The Bangladesh government is considering entering into a cross-border exchange of electricity with neighbouring India through Indian Energy Exchange Ltd, the Times of India reported on Thursday.
The move would formalize the trade of electricity and increase electricity-exchange opportunities between the two countries.
The demand for Indian power is rising in Bangladesh, which purchased 17.31% more electricity from India – at Tk4,712.91 – in 2020-2021 compared to the year prior, according to the media outlet.
At present Nepal and Bhutan buy and sell electricity across borders with India through the IEX.
Bangladesh is not yet a part of it, but it buys Indian power on a contract basis.
Joining the exchange can help each party trade according to their demands and supply position at a given time.
The report said top government officials from both countries are having talks to work out the formalities to that end.
"Indian power is a low-cost alternative to electricity produced in Bangladesh using coal and diesel. Dhaka is paying a high subsidy by purchasing power from private generating companies who use diesel," a senior government official explained to TOI, wishing not to be named.
Electricity flowing from India costs Tk5.8 per kWh compared to Tk8 charged for coal-based gas and Tk52.8 charged by private producers using diesel, according to a presentation made by AK Mahmud, director of Regional Electricity Trade at the Bangladesh Advancing Development and Growth Through Energy (BADGE), to a group of electricity officials, reported the newspaper.
The cost of power subsidy meant for local private generators works out to around 30% of the total electricity bill for the Bangladesh government, TOI said. Opting for the cross-border exchange would enable it to reduce the amount by way of subsidy.
The ongoing crunch in the supply of crude in light of the Ukraine invasion has also raised questions about whether the diesel-based electricity generating firms would continue to obtain sufficient supplies and afford the increased prices.
However, it will be difficult for Bangladesh to opt for cross-border exchanges as the plan is being resisted by private producers, who fear losing a part of their market, sources familiar with the matter told TOI. In such circumstances, the government may have to find a way to enter the exchange without hurting the interests of local producers.
The exchange mechanism would initially focus on thermal power supply from India, TOI said.
But the cross-border mechanism would also offer an opportunity to Bangladesh to use more green energy in the future. Once the mechanism is in place, Dhaka can purchase solar power from India and hydropower from Bhutan.
Nevertheless, Indian power will meet only a small part of Bangladesh’s requirement and private players will continue to serve a major part of the need.
The existing inter-country HVDC transmission link between Bangladesh and India is capable of handling over 70MW of additional supplies, leaving enough room for Indian power flows, reported TOI.