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Bangladesh’s annual economic growth of 7% calls for the scalability of its power infrastructure to keep up with the demands of industry and increased urbanization.
Heavy investment in energy infrastructure has made improvements but by 2030 Bangladesh’s power demand may well reach 34,000 MW. Meeting this increase will create a multibillion dollar opportunity for investment.
Current Status Quo
The current demand in the country is around 6,264 MW with maximum demand having hit 8,250 MW in April 2013. The electricity demand is set to grow at 11% in the 2015-2020 period (PSMP 2010) and the installed capacity was 10,213 MW as of November 2013. However, there is a shortfall due to mismatch between fuel mixes and plant types.
Moreover, 62% of the population is currently covered by the electricity grid with the rest of the population set to come online in the near future. This represents a still untapped market of 61 million people who will be connected to the national grid in the coming years as Bangladesh continues its growth trajectory out of the LDC category.
The power industry is unique in the fact that overhauling it can impact all components across the vertical production chain. This presents ample opportunity for investment in areas ranging from electricity generation to distribution channels in the fuel sourcing function.
Insights on Fuel Sources
The fuel mix of the power plants are heavily dependent on natural gas which is only enough to meet the power demands of the country until 2019.
The power developments board’s master plan lays out a roadmap to reduce dependence on natural gas and move fuel priority towards coal with plans to generate 50% of total electricity using it by the year 2030.
Private units are operating in the market and comprise of 42% of the total installed capacity.
Quick Power Rental from Private Sector
There were various quick rental power plants set up by these units that were aimed to reduce the generation deficit during the 2010/11 period with 22 plants in total by the private sector. These plants have high production costs due to exorbitant furnace oil prices and are set for replacement with alternative fuel sources.
Game Plan for the Future
Keeping pace with the level of economic growth in Bangladesh, the power authorities in the country have devised a master plan through the PSMP 2010 to upgrade the linkages in the sector and reach the optimum fuel mix. In addition, there have been major developments in the sector to ensure that demand is met adequately in the near future.
Regional Connectivity
Bangladesh has started to move towards regional power grid connectivity, the first manifestation of which has been the start of electricity import from India. It was started on a pilot basis in October 2013 with import of 175 MW of electricity. This import has the potential to reach 1000 MW given the infrastructure in place. This gives Bangladesh a cushion in terms of energy security in the near term.
Alternative Sources of Power
Coal: As a fuel source, coal consists of around 3% of the total composition. This is set to reach 50% within the year 2030 according to the master plan by the Power Development Board. This move into coal production is because of two reasons; first because there are huge reserves of coal in the Northern regions of the country, estimated to be around 3 billion tonnes. Second, there is potential to import coal from neighboring countries to fulfill demand if necessary.
Hydroelectricity: Drawing from the previous point of regional connectivity, there is huge potential for Bangladesh to tap in to Nepal and Bhutan’s huge potential hydroelectric generation capacity.
Renewable Energy (Solar): Bangladesh has successfully managed to implement one of the biggest Solar Home System (SHS) projects. Almost 3 million SHSs having being installed to date with a targeted installation base of 6 million by 2015. Currently renewable energy makes up 2% of the total electricity generation.
Wind Energy: Having a 710 km coast line, Bangladesh is yet to take full advantage of wind turbines; upsides from this sector can be extensive.
LNG Import Facilities and Offshore Gas Reserves
Liquefied Natural Gas (LNG) can augment the country’s energy needs by allowing for import of liquefied natural gas and subsequent gasification on landing and distribution. The groundwork has been laid to construct Bangladesh’s first floating LNG terminal at Moheshkhali which is going to have a capacity to handle 5 mn MT/year of LNG.
The infrastructure that is going to be set up for this purpose will also act as a platform for offshore power exploration as well as subsequent extraction and transfer. Bangladesh has substantial reserves of untapped gas in its offshore wells.
Investment Potential
Projected demand to hit ~ 34k MW by 2030. Total investment in the sector over the next 15 years is estimated at USD 70.5 bn.
Source: PSMP
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