[🇧🇩] Energy Security of Bangladesh

[Saif]

Looking back 2024: Energy sector crisis keeps growing

The power and energy sector is set to give the interim government a rough ride in 2025 with its financial burden growing even bigger, mainly due to further increase in power overcapacity and capacity charge.

www.newagebd.net

Looking back 2024: Energy sector crisis keeps growing
Emran Hossain 06 January, 2025, 00:26

The power and energy sector is set to give the interim government a rough ride in 2025 with its financial burden growing even bigger, mainly due to further increase in power overcapacity and capacity charge.

The 2,500MW power generation capacity to be installed in 2025, mostly based on fossil fuels such as coal and gas, will add to the existing power overcapacity, increasing the capacity charge burden by a third to about Tk 35,000 crore, compared with the previous year.

Many of the new and existing power plants would remain unused because of the energy crisis, potentially bringing frequent power cuts throughout blistering summer and affecting life and business.

Increasing energy prices would not solve the problem, energy experts warned, reminding that the interim government’s reform promises inspired strong expectations about energy prices coming down, which had not yet happened.

The ousted Awami League regime is accused of causing a huge financial crisis for the power and energy sector despite increasing the energy prices over a dozen times of energy price increase between 2009 and 2024, mainly due to flawed policies.

The combined subsidy requirement of the power and energy sector is about Tk 50,000 crore. The power sector subsidy requirement, mainly caused by overcapacity and capacity charge, is projected to exceed Tk 39,000 crore in 2025.

‘The problems will remain the same as observed over the past several years,’ said Shafiqul Alam, lead energy analyst of the Institute for Energy Economics and Financial Analysis, Bangladesh.

The government should clear outstanding power and energy bills and sort out a plan for releasing money for uninterrupted energy imports, keeping in mind that the fewer power plants sit idle the better.

Bangladesh Power Development Board accounts showed that the outstanding bills in the power sector stood at nearly Tk 46,000 crore in September 2024.

Raising power consumption, however, remained a big challenge because of reduced economic activities and poor national grid capacity limiting power supply to industries.

Industries rely on captive power rather than depending on the national grid fraught with repeated power cuts.

The 1,320MW coal-based Patuakhali power plant is set to begin operation this year. The BPDB is also set to start paying capacity charges for the 1,200MW Matarbari power plant and 583MW gas-based Meghnaghat power plant, among others, with the power plants ending their test run in 2025.

The delay in completing the first unit of the 2,400MW Ruppur nuclear power plant, which was supposed to be operational this year, would require importing a large amount of furnace oil.

Furnace oil-based power plants are predicted to run daylong during the summer, when the power demand is expected to reach 17,500MW, up by 1,000MW compared with 2024.

Bangladesh’s current installed capacity is over 29,000MW. The power demand dropped to less than 7,000MW during lean hours in the ongoing winter season. During the peak hours, the power demand remained around 10,000MW.

Power outages, however, continued even in the capital in the peak of winter.

‘Boro season is around the corner, reminding us about the diesel demand greatly increasing within the next two months,’ said Bangladesh Working Group on Ecology and Development member secretary Hasan Mehedi.

The setback in renewable energy expansion after the interim government cancelled over 1,000MW renewable energy projects, which had been allowed without bidding, might prolong the energy crisis for longer than expected, energy experts said.

Currently, Bangladesh can generate 700MW from renewable energy sources.

The government recently floated a tender for about 350MW renewable energy projects but their implementation might take a while, particularly because of the negative impression sent to international investors by the recent cancellation of renewable energy projects.

The cancellation of the project of the third floating storage and regasification unit was welcomed but considered a setback in increasing capacity to import gas. Bangladesh’s current gas import capacity is 1,000mmcfd.

Bangladesh currently provides 2,700MW of gas, a quarter of it imported as liquefied natural gas, against the demand of 4,000MW.

While the import capacity remained unchanged, the domestic gas supply would remain the same in 2025 as it was in 2024, if not dropped, energy forecasts showed.

