Top three priorities of power sector budget

Efficiency enhancement, strengthening transmission and distribution system and investment on renewable energy – should be top three priorities of power sector budget

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The success of the power sector needs new narrative which should focus on efficiency, better pricing, low carbon emission power generation and improvement of transmission and distribution. The sector continued relying on fossil-fuel based power generation and related transmission and distribution as its case of achievement. After the preliminary achievements, the success needs to be examined from efficiency and reform points of view. The national budget for FY2022 has special importance from the power sector in the context of changing national and global perspectives with regard to addressing climate vulnerability particularly through clean energy and green growth. Unfortunately, the proposed budget for the power sector has little reflections of that perspective.

The allocation for the power sector in the national budget for FY2022 has been increased- a large part of this is for distribution related projects. There is a growing tendency by the Ministry to seek fund for more transmission and distribution (T&D) related activities. However, a large part of these projects is ‘carryover’ projects where quick implementation of projects are required. The budget allocation for renewable energy related projects should be further enhanced. Activities of Sustainable & Renewable, Energy Development Authority (SREDA) should be further promoted. Government should invest more in RE based projects (both small and large scale projects). Fiscal incentive structure for investment in RE-based power sector projects should be further widened. FDI in the renewable energy should be facilitated by making the domestic business environment favorable including making the businesses viable and derisking. The power sector should be made competitive – thus all types of bidding should be held under ‘open bidding’ system maintaining transparency. In this context ‘Speedy Supply of Power and Energy Act’ should be discontinued immediately.

These observations emerged at the CPD’s Virtual Dialogue on The Power Sector in the National Budget for FY2022: Perspectives on Allocative Priorities & Reform Agenda. The dialogue was held on Sunday, 20 June 2021.

Professor Mustafizur Rahman, Distinguished Fellow, CPD delivered the introductory remarks. He stated that in view of the government’s recent commitment for developing a clean energy based power sector, a lot of attention has been created about how the proposed budget is planned to shift its focus and allocation both towards reduction of fossil-fuel based power generation and enhancement of renewable energy-based power generation.

CPD’s Research Director, Dr Khondaker Golam Moazzem made the keynote presentation at the dialogue. The overall performance of the power sector during FY2021 is mixed. Positive changes observed in case of generation, transmission and distribution. Modest rise in RE based power generation though it’s share is still negligible. Overcapacity and frequent power outage and ‘zero’ load-shedding in official data – three contradictory issues have been continuing. BPDB borne a huge financial burden because of its over generation capacity – per unit cost for some power plants was as high as Tk.1500 although average cost is Tk.7. Variation in per unit cost was higher in FY2020 compared to that in FY2019. Modest level of activities observed in the SREDA. The budget allocation for the Power sector has increased – allocation for distribution get the priority. However, higher allocation does not explain adding new projects rather majority of the distribution related projects are ‘carryover’ projects which portrays inefficiency in project implementation. Transmission related projects observed rise in ‘carryover’ projects. The allocation for distribution and transmission for different agencies shows both reduction and increase in budget which portrays skewed nature of allocation and subsequent adverse effect on electricity users of different areas.

Mr Mohammad Hossain, Director General, Power Cell, Power Division, Ministry of Power, Energy and Mineral Resources, Government of Bangladesh and Mr Mohammad Alauddin, Chairman (Additional Secretary), SREDA, Power Division, Ministry of Power, Energy and Mineral Resources, Government of Bangladesh were present as Guests of Honour at the dialogue. Mr Hossain stated that the government is committed to reduce carbon emission and there are efforts to phase out coal energy. Quick rental power plants will be gradually phased out. Mr Alauddin remarked that there is a need to look for renewable energy beyond solar and wind energy for which more research is required.

CPD’s Chairman, Professor Rehman Sobhan also spoke at the dialogue. He questioned why many power plants are still operating which should have been retired by now. Professor Sobhan also asked the speakers to identify how much of the excess capacity has attributed to distribution failure.

Six Panelists also made their remarks at the dialogue. The excess capacity of energy generation exists in paper only and not in reality, remarked Dr M Tamim, Former Special Assistant to the Chief Advisor and Professor, Department of Petroleum and Mineral Resources Engineering, Bangladesh University of Engineering and Technology (BUET). He further recommended to analyse the sector by looking beyond the budget and considering the real scenario. Agreeing with Dr Tamim, Mr Imran Karim, President, Bangladesh Independent Power Producers’ Association (BIPPA) recommended that Bangladesh should have the capacity to toggle between various fuels to reduce energy generation cost. Mr Asif Ashraf, Director, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and Managing Director, Urmi Group called for tax incentives to businesses that generate solar energy. Mr Mahmood Malik, Executive Director and CEO, Infrastructure Development Company Limited (IDCOL) opined that rooftop solar energy can be a good source renewable energy in Bangladesh, which can be used beyond industrial purpose. Engr. DM Majibor Rahman, President, Solar Mini-Grid Association proposed a core committee of engineers for research and analysis for efficient generation of solar energy. The inter-agency coordination is highly important with a view to ensure efficient power distribution at different district and upazilla levels. The national budget for FY2022 is a business-as-usual and no special initiatives are taken into consideration for the power and energy sector, commented Dr Farseem Mannan Mohammedy, Director, Centre for Energy Studies, Bangladesh University of Engineering and Technology (BUET).

Dr Fahmida Khatun, Executive Director, CPD chaired the session. In the closing remarks, she highlighted the progress of Bangladesh in the power and energy sector. Although, she mentioned that quality of energy needs to be ensured. Uninterrupted power supply is crucial, otherwise production cost and efficiency of industries is hampered. CPD will continue pursuing its effort for green growth and clean energy initiatives in the country taking into account country’s long term commitments.

The dialogue was also attended by high-level policy makers, political leaders, academics, development practitioners, business leaders, civil society activists, international development partners and journalists among others.