Meeting our energy challenges

Undoubtedly Bangladesh is developing, and at a healthy pace, but how sustainable is it in an arena of constrained energy supply? Many economists believe that one of the ingredients of growth in Bangladesh has been low energy prices especially that of gas. Cheap electricity and gas has given Bangladesh a competitive advantage over many developing countries allowing the garments industry to flourish. 

Is the era of cheap energy ending in Bangladesh? We have already seen electricity price double in the last seven years, with threats to consumers from the utilities to be prepared for higher tariffs. If electricity prices keep on increasing, will the steel melting and cement clinker grinding industries survive? These industries are known as energy intensive products because energy is considered to be a raw material in production. Typically, the energy component in the cost of production is more than 10-15 percent. If these two important commodities of the construction industry have to be imported, the impact on the foreign exchange rate and GDP would be significant. 

Gas price for captive generators has been doubled. Although a necessary correction, this sudden increase has put a strain on many industries. We have seen wonderful plans for electricity generation with international companies lining up to build power plants, but we have no comprehensive plans for primary energy. The realities on the ground, with respect to primary energy for power plants and industrial process heat, hint at significant shortages in the years to come. 

Natural gas, which has provided more than 50 percent of the total energy all through Bangladesh's history, has suddenly become scarce, and may be totally exhausted by 2030 if no new gas is discovered. What happens then? The government speaks of meeting shortfall with expensive imported LNG priced between $10-15 per Million Btu. Is our industry ready for the Imported Energy Price Shock? If not, what will happen to our fragile economy that depends heavily on exports of RMG, an industry that is facing intense competition from the likes of Vietnam and the newly industrialised African countries? 

The following is a list of the challenges facing the energy sector: 

Setting up a regasification terminal and concluding a contract to import LNG 

Speeding up exploration to discover new gas 

Completing three large (> 1000 MW) coal fired power plants in the next four to five years, and conclude coal import contracts 

Retiring or repowering old BPDB power plants 

Setting up CCGT power plants using domestic gas 

Setting up CCGT using LNG 

Making significant progress with 2×1200 = 2400 MW Nuclear power plants 

Upgrading the transmission and distribution electricity network from 12,000 MW to at least 20,000 MW 

Reaching at least 90 percent coverage of rural electrification 

Reaching 200 MW with utility scale solar power plants and construct 100 MW of wind power plants 

Improving LPG distribution network and facilitate import of 1 million tons of LPG by 2021 as a transition from natural gas to LPG in urban households 

Developing coal resources  

As can be seen, this is a formidable list of projects that need to be completed by 2021. Given the complexity of some of the projects, it is hard to imagine 100 percent achievement. Even a 50 percent achievement would be considered a fantastic feat given past track records. If the plans and programmes given by the energy utilities were progressing as per schedule, then the following activities would have been visible: 

At least two (2) coal fired power plants would have achieved more than 50 percent completion mark.

LNG regasification plant would have completed and the first shipment would have been in the pipeline 

At least 3 Tcf of gas would have been discovered.  

At least two (2) CCGT power plants under BPDB would have been completed. 

The achievements in LNG terminal construction and gas discovery are virtually nil, and only one CCGT has been constructed so far. The coal power plant situation is in a dismal state. Not a single brick has been laid in these projects. Ground preparation is probably the only visible progress. 

In the last seven years, the success story of the electricity sector that actually stands out is the quick handling of the power crisis in 2009-2010 by constructing liquid based quick rental power plants. This move was heavily criticised by many, but in the long run, the decision proved to be correct as the country managed to retain the 6 percent GDP growth rate all through the last seven years. It did, however, come at a cost, and that is high electricity prices. Consumers accepted this price escalation because they were relieved of the intolerable load shedding. At that point, the government promised two things. First, by 2017-2018, the prices of electricity would start coming down, and the furnace oil power plants would be retired in five years and the diesel power plants would be retired in three years. This was based on the expectation that low cost generation would be added to the grid. This did not materialise, and as a consequence, prices of electricity went up. Most disappointingly, we witnessed the contracts of the oil-fired power plants being extended and worryingly, some new oil-fired power plants were given permission. 

There was great hope that having tackled the immediate crisis, the government will put the energy sector on a robust track to achieve sustainability. But, it appears that it has been derailed. True, there is no load shedding, and it is further true that the government will be able to meet increasing demand in the next two to three years until the next election, but many issues of the energy sector will plague us for a long time to come. Some of these are: 

           Price rationalisation of different fuels; 
           Domestic coal extraction; 
           Gas extraction commensurate with gas reserves and reserve augmentation through vigorous exploration; 
           Improvement of the transmission and distribution network of electricity so that the proposed massive increase in 
           generation can be reached to the con sumers as high quality and reliable electricity. 

There should be no doubt in anyone's mind that the medium to long term electricity projects are facing numerous hurdles. How adeptly the government handles these difficulties would ultimately determine whether people will receive power at affordable prices.

The writer is Professor of the Department of Chemical Engineering, BUET.