Gas accounts for 60 per cent of primary energy consumption.

Compared with the previous year, the gas supply to the power sector dropped to about 910 mmcfd in 2024 from 960 mmcfd in 2023.

‘The sad news is that the initiative that could have minimised import dependency for gas is still not in sight,’ said energy expert Badrul Imam.

Convinced about substantial gas reserve in the Bangladesh delta, Badrul has been calling on successive governments to scale up exploratory activities.

The latest move to attract foreign investors for offshore gas exploration fell flat in 2024. The recent political unrest is believed to have been behind the unwillingness of investors to engage in the gas exploration.

Uncertainty loomed over ensuring the supply of coal as well for the absence of long-term contract with international suppliers. The coal capacity use was about 37 per cent in 2024. The installed coal-based power generation capacity increased by more than 45 per cent in December 2024, compared with the same month in 2023.

Coal accounts for a fifth of the overall installed power capacity.

‘There is no guarantee the government can ensure uninterrupted coal supply this year,’ said Hasan Mehedi.

The challenges in the power and energy sector remained the same despite some positive developments in the sector taken by the interim government in 2024.

The act under which the power and energy projects were taken without bidding by the Hasina government over the past 14 years has been cancelled. The power of fixing tariffs was reinstated to the Bangladesh Energy Regulatory Commission.

On several occasions, the interim government announced, to the relief of ordinary people plagued by a sticky inflation for about three years, no more increase in the power price for now.

In about two weeks after winning its fourth term in office through a rigged election in 2024, the past AL regime had planned to increase the electricity price in phases by 81 per cent in 2024 to stop paying subsidy. The first phase of the increase by 5 per cent came in February 2024.

The regime, however, did not have the time to fully implement the plan as it was ousted by a student-led mass uprising on August 5.

The power price has been increased by 139 per cent since 2010-11 in 14 phases. But the overall comprehensive power sector loss is estimated to stand at Tk 79,720 crore at the end of the current financial year.

‘We must not forget that price increases do not help much. We need to correct our course to come out of the current situation,’ said Shafiqul Alam.​

 

[Saif]

Major gas price hike in the works for industrials

Industrial and captive power connections would soon have to pay a much higher tariff for gas usage after the ministry of power, energy and mineral resources decided in principle to implement a new pricing structure to reflect the fluctuating global market.

www.thedailystar.net

Major gas price hike in the works for industrials
BERC now assessing new pricing formula

Representational photo: Collected

Industrial and captive power connections would soon have to pay a much higher tariff for gas usage after the ministry of power, energy and mineral resources decided in principle to implement a new pricing structure to reflect the fluctuating global market.

Instead of a fixed rate, the new pricing structure will be based on the actual cost of imported liquefied natural gas (LNG).

In line with the decision, Petrobangla yesterday submitted a proposal to the Bangladesh Energy Regulatory Commission (BERC) to revise gas prices for industrial and captive power users.

If the BERC accepts the proposal, industrials and captive power users -- which refers to self-generated, gas-fired electricity within industries -- would have to pay Tk 75.72 per cubic meter for their gas use beyond the sanctioned load. At present, they pay a flat Tk 30.75 per cubic meter even if they breach their sanctioned load.

However, new industrial and captive connections will have to pay Tk 75.72 per cubic meter throughout.

Those who got the primary approval for new connections will have to pay 50 percent of their bills of sanctioned load at the existing rate and the rest at the new rate.

Under the proposed policy, the gas price will be determined by the cost of LNG imports calculated on the average expenditure of the previous three months' total costs -- including operational, transmission and distribution charges -- as well as contributions to gas development, energy security and research funds. A 15 percent VAT would be imposed too.

Between July and September 2024, Petrobangla imported a total of 1,726 million cubic meters of LNG for Tk 10,979 crore. The per cubic meter cost of LNG during that period was Tk 63.58, and after including all additional charges, the final cost per unit reached Tk 75.72.

The new proposal comes despite the government's earlier announcement that they would not fix the prices arbitrarily bypassing the BERC like the ousted Awami League government used to.

