Originally posted in The Business Standard on 08 April 2022
By: Shafiqul Alam
The present trend of the power sector must change in line with our vision to be a self-sufficient country. All the inefficiencies, be they on account of surplus capacity, capacity payment or growing imports of fossil fuels, must be minimised to make the country business competitive
The story is quite the opposite today than it was in 2009. Back then, Bangladesh was grappling with persistent load shedding, almost at every alternate hour even in the capital city of the country.
The total installed capacity of the power sector was a meagre 4,942 MW, excluding captive generation systems installed by the industries. All sectors of the economy were suffering as a consequence of the erratic power supply.
Insufficient investment over a long period and very high transmission and distribution losses were at the heart of the causes that plagued the power sector.
Thankfully, since the incumbent government took office, the outlook of the sector started to experience rapid changes. As an immediate resort, the government opted for quick rental power plants, based on liquid fuels, to ramp up the overall power generation capacity of the country.
While the quick-fix strategy of the government was expensive and the economy was exposed to external price shocks, imputed to growing imports of fuels, Bangladesh eventually did well in economic performance.
The GDP growth rate of the country over the last decade, excluding the Covid-19 period, was hovering around 7% and even registered an impressive 8.15% in 2019. As different reports substantiate, among other factors, the enhancement of electricity generation capacity has been an influencing factor for economic growth.
Bangladesh has recently declared 100% electricity access in the country. The feat is impressive as we are well ahead of the global target of attaining 100% electricity access by 2030, set out in Sustainable Development Goal no. 7 (SDG 7).
The load shedding and power outages have substantially decreased, thanks to the installed power capacity, which is now over 22,000 MW, excluding captive and off-grid renewable energy systems. Overall transmission and distribution losses have declined as well. Yet, the sector is not devoid of challenges, which are different from the ones we had a decade ago.
While the capacity of the power sector was enhanced to propel economic growth, ensuring access to electricity and meeting the growing electricity demand of different sectors, the demand side could not keep pace with increasing installed capacity.
For instance, industrial electricity demand has not risen according to expectations. Existing industries, reportedly, bank on their captive generation units due to the lack of reliability of the grid electricity. Expansion of the transmission and distribution sides has also not been quick enough.
Well, people in rural areas have connections to the national electricity distribution system, but they face frequent power outages as often reported in different media. Therefore, the national electricity grid has a surplus capacity beyond the reserve margin.
Notably, against the installed capacity of over 22,000 MW, the national grid has so far served the maximum demand of 13,792 MW, representing quite a good amount of surplus in addition to the standard reserve margin.
As demand is low, some power plants operate at very low capacities, substantiated in various reports. The capacity payment, as a result, is affecting the performance of the power sector and this has been a trend for the last couple of years.
The relentless efforts to ensure power supply have furthermore affected the energy security of the country. The national grid is now more dependent on imported fossil fuels than ever before. Coupled with this, demand for LNG imports is on an increasing trajectory, which will also affect energy security. And the reliance on imported fossil fuels has made the power sector of the country vulnerable to external shocks in recent times, attributable to the price volatility of fossil fuels in the international markets.
However, since the access to electricity is now 100% in the country, there is a certain level of surplus power generation capacity and overall electricity demand will not increase overnight, the time is now ripe to spearhead efforts on enhancing energy security rather than only power security.
One of the conduits to improve on the energy security front could be utilising the solar potential of the country. As industrial rooftops could accommodate solar systems of several thousand MW, measures should be taken to motivate industry management to utilise their rooftops accordingly.
Although the land is scarce for implementing large scale grid-tied solar projects in the country, it would be logical to identify all available lands that could be used for grid-tied solar projects and thus determine the maximum potential of solar power in the country without affecting agricultural land.
These available lands could be earmarked for potential solar projects in the foreseeable future. Alongside this, agro-photovoltaic (Agro-PV) systems could be encouraged. Likewise, exploration of our local gas should remain a key component in the energy sector planning to offset our staggering level of dependence on imports.
To bridge the gap between generation capacity and demand, the reliability of grid-based electricity must be increased to attract industrial enterprises. More work shall be done on the distribution side to deliver uninterrupted electricity to the people of rural areas. In the medium to long-term, electricity demand will obviously rise and as such, efforts for energy efficiency on the demand side should continue.
The present trend of the power sector must change in line with our vision to be a self-sufficient country. All the inefficiencies, be they on account of surplus capacity, capacity payment or growing imports of fossil fuels, must be minimised to make the country business competitive.
Finally, as stated earlier, the sufficiency in power generation now calls for action to focus on energy security. As things stand, we won’t be able to fully rely on our local energy resources, but the increasing deployment of cheap solar energy, exploration of our local gas and enhancing energy efficiency would surely attenuate our reliance on imported fossil fuels in the years to come.