogue (CPD), highlighted shortage of funds and funding instruments at the event and said, "There are only five financing instruments in the country for renewable energy with dependency on non-concessional loans while there are at least 18 instruments introduced in many countries over the world."

Hasan Mehdi, CEO of CLEAN, Asha Noor Rahman, chief economist of The City Bank, and journalists Salauddin Bablu spoke, among others, at the event.

ERF secretary Abul Kashem moderated the event chaired by Mohammad Refayet Ullah Mirdha, president of the organization.

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