rapid assessment gap analysis - seforall · program is based on rural electric distribution...

Rapid AssessmentGap Analysis Bangladesh

Published: 2012 Disclaimer: Government validation pending

Sustainable Energy for All:

Rapid Assessment and Gap Analysis

Bangladesh

DRAFT

Prepared with support from

Energy Sector Management Assistance Program, The World Bank

June 2012

Sustainable Energy for All Rapid Assessment and Gap Analysis – Bangladesh

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TABLE OF CONTENTS

EXECUTIVE SUMMARY .......................................................................................................................... 4

1.0 OBJECTIVES OF THE STUDY .................................................................................................. 6

2.0 COUNTRY OVERVIEW .............................................................................................................. 6

2.1 ENERGY SITUATION ....................................................................................................... 7

2.2 ENERGY SUPPLY ............................................................................................................ 8 2.3 ENERGY DEMAND ........................................................................................................ 10 2.4 ENERGY AND ECONOMIC DEVELOPMENT .................................................................... 11 2.5 ENERGY STRATEGY AND RENEWABLE TARGETS ......................................................... 12

3.0 ENERGY ACCESS ...................................................................................................................... 13

3.1 OVERVIEW AND ASSESSMENT ...................................................................................... 13 3.2 MODERN ENERGY FOR THERMAL APPLICATIONS ........................................................ 13 3.3 ACCESS TO ELECTRICITY ............................................................................................. 14

4.0 ENERGY EFFICIENCY ............................................................................................................. 15

4.1 OVERVIEW AND ASSESSMENT ...................................................................................... 15 4.2 ENERGY INTENSITY OF NATIONAL ECONOMY .............................................................. 17

5.0 RENEWABLE ENERGY ............................................................................................................ 17

5.1 OVERVIEW AND ASSESSMENT ...................................................................................... 17 5.2 ON-GRID AND OFF-GRID RENEWABLE ENERGY ........................................................... 18 5.3 USE OF RENEWABLE SOURCES FOR THERMAL APPLICATIONS ..................................... 19 5.4 USE OF RENEWABLES FOR PRODUCTIVE APPLICATIONS .............................................. 19 5.5 CONSOLIDATED SUMMARY .......................................................................................... 19

6.0 INSTITUTIONAL AND POLICY FRAMEWORK ................................................................. 19

6.1 ENERGY AND DEVELOPMENT ....................................................................................... 21 6.2 THERMAL ENERGY FOR HOUSEHOLDS ......................................................................... 21 6.3 POWER SECTOR ............................................................................................................ 21 6.4 MODERN ENERGY FOR PRODUCTIVE USES .................................................................. 22 6.5 NATIONAL MONITORING FRAMEWORK FOR SE4ALL .................................................. 22

7.0 PROGRAMS AND FINANCING ............................................................................................... 22

8.0 PRIVATE SECTOR INVESTMENTS AND ENABLING BUSINESS ENVIRONMENT ... 26

9.0 GAPS AND BARRIERS .............................................................................................................. 28

10.0 CONCLUSIONS…………………………………………………………………………………28

APPENDIX A: PROJECTS FOR COMPLETION AS OF 2011. ..................................................................... 30 APPENDIX B:


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TABLE OF FIGURES

Figure 1: Map of Bangladesh .......................................................................................................... 6

Figure 2: Sectoral Use of Gas (2011) .............................................................................................. 7

Figure 3: Gas and Coal Fields in Bangladesh (2011) ...................................................................... 8

Figure 4: Installed Capacity as ff December 2011 ........................................................................ 10

Figure 5: Tariff Structure for Different Consumer Types ............................................................. 15

Figure 6: Status of Power Supply and Demand (2009 – 2015) ..................................................... 22

TABLE OF TABLES

Table 1: Power Sector Generation: Current and Proposed ............................................................. 9

Table 2: Power Sector as of April 2010 ........................................................................................ 10

Table 3: Year-wise Estimated Power Demand and Supply* ......................................................... 11

Table 4: Key Transmission Projects .............................................................................................. 23

Table 5: List of Projects for Implementation in 2012 ................................................................... 24

KEY ABBREVIATIONS AND ACRONYMS

BPDP Bangladesh Power and Development Board

ERB Energy Regulatory Board

GDP Gross Domestic Product

GWh Giga-watt hour (1,000 MWh)

IPP Independent Power Producer

Km Kilometer

KV Kilovolt

KWh Kilo-watt hour (1,000 Wh)

LHPC Lunsemfwa Hydro Power Company

LPG Liquefied Petroleum Gas

MPEMR Ministry of Power, Energy and Mineral Resources

MW Mega-watt

PBS Palli Bidyut Samiti

RAPSS Remote Area Power Supply Systems

REA Rural Electrification Authority

REMP Rural Energy Master Plan

SHS Solar Home System


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EXECUTIVE SUMMARY

Bangladesh has witnessed improved economic growth in recent years. The country’s Gross

Domestic Product (GDP) is estimated at 6.3% for FY12. The government of Bangladesh’s

(GOB’s) target is to achieve 8% growth in National Income by 2013, and 10% by 2017.

However, insufficient physical infrastructure facilities such as power and energy shortages are

key impediments to achieving these as well as the government’s poverty reduction goals. The

World Bank estimates (2010) monetary loss at nearly US$1 billion as a result of power shortages

and unreliable supply.

Bangladesh is one of the world’s lowest energy producers and suffers from a chronic shortage of

electricity and gas. Electricity, critical to economic growth, reaches only about 47% of the entire

population despite the country’s successful rural electrification program. The per capita power

consumption at 220 kWh is among the lowest in the developing world. As of 2010, only about

one-third of rural households had access to electricity with about 16 million households yet to be

connected. The gap between installed and available capacity is growing, deterring new

investments and expansion projects.

Notwithstanding the above, in the context of addressing rural energy issues, Bangladesh has a

better record than most other developing countries. The country’s award-winning rural energy

program is based on rural electric distribution cooperatives where major focus has been the use of

solar home systems (SHS) in the country’s off-grid regions. Nevertheless, in spite of the model

rural electrification program most rural people in the country still have little access to quality

energy services. For example, cooking with biomass in rudimentary stoves continues in majority

of households in Bangladesh.

To increase use of improved Cookstoves, GOB, in particular IDCOL, must take measures to

facilitate a process that promotes variety, improved durability, better safety, and greater

efficiency of improved stoves. Strengthening the current involvement of Gram Shakti, a leading

NGO in Bangladesh will go a long way to achieving these objectives. Using commercial

approaches will add to the viability of a program.

To generate additional power, GOB has taken a number of steps, including further development

of coalfields, intensifying new exploration of natural gas, and increased importation of Liquefied

Natural Gas (LNG). Renewable energy sources will be harnessed more, and in a sustainable

manner. Energy sector reforms will make it possible to have well-functioning energy markets,

which can make energy reach the poor. GOB is also seeking increased private sector participation

through greater incentives and favorable policies. A number of these interventions have shown

positive outcomes during the last decade.

