Dwindling domestic gas supply. Ensuring primary fuel supply to achieve the targeted electricity generation mix as envisaged under the Power Supply Master Plan (PSMP) 2016 and the Perspective Plan will be the most important challenge in the face of dwindling domestic gas supply. The growing shortage of natural gas for Bangladesh has become a burning issue. Petrobangla estimated in 2010 that the widening gap between demand and supply would be 7.0 to 9.0 TCF by FY2029 and according to the most recent data the current gas reserve will likely to be depleted in less than 10 years. What's more worrying is that if the gas demand continues to grow at the current pace (7.0 per cent per annum) the current reserve will be completely depleted by 2023. On the bright side, Bangladesh has sizable unexplored and undiscovered gas resource. Available data indicates that Bangladesh has at least 8.4 TCF of gas resources out of which if 50 per cent becomes available for power, it will support around 2500MW highly efficient combined cycle power plants over their 30-years lifetime.
Absence of a coal policy. The Power Sector Master Plan envisages that 25 per cent-30 per cent of the electricity generation will come from domestic coal in the long run which is an issue to be addressed urgently. Though Bangladesh has large quantities of high quality proven coal reserves, absence of a coal policy restricts us from utilising domestic coal. It takes about 10 years to develop a new coal mine and start production. Consequently, coal production will begin in 2027 at the earliest even if it is decided now. Therefore, it is necessary to carry out the required preparation as early as possible so that it could facilitate the maximum utilisation of the best quality domestic resources. Unfortunately, the production of Barapukuria coal mines in 2015 was 0.68 million tons and did not reach 1.0 million tons as planned. Nevertheless, the PSMP 2016 assumes that total domestic coal production will be 1.1 million tons and 5.7 million tons by 2020 and 2030 respectively.
Since there is no visible movement on domestic coal development, the government has decided to move first on coal-based power generation through imported coal. But coal import entails multiple investment and infrastructural challenges including the construction of one or more deep sea ports (which includes one in Matherbari), working through long-term contracts with foreign coal mining companies/suppliers of coal from abroad and internal shipment of coal to the power plants like Rampal.
The feasibility study for the Coal Transshipment Terminal (CTT) planned at Matherbari has been completed already. The first phase of the CTT will commence operation in 2025 which is planned to handle 10.4 tons per year. As the use of coal spreads, the fuel expense will be slashed, helping to curb increase in power generation costs.
Import of liquefied natural gas. Despite of the government's plan to reduce excessive dependence on gas over the long term, gas-based power generation remains and will continue to remain the largest source of primary fuel. Meeting the increasing public demand as well as using gas as a primary source of electricity generation has become a major challenge for the government. Consequently, liquefied natural gas (LNG) import is being considered as a new major source of primary energy in the coming years. Two large floating storage and re-gasification units (FSRUs) in Moheshkhali, each with capacity of 500 MMCF, are currently near completion, with which the government is also planning to replace oil-fired rental power stations with LNG from 2018 onwards.
Nuclear power option. Bangladesh government visualises nuclear power plant to take a bigger role in power supply mix in the long term. Nuclear power plant can contribute significantly to meet the huge demand of electricity that is necessary to stay in line with the goals of the Perspective Plan to reach the status of a middle-income economy. The PSMP 2016 contemplates six nuclear power plans out of which, four units would be in Rooppur and the remaining two units are to be located in a separate place. The Rooppur power project has been taken under the fast track project list of the government for speedy progress. Government has already signed agreements with the Russian Federation for installing 2400 MW nuclear power plant. The first two units at Rooppur are expected to come into operation by 2025 and the other two units at Rooppur are projected to be completed by 2030. However, Bangladesh has no prior experience in running and maintaining even small (50-100 MW capacity) and medium-sized (200-600 MW) power plants. Leapfrogging to this scale is unprecedented and running such a big nuclear power plant which requires expertise in safety, fuel cycle and waste management will be a big challenge. This will require massive investment in developing a huge pool of experts.
Prospects of renewables. Renewable energy can be crucial in reducing the power deficiency and meeting a sizable share of power demand in the long run. It can also be used to reach electricity to the remote areas where electricity has not yet reached. Dedicated funding support has also been extended through government financial institutions like Bangladesh Bank and Infrastructure Development Company Limited (IDCOL) as well as through private commercial banks. Government has also extended fiscal incentives including duty exemption on certain renewable energy products, e.g., solar panel, solar panel manufacturing accessories, LED light, solar operated light and wind power plant. Bangladesh has already been a world leader in one area of solar - namely off-grid small Solar Home Systems (SHS). Of the 6.0 million SHS installed globally, Bangladesh accounts for approximately 4.5 million or 75 per cent. It has brought electricity to around 20 million people. However, the total SHS only amounts to 100 MW against the government goal to achieve 2000 MW of renewables by 2021. Needless to say, government has a huge task ahead to achieve this goal. It has also taken an initiative to add 500 MW solar energy to the national grid which, if implemented, will give a boost to achievement of the desired goal. Additionally, solar production of 400-500 MW can be achieved from RMG factory rooftops alone. If this can be implemented properly, it will encourage other industries, public and private institution to set up rooftop solar panel which can make significant contribution to the overall power generation. Given that we are a riverine country with a large number of water bodies, this can be a potential source for a floating solar project.
Cross-border electricity trade. Bangladesh can be largely benefited from cross-border electricity trade. Initiatives are underway to enhance cross-border trade of electricity through bilateral/regional cooperation initiatives with Nepal, Bhutan, Myanmar and India. Currently, we are receiving about 450MW-500MW of power from India under a government-to-government deal and further expecting to receive another 500MW of power from India under private sector-to-private sector or private sector-to-government deals. The possible initiatives could potentially add 3000MW of electricity to national grid. In addition,, there could be other major regional initiatives encompassing Bhutan, Nepal and North-Eastern India which have very large hydro power potentials. Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) Secretariat has finalised a draft deal to set up power grid connections for electricity trade among its seven-member countries.
FINANCING REQUIREMENTS: Keeping in mind the current power generation and the desired level of generation by 2031 to reach the goal set in the Perspective Plan, the government has a huge task ahead. In order to meet such a high peak power demand, Bangladesh would need to invest massively in power generation and transmission in the coming years. Keeping the generation cost at the current level (100 MW = US$100 million on average) Bangladesh will have to invest US$45 billion which includes the initial high cost of the Rooppur Power Plant. If distribution and transmission costs are added to this, the overall investment cost by 2031 will be over US$50 billion. Public investment alone would not be sufficient to meet the required investment target. Bangladesh will need private investors and foreign direct investment (FDI) to meet this massive investment challenge.
Now, given our target to become an upper middle-income and high-income country by 2031 and 2041 respectively, and the required power generation needed to achieve such goals, the path to higher economic growth appears daunting indeed. Mobilising the US$50 billion from domestic and foreign investors could be the biggest challenge we have in the coming years to accomplish such rapid growth and structural transformation.
Noor A Ahsan and Nuzat Tasnim Dristy are senior research associates at the Policy Research Institute of Bangladesh (PRI)
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