Bangladesh’s high GDP growth rates, its growing middle class, and its consistent growth in industry have made a dramatic increase in power and energy infrastructure absolutely necessary.
Over its past two terms, the ruling party has set an ambitious plan to grow the national power infrastructure. We have seen a decrease in load-shedding, thanks to the completion of many projects and the import of power from our neighbours. However, we have much to complete if we are to be secure in the near future.
The most recent power generation figures have Bangladesh’s total capacity at 15,821MW, including captive power.
According to the Power Sector Master Plan (PSMP), 2010, the Power Division must increase capacity to 24,000MW by 2021. To increase capacity by almost 10,000MW in the next three to four years, drastic plans have been taken, including nuclear and coal. Other goals include producing 10% renewable energy by 2020.
As a result, the past few years have been characterised by frequent announcements of large power deals. This includes the Rooppur Nuclear Power Plant, the Rampal Coal Power Plant, the BCPCL Coal Power Plant (NWPGCL in association with CMC, China) in Payra, the JICA-funded Matarbari Power Plant, S Alam Coal Power Plant, Orion Coal Power Plant, amongst many more.
Although the progress of many of these power plants did not gain much momentum beyond a few signboards on empty pieces of land, we have seen some progress with the Roopur, Rampal, and BCPCL plants; but it will likely take much longer for the rest of these large-scale plants to come online, if they manage to do so at all.
Financing coal power plants in a post-COP-21 world is not a simple task. Regardless of heavy interest from Chinese financiers, finalising financing and land deals has taken years. Many Chinese state-owned banks are asking for collateral, which for many private developers mean a billion dollars in collateral, and that is simply impossible.
Projects and promises
Changes in technology requirements may have slightly delayed the process for these mega coal power plants, but the lack of progress can be primarily attributed to issues with securing financing, land, and an overall lack of experience.
Many of these plants range from 1,200-1,320MW, and even if we assume that one of them is completed by 2021, we will still have another 8,000MWs to be supplied via natural gas, HFO, diesel, and LNG.
We have read in the news about plans regarding LNG-based power plants, although the details of these plants are still unclear, except for NWPGCL’s 800MW Rupsha plant, to be supplied with re-gasified LNG -- we are yet to see how this landscape is shaped. This will be very dependent on our upcoming FSRU’s and their performance, not to mention future LNG prices, let us hope they remain low for some time.
We have also heard of many solar power plant deals, as large as 200MW, but we are yet to see any substantial progress in this regard. Considering Bangladesh’s lack of land, finding areas with the right levels of solar radiation, and evacuation facilities -- many of these plants are unlikely to be finished.
Although the government is considering changing their approach to solar projects through first establishing solar parks and allowing private companies to bid on parcels of land there, this means it will take even longer before we add any substantial renewables to our power generation mix.
We will most definitely benefit from a realistic approach to our method of development; perhaps a steady jog rather than periods of sprints to sign deals and long breaks before construction
More plans and initiatives
Other plans include importing more from our neighbours. For example, India already supplies 660MW to Bangladesh’s GRID, and this may increase by another 840MW. An import of power is a good quick fix, also likely to be more affordable, however, we have to be weary of not depending too much on our neighbors.
Otherwise, the government has recently handed out many 100-200MW IPP deals to our local private players, this is in addition to their own efforts for new government-owned power plants, many of which have seen some good progress, and we can at least be rest assured that most of these will eventually reach COD.
Yet, in terms of how all these plants add up to our upcoming deficit, we can assume that it will still not be enough
An increased target of electricity generation (including renewable energy), cross border power trade, transmission system strengthening, distribution network development -- all of which are details in the Power Sector Master Plan 2016 -- will provide good business opportunities to developers, OEMs, EPC players, and technical service providers in the coming years.
There is much to do, and it is not simply in generation, but in transmission and distribution as well.
By 2030, demand is estimated to be as high as close to 30,000MW. We are in the midst of a power generation race to catch up with the demands of our industries and consumers.
To have any chance of catching up, the government must take a hard look at their ambitious generation plans and find a way to mix the ambitious power plants with the reliable power plants, all while meeting time deadlines and remaining affordable.
This is no easy task, but we will most definitely benefit from a realistic approach to our method of development; perhaps a steady jog rather than periods of sprints to sign deals and long breaks before construction.
Mamun Rashid is a Partner at PwC. Views expressed in this article are his own.