Electricity demands in Bangladesh is growing rapidly, and the nation requires a near-term expansion of generation capacity to meet this growth. The current plan is to meet future demand with an expansion of largely imported fossil fuel-based electricity capacity. However, this cannot be built fast enough to satisfy the nation’s near-term demand growth.
According to the latest annual report from the Bangladesh Power Development Board (BPDB), the commissioning dates for most of the proposed import coal-fired power stations have been pushed back again. Two coal-fired project proposals have quietly dropped off the development list entirely.
Fortunately, there are indications that a cleaner, alternative power source is set to take off in Bangladesh.
While we recognise there are serious land use constraints, and the fact that it is a world leader in solar home systems, Bangladesh has fallen well behind neighbouring India when it comes to larger-scale solar.
However, recent press reports from June and July of this year indicate that momentum in larger-scale solar projects is now building.
The Bangladesh Economic Zone Authority (BEZA) is reportedly planning to set up a solar power zone in Chandpur district with the aim of developing 1,000MW of solar power. PowerChina are thought to be the main project developers along with the BPDB. In addition, BEZA is considering a second solar power zone in Chittagong that would house a further 600MW of solar capacity.
The BPDB has signed a deal with Chinese firm ZTE for the construction of a 7.4MW solar plant in Rangamati. The plant is expected to generate electricity at a cost of Tk 5.48/kWh or $68/MWh. In addition, the BPDB’s latest annual report discloses a total of 430MW of solar power plants in its development pipeline, up from 40MW in the prior year.
The reported cost of solar at Rangamati is significantly cheaper than the tariff of $82.59/MWh reported recently for a Chinese-funded coal-fired power plant to be built in Chittagong district. This cost for coal-fired generation does not include externalities such as carbon emissions nor air and water pollution.
Importantly, although solar is already looking cheaper than coal-fired power in Bangladesh, the significant solar cost reductions are not over.
The June 2017 New Energy Outlook report from Bloomberg New Energy Finance (BNEF) forecasts the global cost of electricity from solar decreasing 66% by 2040.
The four 25MW solar systems proposed by Hindustan Power indicate how Bangladesh can move forward into larger-scale distributed solar plants. Land use constraints will mean that systems on the gigawatt scales now being seen in India will not be an option. Instead, Bangladesh can look to Japan to see how systems in the tens-of-megawatts can be placed where land is available in a densely populated country.
Bangladesh should also pace its solar roll out. By taking a phased approach to installations over the next decade, the nation can take advantage of continuing reductions in solar power costs rather than locking in initially higher prices by progressively scaling up the rate of installations.
In addition to utility-scale solar momentum, IEEFA also sees great potential for urban rooftop solar, particularly in the Commercial and Industrial (C&I) sector. Foreign companies who manufacture in Bangladesh are under increasing pressure to decarbonise their supply chains. This should see such companies lead on rooftop solar in Bangladesh and help to drive down costs, allowing local companies to follow.
India’s rooftop solar installations grew 81% in financial year 2016-17 according to Bridge to India with 678MW added. C&I is the largest rooftop sector in India with 65% of totalled installed capacity.
Funding for renewable energy is increasingly available. Major international investors including asset managers, banks, and electricity utilities are seeking out opportunities to invest in renewable energy in developing countries. India is already benefitting greatly from this trend. Bangladesh’s Infrastructure Development Company Ltd (Idcol) recently secured $526 million in loans from the Asian Development Bank.
Meanwhile, funding also continues to be made available for 20th century coal technology at a time when Bangladesh needs development based on 21st century technology. Japan’s JICA recently signed a $1.6 billion loan agreement with the Bangladesh government to finance projects including a coal-fired power plant.
This is hardly surprising, given that JICA had a major hand in writing Bangladesh’s new Power System Master Plan, which calls for heavy reliance on imported fossil fuels. In Japan however, a renewable energy transformation has been quietly taking place, and the country recently passed the 100GW of renewable capacity landmark.
In addition, Japanese plans to build new domestic coal-fired power plants are unravelling. Two proposed new domestic coal-fired power plants were cancelled in the first few months of 2017.
With domestic coal-fired power projects increasingly uncertain, Japan looks to developing countries to dump its coal technology on. Hence, JICA has influenced Bangladesh’s Power System Master Plan to ensure future use of Japanese coal technology. Bangladesh is not the only country involved in this strategy, Japan funds coal plant developments in developing nations across Africa and in Indonesia.
Bangladesh needs to avoid locking itself into decades of imported fossil fuel generation technology that will require another round of energy development later this century.
The nation would do better to skip the old and increasingly outclassed technology and go straight to larger scales of solar; a modern, proven, and increasingly cheap technology of the 21st century. This can combine with energy efficiency and other renewable energy to build domestic sourcing and energy security.
Simon Nicholas, Energy Finance Analyst – Institute for Energy Economics and Financial Analysis (IEEFA).