Actions & reforms to ensure clean energy for all

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Bangladesh has initiated various reform initiatives at different times since its independence with a view to strengthening its energy sector. However, there are a number of concerns and controversies which have informed this journey. Some of these were discussed in the first part of the article yesterday. The rest are presented here.

STRENGTHEN RENEWABLE ENERGY DEVELOPMENT INITIATIVES

Undertake Mandatory Regular Revision of Policy Frameworks. The government must put a system in place to revise the energy policies on a regular basis. A specifically designated entity may be set up for this purpose. The mandate of the concerned authority will include the following: periodic review of renewable energy plans and policies, pricing, fiscal incentives and taxation policy, identification of gaps between policies and emerging demands and how to address those; coming up with human resource needs, suggesting ways to integrate renewable energy policy into the overall national energy development strategy. To note, import taxes on renewable equipment remain very high in Bangladesh. Solar inverters and solar panels are currently subject to import duties of 37 per cent and 26 per cent, respectively. The National Board of Revenue (NBR) and SREDA need to work together to rationalise the import tariffs, keeping in perspective the demands of developing the renewable energy sector of the country, incentivising investment and enhancing consumer welfare. An integrated demand projection will need to be undertaken to finalise the country’s renewable energy mix plan.

Promote Local Renewable Energy Equipment Manufacturing. Manufacturing of renewable energy equipment in Bangladesh is almost non-existent at present. Government should promote local entrepreneurs by implementing appropriate policies and fiscal and financial incentives with proper institutional support. There is also a role for FDI here:

Enhance Budgetary Support. Government’s emphasis on low-carbon growth path needs to be reflected in budgetary allocations. Fiscal-budgetary policies will need to be appropriately calibrated in view of this. Additionally, new and creative green financing schemes need to be promoted. To note, these are by now common features in the financial landscape of emerging and Asian developing countries. The present SHS assistance programmes must also be strengthened through the efforts of specialised organisations such as IDCOL, Investment Financing Facility for the Private Sector (IFFP) and other similar entities. The government should extend support for attracting innovative financing schemes, e.g., grant funding and low-interest financing, for interventions targeted to make the country’s current grid infrastructure smarter. In this context, innovations in decentralised storage technologies for more grid flexibility may be mentioned. Least-cost technology for bridging the gap between on-grid and off-grid renewable energy projects ought to be promoted. Along with local funding, Bangladesh should also energetically explore additional funding sources similar to the Southeast Asian countries, which are taking advantage of international funding opportunities and various partnerships.

Revive Rooftop Solar Programme. Although the previous attempts to maximise the use of solar rooftops were not fully effective, government should identify and rectify the attendant weaknesses and take renewed efforts to expand rooftop solar augmentation in government offices, commercial buildings, educational institutions, industrial buildings and places of worship and other facilitates. Consumers should be encouraged to reduce dependence on grid electricity. This also allows consumers to benefit from net metering facilities provided by the government. The government may provide fiscal incentives to facilitate fast expansion of solar energy ecosystem. One possible option in this connection could be in the form of subsidies for rooftop solar systems similar to the ones enjoyed by the IPPs.

Take steps to improve management of biomass energy. A vast majority of the rural population depends on the use of biomass for fuel. However, this is very poorly managed. There is a need to take steps to improve biomass technology, i.e., biomass to biogas. China could serve as a good example here. This is important from the perspective of energy equity and energy security of disadvantaged communities, particularly in the rural areas of Bangladesh.

Explore Wind Power Potentials.  As part of the fuel diversification plan, the government should consider the potential of offshore wind power for generating electricity. Some projections indicate that offshore wind power alone has the potential to generate up to 20 GW of electricity. The government needs to undertake a comprehensive study to assess feasibility, investment required, resource availability and financing options in setting up wind energy projects.

Grid Infrastructure Development for Renewable Source-based Electricity. In order to transmit solar-based electricity on a wide scale, smart grid and smart metering technologies must be put in place. This will also enhance overall grid reliability. Off-grid electricity, when grid electricity cannot be provided, may significantly reduce risks of blackouts and load shedding. The GoB should introduce innovative financing schemes for accessing grant funding and low-interest financing in support of interventions targeted at making the country’s current grid infrastructure smarter. Smart grid technology will strengthen market competitiveness, raise energy efficiency, and provide energy security. This will ensure that electricity is produced, transmitted and distributed in the near-term future by using cutting-edge technology to address the manifold problems afflicting the existing power grid systems.

