by M Tamim
Bangladesh has been developing at a steady pace in the last ten years despite intermittent political turmoil and natural calamities. The GDP growth remained at a healthy range of 5.5 per cent to 6 per cent. Even the world economic meltdown in 2008 and the sharp rise in oil price did not affect the economy so much. The flexibility of the business leaders, the resilience of the workers and the overall determination of the people kept the growth engine running.
Economic growth requires sustainable supply of energy. Although the per capita energy use in Bangladesh is one of the lowest even in the South Asian context, the demand for energy outpaces many countries of similar economic strength. The electricity demand grew by 9-12 per cent in the last seven years and gas demand growth was at a steady 7 per cent.
The mono fuel dependency on indigenous natural gas made the economy vulnerable and the country started facing major supply shortage from mid-2007. This was well predicted by the National Energy Policy (NEP) of 1996 and other subsequent committees. The NEP clearly suggested reduction of dependence on gas and development of coal-based power plants using the coal reserve situated in the northwest of the country. Complacency and lack of vision by the political leadership put the country in a very difficult position.
Following the path of the last BNP-led government, the army-backed caretaker government in 2007 decided to tackle the power shortage issue (as high as 1000 MW in the middle of summer) by buying electricity from rental power plants. This was supposed to be a short term measure.
The new AL-led government in 2009 initially criticised such measure but did not find any better way. By the end of that year they decided to go ahead with the short term rental arrangement. Purchase of electricity under such arrangement reached 3000 MW by the end of 2013. While the average summer output in 2009 was just below 4000 MW, the current capability is about 7000 MW. This is a remarkable achievement for a short period that kept the economy growing.
The biggest question before the rental decision was its sustainability. It was found that the solution was expensive that increased the average production cost from Tk.2.5/kWh in2008 to Tk. 6.3/kWh in 2014. As a result, the government had to increase the power tariff several times. Even then the cumulative subsidy up to 2013 was over 2 billion dollars in power sector only.
It also had to face the accusation of nepotism and corruption. The long term plan floated in 2010 by BPDB had a clear map to avoid such scenario but the government failed to materialise it. The large scale base load projects never took off in the last government’s tenure.
Before embarking on the possible solution to the present energy crisis, one needs to understand the unique nature of our demand, especially electricity. There is a huge seasonal variation in our demand. The lowest demand in 2013 was met with 3800 MW, whereas the highest demand rose to almost 8000 MW. The current winter demand (mid October to mid March) can be served with just 5000 MW and summer requires 7500 MW on an average. The cooling load is actually more than 2500 MW. The annual growth is about 700 MW.
The power demand is typically met by plants that work as base plant (24hrs), intermediate plants (12 hrs) and peaking plants (6 -8 hrs). Different types of technology and fuel are used for such plants. For obvious reason a nuclear plant that requires months to start or shut down is not used for peaking or intermediate use.
On the other hand, oil is not used for base load operation. The other factor that needs to be noted is 50 per cent of our grid power goes to domestic sector now which is steadily increasing. Return on expensive electricity from this sector is minimum. On the other hand 1000 MW supplied to industry will add 5 billion dollar every year to the GDP.
Apart from finance, the current energy problem mainly originates from lack of primary energy supply. By doing an energy balance it is found that about 37 per cent of total energy comes from biomass that is principally used for cooking.
Although gas supplies 45 per cent of total energy, it still comprises 73 per cent of commercial energy. The country has very limited hydro power (230 MW) with no other significant potential. Despite a lot of efforts taken by both public and private sector, the success of renewable energy is limited to solar home system that has reached about 140 MW peak. This is the most expensive solution as well. The gas reserve has reduced to 15 tcf. It will be a great challenge just to maintain the current supply of 2250 MMscfd using the existing reserve, let alone reducing the ever increasing shortage (presently 700 MMscfd).
Seven years of BAPEX alone policy has failed to address the gas shortage problem. It added just 200 bcf new reserve in the last seven years which is three months’ supply for the country. The government should once again open the gas exploration for the IOCs.
The 3.2 billion ton reserve of high quality coal in the northwest is the only other primary energy available in Bangladesh. Although the PDB roadmap clearly shows that about 11000 MW power will come from this coal in 2030, there is no sign of exploiting that yet. With the current activities, the local coal option will remain a pipedream. The option for import is limited to nuclear, coal, LNG and cross border trading.
1995 was the last year when Bangladesh did not have any power deficit. Until 2006-07, the power cut was tolerable but since then the peak summer shortage fluctuated between 700 MW and 1200 MW. Presently the worst shortfall is about 1000 MW. This is really not an insurmountable problem. Couple of 1000 MW coal fired power plants would have resolved the nation’s perennial power deficit for at least the next five years.
