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Power, energy sectors hurting Bangladesh economy: CPD

Staff Correspondent
16 Nov 2023 23:00:40 | Update: 17 Nov 2023 16:06:04
Power, energy sectors hurting Bangladesh economy: CPD

Over negligence of domestic energy sources and aggressive import dependency have been pushing hard the country’s economy and contributing to increasing risky foreign debts, said the Center for Policy Dialogue (CPD) on Thursday.

The CPD revealed that Bangladesh Petroleum Corporation and Petrobangla, two major state energy institutions, are under intense pressure from international energy suppliers, accumulating dues of nearly $1 billion.

Simultaneously, Bangladesh's power sector is grappling with a severe liquidity crisis, facing substantial outstanding payments to private producers and international suppliers.

The CPD emphasised the inefficiencies in electricity sales and capacity payments, citing a report indicating that over 51 per cent of power stations are currently inactive due to unplanned construction. Private power plants alone had to pay $3.5 billion in capacity payments until September 2023.

The CPD, while unveiling its quarterly review of the country's energy and power sector, highlights that due to misguided decisions, the national liability in the power and energy sector is escalating, causing unbearable challenges for the public.

CPD, a private think tank, has initiated the regular publication of power and energy sector data every three months. The first quarterly report for the fiscal year 2023-24, titled "Currents of Change: Quarterly Brief of the Power and Energy Sector of Bangladesh," was released on Thursday.

Khondaker Golam Moazzem, the research director of CPD, argued that paying capacity payments for new power plant constructions is no longer justifiable, and contracts for old power plants should not be renewed. He criticized the lack of a competitive market, attributing unequal contracts to the Special Powers Act and pointing out certain companies benefiting disproportionately.

The private think tank CPD has taken the initiative to publish data on the power and energy sector every three months. It released the first quarter (July-September) report for the fiscal year 2023-24 on Thursday titled ‘’Currents of change: quarterly brief of the power and energy sector of Bangladesh". 

The complex shortage of foreign exchange in the country's economy is exacerbated by new contracts to import expensive LNG, as the government neglects high-potential domestic gas sources.

CPD's study reveals that loans are being obtained for LNG imports with funds meant for gas field development. Petrobangla, for instance, is securing a $500 million syndicated loan with the International Islamic Trade Finance Corporation (ITFC) for six months, a move that CPD warns may provide temporary relief but increase long-term risks.

Meanwhile, the government has a target of drilling 46 wells by 2025 but no progress is visible in this regard, said CPD.

Khondaker Golam Moazzem said Bangladesh is in a deep crisis in the energy and power sector and called for focusing on domestic energy sources to mitigate the crisis. He urged prompt initiatives to reduce imports.

According to the CPD review, coal is identified as the worst source of fossil fuels, with its use increasing in Bangladesh. The government's pursuit of energy transition is criticised by CPD, citing a rise in carbon emissions from gas and coal. Coal alone has contributed to a 68 per cent increase in carbon emissions over the last 11 years, impacting life expectancy due to air pollution.

The report also sheds light on regional variations in electricity consumption, with Mymensingh and Rangpur experiencing increased load shedding despite having the least electricity consumption.

The CPD attributed this not only to a generation shortfall but also to faults in the transmission and distribution system.

While Bangladesh aims to generate 40 per cent of electricity from renewable sources by 2040, CPD expressed concerns about the slow progress and questioned the efficiency of companies involved in renewable energy production.

The report underscores the necessity of creating a competitive market to prevent a further increase in electricity costs for consumers.