Originally posted in The Business Standard on 30 January 2023
Bangladesh’s power sector is not in a favourable situation at the moment and it cannot supply enough electricity to the dynamic economy and growing population. Like other countries, global impacts such as the fuel shortage, dollar crisis and other circumstances have also oppressed our power sector.
Additionally, numerous power plants across Bangladesh have been unable to operate to their usual capacity due to a shortage of gas and fuel. As a result, we are now relying more on diesel-based power plants, which are very costly. This is negatively impacting the manufacturing industry and resulting in losses for the sector.
According to the Bangladesh Power Development Board (BPDB), the government installed 25,000 MW generators nationwide, but they can only generate 13,000 MW power due to fuel shortages, distribution glitches, and other issues. The country has significantly invested in power generation; however, it is still falling short in setting up transmission and distribution infrastructures, negatively impacting the overall supply chain.
There is no denying that the power crisis is disrupting production, increasing cost of business, and spoiling perishable goods. Loss of gas and power can have an unfathomable negative impact on the economy if proper decisions are not taken to fix distribution in the energy sector.
The industrial sector contributes 37.07% to Bangladesh’s Gross Domestic Product (GDP); thus, scarcity of energy and gas supply can lead to a decline in the contribution to the GDP, affecting the overall economy. The Asian Development Bank (ADB) has already stated that our country’s economic growth will slow to 6.6% in FY23.
Grid operators manage the power system manually instead of using modern communications and automation. Most of the nation’s generations are powered by imported fuel and natural gas. And since the fuel prices started increasing in early 2022, the Bangladesh government has begun rationing supplies, limiting the output of the generators, and obligating consumers and manufacturers to depend on alternative power generation resulting in higher cost of doing business.
While policymakers have been aware of the system’s vulnerabilities, the reforms and investments taken have been insufficient due to the constraints of the centralised power sector. Mandatory fixes of the issue require all-encompassing changes in policies and regulations that will need resources, time, and positive will.
According to PwC, Bangladesh must invest $35 billion in the power sector by 2041 to distribute adequate energy to everyone.
Information technology can help improve the efficiency of the power sector. The Japan International Cooperation Agency (JICA) has already proposed a master plan which shall be revised addressing the energy mix and proper supply to ensure energy security.
Policymakers should adopt smart grid technologies as that will make the supply chain networked and non-linear, both physically and commercially. It will ensure that demand and supply are balanced through smart systems.
Innovation and modern ways of working are necessary for the sector as well. Additionally, the government can look for offshore gas exploration, and renewable energy.
Compared to industrialised countries such as China and India, Bangladesh is a lower carbon emitter so coal-based power plant projects can be undertaken partially to mitigate the increasing demand.
Even though the government has already started working towards renewable energy, it makes up less than 1% of the nation’s grid electricity supply capacity. Therefore, renewable energy can provide a great backup to the traditional power supply.
According to the International Trade Administration, electricity demand in Bangladesh will reach 50,000 MW by 2041. Power supply from the Matarbari and Rooppur projects early next year will balance the current situation, but a long term — at least for the next 30 to 40 years — master plan should be formulated by the BPDB and other government regulatory bodies to ensure energy security.
Also, quality power must be ensured for the investors who buy electricity from the government. It has become mandatory to address the issues prevalent in this industry to meet the future demand and ensure uninterrupted power supply for all.