The AL government curtailed the BERC's power as regulator and increased the gas price for industries by more than 150 percent by themselves and fixed it at Tk 30 per unit. The gas price for captive users was also increased several times.

The move to initiate the gas price hike comes as the ministry looks to narrow the fiscal gap of Tk 16,162 crore this fiscal year.

If the price is not increased, the government will have to come up with subsidies, the proposal said.

BERC chairman Jalal Ahmed told The Daily Star that they are yet to start work on the proposal.

"We will take a decision based on our standard operating procedure," he said.

As per the BERC procedures, they have to announce their decision within the next 90 days after completing public hearings.

The new gas pricing structure could dampen enthusiasm for establishing new industries as the increased costs may make the ventures less economically viable, according to businesspeople.

"If the proposal is accepted, industrialisation will come to a halt," said Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association, a major industrial gas user.

No new investment will come as the new units would not be able to compete with existing establishments with that much higher gas prices, he added.​

 

[Saif]

Transforming power sector for net zero

AS 2025 dawns, Bangladesh is shaping up its commitment to cut emissions under the Paris Agreement. While the South Asian country is trying to bring its economy and governance back on track, the moment is ripe to drive a major reorientation in the country’s energy and power sector. Reforms are...

www.newagebd.net

Transforming power sector for net zero
Shahriar Ahmed Chowdhury 08 January, 2025, 00:00

AS 2025 dawns, Bangladesh is shaping up its commitment to cut emissions under the Paris Agreement. While the South Asian country is trying to bring its economy and governance back on track, the moment is ripe to drive a major reorientation in the country’s energy and power sector. Reforms are critical in this particular sector as its future pathway will have enormous consequences for our economy, environment and governance.

The needed shift involves transitioning from a fossil fuel-based energy mix to a green, renewable-based system. The economic case as well as the environmental rationale behind such a shift is indisputable. While Bangladesh has multiplied its power generation capacity over the years, surpassing the demand, the subsidies have become a drain on the national exchequer. Bangladesh has provided more than Tk 1,50,000 crore ($12.61 billion) as a subsidy to the power sector in the last decade — mainly due to poor planning and a faulty fuel mix.

At present, about 25 per cent of our electricity generation capacity and 12 per cent of total generation come from liquid fuels. The cost of power from these liquid fuel-based power plants is more than Tk 25 ($0.21) per unit, whereas the Bangladesh government sells bulk power at Tk 7 ($0.0588) per unit, marking a huge gap that is being met by subsidies. Moreover, the government has to pay the power producers an agreed amount of ‘capacity payment’ even when the power plants sit idle. The high costs of imports, the subsidy burden and the exorbitant capacity charges all make liquid fuel-based power an all-too-costly option for Bangladesh, in addition to their negative environmental footprint.

Renewable energy sources with adequate storage capacity could help Bangladesh get rid of a significant share of the costly liquid fuels. Solar and wind are proven to be the best renewable energy solutions for Bangladesh, with particular potential in the southern part of the country. All the studies show that solar photovoltaic technology will be the cheapest and largest contributor to electricity in the future for the whole world.

But for making that transition, three key bottlenecks — grid, incentives and policy — need to be urgently addressed.

Strong, smart, regional grid

A STRONG and smart grid infrastructure is essential for energy transition, whereas Bangladesh has a weak grid infrastructure for power evacuation. Vested interests often argue that liquid fuel-based plants are indispensable in light of the low voltage problem. We should instead ask the question: Did we delay enhancement of transmission infrastructure to support the liquid fuel plants?

With more variable renewable energy variable renewable energy being injected, grid stabilisation is a concern. Our grid flexibility study shows that we can have up to 20 per cent VRE without power cuts or hampering the grid stability significantly.

With a high-voltage transmission network, smart grid and energy storage, we can easily eliminate the grid-related problems.

Moreover, connecting with the regional grid will increase the flexibility of the national grid. Considering the current geopolitical situation, it is challenging to realise regional connectivity, but we should keep working. Apart from increasing the grid flexibility, the regional grid will support optimising the regional renewable energy potential.