GOB’s longer term energy strategy aims to explore the possibility of: (i) Coal-based power plants

using domestic and imported coal; (ii) Use of Rooppur Nuclear Power Plant; (iii) Availability of

new gas both offshore and onshore; (iv) Medium-term agreement with suppliers to import LNG;

and (v) Significantly increase the use of renewables. It is of relevance to note that use of coal is

constrained by long lag time, high costs and environmental and climate change issues. It will

create an unacceptable time gap.

For the near-term, GOB should consider maintaining and improving its existing power

infrastructure; improving tariffs; timely implement projects with allocated money; improve

overall energy management; increase the use of effective energy efficiency measures; adopt ways

to reduce the current multi-layered decision-making and rigid and out-dated bureaucracy, while

selectively implementing commercial elements, among other measures to increase power


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generation. Expanding rural energy availability such as via min-grids, sustainable biomass use

and SHS can be continued based on previous models and institutional arrangement that have

proven successful. Such measures can minimize power shortages, and over time generate

sustainable, affordable, power supply in line with GOB’s vision.


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1.0 OBJECTIVES OF THE STUDY

The purpose of Rapid Assessment and Gap Analysis is to provide:

A quick brief look of the energy situation in the country within the context of its economic and

social development and poverty eradication; A good review of where the country is in terms of

the three SE4ALL goals, and A good estimate of the main challenges and opportunities vis-à-vis

the three goals of SE4ALL where the major investments, policies and enabling environments will

be required.

1.1 Country Overview

Bangladesh has a total population of about 148 million, with rural population estimated at 107

million, as of 2010. The country’s Gross Domestic Product (GDP) is estimated at 6.3% for FY12,

lower than 6.7% during FY11. Among the key reasons are the unfavorable external economics

and internal supply constraints. The looming Euro crisis has the potential to affect the Bangladesh

economy through exports, remittance, and aid inflows. The government of Bangladesh’s (GOB’s)

target is to achieve 8% growth in National Income by 2013, increasing to 10 % by 2017.

However, insufficient physical infrastructure facilities such as power and energy shortages are

key impediments to achieving government’s poverty reduction goals.

The World Bank estimates (2010) monetary loss at

nearly 1 billion US dollars as a result of power

shortages and unreliable power. The economic

activity of Bangladesh is heavily dependent on

agriculture in respect to employment, where 48% of

the human labor is involved, contributing about

22% to the country’s GDP, as of 2010.

Bangladesh’s economic growth has been improving

in recent years. Successive bumper crop harvests,

strong manufacturing growth, continued recovery in

construction, and sustained robust growth in

services contributed to this improvement.

Notwithstanding the above, poverty in Bangladesh

is widespread, with the nation estimated to have

30% of the population below the poverty line as of

2011. Poverty is especially persistent in three areas:

the north-west, which is affected by droughts and

river erosion; the central northern region, which is subject to serious seasonal flooding that limits

crop production; and the southern coastal zones, which are affected by soil salinity and cyclones.

The poverty rate is highest in rural areas, at 36 per cent, compared with 28 per cent in urban

centers.1 The number of rural poor is estimated at about 49 million. Of this number, almost one

third of the population, live below the poverty line, and a significant proportion of them live in

extreme poverty. Bangladesh Human Development Index (HDI) value is 0.500, ranking it at 146

out of 187 countries surveyed under the UN’s Human Development Index. However, with the

help of international assistance, poverty generally has been declining since mid 1990’s.

1 http://www.ruralpovertyportal.org/web/guest/country/home/tags/bangladesh

Figure 1: Map of Bangladesh


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Bangladesh is particularly vulnerable to climate change. Two thirds of its territory is less than 5

meters above sea level, making it one of the most flood-prone countries in the world. Severe

flooding during monsoons can cause significant damage to crops and property, and an adverse

impact on rural livelihoods. Climate change seems likely to add to the destruction by monsoon

floods, and the frequency of cyclones may increase. Poor people are hit hardest because they are

more densely concentrated in badly constructed housing on land that is prone to hazards.

2.0 ENERGY SITUATION

In Bangladesh, indigenous natural gas is the primary fuel for more than 83% of power generation.

It provides about 75% of the commercial energy, as of 2011. GOB estimates total reserve of

extractable gas (proven and probable) at 20.5 TCF (Trillion Cubic Feet) including 8.5 TCF

that has been depleted as of April 2011. Given multiple usages of the gas—fertilizers fertilizers,

industrial use and others—as well inadequate extraction from native gas fields, on an average,

about 500 MW less of power is generated against the generation capacity. Various sectors using

gas is shown under Figure 2. Sectoral Use of Gas (2011)

Figure 2: Sectoral Use of Gas (2011)

Source: Ministry of Finance, 2010, Towards Revamping a Power Sector Road Map.

Besides gas, as of 2010, a small amount of electricity is also generated with diesel fuel (2%),

furnace oil (3%) and coal (4%). Coal is mainly used as fuel in the brickfields and at the

Boropukuria Thermal Power Plant. Imported oil accounts for the lion’s share of the rest of the

energy requirement. The country’s annual requirement of fuel is estimated at approximately 3.7

million metric tons, as of 2010.

Hydropower contribution is about 3% of total electricity and is produced from Karnafuly Hydro

Power Plant. Other renewables provide less than 1% of total power generation in the country.

About 90% of the more than 30 million households in Bangladesh rely on traditional fuels for

cooking representing a significant public health hazard. Of the total energy supply, published

estimates show that in 2010/11, about 38% was generated from biomass. Per capita consumption

of energy in Bangladesh is estimated at 160 kilograms oil equivalent (kgoe).2

Overall, the country’s energy infrastructure is small, insufficient and poorly managed. A large

segment of the population of Bangladesh has little or no access to electricity or to clean modern

2 For comparison, energy consumption is 530 kgoe in India, 510 kgoe in Pakistan, 340 kgoe in Nepal and 470 kgoe in

Sri Lanka. The average consumption in Asia is 640 kgoe.


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energy sources. Non-commercial energy sources, such as wood, animal wastes, and crop residues,

are estimated to account for over half of the country's energy consumption that has contributed to

deforestation and other environmental problems in Bangladesh. Figure 3 shows location of key

energy sources: gas and coal, in Bangladesh.

Figure 3: Gas and Coal Fields in Bangladesh (2011)

Bangladesh’s geographic features seem to determine the energy sources in the country. The

Padma-Jamuna-Meghna river system divides Bangladesh into two zones, East and West. The

East contains nearly all of the country's electric generating capacity, while the West, with almost

no natural resources, imports power from the East. Electricity interconnection from the East to

the West was accomplished in 1982 by a 230- kilovolt (kV) power transmission line.

2.1 Energy Supply

Bangladesh’s installed capacity—excludes very small power generators—is estimated at 8,005

MW, as of March 2012. This includes a gross total of 3,000 MW have been added to the national

grid in recent years.3 Current generation capacity (as opposed to installed capacity) is in the

range of 5,200-6,000 MW,4compared to a maximum generation of 5,174 MW in 2011 and

4,698.5 MW in 2010.5 Current shortage in electricity production is about 1500-1800 MW as per

the demand of peak hours.

