Policy to make electricity costlier?

Dhaka,  Sun,  24 September 2017
Published : 21 Aug 2017, 21:58:09

Policy to make electricity costlier?

Government agencies do not have clear understanding so far as to the exact cost estimates for natural gas price after the LNG (regasified) starts flowing in the supply systems, writes Mushfiqur Rahman
UK-based The Financial Times published an optimistic article on Bangladesh's prospect to become a manufacturing hub in Asia. The prospect may become a reality if the country can provide infrastructure for unhindered import and export and ensure a suitable investment environment. As of now 'doing business' indexes are not the best. Export and import infrastructures are not in good conditions. Investors' confidence is often negative. Absence of reliable grid power supply, shortages of fuel gas and its unreliable supply, unpredictable future energy prices of natural gas and electric energy  cause further concern for businesses and industries. 

The lead news in the August 20, 2017 issue of Financial Express reads 'Energy likely to be threefold costlier over next 10 years'. Surely, Bangladesh needs to significantly improve availability of land, energy and transport infrastructure for improving investment climate. 

Despite the manifold increase of power generation capacity (installed) in last eight years, Bangladesh still suffers from unreliable power supply problems. The major power generation and distribution company of the government, Bangladesh Power Development Board (BPDB) systematically reports that there is minimum or no gap between power generation and demand in the country. But people in the towns and villages experience systematic load shedding and  unreliable power supply problems. The State Minister for Energy and Power said in a seminar on August 20, 2017 (organised by the Forum of Energy Reporters Bangladesh) that 'the government would ensure power for all citizens by 2018. But supplying uninterrupted electricity will take more time.' 

Government's several promises for base load power plant development initiatives (mainly coal-based power plants planned on imported coal) remain behind the schedule. There is no guarantee that a major coal-fired base load power plant will commence operation within 2021 due to the delay in power plant construction and absence of coal import infrastructure development. 

Natural gas production and supply in the country have increased 1,200 MMCFD over the last eight years but gas demand has doubled during the same period. The yearly natural gas use has reached nearly 1.0 trillion cubic feet now (with nearly 2,700 MMCF gas produced daily and supplied from operating local gas wells). The existing gas supply shortage is estimated at 700 MMCF daily. Now, with the general election not far, the government is trying to install 3,000 mw equivalent of liquid fuel-based small power plants as steps for crisis management.

As the Bangladesh economy grows, its demands for energy have increased steeply. The current installed capacity of electricity generation is 13,596 mw and so far, maximum generation attained was 9,471 mw. The average yearly growth of electricity demand in the last six years has been 11.2 per cent. The government's Power System Master Plan (PSMP) 2016 estimates that electric power demand will grow from the present 15,475 mw to 57,000 mw in 2041.

Under the circumstances, the government has been planning to focus on import-based primary energy supply both for power generation and for domestic industries. But the delays in supply and absence in price assurances for primary energy resulted in slow growth of business expansions for the last few years. The government has opted for imported liquefied natural gas (LNG) and coal as the dependable options for fulfilling primary energy demands.

The government is said to have planned to import 500 MMCFD equivalent LNG and supply it to pipeline networks after regasification within the first half of 2018. The second LNG terminal being developed by the private company 'Summit Group' also promises to supply additional 500 MMCF equivalent LNG (3.75 million tonnes annually) by the end of 2018. Both the LNG terminals are being developed in Moheshkhali Island of Cox's Bazar district.

Government agencies do not have clear understanding so far as to the exact cost estimates for natural gas price after the LNG (regasified) starts flowing in the supply systems. Energy expert Prof. M Tamim of Bangladesh University of Engineering and Technology calculates that current weighted average natural gas price remains at US dollars 2.2 per million cubic feet (MMCF) . If the imported LNG equivalent 500 MMCF per day is blended with locally produced 2700 MMCF per day gas and supplied to consumers, the average per unit gas price will jump to minimum US dollars 3.4 per MMCF. Projecting 2025 and 2030 scenario for LNG import and supply with a mix of local daily productions may push gas prices to USD 6.1 per unit and US 8.2 dollars per unit (assuming a gas blend in 2015 with imported 2,400 MMCFD and 24,000 MMCFD local gas and 4,000 MMCFD import with 1,200 MMCFD local gas in 2030).Published report suggests that the government has moved to form a revolving fund of USD 400 million (Taka 32 billion) to meet the initial cost of importing LNG. The fund is expected to get resources from the 'Energy Security Fund' earlier established by the government to help finance energy projects in the country. 

So far, coal import for power generation on commercial scale is uncertain and only the JICA-financed Matarbari 1st coal transshipment terminal (CTT) is expected to commence operation in 2025 to facilitate imported coal handling for feeding 3,800 MW coal-fired power plants in the planning and implementation stages. As of today, coal-fired power projects are mostly on the drawing boards except Payra and Rampal coal fired power plants. Experts hope that Payra may deliver electricity from the under construction First Unit within 2021.PSMP 2016 projects generating coal based power to reach 35 per cent (of 57,000 MW) within 2041. Such a target achievement is tied with developing coal import facilities. 

The writer is a mining engineer and writes on energy and environment issues. 


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