Incentivising energy transition

HEAVY duties hinder the growth of solar photovoltaic in Bangladesh, which is becoming the cheapest source of electricity the world over. There is an 11 per cent import duty on solar panels, 38 per cent on inverters and 58 per cent on mounting structures and lithium batteries. There is a compelling case why these duties should be waived:

Bangladesh receives around Tk 50 crore ($4.20 million) as import duty from a 100MW solar photovoltaic equipment, which is a pittance compared to our present annual subsidy worth Tk 40,000 crore ($3.36 billion), going mainly to fossil fuel. A 100MW solar photovoltaic system will produce 2.4 TWh of electricity in its project life of 20 years. To produce the same amount of electricity from diesel, we need Tk 6,000 crore ($504.20 million) worth of diesel or Tk 4,000 crore ($336.13 million) worth of furnace oil or Tk 1,000 crore ($84.03 million) worth of coal at current market prices. Waiving import duties on imported solar PV equipment could help us replace the need for importing so much fossil fuel with our hard-earned foreign currency. Such a waiver would only be fair since fossil fuel-based power plants enjoyed duty-free import of equipment and 15 years of tax holidays in the past.

Other countries are sparing no means of incentivising renewable energy growth. Take the case of Vietnam, for example. The Southeast Asian country installed around 9,000MW of solar photovoltaic systems in 2020 alone, mainly from rooftop systems, by giving incentives in the form of feed-in tariffs. If this is not possible for us, we can consider other incentives.

We should inspire and allow all consumers, irrespective of phase or voltage level, to avail themselves of the facilities of the net energy metering guideline, including the 132kV and 230 kV consumers who are currently barred from net energy metering connection. The net energy metering guideline should include the following benefits: like the independent power producers, OPEX operators of net energy metering systems should enjoy tax holidays; the capacity limit of the net energy metering systems should be updated to its sanctioned load instead of 70 per cent of the sanctioned load; prosumers should be allowed to install RE systems at any part of the country and use electricity by providing a wheeling charge to the utilities; and industries inside the economic zones and export processing zones are not allowed to avail the benefits of net energy meterings. The economic zones and export processing zones now purchase power from utilities and sell it to the industries inside while keeping a certain profit margin. Rather than holding onto this profit, the zone authorities could get wheeling charges from the net energy metering users that could partly compensate for their current earnings from the current arrangement.

Enabling policies and ambitions

EVIDENCE-BASED and coherent policy will send a clear signal to investors, the industry and the citizens alike about the ambition, speed and modalities of Bangladesh’s energy transition. We should revise our policy documents to have coherent targets for renewable energy. The existing integrated energy and power master plan, IEPMP, which is replete with flaws like estimation of future power demand, lack of genuine renewable ambitions and promotion of questionable solutions, must be thoroughly revised.

In 2019, the UN Development Programme drafted a national solar energy roadmap and in the high case scenario, 30,000 MW solar photovoltaic capacity development by 2041 was recommended. This roadmap was not approved. We can revisit this document and with necessary revisions, we may approve it so that we can have a concrete, ambitious target. We should prepare a similar document for wind.

The plans and policies should also clarify how we will solve the land scarcity challenge. For example, each ground-mounted solar project should have a mandatory plan for other uses of land beneath it. Moreover, the policies should spell out enabling provisions like developing solar power hubs and transmission infrastructure up to the hubs that could significantly reduce the costs.

The last but no less important point is to stress on energy conservation and achieving energy efficiency, which is far easier than generating new power, while being a key pillar to achieving our net zero targets.

The energy and power sector lays the foundation for achieving Bangladesh’s economic aspirations as well as delivering better governance. Achieving a green and inclusive energy transition is essential for Bangladesh, a leader of the global south in global climate actions. No fossil fuel-based plants anymore — support renewables for our clean and green future.

Md Shahriar Ahmed Chowdhury is the founding director of the Centre for Energy Research at United International University.​