The energy crunch

by Hasanuzzaman

POWER crisis is, needless to say, one of the most critical issues of modern times, which has impaired smooth functioning of industrial activities in the country. The government’s introduction of the daylight saving time has done little help since most rural areas are yet to understand this shift in the hour hand. The authorities have cautioned the industrialists about deepening of the power crisis in 2010.
The ruling Awami League’s election manifesto duly accorded third priority to rejuvenation of this key input sector. Inadequate power supply has long been plaguing the country’s investment and business activities; as a result, new investments have not been forthcoming. It is to be noted that by 2014, a total of 3,462 megawatts of electricity is anticipated to be in supply as a result of the earlier initiatives. However, this is still well below the ruling party’s pledge as outlined in its manifesto (7,000MW by 2013). Implementation of the government’s recent initiative to generate 2,830MW by 2013 will perhaps ease the situation.
The ruling party’s election manifesto, amongst others, mentioned that a three-year crash programme would be adopted to facilitate speedy implementation of the ongoing and under-consideration power generation plants coupled with import of electricity from neighbouring countries. The government has made diplomatic efforts to import electricity from neighbouring countries. The cabinet has recently approved a draft memorandum of understanding for power trading between India and Bangladesh, which was signed in January 2010. Assuming the memo comes into effect, it will certainly be a stepping stone for setting up a major energy ring in the SAARC region.
During the first month of 2009, maximum electricity generation was 3,524.82MW and by December, it had increased to 3,721.49MW (with an additional 196.67MW). In terms of fiscal analysis, in FY2009-10 (July-December), maximum electricity generation increased by 274.14MW over the corresponding period of the previous fiscal year. One of the reasons that could explain this increase is that in 2009 (as of December) 12 private-sector power plants, of which four are rental and the rest IPP, with a combined capacity of 356MW capacity, started generating electricity. It may be recalled here that the commissioning of all these plants was done during the caretaker government’s tenure in 2007-08.
The yawning demand-supply gap has prevented the country’s industrial sector to translate its full potential into reality. The gap was only 441.5MW in FY02 and reached 1,903.9MW in FY09. In January 2009, the power sector master plan estimated the demand-supply gap to be 575.2MW (maximum) which further widened to 1,903.9MW in June and 2,312 MW in December. In terms of long-term projection, the government has estimated the demand-supply gap under three scenarios, using the revised demand estimates, excluding scenario three where the master plan’s projections have been applied (see figure). All the projections share a common feature – the demand-supply gap is anticipated to experience a sharp fall starting from FY2012 to FY2013, and wherefrom it would peak once again.
Meanwhile, no word has yet been finalised on the already formulated coal policy, and the three-year crash programme can be said to have suffered the same fate as the remaining aspirations of the current government. Furthermore, no comprehensive initiatives, other than amended plans (revised at least 4 times already), have been adopted to take these initiatives off the ground.
In case of gas production, it has increased at a rate of 6 to 8 per cent per year in the recent past. In FY2009-10 (July-October), production of gas achieved a record 9.35 per cent growth (compared to FY 2008-09, July-October) with a total production of 6653.12mmcm, indicating an increased use of current reserves. However, Bangladesh continues to face a daily shortage of more than 250mmcfd.
One of the reasons that could explain this shortage is that use of gas has diversified over time. Its use for industrial and commercial purposes and for conversion into CNG has been on the rise. Petrobangla’s share of gas production was 55 per cent in FY2006-07 which came down to 47 per cent in FY2009-10 (July-October). However, due to shortage in supply of gas, the government has regulated its supply to various sectors, especially in fertiliser factories and industrial units during the evening hours which is further constraining efficient operation of business activities.
It can be safely said that any alternatives other than gas exploration will not suffice to ease the energy crunch situation. In October 2009, three offshore blocks were awarded to two international oil companies. A number of issues (both from economic and legal perspectives) are now being debated which relate to absorption capacity in terms of financial and technical abilities of the government; efficacy of Petrobangla in terms of utilising gas for internal purposes and in general, the country’s weak physical infrastructure in facilitating the transportation of gas; ownership disputes; and issues of legal concern.
To attract foreign investors, the government has organised Bangladesh Investment Conference and Road Show on Power and Energy Projects in London, Singapore and New York between December 2009 and January 2010. The first Road Show was held in London during mid-December, though the outcomes and results are yet to be disclosed to the public. Transparency needs to be ensured in all areas of government activities starting from the adoption of the plan to its implementation stage, also as a commitment to implement the Right to Information Act. This is imperative from the credibility perspectives of the government’s intentions and policies. To consolidate domestic presence in the energy sector and establish command over potential benefits, further strengthening of BAPEX has assumed critical importance from Bangladesh’s long-term growth perspective. In other areas, perhaps a listing of past, ongoing and future projects with deadlines, estimated power generation and fiscal costs could be put under consideration to legitimise the power agenda. Indeed, Bangladesh urgently needs to revitalise its energy supply’s status quo but not at the cost of undermining national sovereignty.

new age editorial

Hasanuzzaman is a researcher. hasanuzzaman1984@hotmail.com