At present, about 47% of the entire population has access to power supply. In the rural areas, only

about one-third of rural households have access to electricity with about 16 million households

3 The World Bank, May 2012. Bangladesh Economic Update, Poverty Reduction and Economic Management, Page

12. 4 Total generation as of end 2009/10 was 4020 MW currently, as per the Ministry of Finance, Bangladesh; See:

www.mof.gov.bd 5 The World Bank, Project Information Document, PID C-383, 2012


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yet to be electrified. The per capita power consumption is only 220 kWh,6; the per capita

consumption is among lowest in the world except for Cambodia, Myanmar and Nepal7. It is likely

that the electricity supply situation could have been (much) worse had the additional capacity had

not come on board.

Nevertheless, significant electricity shortfalls continue, given rising demand and overall poor

energy management. Even those with access to electricity experience supply disruptions due to

supply-demand gap. The peak electricity demand is about 6,500 MW, and available generation

capacity of 4,600 to 5,200 MW. Gap between installed and available capacity is growing,

deterring new investments and expansion projects. The power sector generation in Bangladesh is

shown under Table 1. Power Sector Generation: Current and Propose.

Table 1: Power Sector Generation: Current and Proposed

Year Government Sector Private Sector Total

(Megawatt)

Year 2010 360 432 792

Within 2011 920 -- 920

Within 2012 505 1764 2269

Within 2013 725 950 1675

Within 2014 1170 -- 1170

Within 2015 -- 2600 2600

Total Extra Generation 9426

Low levels of connectivity (as compared to countries like India (67%), China (99.4%), Thailand

(99.3%)8 etc in the Asian region) can be attributed to high electricity connection cost per

household. In Bangladesh, it is Tk. 2800 (about 35 USD),9 which causes a high burden on

households given low per capita Gross National Income of 520 USD. Relatively high costs of

connectivity are due to the requirements that the network extensions follow strict financial

criteria.

For example, the line construction criteria for the Rural Electrification Board (REB) is that the

minimum qualifying revenue should be Tk.45, 000 per year per kilometer and Tk.22, 500 per

year per kilometer for line conversion. The government is trying to make these parameters more

realistic keeping in mind the consumer mix, geographical condition, power supply condition and

operational complexity of the Palli Biddyut Samities, the entities that operate under REB. Figure

4 highlights use of energy mix to generate power.

6 Ministry of Finance, Bangladesh 2010: “Towards Revamping Power and Energy Sector—A Roadmap” June 2010;

See also: Website: www.mof.gov.bd 7Bangladesh JICA Coal Master Plan 2010 8 Source: IEA, World Energy Outlook, 2009 9 One Bangladeshi Taka (the local currency) = US $0.0122 (2012)


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Figure 4: Installed Capacity as of December 2011

The vast majority of Bangladesh's electricity consumption takes place in the East, with the entire

region west of the Jamuna River accounting for only 22%10

of the total. Greater Dhaka alone

consumes around half of the electricity supply in Bangladesh. With only about 47-49%11

of the

population connected to the electricity

grid, and with power demand growing

rapidly, electricity consumption per

capita of Bangladesh was as low as

174kWh.12

(2010). As indicated before,

estimates for 2011/2012 show per capita

consumption at 220 kWh.

Energy supply uncertainties pose as

much of a risk to growth in Bangladesh

as do global uncertainties. Gas supply

has increased only marginally relative to demand growth during the last three years. Longer-

term solutions are needed sustain the existing generation and plan for needed power capacity

increases.

2.2 Energy Demand

Demand for electricity is increasing with the improvement of living standard, increase of

agricultural production, development of industries as well as overall development of the country.

However, due to the failure in the last few years to increase electricity generation capacity

proportionately to the demand, electricity shortfall estimated at 1500-1800 Megawatts exists.

Peak power demand is the highest in the evening. The evening peak of electricity demand

constitutes mainly lighting load in garment industries and residential sectors. Lighting constitutes

70 % of the evening peak of electrical load. Households use incandescent lamps while garment

industries use fluorescent lamps extensively. Table 3: Year-wise Estimated Power Demand and

Supply projects the status under normal situation i.e. no adverse conditions. The installed

capacity utilization has been hindered due to poor maintenance and rehabilitation of old power

plants and other factors.

10 “Bangladesh Country analysis” - http://www.geni.org 11 Source BPDP, 2011 12Bangladesh JICA Coal Master Plan 2010

Installed Capacity 6,033 MW

De-rated Capacity 5,480 MW

Production 3,900 – 4,300 MW

Highest Production 4,606 MW (14 April 2010)

Access to electricity 47 %

Per capita electricity

consumption 220 KW

Source: Ministry of Finance, Power Division

Table 2: Power Sector as of April 2010


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Table 3: Year-wise Estimated Power Demand and Supply*

Item 2009 2010 2011 2012 2013 2014 2015

Probable Demand (MW) 5566 5808 6298 6832 7709 8699 9812

Capacity Retired (MW) - 48 - - 448 378 -

Expected Supply Excluding Quick

Rental (MW 4289 4956 5177 7029 8326 9545 11625

Expected Supply Including Quick

Rental (MW) 4289 5109 6363 8683 9764 10527 12601

Deficit/ Surplus Excluding Quick

Rental (MW) -1277 -852 -1121 197 617 846 1813

Deficit/ Surplus Including Quick

Rental (MW) -1277 -699 65 1851 2055 1822 2789

Source: Ministry of Finance, Business Development Plan, 2010

2.3 Energy and Economic Development

Energy in general and electricity in particular are critical for economic growth and development.

Electricity consumption leads to economic growth and has the potential to expand employment

opportunities. Capital, both domestic and foreign, is attracted countries with a reliable and

affordable power supply.

Bangladesh is an energy-intensive and a growing economy. With power demand growing at an

estimated rate of over 10% per annum, the country’s large majority lacks adequate access to

energy, in turn, lowering the country’s productivity. Such a lack of access to services

disproportionately affects the Bangladesh’s as evidenced in the electricity sector. Lack of energy

services is correlated with many of the elements of poverty, such as low education levels,

inadequate health care and limited employment possibilities. Electricity can be used to provide

essential services such as water pumping, lighting and food processing in rural areas.

Experience in Bangladesh indicates that the availability of electricity in the household contributes

profoundly to increases in income and income generating activities.13

In agriculture, farmers are able to plant two crops per year due to irrigation development

instead of one, which results in a large increase in self- sufficiency.

Use of electricity motors for irrigation as a result of availability of electricity helped

reduce food shortages in many Bangladesh areas within four years.

Cottage industries increased their productivity by 50% or more, due to lighting and

electric machinery.

Electrification changed everything for the business community. Small cloth weavers no

longer cease full production after sunset. Instead of choosing between weaving cloths

into garments and dyeing cloth, both functions now operate simultaneously.

There were not many large industrial plants in rural Bangladesh but, many have now

commenced operations, e.g. jute spinners who bring with them a huge opportunity for

employment. This happened in Bangladesh’s Comilla district where following electricity

availability under a cooperative, the customer mix changed to 41% industrial, 9%

commercial, 6% irrigation, and 44% domestic. Large industrial customers such as jute

13 The World Bank, March 2012, Distributional Impact of Change in the Electricity Markets; Summary Report:

Prepared by Mercados Energy Markets, India Pvt. Ltd.


