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Dhaka Tribune

CPD: No immediate good news for the power, energy sector

Rural areas experienced overwhelming power outages of as high as 10 hours

Update : 22 Jun 2023, 08:56 PM

As Bangladesh tries to mitigate the power crisis, the government is moving towards more LNG-based power generation, which the Center for Policy Dialogue (CPD) believes is a wrong move as this provides the perfect opportunity to move towards renewable energy-based power plants.  

Analyzing the power and energy industry, they warn that there will be no good news in the near future as importing LNG further depletes the currency reserves.

According to their report, Bangladesh's power and energy sectors failed to learn from the ongoing crisis.

The CPD study reflects the general picture and government plan for the upcoming fiscal year. 

The study's findings were revealed on Thursday at a dialogue titled "Challenges in the Energy and Power Sector: Can the Proposed National Budget Address Those Challenges?"

The keynote address was given by Khondaker Golam Moazzem, research director of CPD. 

He said that the power sector had become reliant on subsidies. In Bangladesh, the subsidy rate has climbed by 34% over the previous year and accounts for a significant share of the GDP. 

He questioned how such subsidies will be handled in the future.

He also stated that the key concern is whether or not the social security sectors will be affected as a result of these subsidies.

According to the think tank's analysis of the FY24 budget, the power division receives the lion's share of the total budget allocation (93%). 

The allocation has been increasing over the last four years. In the planned budget for FY2023-24, the electricity division receives up to 93% of the total ministry budget.

According to CPD, around 97% of power generation capacity is based on fossil fuels, and this reliance is growing. 

The FY24 budget did not prioritize the generation of renewable energy-based electricity. 

Only five renewable energy projects are budgeted for in the upcoming fiscal year. 

In a nod to the prime minister's directive, CPD stated that the PM has directed authorities to begin steps to power all irrigation pumps in the country with solar energy. 

This plan will save 3.4-3.5 million tons of diesel, or around $1 billion.

Five of the six renewable energy projects are generation-related, while one is distribution-related. 

Only two of the six “concluding” projects will be finished by the next fiscal year. 

In other words, the remaining four initiatives will be “carry-over” projects.

Only three projects with a combined capacity of 53 MW are now in the pipeline by public investment. 

Only 11.5% of total RE projects are planned.

"Industrialization increased as the ruling party came to power and quickly provided electricity," said Mostofa Azad Chowdhury Babu, senior vice-president of FBCCI. Many have to work in the dark there is no electricity. Fuel has become increasingly reliant on imports."

According to M Shamsul Alam, senior vice-president of the Consumers Association of Bangladesh (CAB), Adani's power, cross-border transmission lines, LNG, and coal have all contributed to the power and energy sector becoming an import market. 

The consumer is paying the extra price. A big budget is being made with that money but there is nothing for the consumer in the budget. There may be research on how much money has been laundered in the name of development in the power and energy sector by bringing in foreign investment.

According to Ijaz Hossain, former professor of the Department of Chemical Engineering at BUET, the challenge in the energy industry is that budget allocation in the power sector is increasing. Due to the situation, the administration stated last year that it will enhance gas exploration. Coal, LNG, and fuel oil costs are now cheap on the global market. As a result, the government is once again favoring imports. Without a guarantee of energy, one power plant after another has been built. Any law should make this illegal.

Regarding the FY24 budget allocation for the Power and Energy sector, the CPDs report noted that the Power and Energy sector obtained a large share of budget allocation in the proposed budget for FY2023-24. The Power and Energy sector has been allocated Tk34,819 crore in FY2023-24 (a 28% increase from RFY23). This amounts to 4.6% of the total budget for FY24, which is higher than the revised budget for FY23.

The allocation for power division has grown by 34% compared to RFY23, owing mostly to a 34% increase in the development budget.

They are also concerned about lower allocation in the distribution of energy and mineral resources. 

According to reports, the planned budget for FY23-24 reduces the funding for the energy and mineral resources division by as much as 48%. This signals increased neglect of the domestic gas sector, as well as a preference for importing LNG to meet energy needs.

According to the CPD, the prime minister has asked officials to take preparations to power all irrigation pumps in the country with solar energy. This plan will save 3.4-3.5 million tons of diesel, or around $1 billion.

In his presentation, Golam Moazzem also said that the country is suffering from regular power outages over the last year. 

Rural areas witnessed a massive power outage lasting up to ten hours.

According to the report, massive power generation capacity (27,361 MW), of which 24,143 MW is on-grid and 3,218 MW is off-grid (as of May 1) has become a significant worry for the power and energy sector.

Approximately 97% of this capacity is dependent on fossil fuel, and the dominance has grown.

In contrast to the official position, coal's proportion of power generation has increased; additionally, an additional 6167 MW of coal-based generation capacity will be added to the system by 2026.

As the sole importing authority, BPDB, Petrobangla, RPGCL, coal power, and BPC have limited financial capacity to buy energy in order to run power plants at full capacity. 

It is also stated that the country's fossil-fuel-based energy infrastructure is in serious jeopardy.

According to the investigation, the supply of energy for power plants was determined to be low when compared to full-capacity operation. 

Importing furnace oil requires BPC to open 17 to 18 LCs per month in order to import 500,000 tons of refined fuel and 100,000 tons of crude oil. BPC had $350 million in outstanding bills till April 2023. No private bank has opened LCs. Sonali, Janata, and Rupali banks open four to five LCs per month.

Diesel import 

Diesel stock is only good for 30 to 35 days as of June 2. To address the requirement for US dollars to import petroleum, the government has already obtained a record $2.3 billion loan from the Jeddah-based Islamic Trade and Finance Corporation (ITFC). 

According to BPC, the ITFC loan would not be utilized to import refined oil or fuel, but only crude oil. 

Around 13-14 cargoes of refined oil are imported per month, with 16-17 ships brought in if demand increases.

In the report's concluding remarks, CPD said negligence in the renewable energy sector persists, with no significant shifts in policy or actions.

Load shedding will continue in the coming months/year, putting residences, businesses, industries, and commercial activities at risk.


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