Bangladesh losing $3.3b a year to power cuts

    Originally published in The Daily Star on 22 May 2023

    Bangladesh loses around $3.3 billion a year due to unreliable power supply to homes, offices, and factories.

    This amount is around 1.5 percent of the GDP, said a World Bank report.

    Despite impressive gains made in terms of access to energy, power cuts remain regular in Bangladesh, it said, adding that on average there are over 400 storm-triggered electricity outages every year.

    Even though Bangladesh’s power generation capacity is over 23,000 megawatt, the report said, “Power generation asset utilisation remains low, below 50 percent, due to fuel shortages, poor dispatch, and transmission constraints.”

    The WB made the observations in the report of First Green and Climate Resilient Development Credit, under which Bangladesh received $500 million loan. The loan was approved during Prime Minister Sheikh Hasina’s visit to the World Bank’s headquarters last month.

    The WB, however, tagged several conditions for the loan, including six conditions on power and energy.

    The government had to comply with two of the conditions before getting the loan.

    No capacity payment for rental power plants seeking renewal of contract is one of the conditions that has been complied with by the government on January 8 through a circular.

    “No electricity, no payment [without any minimum guaranteed off-take],” the circular read.

    Finance Minister AFM Mustafa Kamal in a letter to WB President David Malpass in March said the government plans to run more efficient larger power plants and close inefficient liquid-fuel rental generators and small independent power plants.

    He said the government is focused on achieving an efficient fuel mix and reducing the average cost of power generation in future.

    He said that in 2010 Bangladesh went for quick rental power plants to close the gap between generation and demand, particularly during peak periods.

    Now, only 1 percent of the electricity generated in the country comes from rental plants.

    The minister said the government pays a significant amount to rental power plants as capacity payments.

    To systematically assess energy-saving potential and improve the efficiency of large consumers, the WB recommended the amendment of the Energy Efficiency and Conservation Rules with provisions for annual energy consumption reports, periodic energy audits, and capacity development.

    The lender expected that the amendments and their implementation would result in the energy saving of around 1,000GWh in five years from 2022.

    The government amended the rules in line with the WB recommendations in February with provisions for all industries to submit annual energy consumption reports and conduct audits by a certified energy auditor within 18 months and then every three years.

    The finance minister in his letter said the government would adopt a market-linked system from September that would periodically and automatically adjust diesel, heavy fuel oil, and octane prices.

    “The power and energy ministry has prepared a roadmap for the automated price adjustment mechanism for petroleum products, including the necessary institutional responsibilities, consultations process, and other activities needed to approve the system by September 2023,” he said.

    “We will support the establishment of an independent system operator as envisaged in the electricity act to improve the dispatch and efficiency of the power generation system,” he said.