Energy challenges to Vision 2030

Last month, the Energy & Power magazine organised a roundtable titled 'Energy Challenges to Vision 2030' that witnessed a lively discussion about different challenges to achieving energy & power sector vision of 2030.
Bangladesh has a national vision for achieving middle-income country status by 2021 and developed economy status by 2040. As a prime requirement to achieve the vision, the power sector has a vision for supplying uninterrupted quality power to all by 2021 and reaching a 40,000 MW power generation capacity by 2030. In the discussion, ensuring sustainable supply of primary fuel at affordable cost was identified as a major challenge. It was also mentioned that if Bangladesh fails to start mining its own coal and use it for energy generation by 2030, the country will be 92 per cent reliant on imported primary fuel. Considering the price volatility of global energy market it is almost inconceivable what financial impact it may have on the economy.
Bangladesh has adopted various mega projects for achieving the power generation target and is simultaneously modernising transmission and distribution infrastructures. It is also giving emphasis on energy conservation and efficiency as significant amount of energy is being lost through inefficient use, theft and pilferage. Moreover, absence of economic pricing of energy also does not inspire efficient use.
Bangladesh desperately needs huge investment in all segments of energy & power value chain. The government from its own source does not have the required capacity. The state owned enterprises also have their own limitations in reinvesting in expansion and development of infrastructures or explore and develop own resources. In this scenario Bangladesh needs generous investment from private sector either on stand-alone basis or under public-private partnership (PPP). But unfortunately, though local investors have shown commendable capacity in small to medium power generation plant development, most of the other segments of energy and power value chain remain under the exclusive domain of underperforming public sector.
Consequently, Less than minimum attention has been given to exploration and development of primary fuel resources. There has been no discovery of large gas fields for several years. Appropriate initiative for exploration for hydrocarbon in the huge offshore is not yet visible. The government is still grappling with the strategy for mining our own coal. No one can deny that our own primary fuel, which is the least costly fuel option for energy generation, should be the backbone of sustainable energy security.
FUEL DIVERSIFICATION FOR ENERGY GENERATION: In view of the prevailing scenario, the government in the Power System Master Plan (PSMP) has rightly adopted fuel diversification for energy generation. To relieve natural gas from exclusive dependence, coal was identified as a major fuel option. In PSMP 2010, the fuel mix forecasted for 2030 embodies over 50 per cent reliance on coal - 29 per cent on domestic coal and 21 per cent on imported coal.  Mining domestic coal requires political decision from discovered coal mines and setting up of mine mouth coal power plants. Imported coal requires setting up of extensive coal import infrastructures - coal port, storage facilities, concluding coal supply contracts, setting up of modern coal fired power plants etc. For Bangladesh, managing all the segments of coal value chain is a new concept. It requires significant capacity development of technical and managerial personnel.
Bangladesh is also taken initiatives for LNG import and has adopted a few projects for setting up LNG terminals with re-gasification facilities. LNG price, even in the current low price scenario, is about US$10 /MMBTU. The weighted average price of LNG in Bangladesh's gas market is about US$2 /MMBTU. So, LNG import is bound to create price shock. We are not sure what plans government has to manage this price impact on LNG use.
We have identified some challenges that Bangladesh is facing in achieving the energy sector vision of PSMP 2015.
GOVERNANCE: The technical and managerial personnel devise projects, manage and monitor implementation and finally operate and maintain the facilities. Unfortunately, too much bureaucratic regulation at each of these stages stagnates the infrastructure projects from inception to completion. Views and opinions of technocrats do not always receive the right attention. As such, mega projects are adopted with extensive techno-economic feasibility studies, but interference by non-technical bureaucrats often creates protracted delays. As an example, we may refer to indecisions on coal mining, adoption of too many imported fuel based power generation projects without firming up investments and without even starting fuel supply negotiations. There is no pricing policy, no utilisation plan of depleting gas resources.
Another example, Years have passed after the resolution of maritime boundary disputes but offshore exploration has not yet taken off. Many high officials visit foreign countries off and on for knowledge gathering on energy and power but after a few years they get transferred to other ministries making hardly any contribution to energy sector.
INVESTMENT: Government delegations very often travel abroad, organise road-shows and seminars for encouraging foreign direct investments. We are unsure how much these have benefited. Bangladesh has signed few MoUs (memorandum of understandings)with Japanese, Chinese, Russian, Korean, Malaysian and other investors, and some G-to-G arrangements are on the agenda in the power and energy sector. But most of these MoUs have not been converted into agreements. None of the mega projects, excepting the self-financed Padma Multi-purpose bridge project, has actually taken off. Physical works of the projects in Matarbari, Maheskhali, Payera, Rampal and Rooppur are still at least a year away to start.