Continue Exploring Opportunities of Cross-Border Electricity Trading (CEBT). Bangladesh is currently importing electricity from India. Potentials of cross-border electricity trading should be further explored through bilateral and multilateral initiatives, with a view to strengthening energy security of the country. Harmonised policy framework and regional energy cooperation will help the government to explore the possibility of getting access to the hydropower generated in Nepal and Bhutan by channelling the flow through India. Joint venture opportunities should be actively explored for hydroelectricity generation in Nepal and Bhutan. However, due caution must be exercised to secure Bangladesh’s national interests in undertaking cross-border trading and power projects. Over dependence on a single country for import can be strategically risky venture. All such deals must be made in a transparent manner. 

Make Use of Abandoned Power Plants for Renewable Electricity Generation. The government should actively consider retrofitting decommissioned coal power plants (such as in Moheshkhali) into solar-powered electricity production sites. Redeveloping these plants into new green renewable energy projects will help make productive use of valuable property which may otherwise remain unused. Such coal-to-solar projects will benefit local communities and businesses. 

Put Emphasis on Improving Biomass Technology. The majority of Bangladesh’s rural population relies on biomass energy; however, the management of biomass remains poor. Installing household digesters on a large scale in rural areas, similar to the ones in China, will improve the energy status of particularly the rural marginalised population in Bangladesh. The digesters will not only provide clean cooking gas but will also generate significant benefits by improving the sanitary and health conditions of rural communities through the treatment of agricultural and household wastes.

REDUCE FISCAL BURDEN

Design Exit Strategies for QR and Rental Power Plants on An Urgent Basis. Although QRs and other rental power plants were seen to be a promising solution to the then prevailing energy crisis, time has come to seriously think about their phase-out. These power plants are still in operation and enjoying capacity charge payments, creating significant fiscal-financial strain on the economy. The government must start decommissioning these power plants, and this should be completed over the next two years. Winding up of these power plants will also help reduce the share of liquid fuel in the electricity generation mix, which in turn will help reduce subsidies in the energy sector. This is also important from the perspective of subsidy diversification across the economy. The government should take initiatives to make adjustments to the current contracts and licenses with a view to significantly lower the fiscal burden. In case complete decommissioning at the earliest is not feasible, owing to various factors including institutional and contractual constraints, a time-bound exit plan must be put in place. In this regard, lessons should be learned from successful rental models around the world.

Ensure Energy Justice. The government must ensure energy justice for consumers by enacting legislation prohibiting all types of unsolicited and uncompetitive investment in the energy sector, limiting political appointment of directors of energy utilities, repealing recent BERC-related amendments, and doing away with additional charges associated with provision of services and sale of energy utilities. Energy justice is critically important for attaining SDG 7, which talks of equity and affordability in view of energy security. Decision making concerning the country’s energy sector must be carried out in an inclusive manner, with participation of all key stakeholder groups. 

Reduce Reliance on Foreign Companies. The government must not approve energy sector master plans which rely heavily on foreign consultants, foreign borrowings and foreign companies, imported coal, nuclear energy and LNG. Since reliance on foreign exploration companies carries with it the risks of overproduction, overpricing and pressure to export, the government must design an energy sector strategic plan that prioritises national capacity building and exploration of national energy resources by deploying primarily national capacities. Involvement of foreign companies may be considered only when national capacities are not yet ready to take on the task.

FORMULATE WELL DEFINED AND TRANSPARENTLY DESIGNED POLICIES THAT MEET THE DEMANDS OF NATIONAL INTEREST

Design Transparent and Accountable Policies. National Energy Security Needs, National energy master plans, policies and legislative initiatives in place must be reviewed, amended and updated in line with the long-term national interests and interests of country’s energy security. All concerned decisions must be made through wide consultations, in a transparent manner. All relevant documents should be accessible to all stakeholders. By inviting scrutiny and engaging stakeholders in discussions and dialogues, policy flaws can be identified early on and addressed properly. Efficient supply-side management (production and distribution) and reliable demand side forecasting should be an integral component of energy planning. Expertise and experience of energy experts from the region may be sought to learn from best practices in managing the energy sector.

