Solar power can reduce Bangladesh’s spot LNG purchase by 25%: Think tank

The spot market LNG imports might cost Bangladesh nearly $11 billion in the next two years, but solar power could cut the cost by 25 per cent and save the nation $2.7 billion, according to the global energy think tank Ember.

The think tank disclosed its findings in a mini briefing published on Thursday, showing that heavy reliance on gas for power generation is the main reason behind the current LNG import crisis in Bangladesh, said a press release.

Ember’s Data Explorer shows that Bangladesh’s electricity demand grew on average by 8 per cent annually in the last decade. About 62 per cent of the country’s demand is met with gas-generated power. In this context, to meet the demand, the country started importing LNG from 2018-2019 and eventually started purchasing LNG from the spot market in 2020.

By contrast, during that time, renewable energy generation saw only marginal growth and accounted for just 1 per cent of Bangladesh’s total power generation in 2021.

Ember’s analysis finds that under current plans, Bangladesh is slated to spend $11 billion between 2022 and 2024 just on spot market LNG imports to keep up with its growing electricity demand. This number could be even higher if Bangladesh’s spot LNG imports continue to increase as per the trend in recent years.

The Mujib Climate Prosperity Plan published in 2021 laid out ambitious solar targets. If this plan is fully implemented, additional solar generation can reduce the LNG imports by 25 per cent between 2022 and 2024, saving about $2.7 billion.

Ember’s Senior Electricity Policy Analyst Aditya Lolla said, “Bangladesh can turn the current power crisis caused by the spiralling gas prices into an opportunity. Redirecting its efforts to ramp up renewable energy capacity and grid augmentation investments now can solve so many problems.

Ember’s Electricity Analyst Dr Achmed Edianto said, “Renewable energy, especially solar, represents a low-risk diversification option when compared to other fossil energy sources. Domestic renewable energy sources would help Bangladesh control the energy crisis and protect the country from global market volatility.”

A practical breakthrough is required to allow the renewable market to grow. For this, the government needs to address various supply-side issues such as insufficient grid infrastructure, lack of flexible capacity to accommodate rising outputs from variable renewable energy, and oversupply in the domestic electricity market, said the release.

In its updated NDC, Bangladesh committed to 4.1 GW RE by 2030 depending on international support, up from the current level of 0.5 GW. While this is a step in the right direction, it will not be enough.

India is currently building solar power plants at an average cost of $560 million. Even if the cost is 50 per cent more in Bangladesh, about 6.5 GW of solar could still be installed with the same $11 billion, which Bangladesh might have to spend on spot market LNG purchases in just 3 years, the release added.