Political will, efficiency essential to address energy crisis

With high energy prices biting both industries and domestic consumers, The Business Standard recently held a Focus Group Discussion on the prevailing energy crisis and how Bangladesh can resolve it.

Demand based on unrealistic growth projections must be revised

Dr M Tamim

Professor, BUET

As a tier-3 country, I do not see any scope for us to go beyond fossil fuels in a big way for the next 20-25 years. SDG-7 says that you must ensure access, which we have achieved 99% accessibility to electricity, which is a good thing. 

But access to affordable, reliable and sustainable modern energy — that is what SDG-7 states. Now we are only focusing on sustainability. How about reliability and affordability? Then we have to think about a fuel mix that will allow us to have reliable, affordable, and also sustainable energy. 

The energy and power system master plan which has already been finalised talks about 2050, about 30 years from now. This is far-fetched. In 30 years, so many things will happen. Why are we bothering about doing all these things, theoretical exercises? 

The economic growth projection shown here is averaging two scenarios — a perspective plan which projects 9% average GDP growth for 20 years, which is an absurd, unbelievable growth estimate for 20 years in a row. 

Based on that projection, energy consumption has been estimated to reach 60,000MW by 2040. This must be revised, must be reviewed. Percentage of power taken by industries from the national grid is flat since 2017. It means industries are not taking power from the grid and the domestic consumption, which is now consuming 55% of electricity, is the main driver of the power generation growth. 

Right at this moment, per unit production cost of our electricity is Tk11. It is being supplied to consumers at Tk8, requiring the government to subsidise Tk3-4 per kilowatt hour. The government cannot survive with this kind of subsidy. 

Industries need reliable power. Once you start giving reliable power from the grid, the difference between the costing of captive and grid power — Tk4.5 per unit in captive while industries are buying grid power at Tk7-Tk7.5 — must be looked into. Cost of captive power is low because they get gas at cheaper rates. How a product with Tk7.5 cost will compete with the one priced at Tk4.5?  

We cannot predict what our requirements will be after five years. But demand has been predicted to be 40,000MW in 2030. I challenge that we will in no way require 40,000MW in 2030. We have a seasonal variation, highest is 6000MW and average 3000-4000 MW, in demand. In winter, we have to keep 4000 MW capacity idle. 

In the case of renewables, we can see that unless we have storage, unless we have flexible demand management and smart grid, we can add at best 10-15% renewable electricity, which is about 2000-3000MW, to the traditional grid. In the US, the average waiting period for a large-scale renewable project to get permission for independent system operation for grid integration is four years. About 8,000 renewable projects in the US have been kept waiting. So this is not an easy task. 

If the economy does not improve much, if industrialisation does not grow that much, and if we cannot support the industries adequately, we will suffer more in future, no matter what plan we formulate. 

Efficiency cannot be substituted by anything else

Imran Karim 

Vice-chairman, Confidence Group

Bangladesh is still floating on gas. It appears to be like that. Then why are the IOCs not here? If there is sufficient gas in the country, and that gas can be extracted in the cheapest possible method, people will come and put money. Money will find its way. 

We should have developed our own extracting ability. Based on Bloomberg data and other trends, I envisage that our average power generation cost from 2024 to 2030, since we are likely to be very import-dependent, will be in the region of 11-11.5 cent. This is roughly about the same price we are paying to solar power plants based on 'no electricity no payment.' 

Because of land scarcity, I am not sure how many solar power plants we will be able to build. Other than floating and rooftop solar panels, I am not extremely optimistic about the prospect of solar energy in Bangladesh. 

If the power generation cost is 11-11.5 cents in Bangladesh, we have to achieve maximum efficiency to maintain this level. Of 11,500MW gas-based power generation at grid level, about 3000MW comes from power plants with low capacity — 1700MW to 2000MW being produced in plants with 38% capacity. 7000MW comes from plants with 38% efficiency or below. 

If the latest international market price of LNG of $13 per MBtu is considered, electricity production cost could even go as high as Tk25 per unit. These power plants should absolutely be taken out. Now there are power plants producing about 2000MW, with generation costs ranging from Tk16 to Tk25 per unit. This is because of multilayer subsidies. Blended price of gas (imported and local) is Tk22-23 per unit, which is sold at Tk14.

If you want to keep our energy price and the cost of power low, going forward to 2030, then there is no way but to increase efficiency. If you want to do that, you have to get rid of inefficient plants, whatever fuel they may use. 

