Bangladesh is at a critical stage in its development, looking to reach middle-income status by 2021. Key to this change is the expanded growth of GDP, from its stable 5-6% current growth to a 7.5% to 8% level. To reach the next level, Bangladesh will need to overcome a number of constraints to continue on its export-led growth path.
These are: (i) Insufficient supply of reliable energy, (ii) policies that indirectly stunt the development of economic activities unrelated to ready-made garment exports, (iii) insufficient security about property and land rights due in part to inadequate registry systems.
Up until this point, Bangladesh’s economic growth has been maintained by labour-intensive industries such as the RMG sector. However, economic theory and history of international development shows us that a structural change in the economy is necessary to foster diversification and subsequent growth of high value-added industries.
The country will continue to depend on its “traditional” industries such as the RMG, but new industries are predicted to grow and eventually overtake. To facilitate this change -- due to the energy-intensive rather than labour-intensive nature -- the energy consumption of the industrial sector is expected to rise rapidly and exponentially.
As the reserves of natural gas deplete (with the deficit between usage and supply predicted to reach 52% in 2030), the need to look to other fuel sources has become critical. This is where energy efficiency (EE) becomes an attractive mechanism for change, as it is widely seen as the most cost-effective, fastest, and most accessible way of reducing energy use. Coupled with the increasingly energy-intense industrial sectors, the increasing unit cost, and possible unstable energy security scenario, it is a key policy progression. One, however, that requires a degree of structured, considered, and nuanced thought.
As the importance of environmental issues within society has risen over the past decade, the value of effective environmental management has also become more recognized within commerce and business as a key tool in developing a streamlined energy efficiency methodology. Notably for Bangladesh, environmental auditing in recent years has transformed to include global warming, resource depletion, recycling, and transportation issues as key factors within its mechanisms.
EE for Bangladesh is not a new concept, although its application has been uneven. The reasons for this -- be they political, economic, or educational -- are varied, but due to the strains on the production side, there is significant momentum towards adopting energy efficient solutions. The transition will not be easy, as it must be a top-down approach that also requires the use of tailored solutions for different sectors.
We studied the course of policy development in Bangladesh. In particular, we examined the development of the Energy Auditing Framework by the Sustainable and Renewable Energy Development Authority (SREDA). SREDA is the national nodal organization for promoting demand-side energy efficiency and conservation in the country.
Energy auditing is a key mechanism for improving energy efficiency in key sectors of the economy, and can provide the source for the development of Energy Management Systems (EMS) and the data to further EE policy development. In countries with a more sophisticated EE mechanism, real estate has been a sector that has seen significant progress on this front.
Regulatory bodies have three main instruments available for maximizing energy efficiency in buildings -- regulations, auditing, and certification. The auditing aspect of this is outlined in depth, in the “Energy Audit Regulations for the Government of Bangladesh 2016.”
The initial document was found to be an excellent and comprehensive policy outline. However, when the EAR was passed through to the Ministry of Law, Justice, and Parliamentary Affairs, there were a number of critical factors that were cut back.
Firstly, the system of tiering for the energy auditors was removed. Secondly, an internal role to the consumers, the “energy manager” was no longer mandatory. Finally, the provision to impose fines for failure to comply with the auditing process was completely removed. These steps unfortunately took away a lot of the power and effectiveness of the framework, and softened the ability of the regulator to enforce it.
The issue of corporate secrecy has been raised as a significant barrier to the success of the EAR framework, and also the integrity and quality of the data gathered in the process. The removal of some of the regulatory power compounds this issue. Another factor raised is the level of sophistication required in producing an effective national EE regulatory system. Bangladesh has some excellent educational institutions in the fields of renewable energy and sustainability, but a level of nuanced capacity-building is required. The level of analysis of EE in Bangladesh is already extensive but implementation has been slow for a number of reasons.
These include: Complex and non-uniform energy pricing, inflexibility in changing, the idea that EE is an economic constraint, lack of and weak enforcement measures, lack of knowledge development, the lack of coherent strategy, the continued use of traditional methods within industry, lack of data collection and dissemination, lack of access to finance for EE, and barriers to access to global funds and knowledge-sharing.
Several policy recommendations emerge from this review. Firstly, we need to develop and continuously re-evaluate the EAR framework, as it is an excellent building block and potential catalyst for future EE developments. The considered collection of data, and its subsequent publishing, is a proven effective tool in promoting EE and sustainable development. The promotion and facilitation for private investment in EE by the government by supporting capacity-building, standardized measurement, private lending, and technology research and deployment. The backing for and encouragement to develop EE human resources to evaluate, implement and monitor. The establishing and continued development of effective enforcement and evaluation measures for EE. The development of the EAR framework to incorporate energy management systems (EMS). Finally, the use of sector-wise benchmarking as a tool to ensure that industrial energy intensity and usage is at the desired level.
The government of Bangladesh has all of the information to design and implement a global standard EE program. It needs to join the growing number of countries developing this future technology, and not be left behind. The market development needs to be facilitated by the government to ensure the best start. The energy demand in Bangladesh is expected to increase exponentially over the next decade, and with the change in the national energy mix, the use of EE is of critical importance to ensure this development does not become a crisis.
Rob Louis-Hartley and Salma Islam were researchers for Economic Dialogue on Green Growth, a UK Aid-funded policy research program in Bangladesh.
