Improving energy efficiency in Bangladesh could save $460 million annually and reduce reliance on costly liquefied natural gas (LNG) imports, according to a report by the Institute for Energy Economics and Financial Analysis (IEEFA).
As per the report released on Monday, the initiative to improve energy efficiency can help wean the country off its expensive import dependence as well.
The report surveyed 51 industries with 124 gas-fired captive generators with a combined generation capacity of about 250 megawatts (MW) to find solutions to reduce the country’s increasing LNG demand.
“An insatiable appetite for gas could lock Bangladesh into a vicious cycle of spiraling prices and supply issues pertaining to LNG, and threaten to stall its economic transformation,” says the report’s author, Shafiqul Alam, lead analyst – Bangladesh Energy, IEEFA.
“The plan to import sufficient energy for development was not designed to cope with the high-level
of volatility in the international fuel market, depreciation of the local currency, and weak fiscal conditions,” he said.
“Low efficiency in gas-fired captive power generation consumes a significant amount of gas annually. This is despite the average efficiency in captive generation increasing to 35.38 percent from 30 percent in the last decade,” Alam said.
“Additionally, a significant percentage of industries do not utilize the waste heat released by these generators,” he added.
The report found that by replacing the vast stock of aging, inefficient generators with more efficient models already available, and harnessing the waste heat produced by generators for other applications, Bangladesh could reduce the demand for imported LNG by a massive 50.18 billion cubic feet a year, or 21 percent, representing an annual saving of $460 million.
Replacing generators will require significant upfront investment, this capital outlay can be recouped within 1.5 to five years. The payback of investment in waste heat recovery is only about one year, the study found.
The alternative is to spend far more on building additional infrastructure to cope with the increasing local demand for fossil fuel imports against a global backdrop of tightening regulations to produce environment-friendly products.
“As the era of cheap energy comes to an end, with the government likely to make energy pricing more competitive in the foreseeable future, enhancing energy efficiency will be financially more rewarding. Any complacency in undertaking energy-saving measures will likely erode the competitiveness of industries in the international market,” Alam added.
The policy foundations for such a shift already exist in Bangladesh. For instance, energy auditing of designated consumers, including industries, is mandatory.
The Sustainable and Renewable Energy Development Authority (SREDA), established to accelerate the deployment of clean energy, may design measures to swiftly scale up energy efficiency.
However, greater support, incentives, and access to finance are essential to drive the country’s energy sector towards a more secure and sustainable future, the report found.
This study calls on the government to spearhead a comprehensive approach in the medium- to long-term, by enhancing the reliability of the electricity grid to encourage industries to shift to grid power from captive generation, increasing renewable energy capacity and more
Alternatively, replace gas turbines from old combined-cycle gas-fired plants, which are due to be phased out, as a source of power, when renewable energy is not available.
All the measures will help Bangladesh reduce its dependence on gas far more than efficiency improvements in captive generation alone.