In this age of technology all major energy companies and investors are well aware of the challenges of doing business in Bangladesh. If the government is really serious there is no use of sending officials for less productive and limited utility road-shows abroad. Such events can take place in Bangladesh inviting genuinely interested investors. The wrong culture of indecision, lack of security, uneconomic power and energy pricing cannot encourage major companies risking billions of dollars in investing in Bangladesh's energy and power sector. Moreover, the Bangladesh Energy Regulatory Commission (BERC) has also succeeded in operating independently. Staffed by retired bureaucrats, BERC does not have the required technical manpower.
PRIMARY FUEL: Failure to expedite exploration and development of own petroleum resources at offshore and onshore locations has created crisis in the mono-fuel natural gas dependent energy sector. The government also failed to adopt policy for its own coal resources exploitation. In the wake of depleting gas resources, government adopted contingency expensive fuel-based power generation which achieved success in averting serious energy crisis. But failing to develop traditional fuel-based power plants with assured supply of own fuel has made energy security really vulnerable. PSMS 2010 envisages for almost doubling the present level of generation from 11750 MW to 24,000 MW and sustainable supply of power to all by 2021. The target for year 2030 is 40,000 MW. 50 per cent of the power is targeted to be generated from own and imported coal. LNG will be imported to overcome gas deficit. But till now, works for setting up coal port and LNG terminal have not commenced, meaningful negotiation for fuel import is not visible and government does not seem to have firm conviction for mining own coal.
INFRASTRUCTURE: Bangladesh will require major expansion and development of infrastructure to facilitate import of coal and LNG for evacuation, transmission and distribution of generated additional power. At present, the country's power system struggles in handling less than 8000MW power. Hence, the entire power system value change requires huge upgrading for managing 24,000 MW by 2021. Besides, to ensure efficiency, smart grid and smart metering, SCADA with modern load dispatch centre for power grid and SCADA , telemetry and prepaid meter for gas system need to be set up.
CAPACITY DEVELOPMENT: Bangladesh needs to be additionally concerned about emissions because of its being one of the most vulnerable countries from adverse climatic change due to emissions. It cannot afford to have any significant rise in emissions from energy generation at its own backyard. Bangladesh will have to manage coal terminals and LNG terminals. The country will soon have to operate nuclear power plant. Bangladesh is planning to introduce smart metering and smart grid in transmission and distribution sectors. All these will require qualified and trained professionals and extensive capacity building. There is not much time left. Facilities may be developed by foreign companies or contractors. They may even operate in the initial years. But we need to create core competence as soon as possible to operate modern facilities efficiently.
PRICING: There must be a consensus that for sustainable energy security and supply of quality power, consumers have to bear the economic price of power and energy. The present prices are well below economic pricing. The pricing must be made market-based or cost-plus in phases. For keeping power generation cost within affordable limit, the government must prefer the least cost options. Our own primary fuel gas and coal are the least cost options.
SUGGESTIONS: To confront and overcome the challenges without causing major discomfort to users, we urge upon the government to:
n Give priority to domestic primary fuel: gas and coal as much as possible
n Start exploration of own coal without delay and start simultaneous actions for setting up mine mouth coal fired power plants
n Engage IOCs (international oil companies) in exploration for petroleum in offshore through fresh PSC (production sharing contract) bidding round outside Bangladesh Petroleum Exploration Company (Bapex) ring-fenced area
n Expedite offshore exploration for petroleum  through updating Model PSC 2012
n Expedite negotiations for concluding agreements with parties with whom MoUs have been inked for major imported fuel based power plants.
n Select few feasible imported coal-fired power plant projects and start physical works of coal terminals and coal fired power plants.
n Start negotiation for coal import with leading suppliers.
n Start physical works of LNG terminals as soon as possible and also start negotiation for long-term LNG supply with major suppliers.
n Plan and implement capacity building of professionals for creating core competency in managing projects, operation and maintenance of facilities.
n Review PPP and open mid and downstream sectors gradually to private sector.
n Strengthen BERC (Bangladesh Energy Regulatory Commission) to allow it to operate independently as per its Act.
n Re-organise boards of directors of all state-owned power and energy companies inducting line professionals.
Engr. Khondkar A Saleque
is an energy consultant.
[email protected]