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spinners have moved to the district given availability of reliable, low cost electrical

energy (and cheaper labor).

2.4 Energy Strategy and Renewable Targets

Currently, around 63% of total energy production comes from public sector, and the private

enterprises contribution is inadequate. To meet power shortages—current and projected—GOB is

proposing use of Public Private Partnership (PPP) and private investment, in addition to public

investments. Moreover, use of coal and other fuels will be enhanced in order to reduce

dependence on natural gas for power generation. The demand for electricity will also be

addressed through the use of renewable energy and regional cooperation. Initiatives have been

taken to bring qualitative changes in demand-side management and use of fuels in order to save

power and energy.

GOB also plans to diversify its energy mix and buy captive power from renewable and non-

renewable sources. To-date, the government has contracted to purchase 88 MW of electricity

from captive generation sources. In addition, initiatives have been taken to import electricity

from India, which has the neighboring countries and started to build 400 KV transmission line

and HVDC (High Voltage Double Circuit) sub-stations through Regional Grid Interconnection.

India has made the commitment to supply 250 MW of electricity from their “Unallocated

Resource” in 2012-13.

GOB’s energy strategy will also explore the possibility of: (i) Coal-based power plants using

domestic and imported coal; (ii) use of Rooppur Nuclear Power Plant; (iii) Availability of new

gas both offshore and onshore; (iv) Medium-term agreement with suppliers to import LNG; and

(v) increase the use of renewables. Overall, GOB’s Energy Strategy aims to:

Diversify the use of primary energy, such as gas, coal and liquid fuel, for power

generation;

Have provision for dual fuel in power plants wherever possible;

Increase power generation through renewable sources, such as solar, wind, small hydro

etc;

Implement nuclear fuel based power plant;

Finance power generation projects through Public-Private Partnership, government

funding for IPP;

Increase sector efficiency, reform measures must be implemented.

The major impetus to meet power and energy goals under GOB’s Energy Strategy is based on the

public-private partnership (PPPs) under the government’s Outline of Perspective Plan of

Bangladesh. An Independent Power Producer (IPP), formulated in 1996, would be reviewed for

potential updating. Proposed Private sector participation primarily is proposed through IPP, SIPP,

Rental, Quick Rental and Joint Venture policies under the PPP framework. As part of these

efforts, GOB earlier organized Road Shows in London, Singapore and USA (2010) with excellent

outcomes.

The strategy’s successful implementation is projected to potentially produce additional 2269 MW

by 2012, 1675 MW by 2013, 1170 MW by 2014 and 2600 MW by 2015. Since large power

plants have a 3-5 years or more installation time, GOB proposed initiatives to set up 1000-1200

MW Quick Rental Power Stations that can provide power in shorter timeframes.


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3.0 ENERGY ACCESS

GOB will make all efforts to (significantly) increase energy access, double the rate of

improvement in implementing energy efficiency and renewable energy use in its energy strategy.

Rural areas will get increased attention and GOB proposes to build upon its successful rural

electrification.

3.1 Overview and Assessment

Bangladesh faces a significant challenge in increasing energy generation and supply including

revamping its network responsible for the supply of electricity. The real demand for electricity

could not be met due to the shortage of available generation capacity. A good number of

generation units have become very old, with poor reliability and productivity. Most of these units,

as of 2011, have been operating at a much-reduced capacity. In addition, given the shortage of

gas supply, some power plants often are unable to utilize their rated generation capacity. Load

shedding over the years has increased.

To achieve the target of electricity supply to all by 2021, several corrective measures are needed.

Broadly, these include: sound energy management, increasing private sector participation,

ensuring good governance, timely and proper implementation of projects with allocated money,

and increasing private sector participation. Over the last few years, there was a significant gap

between the allocation and the implementation of GOB’s Annual Development Program (ADP)

in the power sector; only 29 percent of the allocated ADP during fiscal year (FY) 2011/2012 was

implanted during the first eight months of the FY.14

When a huge amount of allocated money is

required to be implemented within a short period of time, corruption is often a desirable outcome.

Separate allocation for the maintenance and modernization of age-old power plants is urgently

needed. Due to the shortage of gas, enhancing use of coal, the other primary fuel for generating

electricity, has been explored by GOB. However, while coal offers safer and cheaper prospects,

its use need to be weighed in the context of cost, lag time and environmental and climate change

issues.

To address the nagging power crisis, for the short term, GOB is using quick rental and peaking

plants for increasing power supply. However, most of these plants use second hand equipments

and machineries that are less efficient and unable to generate the needed power supply.

GOB has implemented corrective measures, albeit slowly. For example, good strides have been

made in increasing energy access for rural areas. Its SHS program for rural areas is the flagship

program having exceeded expectations. The country’s rural (power) distribution cooperatives

called PBS’s are well run, unless power supply, due to shortages, is rationed for them. The

country’s Grameen Bank, through its NGO, Grameen Shakti, is actively participating in

increasing the use and supply of improved Cookstoves. In recent years, large numbers of people

in Bangladesh have moved up the energy ladder to cleaner fuels such as electricity, and LNG.

However, lot more needs to be done to meet GOB visions.

3.2 Modern Energy for Thermal Applications

Modern energy for thermal applications such as cooking, heating etc. continues to be in limited

supply in Bangladesh. While some areas are well served, many, particularly in rural areas lack

14 Rahman, K.M.M (2011) “Electricity scenario in Bangladesh”. Center for Research and Action on Development,

Dhaka, Bangladesh; www.unnayan.org


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access to electricity and biomass continues to be a dominant fuel for cooking. Nationwide, for

cooking and hot water heating, majority of Bangladesh’s population uses solid fuels, primarily

wood, according to the World Bank. Such a high reliance on solid fuels is an indicator of poverty.

Providing rural electrification is beset with several technical and financial constraints, in addition

to other complex challenges.

Of-grid solutions such as diesel, solar or micro-hydro power plants may provide some good

options. For cooking, use of improved cookstoves to gain higher energy efficiency and minimize

or eliminate severe health hazards is increasingly being looked into.

3.3 Access to Electricity

Tariffs everywhere are the backbone of power supply and its long tern sustainability. In

Bangladesh, the Energy Regulatory Board (ERB) is responsible for approving tariffs. The

electricity tariffs in Bangladesh are volume differentiated tariffs (VDT), and characterized by

different rates, including lifeline, for different consumer categories. It may be of relevance to note

that many poor households do not have access to electricity. Hence availability and/or increase in

tariffs, including lifeline, would have no impact on this (large) segment of Bangladesh’s

population. Anecdotal evidence indicates that the current lifeline rate slab, 0-100 kWh should be

lowered to 0-50 kWh since only the lower income, rather than the poor, are benefiting from the

lower rates.

A rising block tariff has been in practice in Bangladesh essentially to address affordability

concerns through a cross-subsidy from large to smaller electricity users. Large consumers

subsidize small customers. Overall it is observed that for all customer categories there has been a

marginal change in the per unit rate of electricity. For 2010, the Tariffs are as follows: (i) 0-100

kWh, cost Tk 2.00/kWh15

; 101 – 400kWh, cost Tk 3.30/kWh; and 401 and above, cost Tk

5.65/kWh. In the lower range, the power tariffs are low and not cost-reflective. Figure 5 reflects

various categories.