Presently the country’s base load capacity is about 3500 MW. Out of these, combined cycle gas generation is close to 1800MW with an average efficiency of 50 per cent. The immediate need would easily be met if the last government could start the two Bibiyana projects and the Bhola 225 MW ccpp on time. These three projects would have added almost 1000 MW of the much needed base load capacity.
The energy mix by 2030 proposed in the Power Sector Master Plan (PSMP) is well thought out and sustainable. It will also keep the generation cost to an acceptable level. The plan envisions 50 per cent of over 37000 MW required capacity from coal, 25 per cent from gas, 10 per cent from oil and 15 per cent from other sources including cross border import, hydro and other renewable.
Perhaps, the most unattainable target would be the renewable part. Out of the entire coal generation, about 11000 MW is supposed to come from local coal. Of the competing fuel and technology for base load plants (typically over 300 MW) the cost of production from imported coal is Tk 7-8/kWh, local coal Tk 6/kWh, nuclear Tk 6.5/kWh, LNG ($16/million btu) Tk 12/kWh and local gas ($1/million btu) Tk 2/kWh.
Imported LNG for base load is not feasible. The option for local gas is also not viable at this point of time. That leaves only coal and nuclear as option. The government is going in the right direction in terms of fuel and technology preference.
The question of the capability of materialising these plans is a different issue. Leaving own coal for the future is a policy mistake for which the energy security of the country would be jeopardised.
For peaking plants that is required to tackle the evening and early morning peak demand, the technology must allow quick start and shut down of the generators. Oil and gas based generators are commonly used for peaking purpose. High sulfur furnace oil (HFO) driven reciprocating engines or turbines will cost Tk 19 to Tk 22 for each kWh electricity production. Diesel can also be used but the cost will be above Tk 25/kWh. On the other hand $16/million btu imported LNG driven gas turbine will cost about Tk 17 to produce one kWh. LNG for peaking plants is very much viable. The price of LNG is relatively stable and the technology is also much cleaner.
Bangladesh is importing about 500 MW power from India now. After more than 20 years of efforts, finally the last government could break the taboo of energy business with India. It was the single most important success story in the power sector. Now the transaction is more than six month old.
Government is receiving power reasonably close to the contract and Bangladesh has an immaculate record of paying its dues with no exception here. If this trust building venture can eventually bring in 3500 MW power from India and other regional countries by 2030 as expected in the PSMP, it will be a wonderful realisation of the SAARC dream that started in mid seventies.
Bangladesh should not shy away allowing hydro power flowing from northeast India to its western part as long as it receives its due share of the deal. At Tk 6/kWh, it is as good as any other base load option the country has now without the pollution worry.
The seasonal difference of the evening peak demand is 2400 MW (8100-5700). This is entirely cooling load that is increasing very rapidly every year as more and more households and offices are opting for air conditioners. This means that during the winter period (about five months) this additional capacity would be sitting idle and that is a huge inventory to maintain at a very high cost when there will be no revenue generation. The daily load curve also shows significant difference between the lowest and the highest demand during the day (about 2400 MW).
Understanding and assessing the need of base load, intermediate load and peaking load is very important for the future investment outlay in the power sector. Following World Bank prescription, Bangladesh invested lot more in peaking plants than required in the past. This was done without understanding the electricity growth portfolio.
The so called rental plants are also supposed to be for peaking purpose only which are to run at 15 per cent capacity but many of them are contracted to run at more than 80 per cent capacity due to lack of base load support. A heavily populated country with rapid urbanisation will draw huge power in the domestic sector perhaps much more than even the industry sector. Household demand curves are quite different than the industry. The ideal daily load curve would be a horizontal line but that never happens. Different countries take different measures to reduce the gap between peak and off peak demand and balance the seasonal variation, encouraging incentive based off season use of electricity.
Until the large base load power plants are brought in the power stream, liquid fuel dependence will continue to bridge the gap. Improving efficiency in all sectors (household appliances, fans, air conditioners, industrial motors, boilers, distribution transformers etc.) and well planned demand side management can also ease the pressure on generation.
The energy and power sector must be managed and controlled by the professionals but unfortunately it has been dominated by the politicians, especially in the last twelve years. If proper planning in ensuring sustainable supply of primary energy, infrastructure development, fuel and technology selection, financing, system design and most importantly – commercial framework of business is not done in an integrated manner and clear vision, the country will be struggling to resolve its energy problem.
The author can be reached at: email@example.com
Special Supplement on Energy Security in Bangladesh Series