Formulate Guidelines for Private Sector Investment in Energy. As is known, investment in energy infrastructure is highly capital intensive. Public investment alone can hardly meet the requirements of financing needs of energy infrastructure. As is known, the private sector has played an essential role in the development of the energy industry in Bangladesh. While encouraging the private sector to come forward, the government must ensure that this is done following guidelines that secure the broader interests of the country and its people. The government will need to come up with proper guidelines to regulate the involvement of private business, investors and entrepreneurs in the energy sector from this perspective.

Ensure Efficient Energy Data Management and Reporting. Reliable and timely energy-related data is critically important for formulating sound energy plans, making precise projections about demand, investment and financing needs, and for taking proper decisions. However, availability of reliable data for the energy sector has remained a major concern in Bangladesh. Government should make the necessary investments to create a national energy sector data bank in a way that ensures transparency and accountability in data collection, dissemination and use. The support of modern, smart technology will be helpful in this regard. Automated software-based data management system should be put in place in this regard. The government should also consider establishing an energy data centre, which will help it formulate appropriate policies for the energy sector on the basis of reliable data and information.

Consider Enacting A Mineral Resource Export Ban Act. Bangladesh’s gas resources (both onshore and offshore) are one of the principal non-renewable sources of energy for the country. These resources are limited. In view of this, domestic use of these resources must receive the highest priority. Their exploration must not be subject to export-permitting contracts. If appropriate policies are taken, these resources will enable Bangladesh to ensure energy security as well as economic security. The government should consider enacting a Mineral Resource Export Ban Act to ensure that the country’s mineral resources are used to meet its own needs so that these remain in the hands of the people. Exploration should be designed and sequenced in a way that extracted gas resources can be deployed towards domestic energy needs for electricity generation, household consumption and industrial use so that the question of whether to export or not does not arise.

INTRODUCE ENERGY EFFICIENCY PROGRAMMES AND ENSURE EFFICIENT DEMAND SIDE MANAGEMENT (DSM)

Promote Energy Efficiency. The government must promote energy efficiency initiatives which are important from the perspective of ensuring energy security. It needs to offer tax rebate incentives for energy-saving technologies and incentivise consumers to buy energy-efficient appliances. Use of high-efficiency household appliances should be encouraged. Besides, awareness raising programmes should be launched to induce behavioural changes in people as regards energy saving. Similarly, energy producers should be provided with fiscal, financial and regulatory incentives to manufacture energy-efficient products by adopting energy-saving technologies. Raising tariffs on inefficient energy-intensive products will induce consumers to adopt green alternatives. Peak demand can be reduced by deploying peak and off-peak tariff regimes.

Strengthening DSM Initiatives. Efficient DSM is required for improving energy sector performance. Sound load management allows energy producers and distributors to better utilise available energy, optimise load usage patterns to bridge the gap between energy supply and demand and reduce peak load demand. This contributes to higher energy efficiency. DSM benefits both the power utilities and the consumers. It helps power utilities improve power system quality, reliability, and operational efficiency. This benefits them financially; DSM allows for adequate utilisation of liquid oil-based plants during peak hours while maintaining the continuous operation of other plants, leading to a balanced energy supply. Consumers can benefit from energy savings through changes in energy consumption patterns and reductions in peak demand, which are reflected in improvements in system load profiles. However, benefits of DSM are not being fully realised due to lack of adequate adaptable load as also lack of public awareness. Categorising loads into base, intermediate and peak components to optimise power plant production will also be worth considering.

Undertake Regional and Sector-Specific Demand Projections. There are differences in demand patterns for electricity, including peak demand, depending on economic, geographic, and demographic trends across different areas of Bangladesh. There is a need for undertaking region-wise forecasts for the electricity market and demand. This will help rationalise expenditure and also reduce environmental risks. This approach can be applicable also for the special economic zones a number of which are being established at present. It can also help reduce the costs by optimising transportation demand by ensuring proper energy distribution.  The government must project reliable 5-year energy demand by considering spatial dimensions of energy demand to avoid over and under-production. Reliable demand projection will help do away with reliance on population-based estimates, resulting in a more accurate energy demand forecast. Appropriate projection about household and industrial demand is necessary for determining the level of installed capacity, energy generation and composition of different types of fuel and energy mix.