15

One Taka (Bangladesh’s currency) = US $ 0.01 (2012)


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Figure 5: Tariff Structure for Different Consumer Types

Source: The World Bank, March 2012, op cit

Given increasing energy demands and need of new projects especially the high cost liquid fuel

based peaking plants (can be implemented in 18-24 moths), current tariffs are likely to go up by

15-20% by 2014 to help offset high costs. ERB however projects downward tariff adjustments in

2014/15, as new gas and coal based power plants come on-line.

4.0 ENERGY EFFICIENCY

For promoting energy efficiency (and also increased renewable energy) in Bangladesh, the

government is implementing some key measures. For example, it is in the process of establishing

SREDA as a statutory policy and resource mobilization agency for promoting renewable energy

and energy efficiency in Bangladesh (See Section 7.0). The necessary legislation has been drafted

and, as an interim measure, a small cell within the MPEMR has been established to initiate the

preliminary activities of SREDA. Once fully operational, SREDA is expected to be the

coordinating agency for the national household energy program.

The Rural Electrification Board (REB) is implementing the CFL component under the ELIB

program. For the program, REB is the apex body responsible for planning, financing, and

installation of the rural electrification network of the country. The CFLs are procured by REB

and are given to the distribution utilities and the rural cooperatives (Palli Biddyut Samities or

PBSs) for distributing to the households in exchange for incandescent lamps. The program is

registered under the Clean Development Mechanism (CDM) for claiming carbon credits with

IDCOL as the Coordination and Managing Entity (CME).


Energy prices (gas and electricity) have been traditionally low in Bangladesh and theft is

endemic. Therefore, there is very little incentive to be energy efficient from an energy cost point

of view. In the past, most energy efficiency improvements in the country seems to have come

about as a result of other things, such as autonomous efficiency improvements, product quality

improvement, environmental regulations, etc. Bangladesh’s import policy is heavily biased

against energy efficient devices.


16

Furthermore, energy efficiency in Bangladesh (and perhaps in many other countries) seems to

imply a connotation that ranges from neutral to negative. The following is based on actual

interviews with some Bangladesh banks. By and large, banks in Bangladesh are not interested in

funding energy efficiency projects especially because these are difficult to monitor and in many

cases profitability is marginal. The attitude seems to be common in many other countries as is the

lack of awareness about the role and the need of energy efficiency.

1. For financing new projects banks only look at the economic viability of an industrial

project. Banks, in general, are not concerned about energy efficiency

2. Banks will only invest in an energy efficiency project if they initially funded the

particular industry and the project initiator can prove that it will make savings and repay

the loan. They may do this even if the industry is not presently profitable, but the project

developers must demonstrate that the energy efficiency component will improve the

project’s financial viability.

3. It is highly unlikely that Bangladesh’s banks will get involved in an industry just for

energy efficiency component.

4. Leasing companies are more likely to be interested in investing in refurbishing and

energy efficient technology for existing industries.

Suggested mitigation measures include: (i) An awareness raising campaign for banking and other

staff such as project evaluator(s); (ii) in the interim, availability of concessionary funds need to be

ensured or some kind of GOB’s guarantee; and (iii) instituting legislative pressure from the

Government.

Potential Use of Energy Efficiency

There is a significant potential to save energy in the industrial sector through implementing

energy efficiency measures. For example, in the garment industry, there are about 4,100 garment

industries registered with the Bangladesh Garment Manufacturers and Exporters Association

(BGMEA). The garment industry exports constitute more than 50% of the total exports. These

industries on average consume about 1 million kWh of energy per day. The energy efficiency

potential in these industries should be studied in detail. Energy efficiency can be achieved in

these industries by introducing energy efficient devices (electronic starter) and efficient

fluorescent lamps.

Compact fluorescent lights (CFL) may be useful in households, shops and for some specific

lighting needs. The market share of CFL is 100,000 pieces per month. The penetration rate is

about 2 %.16

A few years back, low quality CFLs had flooded the market. However, users’

negative experience with these CFLs, and campaign by reputed CFL manufacturers has

successfully reversed this trend. Nowadays, good quality CFLs is assembled locally. There are no

qualified lighting engineers in the country.

The transport sector, which consumes the bulk of the imported oil, is severely constrained by

restricting rules and regulations that do not encourage efficiency. Exorbitant taxes and duties on

transport vehicles and their accessories forces transport owners to continue using old vehicles for

as long as they can. In fact, using periodic engine rebuilding, a truck or a bus can be made to

operate indefinitely.

16 GTZ, May 2006, Productivity improvements in industry through Energy Efficiency Programs, Prepared by: Center

for Energy Studies (CES), BUET, Dhaka


17

The high taxes also encourage entry into the country of second hand engines, and sometimes

from other developing countries where pollution laws are strict. These factors cause the specific

energy consumption of vehicles to be extremely high in Bangladesh. In addition, these vehicles

are responsible for a considerable amount of local pollution in all cities.

Lax enforcement of environmental laws means that polluting vehicles can operate with impunity.

The overall costs of running old buses even after very high operation and maintenance expenses

are significantly lower than those for new vehicles. Regulated bus fares also discourage owners

from upgrading their fleet(s). The per kilometer bus fare set by the Government is so low that bus

operations are marginally profitable. There is a need to legislate adequate vehicle maintenance in

the interest of energy efficiency, lowered pollution, and improved safety. Such requirements exist

in the US and some other countries.

Gas is predominantly used in boilers, furnaces and kilns. However, given the influx of local

manufacturing and lack of technical standards and/or their enforcement, most of this equipment is

used by Bangladesh’s Small and Medium Enterprises ISME’s). Needless to say, energy

efficiencies of most these devices are low to extremely low, and in many cases these devices are

also unsafe. There exists good opportunity to improve the efficiency of gas use in these

applications.

Another area is in the improvement of power quality, motor and transmission efficiency and

monitoring and maintenance could increase the efficiency of energy use. Low voltage, sag,

flickers and other such problems are common phenomena. Cheap, low quality motors are often

used in many small and medium scale industries. Voltage balancing of all the three phases is not

always practiced. Many small and medium scale industries cannot employ qualified graduate

electrical engineers to look after their electrical system.

4.2 Energy Intensity of National Economy

Energy intensity is a measure of efficiency of a nation’s economy. High-energy intensities

indicate a high cost of converting energy into GDP, while lower energy intensities indicate a

higher GDP per unit expenditure of energy. It is usually calculated as unit of energy needed to

produce per unit of GDP. Bangladesh’s energy intensity of the economy is very low.

5.0 RENEWABLE ENERGY

Renewable energy sources in Bangladesh include: hydropower, Solar Electricity, Biomass and

biogas. To limited extent, bio-gasification of agricultural and other feedstock is also carried out.

The 2008 Renewable Energy Policy of GOB laid out the target of meeting 5% of total power

demand from renewable energy sources by 2015, and 10% by 2020. These are ambitious targets

given the fact that access to electricity is below 50% today and the current share of renewable

energy is less than 1% of total power generation in the country.


