Source: “IEEFA Report”, Editing by Rishan Nasrullah
PenInfo Desk: A new report by the Institute for Energy Economics and Financial Analysis (IEEFA) has found that the Bangladesh Power Development Board (BPDB) can save Bangladesh Taka (Tk) 138 billion (US$1.2 billion) of annual losses, funded by government subsidies, through electricity sector reforms targeted at addressing core problems, including adding 3,000 MW of renewables.
A multifaceted approach to fixing the power sector’s core problems and consistent actions from now through to 2030 can help cut the government’s subsidy burden to nearly zero, the report found.
Bangladesh can achieve the savings by shifting half of the industrial demand, met by captive generators, to the grid, adding 3,000 megawatts (MW) of renewables, reducing load shedding to 5 percent from the fiscal (FY) 2023-24 level and limiting transmission and distribution losses to 8 percent.
“With the reserve margin hovering around 61.3 percent, Bangladesh’s power sector has an overcapacity problem which contributes to the BPDB’s persisting subsidy burden” said report author Shafiqul Alam, Lead Analyst – Bangladesh Energy, IEEFA.
“Despite a series of power tariff adjustments, the hefty revenue shortfall and subsidy allocation will likely persist in the foreseeable future. IEEFA’s proposed roadmap for reform suggests improving power demand forecasting methods by factoring in the role of energy efficiency to reduce overcapacity.”
The IEEFA’s roadmap for reforms suggests improving power demand- forecasting methods by factoring in the role of energy efficiency to cut overcapacity.
“Our roadmap recommends limiting new investments in fossil fuels-based generation while promoting renewable-energy deployment. Further, it suggests the modernization of Bangladesh’s electricity grid to encourage industries to shift to grid power rather than operate gas-based captive plants and minimize load-shedding. We find that taking such consistent actions can help reduce the sector’s subsidy burden,” says the report, authored by the institute’s Lead Energy Analyst, Shafiqul Alam. It says BPDB’s total annual expenditure increased 2.6fold from FY20 to FY24 against revenue growth of 1.8 times, necessitating government subsidy allocation of Tk 1.267 trillion ($10.64 billion) to ensure power supply to keep the economy rolling.
Yet, the BPDB recorded a cumulative loss of Tk 236.42 billion, the institute notes in the report. In FY24 alone, the government gave Tk 382.89 billion worth of subsidy to the power board.
To bring the subsidy burden down to nearly zero, the IEEFA recommends ensuring industries fully rely on the national electricity grid.
“Additionally, the country should gradually transition to electric systems from gas-driven appliances, such as boilers. This will help increase the BPDB’s revenue from selling additional energy while reducing capacity payments to idle plants.”
The institute’s projection by factoring in such variables shows the country’s peak power demand in 2030 is likely to be 25,834 megawatts against the Integrated Energy and Power Master Plan’s (IEPMP) forecast, made in July 2023, of 27,138-29,156MW.
The roadmap also shows halting investment in fossil fuel-based power and limiting the use of oil-fired plants to 5.0 per cent of total power generation.
If these steps are taken along with the anticipated 4,500MW fossil fuel-based power-plant retirements, the report expects Bangladesh will have a system capacity of 35,239 megawatts.
Peninfo/desk/06.12.24/01.18am