Strengthen BERC’s Capabilities and Establish an Independent Energy Commission. The capacity of the BERC to undertake its mandated tasks in areas of determining cost and tariffs will need to be strengthened. Its work must be carried out in a transparent manner. A system should be developed to ensure that public hearings are regularly held, the consumer’s voice is given due importance and the consumer’s rights are secured. BERC’s authority in the area of setting energy prices must be restored. The government should also consider establishing a dedicated independent energy commission comprising of energy experts, economists, professionals, private sector representatives, financial analysts, legal experts, and representatives of civil society and consumer groups. The committee will foster multistakeholder dialogues and promote collaboration in areas of formulating energy strategy, policies and prices. The independent commission can also provide guidance as regards methods (formula) for setting energy prices and measuring the performance of the energy utilities.

Strengthen Cyber Security Measures. Experience of other countries show that energy industry is highly susceptible to cyber-attacks. Protecting energy systems from cyber-attacks will become increasingly important as the risks grow. This is needed not just for the benefit of the energy sector itself but also for the purposes of economic and national security. There is a need to pay urgent attention to ensuring cyber security and enhancing cyber resilience. These issues should be given due importance in the course of energy planning and at the early phase of implementation of energy-related projects. The government must collaborate with various concerned entities along the energy sector supply chain to strengthen cyber resilience at every stage and stay ahead of the threat actors.

Ensure Quality and Continuity of Electricity Supply. Maintaining a steady supply of electricity should be given the highest priority by the government. The government should also be committed to ensuring steady voltage levels to support seamless technology adoption and avoid disruptions. Utilisation of surplus electricity should come under the purview of energy planning.

Strengthen Transmission and Distribution Systems. Due attention should be given to the installation of high-power transmission lines to meet growing demand and to evacuate the additional electricity produced by the new power plants. To deliver dependable and reliable energy to consumers, the government should prioritise the task of putting in place an efficient distribution system. Government should explore avenues of large-scale investment, both local and foreign, by putting in place the needed infrastructure towards efficient transmission and distribution of power in view of the future demand of the energy sector.

LNG AS AN ALTERNATIVE TRANSITIONAL FUEL

Since natural gas exploration takes time to be implemented, and has a limited success ratio, it will take time before it becomes somewhat clear what the country’s long-term energy-mix is likely to be. In the backdrop of depleting national gas sources, government’s lack of past initiatives as regards investment in gas exploration is a key reason in this, the government has decided to attach high priority to LNG-based power generation to bridge the demand and supply gap. Bangladesh now has two Floating Storage and Regasification Units (FSRUs), with a total capacity of 7.5 million tonnes a year. The country is also developing a land-based terminal which can handle 7.5 million tonnes per annum (MTPA) of LNG; this is expected to be in place in 5 years.

However, the existing pipeline network is considered too narrow to accommodate future natural gas delivery. Additionally, the price of imported LNG tends to be high and volatile.  The operating cost of FSRUs is high also due to the high charter rates of the ships that transport LNG to Bangladesh.  All these may cause market distortions, resulting in continuing high prices and an untenable subsidy requirement in future. The government should also recognise the risks of overcapacity, capacity charge issues, and expected price distortions associated with LNG. It is also worth noting that the costs of exploration and development of untapped gas resources are likely to be lower than the costs of LNG import.

In view of the above, the higher dependency on LNG as an alternative fuel option remains questionable in the medium to long term. The government should revisit the LNG expansion plan and study its fiscal-financial and macro-economic implications before allowing for large-scale investment in electricity generation based on imported LNG. The envisaged power sector master plan must take cognisance of this before finalising the energy mix strategy for the future. The plan must focus on domestic offshore and onshore exploration, as was noted earlier, as the critical strategy in designing medium to long-term energy sector development strategy.

PROMOTE RESEARCH AND DEVELOPMENT (R&D) IN THE ENERGY SECTOR

Because energy technology and fuel choices are significant determinants of prosperity and well-being of the people, environment quality and national economic security, the overarching importance of evidence-based energy sector policymaking cannot be overemphasised. Adequate investment in the energy sector’s R&D must be seen as a key precondition for sound policymaking. Relevant institutions must receive the financial and technical support that they need. For example, the government may think of establishing an Energy Storage Lab to explore technologies and solutions to make energy storage systems competitive and marketable. Increased R&D investment will help attract more investment in wind, solar, bioenergy and geothermal energy sectors, playing an important role in ensuring energy security through a diversified energy mix.