At present, a number of renewable energy programs are in place, while others are under planning.

The country’s flagship solar SHS program is a public-private partnership model. Under the


18

program, the Partner Organizations (POs),17

(mostly NGOs), procure and install the systems

following IDCOL’s technical standards. Other renewable energy (RE) projects related utilization

of biomass and biogas and in a limited supply, given limited indigenous resource, to hydropower.

5.2 On-grid and Off-grid Renewable Energy

GOB’s target is to produce electricity from renewable sources as 5% of total production by the

year 2015, and 10% by 2020. The country’s Renewable Energy Policy is conducive to private

sector participation. The government is in the process of setting up a Sustainable Energy

Development Authority (SREDA) with the goal of expanding use of renewable and also

implementing energy efficiency measures while creating awareness of such measures, (See also

Section 6.0: Institutional and Policy Framework). In the rural areas, only about one-third of

households have access to electricity with about 16 million households yet to be electrified. A

number of key public, private, and non-government organizations (NGOs) play a key role in off-

grid electrification, including the SHS program, the household energy program, and the ELIB

program.

To support GOB’s vision of providing universal access to electricity by the year 2021,18

the

World Bank is continuing its support the Solar Home Systems (SHS) and mini-grid options for

providing access to electricity in areas where grid electricity is difficult, expensive, and will take

years to reach. Under the current efforts, starting with 2012, a proposed project would extend

support for another 550,000 systems following the same model and institutional arrangement as

has been proven successful under the on-going Rural Electrification and Renewable Energy

Development (RERED) project in Bangladesh.

The World Bank supports the Solar Home Systems (SHS) program of Bangladesh. It has emerged

as a viable electrification option for lighting and other basic services in remote rural areas without

grid access. The potential market for SHS is about 6 million households and businesses. The SHS

program was started in 2003 with an initial target to install 50,000 SHS over the 5-year project

period under the on-going Rural Electrification and Renewable Energy Development (RERED)

project.

To-date, the SHS program has far exceeded its goals. It is currently installing 40,000 systems per

month making it one of the fastest growing SHS programs in the world. Together with support

from the Bank and other development partners, the program has installed more than 1.3 million

SHS in rural off-grid areas, contributing to increasing access to electricity by 4%. Continuing

with the successful installation of the SHS, the target is to reach another 1.3 million in the next

two years. This will require support from the Bank and other development partners.

In addition, renewable energy-based mini grids for rural areas are being supported through active

participation of the private sector, as stipulated under the Remote Area Power Supply Systems

(RAPSS) guidelines. The RAPSS would be based on the least cost option (solar photovoltaic,

biomass gasifier etc) for the consumers. It will build on the lessons learned from the pilots

supported under the on-going RERED project.

17 The PO selection committee of IDCOL selects the POs as per the eligibility criteria. Starting with 5 POs, the

program now has 29 POs, and IDCOL expects to engage more POs as part of its goal of achieving a commercially

sustainable competitive market for SHS in Bangladesh. See also Section 8.0 of this report. 18 "Vision-2021" of the Election Manifesto of the ruling party has inspired the entire nation towards fulfillment of a

dream for a prosperous Bangladesh. This Vision consists of a number of innovative initiatives to lead the country

towards higher economic growth. A commitment for achieving 8 % growth in National Income by 2013, then raising it

to 10 % by 2017 and maintaining it there has been expressed. However, insufficient physical infrastructure facilities

such as power and energy shortage are creating obstacles to reach this goal.


19

Providing grid-quality electricity from renewable energy sources in the RAPSS areas will help

serve the commercial needs of the rural markets and also small enterprises, where the potential

consumption of electricity is much higher than the basic lighting and electricity needs of a typical

rural household that could otherwise be met by SHS, as an off-grid power source such as vial

batteries. Following identification of areas where such mini-grids are the least cost option, GOB

plans to offer licenses through a competitive process for owning and operating the RAPSS

schemes.

5.3 Use of Renewable Sources for Thermal Applications

Biomass, including biogas is being used in Bangladesh, mostly in rural areas, to provide heat for

thermal applications. The private sector participation in these systems however remains low. Use

of renewable energy, such as from biomass, for thermal applications are complex and for most

part considered unprofitable. As incentives, GOB has provided (limited) loans and subsidies.

Through gasification and also via larger biogas systems, electricity is also being generated,

though on a limited scale, in Bangladesh. GOB’s policies and programs encourage sustainable

use of biomass. Scaling up these programs however will require capacity building at local,

regional and national levels.

5.4 Use of Renewables for Productive Applications

Rural electrification, including through use of renewable energy (RE), often does not

automatically create development benefits that are commensurate with the investment. It is,

therefore, important to look and enhance productive uses of RE. Productive uses could be of

several types. Broadly, they could be divided into those characterized as self-supply or as

providing service to the local community and the second is characterized by a focus on and

production for external markets. Common examples are crop drying or processing and water

pumping are particularly important to small-scale agriculture.

In Bangladesh, a number of applications of renewable energy for productive uses especially in

rural areas exist. Included are the solar home systems and use of biogas for such applications as

crop drying, irrigation and small cottage industries. Many of these applications use micro-finance.

However, lot more needs to be done for such use to expand. Included are: the feasibility studies,

in particular the technical and economics of use and the needed management support.

5.5 Consolidated Summary

There is a strong potential and urgent need to develop renewable energy as power source and also

to help reduce the use of oil, all of which is imported. Another way to cost-effectively increase

energy supply is through (successful) implementation of energy efficiency measures; (See

Section 4.0). Increasing energy supply will help increase access, improve its productive uses and

bring better living standards.

6.0 INSTITUTIONAL AND POLICY FRAMEWORK The Vision and Policy Statement (2002) of the Government of Bangladesh (GOB) on Power

Sector Reforms includes the objectives of: i) bringing the entire country under electricity service

by the year 2021 with improved reliability and quality; ii) increasing the sector’s efficiency and

making the power sector financially viable; and iii) making the sector commercial and increasing

private sector participation. Several public and private entities may have to called upon to

achieve these goals.


20

Key public sector players in power production in Bangladesh are: (i) Bangladesh Power

Development Board (BPDB), (ii) Ashuganj Power Station Company Limited (APSCL), and (iii)

Electricity Generation Company of Bangladesh (EGCB). Private sector participants include:

Independent Power Producers (IPPs) and large industries produce approximately 1,200 MW

electricity for their own use, and in addition supply about 88 MW to the national grid. At present

nearly 63 % of total electricity production is produced from public entities. BPDB’s contribution

to the total supply is about 46%, as of 2010.

In the renewable arena, the Infrastructure Development Company Limited (IDCOL) is

responsible for the renewable energy program. IDCOL, a government owned infrastructure

finance company, has been implementing including the Bank-supported SHS and other renewable

energy programs under the RERED project since 2003. IDCOL is also channeling funds to the

private sector for the renewable energy based mini-grids and solar irrigation schemes under the

on-going RERED project. IDCOL has also been implementing the national domestic biogas

program providing for clean fuel options for cooking and lighting purposes.

