Bangladesh’s challenges in clean energy

As Bangladesh’s fast-growing economy has shifted to rely more on imported fuels such as liquefied natural gas (LNG) to meet its growing energy needs, volatility in the international market stemming from Russia’s invasion of Ukraine has caused a gas supply crunch and power outages.

And as the appreciation of the dollar against the Bangladesh taka strained the country’s foreign currency reserves, the government has significantly hiked gas and electricity prices over the last year to rein in energy subsidies, a measure that has hit entrepreneurs.

Against this challenging backdrop, Bangladesh has drafted a new Integrated Energy and Power Master Plan (IEPMP) for the 2024-2050 period, with the goal of ensuring an affordable, sustainable and secure energy supply.

Energy experts said the draft plan, soon to be finalised, shows positive shifts – such as reducing an earlier emphasis on coal – but voiced concerns about a growing reliance on LNG and unclear ambitions when it comes to renewable sources of energy.

Several analysts said Bangladesh should invest more in clean energy such as solar if it is to meet a target of generating 40% of its power from renewables, and that doing so would ultimately prove far more economical than spending heavily on fuel imports.

 The draft plan seeks to address Bangladesh’s longstanding reliance on domestic natural gas, which amounts to more than half of the country’s primary energy supply, by considering options to diversify energy sources.

In 2021-22, 55% of the country’s power was generated from natural gas as it achieved a goal of providing universal electricity access, according to a Reuters report. Under the draft plan, gas consumption by the energy sector will grow between 160% and 360% to generate 30% of power by 2050. The proposal seeks to accelerate energy imports, as domestic gas production is not expected to rise rapidly.

Imports of LNG are projected to grow to 49 million tonnes in 2050   4.6 million tonnes in 2022 to meet rising energy demand.

Shafiqul Alam, an energy finance analyst at the Institute for Energy Economics and Financial Analysis (IEEFA), said the plan had overestimated power demands, resulting in an excessive forecast for LNG imports which may not be required.

One of the main problems with relying on LNG imports is its price volatility, according to several energy experts.

Bangladesh had to suspend purchases of LNG from the spot market in July 2022 when prices skyrocketed in the wake of Russia’s war against Ukraine.

The government recently resumed buying LNG after an eight-month pause, but simultaneously moved to raise energy and power prices and cut growing subsidies that stood at 273 billion taka ($2.55 billion) in the 2022 financial year.

The government is now eyeing the installation of two more privately-owned offshore units and an onshore LNG terminal, and the draft plan estimates that about half of the required investment for power generation will have to go to the gas sector.

Instead of leaning towards LNG imports, Bangladesh should ramp up natural gas exploration at home, some experts said.

The energy plan’s reliance on imported fossil fuels is also at odds with Bangladesh’s policy priority to grow the share of clean energy in its power mix. While natural gas is less polluting than coal or oil, gas is still a major driver of climate change. It is almost entirely methane – a greenhouse gas that is much more potent than carbon dioxide in the short term if it is released into the atmosphere.

In 2021, the Bangladesh government set a target to generate 40% of its power from renewables, up from a previous aim of 30%.

The nation’s renewable energy capacity stands at 967 megawatts (MW), which is just over 3.7% of total installed power generation capacity.

To attain the 40% target, the draft plan includes options such as boosting use of nuclear power, carbon capture and storage technology and ammonia and hydrogen technologies.