Energy consumption in Bangladesh comprises 0.1% of the total world energy. Consumption of commercial energy makes up about half of the total energy consumption, sometimes less than other South Asian countries.
The two most important energy-intensive sectors are transport and industries, accounting for around 50% and 43% respectively of the total commercial energy use in the country (EIA, 2001a). Gas is currently the only indigenous non-renewable energy resource in the country that is produced and consumed in significant amount.
Investments in the energy sector constitute a crucial part of a country’s infrastructure. As a developing country, demand of energy supplies increases more rapidly than income growth; therefore, economic growth could be affected adversely.
The gas and power sector accounted for most of the foreign investments that have taken place in Bangladesh during the recent years. Without appropriate investment in the energy sector, other sectors often suffer.
The World Bank estimates that load shedding represents about 0.5% loss in GDP and $1bn loss in terms of industrial output per year. Especially, the garment sector of Bangladesh has experienced severe energy problems and therefore had to invest heavily in spare power aggregates.
Power shortages can also have serious social consequences. Energy accounts for an important part of the government expenditure, even more than health and family planning. Consequently, donors have spent more than $1bn in the power sector.
Most of the population in rural areas do not have access to commercial energy for lighting and cooking, and depend primarily on biomass. Thus, the main challenges before the country are how to provide electricity to domestic and industrial consumers, and broaden access to natural gas at households.
Regional energy market
Bangladesh and its surrounding areas are thought to be rich in energy resources, which remain mainly untapped and unexplored. North-east India and Myanmar are well-endowed with gas and significant oil reserves. Neighbouring Nepal and Bhutan also enjoy a huge, largely untapped hydro-electricity potential.
Economic and population growth has led to rapid increases in commercial energy consumption in South Asia, well above the rate of Organisation for Economic Co-operation and Development (OECD). It has been observed that energy consumption in the region has increased by 60% since 2000 till date.
South Asia’s commercial energy mix is as follows: coal (43%), petroleum (35%), natural gas (13%), hydroelectricity (8%) and nuclear (1%). The commercial energy mix in Bangladesh is much depended on natural gas (78%) while India depends on coal (51%). Bangladesh has huge coal reserve in its northern part. However, due to lacking of finalising the coal policy, it can’t be developed yet.
South Asian consumption of energy per capita is estimated at 443kgoe (kilograms of oil equivalent), with India having the highest at 479kgoe and Bangladesh the lowest at 197kgoe. Bangladeshi consumption and production of commercial energy is even lower compared to the low South Asian regional standards.
Per capita electricity consumption in Bangladesh is a paltry 120kWh, compared to around 423 and 319kWh for India and Pakistan, and 600kWh for Bhutan. The low energy intensities reflect a widespread use of traditional biomass by the rural population and an underdeveloped industrial structure.
Regional cooperation
Energy endowments include coal (mainly India, partly Bangladesh), gas (India, Pakistan, Bangladesh) and hydropower (India, Pakistan, Bangladesh, Sri Lanka, Bhutan and Nepal). There are no technical or economic reasons to prevent the development of bilateral or regional agreements to utilise these resources more effectively and contribute towards the creation of a regional energy hub or an economic growth zone (Sobhan, 1999). Energy demands in Bangladesh and India is estimated to increase by 8.5% and 6.5% per year respectively according to the study by Pesaran et al (1998:167).
The economic and technical advantages of a regional electricity and gas grid or pipeline are many. It ensures greater supply security and reliability, reduces the reserves needed for meeting peak demands, lower costs through economies of scale, increases diversification of primary sources of energy and contributes to overall efficiency.
The formation of a Saarc committee (Technical Committee on Energy) is a small step in the right direction. The prospect of an inter-regional electricity grid has also been put on Saarc’s agenda.
In Asia, electricity trade occurs between a few interconnected countries: between Thailand and Laos, Indonesia and Singapore, Vietnam and Laos, and China and Hong Kong. It is under consideration between Thailand and Malaysia. An Asean electricity grid has also been discussed.
Recently, Bangladesh has done a good job with India for interconnection of electricity. Bangladesh struck a bilateral agreement with India for enhancing power production. Under this agreement, Bangladesh will purchase 500MW electricity from India at the end of this year. Besides this, Bangladesh and India have undertaken a mega coal-based power plant at Rampal near the Sundarbans with the capacity of around 1,300MW.
Barriers for regional cooperation
Saha (1998) has identified five types of inter-related barriers that hinder regional cooperation in energy: barriers related to policy, technical, institutional, commercial and financial issues. Among these, political barriers may prove to be the most intractable. Fundamentally, experts opined that there remains considerable distrust and sensitivities amongst the countries of the region, which must first be overcome.
Energy security and the role of Nepal and Bhutan
Nepal is primarily depended on hydroelectricity, in which, it has a huge potential, as indicated by an annual average flow of 225bn cubic metres. In terms of hydropower potential, Nepalese rivers have been graded into three categories, based on their origins. Those originated from the Himalayas have the highest potential. In category 3 are the seasonal rivers with the least potential. Category 1 and 2 rivers are thought to have a combined technical potential for generating 83,000MW, of which around half is economically feasible. Projected power demand of Nepal for 2005 was estimated 622MW. A number of projects are under development and mainly aimed for export around 18,000MW.
In the case of Bhutan, the technically-feasible hydroelectricity potential is around 21,000MW, of which only 334MW is now being generated. Steps have been taken to unbundle the electricity sector and plans are underway to commission large power plants. This will allow Bhutan to undertake additional exports to India.
Power Grid Corporation of India awarded a contract to a Japanese firm to provide technical consulting services for the supply of electricity from Bhutan to New Delhi along a 1,116-mile-route. Given the far closer proximity to Bangladeshi urban-industrial centres, exports to Bangladesh may be economically viable in the long run.
India, Nepal and Bhutan are likely to be the most relevant for Bangladesh in its endeavour to chalk out a regional energy strategy. Nepal and Bhutan are endowed with considerable hydroelectricity potential and could compete with Bangladesh in the regional export market for power.
On the other hand, India is looking to augment its sources of energy and is eyeing Bangladeshi gas along with possible pipeline gas from Iran (via Pakistan) and LNG from the UAE. As far as Bangladesh is concerned, India represents a potential market for power and gas. So, from the commercial point of view, energy demand scenarios in India need to be carefully analysed by the Bangladeshi policymakers.
Similarly, Bangladesh also needs to focus on potentially energy-rich Nepal and Bhutan to explore the possibilities for a regional approach to energy security. The energy resource base in Myanmar and Northeast India is also considerable; Bangladesh will need to keep these in mind while formulating its energy development strategy. A more enlightened approach may well be, to link up with the Myanmar gas pipeline, which goes all the way to Thailand, thus providing access to SE Asia.
So, it is keen to build up a tight cooperation between the Saarc countries that can be very helpful to reduce the energy deviation in these countries.