Originally posted in New Age BD on 5 April 2023
An estimate by the US-based Institute of Energy Economics and Financial Analysis has revealed that Bangladesh needed to invest $1.71 billion annually for achieving its target of 40 per cent electricity from renewable sources by 2041.
The estimate was revealed in a study titled ‘Charting an electricity sector transition pathway for Bangladesh’ released online on Wednesday.
The yearly investment needed by Bangladesh for achieving its renewable energy goal is lower than the power sector subsidy amounting to $2.82 billion in financial year 2021-22.
The estimate did not include investment needed for grid modernisation and storage facilities.
‘Renewable energy capacity addition is the most favourable option for Bangladesh’s power system, which suffers from a hefty subsidy burden and overdependence on imported fossil-fuels,’ read the first line of the executive summary of the study.
Bangladesh can easily generate 1,700MW to 3,400MW of solar power during the day, and 2,500MW to 4,000MW of wind power to reduce the use of costly oil-based electricity.
‘Bangladesh’s electricity generation model appears unsustainable without a clear transition pathway. Therefore, policymakers should raise their renewable energy targets and reflect the same in the upcoming Integrated Energy and Power
Master Plan,’ said the press release issued on the occasion of the release of the study quoting Shafiqul Alam, the author of the study.
High fossil fuel prices and increased power generation costs raised the requirements for subsidy by 300 per cent since 2019-20, according to the study.
In 2021-22, Bangladesh paid in subsidy Tk 297 billion, the study said, adding that, compared with the year before, the subsidy was nearly 152 per cent higher.
In the financial year 2020-21, Bangladesh spent Tk 118 billion in subsidy.
In 2019-20, the study said that the power sector subsidy stood at Tk 74 billion.
‘Rising subsidies eventually compel the government to pass the rising cost on to the consumers. This results in a spectre of price hikes for electricity and different fuels in quick succession,’ Shafiqul Alam, also the IEEFA financial analyst, said the press release.
Bangladesh increased the electricity price three times – each with 5 per cent hike, and the gas price by 179 per cent since January.
In the past year, the fuel price was increased by up to 50 per cent and the gas price by 23 per cent.
Despite these price hikes, the study said that the subsidy burden of the power sector in the financial year 2022-23 could exceed what was paid in the previous year.
The study warned that the average electricity generation cost would likely cross double digits in the current financial year.
In the past year, the average power generation cost stood at Tk 8.84 per kilowatt-hour, the study said, adding that the levelised cost of electricity from rooftop and utility-scale solar was around Tk 5.25 per kilowatt-hour or $0.05 per kWh and Tk 7.6 per kWh and $0.072 per kWh respectively.
The report said that the government’s Renewable Energy Policy 2008 failed to encourage renewable investment while the power system master plans of 2010 and 2016 actually encouraged fossil fuels such as coal and gas.
Bangladesh’s installed generation capacity jumped to 23,482MW in 2023, excluding captive power, from 5,493MW in 2009, almost entirely based on imported fossil fuels.
In 2009, over 82 per cent of the installed capacity was based on locally extracted natural gas. The gas share in the energy mix dropped to 49 per cent in 2023, with 20 per cent of the demand relying on imported LNG.
The share of coal and fossil-fuel-based power import increased in 2023.
Bangladesh needs $4.45 billion as fuel cost for uninterrupted power supply from February to June, according to the study.
Bangladesh generated 28.44 per cent of its electricity in FY2021-22 from power plants that run on imported furnace oil and diesel.
The oil-based power plants are mainly operated to meet peak electricity demand at day.
The study calls on the government to lift the current cap on rooftop solar installation capacity by up to 70 per cent of the sanctioned load of industrial and commercial buildings.
It also recommended waiving duties – ranging from 15.2 per cent to 58.6 per cent – on fibre-reinforced polymer walkways, imported inverters, mounting structures and direct current cable for rooftop solar projects.