Energy is the prime mover of an economy and gainful utilization of energy is what matters the most. As the national budget was unveiled on June 11, discussions on the energy sector have once again surfaced and for obvious reasons. Many are interested to look into, among other things, the specifics of the initiatives the government would like to undertake in light of the surplus capacity that power sector currently has.
Further to that, what could be the immediate measure, if at all anything is planned, to address the corona-led fall in the demand for electricity? On top of these, people have reasons to ponder over why we would need to add more fossil fuel-based power capacity in the immediate future given the level of excess electricity and daunting challenges of energy security.
Media reports and power generation statistics show that half of the installed power capacity remains idle in the country due to less demand and corona induced crisis. In the midst of surplus electricity and the associated burden of huge capacity payments to the idle installations, the perfect response, in my humble opinion, could have been a well-planned exit strategy from the costly rental based power plants.
This stance is economically effective as the demand for electricity would not sharply rise in the aftermath of Covid-19 attributed to the fact that large installations, for instance, industries do not solely depend on grid-based electricity.
Moreover, since we are yet to reach the peak of Covid-19 infections, the post-corona recovery process might take more time compared to some other countries.
On the other hand, for the first time since the installation of the first furnace oil based plant over a decade ago, import duty on furnace oil has been levied.
It makes the impression that rental plants will continue to operate, at least in the foreseeable future, despite their shortcomings and negative impacts on the economy.
The allocation to the power sector in the coming fiscal year is slightly less than that of the current fiscal year, ending on June 30. Although energy division would find its budget to be significantly cut on a year-on-year basis, the case for power division is opposite.
Local exploration of gas to attenuate reliance on import, as a result, does not seem to be on the card as a priority. The real concern is that power plants with aggregate capacity of over 16,000 MW are reportedly under construction and the government is on the track to install a total capacity of 60,000 MW, based on power systems master plan-2016, by 2041. It is mainly dominated by fossil fuels of which a significant percent would be harnessed from coal against the global tide of maximizing the benefits of clean and renewable energies.
And it remains to be seen to what extent distribution capacity of the grid will be expanded to ensure supply of quality electricity.
Power system of any country, for all practical purposes, has certain reserve margin and it varies considerably from country to country. Germany, for example, being a net electricity exporter, has a reserve margin, which can accommodate the fluctuating demands of export destinations. In pursuant to the energiewende (energy transition), Germany has ambitious renewable energy goals alongside the approved plan for retiring nuclear units by 2022.
In addition, German coal power generating plants would be phased out by 2038. Germany, therefore, has a high reserve margin. Other countries which maintain higher reserve margins have their own circumstances and these margins do only make sense when there are economic reasons.
However, in the context of Bangladesh, the installed capacity has significantly outpaced the growth in demand for electricity, resulting in surplus capacity. And our grid is not dominated by variable solar energy either. Notably, the International Energy Agency (IEA) recommends a reserve margin of 15 percent, recently appeared in a report in an Indian newspaper.
The other thing to think about for Bangladesh is to reduce inefficiencies in transmission and distribution. Here, Bangladesh has shown impressive improvement over the years in minimising combined transmission and distribution loss, which, according to Power Cell, stood at 11.96 percent during 2018-19.
The world average, according to the World Bank, was hovering around 8.2 percent in 2014 and is declining as well. Bangladesh, therefore, has enough rationale for enhancing efforts to minimize this loss as under the prevailing scenario, 11.96 percent of the produced electricity is practically wasted in generation, transmission and distribution. Notably, combined transmission and distribution loss showed a slight rebound to 11.96 percent in 2018-19 compared to 11.87 percent in 2017-18.
While each additional power generating unit comes at a cost, it is even costlier for a country that relies significantly on imports of energy. At a time when revenue stream has been affected due to structural surplus electricity and the impacts of Covid-19, it is imperative to carefully review the power system master plan. We have to think whether we need to roll out more fossil fuel-based plants as capacity payments affect the economy and the energy security issue of the country looms large. One of the strong arguments is, if at all, we would have electricity demand as high as 60,000 MW in 2041.
Policy making process, of course, involves prioritizing among the competing choices and has certain trade-offs. And as much as we realize, it is not sensible to expect that there will be a dramatic change overnight.
The surplus installed capacity of the country, however, provides a breathing space to shift attention towards enhancing supply side efficiency and to flank renewable energy policy properly with the power policy to take the advantage of renewable energy and solar in particular, which is highly cost competitive now.
In all sincerity, the corona-led fallout also turns out to be an opportunity for great introspection rather than running on the momentum of rolling out fossil fuel-based power units. When we struggle to cope with huge surplus electricity, there is perhaps less room for making costly mistakes.
While initiatives taken in the past to cope with rising electricity demand are laudable, will it be possible for the government to turn the tide now under the difficult and different circumstances?
Shafiqul Alam, is an engineer and environmental economist; a Humboldt scholar and currently a senior adviser to an international agency