Electricity: Reality and the way forward

With a current demand of about 5000 m.w., the national grid can reliably only supply about 3000 m.w., resulting in shortage of about 2000 m.w. during peak period. It is estimated that the demand is growing at 10% per annum. Considering the above circumstances, the generation of electricity should not be a challenge in Bangladesh. However, between 2001 to 2006, GOB has added only about 200 m.w of new generation capacity, creating this huge demand supply gap. The Power System Master Plant, authored by Acres International Limited, expects that base load demand of electricity will be around 7000 m.w. by 2011. It is expected that about 600 m.w of present generation capacity will be redundant due to old age. Keeping in mind at least a 20% reserve margin for a stable grid, the additional capacity required by 2011 is 5000 m.w.

Adding 5000 m.w. would require about $3.5 billion i.e. about Taka 24,500 crore, the optimal cost effective solution would be seven 700 m.w high efficiency combined cycle natural gas fired power plants. These plants may be built in Meghnaghat (Dhaka) 2X700 m.w., Sirajganj 1X700 m.w., Sylhet 1X700 m.w., Mymensingh 1X700 m.w and Bheramara 2X 700 m.w with 50% export to India, (this will require gas connection to Bheramara), Khulna 1X700 m.w (this will require gas connection to Khulna). In each of these places a river is available, a necessity for combined cycle power plants. However, in Bheramara there might be shortage of water. One of the solutions for this may be to sell 700 m.w of electricity to India, thereby making India a stakeholder in the Bheramara power plant.

Although the task of adding 5000 m.w may seem challenging, it is indeed possible. Moreover, this will enable Bangladesh to have double digit growth, and alleviate poverty. As mentioned above, Bangladesh has the right policy, feed stock, natural gas as well as demand, backed by purchasing power.

Natural Gas: We need to continue to invest in exploration, production and transmission. Fortunately, this is already taking place and will accelerate as the exploration and production (E&P) companies realise the demand for the gas emanating from the electricity sector. Each of the E&P companies assured the author that there is enough gas for these plants to run for 25 years, and they are very eager to increase capacity. In fact, E&P companies will be able to double the capacity in two years, from the present 1400 mmcfd to 2800 mmcfd. However, the additional gas required for 5600 m.w is 115 mmcfd. Of course the gas pipe line network must be extended to western Bangladesh, including Bheramara and Khulna. Gas has already gone to Sirajganj and Bogra. It is only right that the western parts of Bangladesh should also receive the huge benefits stemming out of Bangladesh having clean fuel like natural gas. Fortunately, this is already planned, and action is being taken by the GOB through Gas Transmission Company Ltd (GTCL) and WESTGAS.

Electricity Transmission lines need to be upgraded. This has been taking place over the last five years and, therefore, would not be a major obstacle. Similarly, distribution of electricity has also expanded in the last five years, probably more than could be used, resulting in the Kansat debacle where lives were lost demanding electricity in already electricity connected homes, industries and pumps.

The Funds necessary, i.e. about $3.5 billion will be invested by national and multinational companies, stock market for equity and for debt commercial banks, development banks, export credit and multilateral agencies. The author has been privileged to discuss the financing issues with global giants in the power sector, as well as debt providers, and feels confident that the investment of $3.5 billion in the power market of Bangladesh, over five years, can be achieved without much difficulty. The goal of all investment, equity and debt, is to receive a fair return at a reasonably low risk. Bangladesh power sector provides these through demand of electricity vis a vis cost of electricity. An efficient combined cycle plant as envisaged in a 700m.w power plant would be about 55% efficient, i.e. produce 56 units of electricity from 100 units of natural gas. If such a plant is utilised at 85% load with gas price at $1.20 mmbtu, as charged to BPDB, it would result in a cost of approximately Tk 1.80 per kw resulting in substantial profit for BPDB, or electricity off -taker, at the same time providing reasonable profit to the electricity generator.

The Electricity System can be further improved with control of system loss and theft. This has already improved from about 40% in 1997 to about 25% in 2005. The GOB should make electricity theft a criminal offence rather than a civil offence. The only recourse available to the distributors as per the present system in the disconnection of electricity lines. This is inadequate in the context of political realities and muscleman-ship of local politicians, who usually are beneficiaries of theft, along with illegal employees of electricity distribution companies.

The only difficult reality is that GOB must also increase electricity tariff taking into consideration the increased cost of all products and services. The consumers of electricity would be recipients of a more continuous supply of electricity, along with the required voltage, if they discourage theft and accept reasonable tariff increase.

Bangladesh is further fortunate to find substantial good quality coal deposits in the north- western part of the country. This coal must be harnessed in the most efficient manner. To that end GOB should form a far-reaching "Coal Policy." The policy should include electricity generation from coal. However, this method of electricity generation will take time as coal mine development, production of substantial amount of coal, and setting up power plants thereafter will not be possible before 2012. Of course, all the oil based power plants should be closed, or converted, and connected to gas for gas based operation as soon as possible. Finally, I will take this opportunity to mention that I strongly believe that all land transport should immediately be required to convert and use Compressed Natural Gas (CNG). This alone would save the country huge foreign exchange spent on imported petroleum products.

Bangladesh is geographically near two of the most well-performing countries of the world, China and India. We have similar resources and conditions as those countries. In fact, in Bangladesh with the availability of her own natural gas, and the more recently discovered coal, and having a homogenous people, given electricity, the most important physical infrastructure for development, Bangladesh will certainly achieve double digit growth.

Muhammed Aziz Khan is Chairman, Summit Group of Companies.