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    Part II – PSMP 2016 and Strategic Shift in Bangladesh’s Power Sector

    LightCastle Analytics Wing

    This write-up dives deeper into the demand and supply sides of power consumption and production in the Bangladesh economy. Although Bangladesh has been able to become partially self-sufficient in producing electricity, it still struggles to meet peak demand. The projected peak demand up to 2040 is: 1

    Source: JICA PSMP 2016

    The current power generation capability of respective sources against maximum power demand is:2source: JICA PSMP 2016

     Currently, Bangladesh is overly reliant on its textile industries to spur economic growth and development. However, in order to achieve “Vision 2041” and attain the status of a developed economy within 2041, there is a greater need of diversification in industries. High Value industries such as: Light Engineering, Agro Processing, Pharmaceuticals, Electronics, ICT/Software, Auto Parts and Shipbuilding are potential high value industries identified by the JICA team, which according to them, will help achieve the economic status by 2041.

    Greater diversification of industries, if implemented successfully, will add value to the GDP of Bangladesh. The subsequent impact on standard of living will result in greater need for transport from the masses and higher demand for electricity. The following section provides brief overview of the PSMP identifying the current supplies of electricity and providing roadmaps to meet the growing demand of power in the economy, both from residential and industrial sectors.

    Natural Gas (Domestic and Imported)

     The predominant source of generating power, Natural gas is not in abundant supply for Bangladesh. The present power generation capacity is 38%, while the international benchmark is 45%. The increase in efficiency can result in additional annual capacity of 1,300 MW.

    Where the Supply is coming from?

    The following provides a snapshot of the current status of domestic natural gas in Bangladesh:3Source: Field-wise natural gas reserve estimates (Petrobangla, Nov. 2014), and Draft Five Year Gas Supply Strategy 2015-2019)

    Bangladesh doesn’t have an abundance of natural gas available from domestic sources, therefore, it is imperative that efficient policy development and technological advancement takes place in order to ensure maximum efficiency.

    Targets

     Introduction of International Oil Corporations (IOCs) for both offshore and onshore development. The focus should be on amendment of the Production Sharing Contract (PSC) which would attract large scale IOCs adept with advanced technology.

    • BAPEX is not capable of acquiring energy resources from overseas sites. There should be legal and regulatory changes in the framework to allow entry for overseas energy resources.
    • The efficient use of gas is important and as such, tighter regulations needs to be developed to stop substandard facilities from wasting natural gas.

    Domestic gas field production will peak in 2017 and then decline gradually. However, the demand for gas is forecasted to increase substantially. As such, the gap in demand and supply has to be filled in with import gas (LNG).

    The introduction of LNG via Floating Storage and Regasification unit (FSRU) is expected to be launched by 2019 and it will provide around 17% of gas. The forecast is predicted to be:4Source: PSMP 2016

    With the declining domestic gas production, it is important to focus on the distribution and storage infrastructure in order to attain maximum efficiency. The development of necessary infrastructure requires extensive capital and financial investment, as such, it is important to develop a separate Master Plan for LNG gas.

    Targets

    • Commence Phase 1 of FSRU and inject 500 mmscfd of gas supply in 2019, additional 500 mmscfd by 2023.
    • Develop Land terminal LNG: Supply 500 mmscfd by 2027, expanded to 2000 mmscfd by 2041.

    Coal

     In recent years, Energy production from Coal has been on the frontline of energy policy for the Government of Bangladesh. Despite strong protests from environmentalist groups, steps have been taken towards extraction of coal mines.

    Although GoB has put strong emphasis on the development of coal based power plant, the current situation is not promising. At present, there is only one Coal power plant in Boropukuria, which is not producing large volume of coal to the adjacent Boropukuria power plant.

    Targets

    • To conduct feasibility study on infrastructure of import of Coal and undertake necessary investments to develop infrastructure.
    • Introduction of open pit mining technology in Boropukuria and subsequently in Phulbari.

    Oil and LPG

    The current oil demand in Bangladesh is around 5 million tons and is expected to increase substantially due to growth in the industrial and transportation sector.5Source: PSMP 2016

     Although Bangladesh has several plans to increase domestic oil production, majority of the forecasted oil demand is to be met through import of oil. The price of oil is highly dependent on global movement of oil price and as such, there is little scope of drastic change in the oil import and consumption scenario of Bangladesh. Bangladesh government has long been providing subsidy to petroleum products and as such prices are kept artificially high. This isn’t a sustainable plan in keeping with the increase in demand.

    At present, only 2% of total oil demand is met through the use of LPG. However, as natural gas reserve is declining, the demand for LPG as an alternative source of cooking fuel is set to increase. LPG, at the moment is expensive (priced 2-3 times higher than pipeline gas). Due to high price, it is concurrent to the Governments vision of universal access to energy.

    Targets

    • Provide clear strategy towards reducing subsidy in purchasing oil.
    • Provide holistic policy regarding the import, distribution and consumption of petroleum products.

    Renewable Energy

    As one of the most susceptible country to the adverse effect of global warming, Bangladesh is in a strategically key position in terms of renewable energy. However, there are limitations to the maximum potential power generation through renewable sources. The two main limitations are the lack of available land and meteorological conditions. The highest renewable energy power generation potential is 3,700 MW.

    The most promising renewable energy sector is the Hydropower sector due to the geographic nature of Bangladesh and its neighboring countries. According to a JICA survey, cross-border hydropower available to Bangladesh is in the range of 3,500-8,500 MW by 2030, mainly sourced from Nepal and North West India.7Source: SREDA- World Bank Scaling Up Renewable Energy in Low Income Countries (SREP) Investment Plan for Bangladesh, October 2015.

    Targets

    • The development of technical rules and regulations for grid-connected renewable energy generation.
    • Domestic renewable power generation to be increased to 3,800 MW by 2041.
    • Domestic biogas production 3 million m3/day by 2041.

    Benchmarks and Goals

    Bangladesh has shown success in meeting the Millennium Development Goals (MDGs) in the past few years. World Bank has set new goals, known as Sustainable Development Goals (SDGs), three of which are closely associated with access to electricity. The three SDGs are:

    Clean energy for everyone: Secure access to affordable, reliable, sustainable and modern energy for everyone.

    Industrial and technological innovation and social infrastructure: By developing robust infrastructure, promote inclusive and sustainable industrialization and also expand technological innovation.

    Urgent handling of climate change: Take urgent countermeasures for climate change and its impact.

    The Master Plan in Power sector reflects the goals set by the international community and also the government of Bangladesh. The Power and Electricity sector has to provide the backbone for economic and industrial development of Bangladesh’s economy in the upcoming decade.

    Research conducted by Ahraf Zahir, Junior Associate at LightCastle Partners. For further queries, contact us here: [email protected]

    LightCastle Analytics Wing is the research division of LightCastle Partners. It is tasked with producing periodic reports on the different sectors of the economy, analyzing trends in markets and making methodical, thorough and intelligent analysis to improve strategy and drive business growth.