Our coal-based plants, in operation or upcoming, are perhaps among the most modern in the world, with ultra-super critical efficiency. Their quoted efficiency is 38%, actual efficiency achieved is 40%. As far as coal is concerned, this is very good.

Our HFO-based plants are running at 45-46% efficiency.  So efficiency is absolutely key. If we do not rush for efficiency, if we continue to run on imported fuels, then we will have a very high cost of power. So efficiency cannot be substituted by anything else.

We have maintained three exchange rates in 2022-23 — Tk100 a dollar for import, Tk105 for export and Tk110 for remittance. Which bank will sell a dollar at Tk100 which it buys at Tk105 or Tk110? Why will it sell? Can it be the usual process? 

If such economic problems can be fixed, then energy issues will be solved automatically.  

Solutions to energy sector problems require political will

KM Rezaul Hasanat

Chairman, Viyellatex Group

If the government allows me reliable and quality electricity at Tk8, I will shut down my 30MW capacity captive plant which I have for my spinning, garment and fabric units. Because the power generation cost at my captive plant is at the level of Tk7-8 per unit and there are a lot of hassles. While calculating capital power generation cost, we just see net expenses like costs of gas, generator etc, but we do not factor in various other costs. 

Solutions to energy sector problems require political will, which will be followed by appropriate planning.          

With only a carbon emission of 0.5 tonne per capita, why should we be troubled with so many environmental issues? It has been widely campaigned that we are doing 'dirty' work, which we are not actually doing. We cannot extract coal, no finance will be available for coal projects, why? It is international politics that does not want us to be self-sufficient in any aspect, so that we are compelled to import. We cannot go for open pit mining. But in the USA, you will see large lakes in Michigan or other states, many of those were once mines.

We are still running inefficient power plants. By shutting down 30-35% capacity plants, we can have double benefits — gas consumption halved and getting double electricity from the same amount of gas. 

For this, political will is required. The government does not close down old power plants in fear of political backlash. It seems the government is running power projects as a charity. It cannot be like this. You have to choose between the two — market economy or charity through social economy.   

Ten years ago, we had to struggle to take up a Tk100 crore project, now we are taking up $100 million dollar projects one after another. Our capability has gone up. We can do more. The question is: do we have the will to go for exploration, if required, in joint ventures with multinationals? This is something we have not yet seen in the government's policy. 

Solar power can be available at a cheaper rate in the Opex model (operating expenses model in which the plant is built on 'no electricity no payment' basis), at Tk7-8 rate. This model needs to be promoted significantly to attract more investors and get more solar power, which can be much more than 2000MW.

It can be promoted through a cluster process. Say for example, if someone wants to install solar panels on 1,000 rooftops in Mirpur, he or she should be allowed to do so. If it succeeds, then many others may be interested in it.  

You won't find a single solution in energy and power. There is no magic wand. If you need to adjust electricity prices upward, you should go for it. Whatever we say, a strong political will is needed here. There is no other way. 

Have to continue extracting fossil fuels with improved technology

Engineer Khondkar Abdus Saleque 

Energy expert

Even in the absence of global shocks like Covid-19 and wars, Bangladesh could have faced an energy crisis, though perhaps not as severe as the current situation. Procuring energy from a volatile global market has subjected Bangladesh to significant impacts such as price fluctuations and transportation problems due to its geographic location, as well as supply chain disruptions. These challenges have intensified the country's energy-related issues.

Ensuring sustainable energy security involves providing everyone with access to quality and affordable electricity. Achieving this goal requires a proper fuel mix within reach. However, policy limitations, inefficiencies in implementation, and, to some extent, corruption have compelled Bangladesh to rely on imports for 48-50% of its fuel requirements. The depletion of the country's own gas resources, coupled with insufficient exploration efforts, has contributed to this reliance. A gas field discovered in Myanmar territory at the foot of the Chattogram Hill Tracts could have been found within Bangladesh's territory if exploration had been more proactive.

Over the last 13-14 years, inadequate efforts have been made to search for gas, marking a significant national failure. Despite the relatively small size of Bangladesh's offshore area, it has been divided into 15 blocks unnecessarily — five to six blocks could have been enough. Still we did not make use of our offshore gas potentials. Even if exploration begins now, it will take eight to 10 years to yield results.

There is a claim that Bangladesh's gas resources are exhausted; studies suggest a 52% probability of 32.5 TCF gas in the land. A US consultant, Bustos & Associates, in 2011 had seen 92% possibility of 34TCF gas onshore. Failure to pursue these possibilities has led to the current crisis. Only 30% of Bangladesh's land area has been explored for gas, leaving 70% unexplored. The country may have overlooked potential gas reserves, and it is crucial to continue exploration efforts. Now we are in such a situation that we might need to import gas from India.

