As legacy technologies and incumbent business models start failing, it is usually considered a time of the “transition technology.”
The “old” slowly paves the way for the “new.” However, in the case of energy, things are moving at a much faster pace. A few days back, the Sueddeutsche Zeitung, discussed the fatal hubris of the big four energy players in Germany: Eon, RWE, EnBW, and Vattenfall.
Those enterprises were convinced that nothing could possibly harm their oligopoly, nor their government backing. Hence, while contemplating greener horizons, it was always clear that coal would just last a little longer and that atomic power would ease the transfer to those far away “renewables.”
However, what was once perhaps naively considered a complex transition requiring several decades, suddenly appeared around the corner.
Not too long ago, 35% of electricity from renewable sources was associated with “unthinkable,” “too volatile,” “a certain total blackout,” “the economy will suffer tremendously.”
Today this is a reality.
And those once all-powerful enterprises? They found themselves in an existential crisis. Their hesitance to embrace the new energy world proved to be their Waterloo. And it was not politics that ended this big era, politics only reacted to the trend of time, dominated by the consumers, and accelerated by events such as the Fukushima disaster.
Last year in Marrakech at the COP22, we witnessed how Bangladesh, along with its partners of the Climate Vulnerable Forum, adopted the strongest declaration for Climate Action, a target of 100% renewables by 2050.
Unlike the situation in Germany a decade ago, it is clear where Bangladesh is headed. The challenge today lies in whether the country can learn from the mistakes made by others, and how far it can afford to continue to bet on transition technologies.
The transition technology dilemma is not a question of just letting the existing fossil fuel or nuclear power plants run a little longer, rather, the majority of such power plants have not been built yet here. Instead, Bangladesh faces the very real risk of locking itself into outdated “transition technologies” and business models, and ignoring lessons for which others have paid for dearly.
Every proposal today to build a new power plant should be carefully weighed against its life span and the path the country has started to embark on. Our goal of 100% renewables by 2050 may come a lot quicker than we could possibly imagine today.
This new energy world we are all moving towards is driven by the 4Ds: Decarbonisation, decentralisation, democratisation, and digitisation. Since the Paris agreement, there is a general global consensus on how this decarbonisation process will shape up in coming years. And with ever more and stronger record rains, as we experience them right now in Dhaka, and associated floods, record droughts, cyclones, salination, etc, we will no longer be able to look away.
We will and are being forced to fully embrace the need to rapidly develop while emitting less carbon. Again, action based on political commitments start with us, the consumers! The private sector needs to respond to free market behaviour -- our actions -- which in turn will influence national policy.
As the world continues to decouple carbon emissions and economic growth, so will change the old paradigm of centralisation, where electric power is produced far away from where it is used. Decentralised rooftop solar in urban Bangladesh will be the game-changer here. A Feed-in-Tariff (FiT) would encourage consumers to invest in their own energy security, and support the struggling national grid.
A recent interesting piece from the Harvard Business Review titled The 3 Stages of a Country Embracing Renewable Energy, divided this transition path into three phases: Phase one, where a country focuses mainly on promoting renewable energy sources, possibly with secondary objectives of establishing a domestic manufacturing base.
Phase two is when the shares of renewables in the energy mix reaches a level where grid operators have to intervene more frequently to keep the grid in balance. The landscape of utility companies is undergoing significant transformations.
Phase 3 is when the electricity supply industry sees first-hand how their sector is transformed from being a public infrastructure towards a truly private one, where solutions are customised for each producer and consumer.
So in which phase is Bangladesh to be placed? The answer is in all three.
Public discourse focuses on problems described in Phase 2, however, the country hasn’t even seriously started to embrace Phase 1, despite strong political commitments. Incumbent institutions, like BPDB and REB, struggle to move past the legacy mandate of grid extension at any cost.
This debate exacerbates economic pressure on communities trapped on the waiting list for a grid connection that is often inferior to that which a solar system is able to offer. Nevertheless, while this debate rages in the national hubs, rural Bangladesh has quietly become global avant-garde in embracing the 4Ds.
Recent studies show that on average their electricity supply quality is superior to that of the REB, so why is the country trying to jump back from Phase 3 to Phase 1 at a cost of Tk139 billion recently approved by the ECNEC for grid extension?
While Dhaka is still stuck in the discussion on the FiT, a local start-up, named SOLshare, establishes peer-to-peer microgrids based on existing solar home systems. Power can flow freely between the houses and small businesses, all necessary appliances can be run, and surplus power is traded based on net-metering and mobile money in real-time.
Overnight villagers turn solar entrepreneurs trading electricity for income generation. They are not producers, they are not consumer, but prosumers, the full cycle of Phase 3!
The global energy transformation cannot be stopped anymore. The question is who is going to drive it – community initiative, entrepreneurial disruption, or traditional supplier adaptation?
Manufacturers and businesses not only have to face it but manage it effectively. National and industrial competitiveness is at stake. The German Ambassador to Bangladesh recently remarked the energy transition in Germany was a societal movement, initiated by its citizens, only later political calculus paved the way for a larger uptake.
If the people in Dhaka understood the benefits of solar the way they do in rural areas, a similar leapfrogging in phases could be possible.
Dr Sebastian Groh is an Assistant Professor, School of Business and Economics, North South University, and Managing Director at ME SOLshare Ltd and Setu Pelz is a PhD student, Department of Energy and Environmental Management, Europa-Universität Flensburg, Germany