The Rural Electrification Board (REB), in addition to rural energy, is responsible for procurement

of CFLs under the ELIB program. Power Cell at the Ministry of Power, Energy and Mineral

Resources (MPEMR) is responsible for supporting sector reform activities. REB is implementing

the CFL component under the ELIB program. REB is the apex body responsible for planning,

financing, and installation of the rural electrification network of the country. The CFLs are

procured by REB and are given to the distribution utilities and the rural cooperatives (in Bengali,

the national language, called Palli Biddyut Samities or PBSs) for distributing to the households in

exchange for incandescent lamps. The program is registered under the Clean Development

Mechanism (CDM) for claiming carbon credits with IDCOL as the Coordination and Managing

Entity (CME).

The government is in the process of establishing a Sustainable and Renewable Energy

Development Agency (SREDA) for promoting renewable energy and energy efficiency in

Bangladesh. The necessary legislation has been drafted, and as an interim measure, a small cell

within the MPEMR has been established to initiate the preliminary activities of SREDA. Once

fully operational, SREDA is expected to be the coordinating agency for the national household

energy program, energy efficiency and renewable energy. Bangladesh’s Power Sector

Organization Chart (2009) is presented below.

Bangladesh Power Sector: Current Structure


21

Power Cell, a technical arm of the Power Division of MPEMR, provides technical assistance for

design and implementation of power sector reform activities. In support of this service to the

sector, the Power Cell has been receiving technical assistance funding through the ongoing Bank-

supported Power Sector Development Technical Assistance (PSDTA) project, which is scheduled

to close in December 2012.

6.1 Energy and Development

Institutions, along with the private sector, listed in this report are involved in energy and

development activities directed towards increasing Bangladesh’s economic growth, and income-

generating opportunities primarily as poverty alleviating tools. Some meaningful inroads have

been made to-date. However, lot more needs to be done. GOB setting up specialized renewable

institutes such as SREDA is commendable approach.

Private sector participation in energy is limited to generation. Nevertheless, attracting the private

sector for the development of these capital-intensive projects with long construction periods by

2013 poses a major challenge. For example, it will be necessary to complete technical and

economic feasibility studies and environmental impact assessments, find and select project

sponsors, and implement an adequate financing structure (public/private partnership) to manage

market and project risks. There may be additional site-specific needs. During the last few years,

GOB has also granted concessions to private companies, as part of increasing the country’s

energy supply.

6.2 Thermal Energy for Households Biomass—fuelwood, agribusiness activities, including sugar mills, oil palm producers and lumber

mills, biogas from treatment ponds, and similar wastes—is the most common source of thermal

energy for household use such as for cooking as well as electricity generation in many locations.

In urban areas, some households use LNG and limited amount of coal for cooking.

6.3 Power Sector

GOB has formulated plans regarding production as well as power supply considering the

increased growth in power demand resulting from economic development along with the ongoing


22

rising demand in electricity. Following the plan, around 9,426 MW additional may get added to

the national grid by 2015, in total; however, power supply capacity will reach to 11500 MW

(installed current capacity is 8,005 MW) due to the retirement of some existing old power plants.

Bangladesh’s power sector status is shown under Figure 7: Status of Power Supply and Demand

(2009 – 2015)

Figure 6: Status of Power Supply and Demand (2009 – 2015)

On an average, the demand for electricity is assumed to enhance by about 10.5 % each year

starting from 2009 to 2015. On the contrary, the capacity for power generation will be augmented

at 18.5 % to achieve the ability of producing surplus electricity by 2011.

6.4 Modern Energy for Productive Uses

The information provided elsewhere in the report covers this item.

6.5 National Monitoring Framework for SE4ALL

There is no formal framework for evaluating energy projects in Bangladesh. For evaluating

utilities, such factors as transmission losses (currently about 4% and distribution losses, currently

about 18-19%), customers metered and billed, energy efficiency improvements etc. are often

used.

7.0 PROGRAMS AND FINANCING

Recognizing the challenges, the Government of Bangladesh (GOB) has adopted a multi-pronged

strategy in the power sector that includes energy conservation, load management, adopting grid

and off-grid electrification approaches to extend electricity services, promoting private sector

investment in short and longer-term power supply measures, and improving sector governance

and efficiency. As part of this effort, several programs and policies are under review and/or

implementation. Donor assistance is a key part of most of these efforts.

The GOB articulated a Vision and Policy Statement on Power Sector Reforms in 2002. The

Statement includes the objectives of: i) universal access by the year 2020 with improved

reliability and quality; ii) stabilizing the sector’s financial status and increasing its efficiency; and

iii) operating the sector on commercial principles and increasing private sector participation. All

these interventions are in line with SE4ALL goals. The followings lists key approaches to meet

these goals.


23

Energy supply It would be increased through planned projects, energy efficiency

measures, increasing tariff (which will save on wasteful use of energy), and better

metering, monitoring etc. to prevent thefts. Private sector will be an active partner in

increasing power supply. Relevant additional information is included elsewhere in the

report. Rural areas are getting priority consideration.

Access: Access to electrification would be provided through various means, as listed

earlier. Included are the public and private sector partnerships. Separate regulatory

accounts, transparent pricing, and benchmarking to help develop competition—reduce

barriers to open access and increasing autonomy of dispatch—and similar measures can

significantly help improve access. Power availability and affordability should increase

given potentially increased power supply as well as private sector participation, as listed

earlier.

Demand: For the poor, GOB provides lifeline rates for electricity. Poverty alleviation

schemes, on-going and planned, increasingly will help uplift people from poverty. With

increased income, the group is likely to experience economic growth and potentially

better living standards. Better energy management will ensure sound demand

management, as well.

Sustainability: With domestic and international donor assistance, GOB is implementing

initiatives such as towards improving Cookstoves as well as disseminating information

on (indoor) smoke’s adverse health impacts. Some reforestation activities are also

underway.

In the area of power transmission, Table 4 provides an overview of these projects. GOB has

upgraded a total length of 230 KV electric lines at 2644.5 circuit kilometers and for 132 KV

electric lines, the length are 5715 circuit kilometer. Additional 3000 kilometers of transmission

lines installation is proposed building by GOB by 2015.

Table 4: Key Transmission Projects

Transmission Line Voltage

Level

Length

(KM)

Possible Date

of Completion Present Situation

Bibiana- Kaliakoir 400 KV 194 2011-2012 DPP is sent to the Ministry.

Chittagong- Meghnaghat 400 KV 260 2014-2015 Soon the preparation of

PDPP will be started.

Aminbazar-Maoa-Khulna 400 KV 200 2014-2015 Soon the preparation of

PDPP will be started.

Fenchuganj-Bibiana-Comilla 230 KV 160 2011-2012 PDPP is sent to the

Ministry.

Bheramara-Bahrampur-(India)

Regional Interconnection

transmission line and HVDC

Substation (600 MVA) 19

400 KV 30 2012-2013 Evaluation of Tender

Documents is under review.

Barisal-Bhola 230 KV 60 2012-2013 Evaluation of Tender

Documents is going on

Construction of Transmission

line for Evaluation of power

from rental power station

implementing at a short term

basis and picking power station

at the government sector

- - 2010-2011 In the implementation

process.


