Energy challenges for the new government

The new government has announced several policies and action plans to alleviate the energy crisis. The vital question that arises �" will these measures provide enough relief. Currently, Petrobangla supplies roughly 2,700 million cubic feet per day (MMcfd) of gas against a massive national demand of 3,800 to 4,000 MMcfd, resulting in an acute deficit. The inability to supply enough gas is predominantly the result of years of neglect of gas exploration. As a result, import dependency is increasing every year. The country now must import nearly 65% of its energy needs in the form of petroleum oil, LPG, LNG, coal and electricity. If the trend continues in a decade the country will have to import more than 90% of its energy needs. It is obvious that this implies huge requirements of foreign currency. 

Continuing the 100-well gas production enhancement program, deep drilling in existing fields and invitation of bids for offshore blocks are certainly steps in the right direction and praiseworthy.  Whether these will yield the desired benefits depends much on the government’s sincerity of purpose and how the programs are implemented. All required resources should be devoted because aggressive gas exploration is fundamental to reducing energy import dependency. 
 
The recently announced renewable energy program is also praiseworthy, but the government must do much more to ensure its success. For example, it must make the import tax structure equal for all importers; and additionally, must ensure concessional finance for government agencies which have land to build solar parks. To overcome the land crisis, fallow government land must be made available for private sector projects. 20% renewable electricity by 2030 is extremely ambitious and cannot be achieved by government alone. It will require extensive private sector participation but without continuous proactive assistance from a high-powered dedicated government agency not much will be achieved. 

Apart from the above two supply driven policy measures, the government has not provided much direction for the energy and power sectors. The deep energy supply crisis implies that no existing simple strategy will suffice in tackling the crisis. The government must get out of the conventional mode of trying to buy more LNG and solve the problem. It must start dealing with deeper issues such as �" 
*    How to supply affordable fuel to industry 
*    How to close the gap between cost of electricity generation and the bulk tariff 

Supply of fuels to the industrial sector is undoubtedly the biggest challenge for the government in the near term. No government has given much thought to it and allowed the demand for gas for the industrial sector to reach the present unsustainable level. Today, the government finds that it cannot afford the cost of supplying the full demand for gas because of high price and supply volatility of LNG. Our industrialists are also to blame for this situation. They have become too reliant on cheap gas. Never have our industrialists thought of using other fuels or opting for industries that do not require much energy. The days of energy intensive industries in Bangladesh are over. Industries in Bangladesh should be labor intensive, have low energy consumption and focus on the agricultural sector for raw materials. A serious barrier to industrialization is that Bangladesh does possess many raw materials. Using imported raw materials and high-priced energy, industries cannot be viable. 

What to do then with existing energy intensive industries such as steel, ceramics, cement and textiles. Moreover, what about the thousands of crores of Taka of new investment waiting for gas connections. Many of the industries unfortunately have suffered for so long that they may not survive. Those that can survive must be given special dispensation to assist them to survive in this critical time. Ready-made garment (RMG) and other low energy consuming industries can survive using energy conservation and energy efficiency. For the future, industries have two options, build industries assuming high gas prices or use alternative fuels. The important criteria should be energy availability realities of Bangladesh. The government must formulate a realistic industrial policy and must stop making false promises to industries regarding fuel supply. 

Grid electricity supply is mainly the government’s responsibility. It must be supplied reliably and at an affordable price. The first and foremost thing is that BPDB must reduce the subsidy burden for the government. This isn’t going to be easy but not increasing the lifeline tariff is certainly a retrogressive step. If such a large proportion of customers do not pay the real cost of generation, there is very little chance of recuperating full costs. The second most important thing is to reduce the use of oil-fired generation. Due to gas shortages, BPDB relies on expensive oil-fired power plants to fill the grid gap.

Oil accounts for over 10% of the electricity generation�"vastly outstripping regional neighbors like India and Pakistan. The government must give a clear pathway for reducing oil-fired generation; it can make a commitment to reduce 1,000 MW every year until 2030. Loadshedding distributed equally between urban and rural areas could be practiced on all days, even in winter until the subsidy is reduced to 10,000 crore Taka. Reduction below that will depend on the government’s political decision of continuing lifeline tariffs. The other ways to lower costs of production are reducing system losses and management level costs. Government plans and specific commitments on these issues are essential.