If RMG is at the heart of the Bangladesh success story, then the power infrastructure is its lifeblood. Greater power generation as well as access to electricity is key to fueling the growth of not only key industries but also the growing appetites of urban middle-class households. At the moment, continued heavy investment in energy infrastructure has made improvements but by 2030 Bangladesh’s power demand may well reach 34,000 MW. The challenge of filling this gap represents a multi-billion dollar opportunity for invest.
Meeting the Energy Demands of the Future
The government has made great strides in electricity generation over the last decade. Over the period 2006-2015, peak demand of electricity in the national grid grew at a CAGR of 8.11% per year, from 2787 MW in 2006 to 6078 MW in 2015. On the supply end, installed capacity grew at a faster pace of 9.11% CAGR per year, from 4650 MW to 11282 MW.
Furthermore, load-shedding has become far less frequent during this period as peak electricity generation has usually kept pace with peak demand. Consistent electricity generation is a key issue for thrust sectors such as RMG, and also a key factor in facilitating greater internet activity among the population.
However, there is still much work to be done for the future, as electricity demand may well reach 34,000 MW by 2030. This means that not only will the government need to continue to heavily invest in the power sector, but must also expand the scope of operations as well as change its nature over time.
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Moreover, 62% of the population is currently covered by the electricity grid with the rest of the population set to come online in the near future. This represents a still untapped market of 61 million people who will be connected to the national grid in the coming years as Bangladesh continues its growth trajectory out of the LDC category.
The power industry is unique in the fact that overhauling it can impact all components across the vertical production chain. This presents ample opportunity for investment in areas ranging from electricity generation to distribution channels in the fuel sourcing function.
The Changing Composition of the Fuel Mix
At the moment, the vast majority of the electricity generated (62.59%) comes from natural gas, which is currently the cheapest fuel source. However, this status quo cannot remain much longer as natural gas reserves are depleting fast and won’t be able to support electricity demand after 2019.
For the next five-year plan of 2016-2020, the Planning Commission has outlined the need to move away from natural gas. The focus will be shifted towards imported coal and LNG, which will be used to generate an additional 6000 MW of electricity.
A significant portion of this additional power will be provided by the private sector. Already, the private sector provides 42% of the total installed capacity.
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The Way Forward
The search for long-term alternatives to natural gas is already underway. Although coal currently is the target of the largest efforts in this context, other options such as hydroelectricity and solar power are also being explored. Overall, there is the opportunity to potentially invest 70.5 Billion USD to gear up for Bangladesh’s power needs of 2030.
- Coal: Currently providing only 3% of the fuel mix, coal is scheduled to provide 50% of the fuel for electricity generation by 2030. This move can be justified by two reasons: firstly, there are huge reserves of coal in Northern Bangladesh, estimated to be around 3 Billion Tonnes. Secondly, there is also the option of importing coal in the short term, as laying the groundwork for building substantial coal mining facilities will take some time.
Currently, the Coal Power Generation Company is courting foreign firms for building the Matarbari Coal Power Plant, which is set to be the largest coal-fired power plant in Bangladesh’s history.
- Hydroelectricity: With hydroelectricity, there is the option of exploring regional power grid connectivity in earnest. This has already seen some modest beginnings with the start of electricity import from India in October 2013 on a pilot basis of 173 MW, with the potential to generate 1000 MW of electricity from this arrangement. However, with hydroelectricity, the scope of regional connectivity is much greater. In fact, the SAARC region, especially countries like Nepal and Bhutan, has the potential to generate 300,000 MW worth of hydroelectric power, which would significantly benefit member states like Bangladesh who have shortages.
- Solar Power: Bangladesh has managed to implement one of the most successful long-term Solar Home System (SHS) Projects so far. Since the program’s inception in 2003, IDCOL has worked with 47 partner organizations to install 3.8 million SHSs, providing electricity to 20 million rural people. IDCOL currently targets to build 6 million more units by 2017. The project has also garnered financial support from World Bank, who offered the government 78.4 million USD in 2014 to finance 480,000 SHSs.
The private sector is also deeply involved with other solar power projects. Rahimafrooz, the nation’s largest solar power provider, has expressed interest in building rooftop solar installations at various areas of Dhaka and Chittagong. In fact, it has already built a 50kw grid-tied solar panel on the rooftop of the Bangladesh Secretariat building at Segunbagicha, Dhaka. Dhaka Power
Distribution Company Limited (DPDC) is buying electricity from the plant.
In fact, the government has committed to eventually installing solar panels on the rooftops of all government buildings.
The solar power sector is also experiencing foreign investor activity. Skypower Global, one of the world’s largest solar power producing companies, is set to invest 4.3 billion USD in Bangladesh’s solar power industry.
- LNG: Liquefied Natural Gas (LNG) can augment the country’s energy needs by allowing for import of liquefied natural gas and subsequent gasification on landing and distribution. The groundwork has been laid to construct Bangladesh’s first floating LNG terminal at Moheshkhali which is going to have a capacity to handle 5 million MT/year of LNG.
Importing LNG is a logical next step if we want to continue use natural gas as a majority fuel source in the face of depleting reserves.
Furthermore, the state-owned North-West Power Generation Co Ltd (NWPGCL) is also planning to build a 750MW-850MW re-gasified LNG-based combined cycle power plant in Khulna. This plant will use LNG imported through India.
- Wind Power: Although the potential benefits to be reaped from this sector are extensive, no significant project has been yet started in wind energy. Bangladesh’s 710 km coast line provide ample ground for future projects.
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