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Present and future of energy and power sector

Power and energy is critical to the incremental economic growth of Bangladesh. It fuels and keeps economic mobility. Bangladesh has become already one of very few surprising economies achieving 7 percent plus growth trajectory despite minimum mineral and natural resources. Power sector of Bangladesh has marked a commendable development since 2009 managing to recover from power wreck havoc with 12 percent average growth in past years. A thorough power and energy sector portrait below will justify how this sector is progressing and leading Bangladesh to new era of growth and economic prosperity having a paradigm shift.

Overview of power and energy sector:

Bangladesh has the legacy of enormous gap of demand and supply of power. During this time Power sector has managed to rapidly improve to some extent taking the power generation capacity from 5000MW to 13000 MW using different energy and fuel mix. The energy and power sector has accelerated since private sector independent power generation companies; IPPs, SPPs and Captive Power solution took challenge and robustly contributed to power generation and way forwarded this industry accounting for 48 percent of total power generation.

The growing export oriented Industry and business-led economic growth of Bangladesh requires huge supply of energy and power to make Industry and GDP Contribution to 32% alongside growing domestic use. The on-going growth of power has given access to almost 67 percent people of Bangladesh. Considering the incremental energy and power demand, the master plan of development the seventh five year plan has envisioned allowing access to power and electricity entire population of Bangladesh in 2021, the year of economic graduation of Bangladesh to Middle-Income Country. On the other hand, Bangladesh has got energy scarcity against compound growth of primary energy Gas in its multiple utility in domestic use, wide-range of industries; Fertilizer, cement, steel and commercial operations, public transport and power generation. Bangladesh had probable reserve of natural gas 27 TCF of which leftover reserve is about 10 TCF and estimated demand is 2TCF per annum for meeting cross-sectional demand. Against the growing need of primary energy, Bangladesh is desperate for alternative energy like LNG.

New Development:

In line with the Power Sector Master Plan (PSMP) target of 34000MW power generation, 40000 MW by 2040, many initiatives have been taken from public and private sector. Remarkable success of Private sector in Power sector has left Government assured the capacity of private sector which also encourages the PPP development apart from stand alone IPP and Public sector initiatives. Following development were held in this sector in recent time:

  • Local and foreign private partnership has developed in power generation alongside G2G and Joint venture of Government and foreign companies held and replaced conventional power generation technology with combined cycle of power generation plants give highly efficient and clean power generation technology.
  • Per capita consumption of power has increased from 220 KHW to 371 KWH.
  • The system loss in energy efficiency has substantially reduced by 3 percent to 13 percent in power generation.
  • Diversity in fuel use in power generation happened which some extent reduced the dependence of gas and increased other fuel like furnace oil, diesel and coal.
  • Cross border power transfer contracts held between India and Bangladesh.
  • To cut primary energy gas shortage, the on and off-shore blocks have been awarded to IOCs like Conoco Phillips, Tullow, Statiol, Chveron and Australian Santos partnering BAPEX.
  • New 100 wells are being drilled to generate more gas to overcome gas crisis and more 3D and 2D geological seismic surveys are in progress.
  • For immediate gas shortage way out, the imported LNG is being sourced from Qatar, Singapore and floating terminal and recycling project is in progress in Chittagong which is expected to be in operation in 2017.
  • The seventh five-year plan estimated to produce another 12584 MW power by 2020 of which almost 5000 MW will be generated by private sector IPPs using diverse fuel mix. 4557 MW will be from imported coal, 4031 MW gas generated and 1750 MW LNG sourced.
  • Government has approved 57 power generation projects under seventh five year plan of which 23 projects are owned and managed by IPPs.
  • Cross-Country Power transaction between India and Bangladesh took place.
  • Investment in power sector requires over 10 percent of GDP but the allocation of Government in ADP and seventh five year plan is much less than required and larger share of fund is allocated for power generation and transmission than sourcing of energy.