To address technical challenges, the government should encourage industrial investors to partner with state-owned entities for gas exploration, similar to the partnerships formed in power generation. Financial constraints, such as cash crises at entities like Bapex, hinder technical progress. Timely decision-making is essential to avoid delays when technical issues arise during drilling.

Areas like Chattogram Hill Tracts, Bhola, Chhatok, and Tengratila show signs of oil and gas presence and should be prioritised for exploration. The government's focus on converting gas into Compressed Natural Gas (CNG) is risky, and exploration near Bhola and in offshore areas should be considered.

While investments have been made in the transmission system, there is a mismatch between the system's capacity and actual gas supply. Reevaluating the continued use of gas pipelines for domestic consumers and exploring alternative options like LPG could be more efficient.

The gas sector is marred by corruption, and efforts to eliminate illegal connections have proven challenging. There are also limitations with LNG contracts, and the government should consider long-term contracts with assured pricing formulas. Collaboration with top LNG buyers in the region could provide stability.

Increasing LNG supply is challenging due to financial constraints and infrastructure limitations. The reliance on captive generators for 2800MW of electricity highlights the struggle to meet demand. The fuel mix, with a significant gap between gas-based plant capacity and actual generation, needs attention. Coal, with high-quality resources at Barapukuria and Phulbari, should be explored to address the impending energy scarcity.

The global shift back to coal and advancements in technology suggest that countries like Bangladesh may continue using fossil fuels. Nuclear power is also a viable green energy option. However, challenges such as transmission system limitations, outdated distribution systems, and financial issues persist.

Renewable energy sources like deep offshore wind, hydrogen generation through seawater hydrolysis, and hybrid solutions such as solar rooftops and micro wind turbines can contribute to the energy mix. Although land scarcity limits large-scale solar projects, the government's ambitious target of a 40% share for solar energy by 2041 may face challenges.

Bangladesh must prioritise proactive exploration of its gas and coal resources, invest in modern technologies for fossil fuel use, and consider nuclear power to address the current and future energy challenges. A holistic approach, including renewable energy sources, will contribute to a diversified and sustainable energy mix. Political will and timely decision-making are crucial to achieving energy security in the country.

Reducing losses will help secure our energy future

Humayun Rashid 

Managing Director, Energypac Power Generation PLC

First of all we should see who controls energy, who manages it? BPC manages the chain. The government says BPC is a regulator, but in fact, it is a commercial entity,which produces at Tk54 per litre, buys at Tk64 and sells at Tk130. 

With the diesel BPC is supplying to you, you will not be able to operate higher than Euro-2 model engines, whereas Euro-5, Euro-6 vehicles are now plying the roads worldwide. BPC does not make any disclosure about this standard and the consumer rights body does not say anything about it. Consumers here do not have any voice.

A reformation is badly needed here. Those who sit on the board are politically motivated and do not have a clear picture of consumer needs. 

BERC is now a paper tiger. Say, my target is set at 10%. From where? Our natural gas pipeline leakage, both technical loss and theft, amounts to 12% or more.

If we could save this 10% gas, it would save $300-400 million a year. 

In electricity, system loss is 12-14%, taking technical and non-technical losses together. You need to set a target for them and tag their paychecks to it, like the one practised in the private sector entities. 

There are two ways out — enhancing efficiency and saving energy. If we can reduce losses in the energy sector, in other words, save 10% in electricity, then we can strengthen our energy security further.

Need to ensure cost-reflective energy pricing 

Dr Sakib Bin Amin 

Associate Professor, North South University

If we look at three core reform instruments — restructuring of the core utilities — both horizontal and vertical unbundling is necessary.  

Second most important, which most countries have adopted, is establishing an independent regulatory authority in its true sense. 

Third is welcoming the private sector in all the transmission, distribution and generation sectors.

What we see in developing countries, there is an absence of cost reflective pricing. As we speak about encouraging the private sector, without giving them proper incentive, we cannot expect the private sector will come and change everything overnight. We have to ensure cost-reflective pricing in the energy sector.

Now a new economic formula defines energy security — the 4-A framework: availability, affordability, applicability and accessibility. I have tried to analyse this formula in Bangladesh's perspective using some data. In terms of availability and applicability, we have more or less achieved a sort of energy security.

However, if we talk about affordability and accessibility, we still have a long way to go.