FORMULATE AN INTEGRATED POWER PLAN TO DRIVE THE ENERGY TRANSITION PROCESS

While Bangladesh has increased its electricity generation capacity over the past few decades, the country is facing many challenges going forward. A number of these have been noted earlier. Bangladesh must go for energy transition favouring the renewable energy sources, by extending all out support towards renewable energy transition process. Bangladesh’s SDG commitment and stance in various global fora should inform its strategy in this connection. Such a strategy will also enable Bangladesh to attain its Vision 2041 aspirations to make the transition to an economically developed, socially inclusive and environmentally sustainable country by 2041. The government must prepare a roadmap for implementing an integrated plan encompassing generation, transmission and distribution activities in preparation for the envisaged green and renewable energy transition.

REDUCE DEPENDENCE ON COAL AND NUCLEAR BASED POWER GENERATION

The government must recognise the environmental risks and risks to people associated with coal and nuclear power generation. The focus must be on sustainable and clean energy alternatives, and not the high-cost and environmentally harmful power generation. The government’s policy must be guided by the fact of the formidable environmental and social costs that come with fossil and nuclear fuel.

CONCLUDING OBSERVATIONS: Energy plays a critically important role in the developmental journey of any country. Bangladesh is no exception. In recent times, Bangladesh has taken several steps towards increasing the energy supply to meet the growing demands of the economy. However, the country at present is facing many challenges in attaining energy security. The discussions in the preceding sections have highlighted some of the key concerns in this backdrop. An overhaul of the energy plan and policies has become a necessity in going forward. The Policy Brief has highlighted a number of tasks in connection with the renewable energy transition, access to clean energy at affordable prices, investment in the exploration of the domestic mineral resource, moving away from LNG-centric import dependence and fossil and nuclear fuel-based electricity production, domestic capacity building in gas exploration, raising efficiency in energy sector management and evidence-based time-variant policy making. Attention was drawn to Bangladesh’s SDG commitment and stance in relevant global fora. The challenge of attaining the aspiration of an environmentally friendly, economically developed and socially inclusive Bangladesh will largely hinge on whether Bangladesh is able to do the needful in view of the needs of energy security and energy transition that meets the demands of its economy and aspirations of its people.

[Concluded]

The paper is the last part of the policy brief which is prepared by a team of experts with Dr A K Enamul Haque, Dean, Faculty of Business and Economics, Professor, Department of Economics, East West University as Chair and Dr Sakib Bin Amin, Associate Professor in Economics, Director, Accreditation Project Team (APT), North South University, Bangladesh and Assistant General Secretary, Bangladesh Energy Society (BES)serving as the Penholder Expert. Other team members are: Mr Abul Kalam Azad, Project Manager, ActionAid Bangladesh; Professor Anu Muhammad, Eminent Economist, Formerly with Department of Economics, Jahangirnagar University; Professor Badrul Imam, Department of Geology, University of Dhaka and Former Chairman, Petrobangla; Mr Humayun Rashid, Managing Director, Energypac; Dr M Tamim, Professor, Department of Petroleum and Mineral Resources Engineering, Bangladesh University of Engineering and Technology (BUET); Professor Dr Md Shamsul Alam, Energy Advisor, Consumers Association of Bangladesh (CAB); Ms Moshahida Sultana, Associate Professor, Department of Accounting & Information Systems, University of Dhaka; Mr Shafiqul Alam, Energy Finance Analyst, Institute for Energy Economics and Financial Analysis (IEEFA) and Mr Shahriar Ahmed Chowdhury, Director, Centre for Energy Research, United International University.

The Policy Brief exercise is the outcome of an initiative of the Citizen’s Platform for SDGs, Bangladesh hosted by the Centre for Policy Dialogue (CPD). The issues were identified and prioritised through

nation-wide consultations with local level people and organisations. The initiative was led by Dr Debapriya Bhattacharya and Professor Mustafizur Rahman, Distinguished Fellows at the CPD. [email protected]