Alternative mode of energy and power:

The power generation in Bangladesh was heavily dependent on conventional natural gas as cheap source of raw material. Due to relentless gas use in many other different gas dependent industries, power generation and other gas dependent industries ended up gas supply shortage. During this decade, IPPs, SPPs and Government power generation companies found HFO, Diesel as alternative economical form of energy for power generation reducing absolute dependence on gas energy.

  • Considering the lowering reserve of gas, the imported coal based power generation has been another ideal and relatively inexpensive power generation source. And, Bangladesh has got also adequate amount of untapped reserve of coal to support local power plants too.
  • Taking the advantage of comparative low cost imported coal, Bangladesh Government has undertaken several coal power plants under G2G agreement and Private sector power plants also came forward to progress the power generation capacity against power generation target by 2021 and 2030.
  • Taking the urgency of environmental safeguard and sustainability issue into account, the clean and renewable energy and power generation issue has become pressing across the globe as opposed to conventional power generation trend.
  • Bangladesh produces only 403 MW of renewable energy. But the demand of renewable energy like hydroelectricity, solar power is on rapid increase to gradually substitute the conventional energy sources in line with the target of SDG 2030.
  • Bangladesh has not got any natural advantages to source hydro electricity and wind power except Solar power.
  • As reaching out to every corner of country to access conventional power network due to unaffordable tariff and inadequate transmission and distribution infrastructure, home panel solar system, rooftop solar panel and solar irrigation in Agriculture are being popular and so far 4 Million families have come under solar power facility.
  • Imported Liquefied natural gas (LNG) is going to be alternative option to overcome incremental gas demand and LPG (liquefied petroleum Gas) supply to reduce the natural gas dependence in private transport vehicles and domestic use.
  • The country’s ever first and largest nuclear power plant backed by Russian Investment for 2400 MW power by 2023 is progressing with commitment to provide affordable and safe electricity.
  • These two new modes of gas use are prioritized from futuristic energy security standpoint.

Financing in Power sector:

Apart from local banks, many foreign banks, off-shore financing companies invested in power sector development. International development partners repeatedly negotiate government agencies for financing new project aiming to power generation, distribution and transmissions. Alongside public sector, many EPCs have developed in Bangladesh which invest using debt financing sourcing local and foreign banks. Private sector EPCs also look for local and foreign partnership for joint venture power generation business using diverse energy mix.

  • The incremental energy and power sector requires more than $20 billion investment to realize the 23000 MW power generation target.
  • Investment opportunities are available in upstream and downstream of energy sector and investment opportunities in power sector is limited to only generation but transmission and distribution business also open up new opportunities there.
  • FDI with local partner in Bangladesh is always welcome alongside G2G arrangement for PSC in exploration and well rigging.
  • Development partners JICA, ADB, WB, IFC are providing assistance to wide range of high capacity power generation G2G and PPP projects in coal, LNG.
  • IOCs from Malaysia, Singapore, UK based Kairns, Irish Tullow, US Chevron and investors from China invest in Greenfield projects in offshore exploration and power sector infrastructure development.
  • Foreign offshore banking companies like IDB also extend cooperation for low-cost soft financing in long term in power sector projects.
  • Local Power generation companies are building their capacity to deal with power plants upto 500 MW but larger projects and coal power generation and renewable power technology need to be sourced through FDI and local and foreign partnership.
  • Issuing bond in overseas capital market to raise fund for power sector of Bangladesh.

The energy and power sector scenario is very enormous however the article tried to demonstrate outlining the precise partial portrait of energy and power sector of Bangladesh from the macroeconomic perspective of Bangladesh. Indeed, this picture justifies robust development considering more than 20 percent estimated annual growth and need of huge investment down the road to enlighten the civilization of Bangladesh and facilitate intensive industrialization led monumental and inclusive socio-economic development of Bangladesh in the days to come.

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