24

The Renewable Energy Policy (2008) of GOB laid out the target of meeting 5% of total power

demand from renewable energy sources by 2015 and 10% by 2020. The Remote Area Power

Supply Systems (RAPSS) guideline of 2007 allows for private sector participation in

development, operation, and maintenance of electricity generation system and distribution

networks in remote rural areas including isolated islands to supplement GOB efforts at achieving

universal access by 2020.

However, beyond the successful solar home systems (SHS) program, there have been little

renewable energy generation investments made since the policy was announced. GOB is

preparing the legislation to establish a Sustainable and Renewable Energy Development Agency

(SREDA) as an autonomous body to lead its efforts in promoting renewable energy and energy

efficiency in the country.

The SHS program is a public-private partnership model where the Partner Organizations (POs)

(mostly NGOs) procure and install the systems as per technical standards set by IDCOL.

Consumers sign SHS purchase contracts under a micro-finance scheme with the POs.19

(See also

Section 5.1)

As part of its efforts to reduce the existing demand-supply gap, GOB has embarked upon the

Efficient Lighting Initiatives of Bangladesh (ELIB) program with the World Bank support to

replace incandescent lamps with energy efficient Compact Fluorescent Lamps (CFLs). The first-

phase distribution of 10 million CFLs has been completed, though there are problems related to

product quality. The second-phase distribution of another about 7 million is being planned,

including actions to overcome quality issues. However, in the areas of energy efficiency, lot more

needs to be done. (See also Section 4.0: Energy Efficiency). Table 5 shows the diversity of

projects.

Table 5: List of Projects for Implementation in 2012

Sr.

No. Name of the Power Station

Capacity

(MW) Fuel

Expected

time of

Completion

Current Status

Public Sector

1 Ghorashal Peaking Power

Plant (PDB) 200-300 Gas/Diesel June 2012

Retender floated on

22/04/2010

2 Khulna 150MW Gas Turbine

(GT) (NWPGC10) 150 Gas/Oil June 2012

Evaluation of

financial proposal

underway

3 Shirajganj 150MW Gas

Turbine (PDB) 150 Gas/Oil June 2012

Tender evaluation

in final stage

4 Kaptai Solar Plant (PDB) 5 Solar June 2012 Under scrutiny of

the Ministry

Private Sector

5 Katakhali, Rajshahi Peaking

Power Plant, IPP (PDB) 50 HFO April 2012

Evaluation of PQ11

underway

6 Syedpur PeakingPlant, IPP

(PDB) 100 HFO April 2012

Evaluation of PQ

underway

19 After the systems are installed, the POs apply for re-financing from IDCOL for a portion of the micro-finance they

extended to the households. After technical and other verifications, IDCOL releases the credit and a fixed subsidy

(currently $28 per system) to the POs. This refinancing provides the POs with funds to install more systems and reach

even more remote areas. Starting with 5 POs, the program now has 29 POs, and IDCOL expects to engage more POs as

part of its goal of achieving a commercially sustainable competitive market for SHS in Bangladesh.


25

Sr.

No. Name of the Power Station

Capacity

(MW) Fuel

Expected

time of

Completion

Current Status

7 Jamalpur Peaking Plant, IPP

(PDB) 100 Gas/HFO May 2012

PQ announced on

05/04/2010

8 Chapainawabganj Peaking

Power Plant, IPP (PDB) 100 HFO May 2012

PQ announced on

28/03/2010

9 Comilla Peaking Power Plant,

IPP (PDB) 50 Gas/HFO May 2012

PQ announced on

28/03/2010

10 Khulna Peaking Plant, IPP

(PDB) 100 HFO May 2012

PQ announced on

28/03/2010

11 Wind Power Plant (PDB) 100 Wind June 2012 PQ announced on

12/04/2010

12 Solar Power Plant (PDB) 9 Solar January

2012

PQ announced on

07/04/2010

13 Tangail 20MW, IPP (REB12) 20 HFO June 2012

14 Chandpur 15 MW, IPP (REB) 15 HFO June 2012

15 Bhola 150-225MW, CCPP

(2nd unit, SC13 )(GT14) 100 Gas June 2012

Evaluation of PQ

underway

16 Keraniganj 150-225MW,

CCPP, SC (GT) 100 Gas/HFO July 2012

PQ announced on

05/04/2010

17 Madanganj 150-225MW,

CCPP, SC (GT) 100 Gas/HFO July 2012

PQ announced on

05/04/2010

18 Bibiana 300-450MWunit),

CCPP, SC (GT) 200 Gas August 2012 RFP15 given

19 Bibiana 300-450MW (2nd

unit), CCPP, SC (GT) 200 Gas

October

2012

Evaluation of PQ

underway

20

Meghnaghat 300-450MW

Combined Cycle(2nd unit),

Duel Fuel: GT unit

200 Gas/HFO October

2012

Evaluation of PQ

underway

Both Public and Private

Sector

21 Mymensingha Peaking Plant,

(PDB and RPCL16) 150 Gas/HFO June 2012

22 Gazipur (RPCL) 50 Gas/HFO June 2012

23 Rauzan, Chittagong (RPCL) 20 Gas/HFO June 2012

TOTAL 2269

Rural Electrification and Renewable Energy Development II (RERED II) is a more recent Project

(P131263) under the World Bank. Three Bangladesh organizations, Infrastructure Development

Company Limited (IDCOL), Power Cell, Rural Electrification Board, will implement the project.

IDCOL is a government owned infrastructure finance company that has been implementing the

Bank-supported SHS and other renewable energy programs under the RERED project since 2003.

The aim of the RERED II project is to increase: (i) number of households and enterprises getting

access to electricity through renewable energy sources; (ii) number of higher performing cook

stoves adopted by households; and (iii) number of CFLs distributed in exchange of incandescent

lamps. In addition, the project proposes to establish a functional Sustainable and Renewable

Energy Development Agency (SREDA) for promoting renewable energy and energy efficiency

In addition to the SHS program, under the World Bank support three renewable energy-based

mini-grid schemes (pilots) are under implementation for providing access to electricity in selected

off-grid remote areas. Under the schemes, private operators identified the least-cost technology


26

options (solar photovoltaic, biomass gasifier) for providing grid quality electricity in the selected

locations. Private operators invested equity in these schemes (along with a mix of credit and grant

support), and are currently operating these systems on a fee-for-service basis, providing

electricity services to residential and business customers. GOB plans to scale-up these types of

schemes under the scope of the RAPSS guidelines.

Nevertheless, the transition to modern, clean cooking fuels like natural gas, liquefied petroleum

gas (LPG),20

and to some extent electricity, will take a long time, as access to these fuels are

limited, and the appliances to use them are not affordable by the poor. Improved cook stoves

(ICS) are the transitory options for the majority of the poor along with biogas for families with

cattle. An ICS with chimney: (i) reduces indoor air pollution, thereby reducing exposure levels to

health-damaging pollutants; (ii) could save up to 50 % of the traditional biomass fuels used; (iii)

reduces carbon dioxide (CO2) emissions and the resultant greenhouse effects; and (iv) helps

conserve forest resources.

Despite a number of efforts to introduce ICS in Bangladesh since 1980s, only about 2 % of the

population relying on traditional fuels has access to ICS. A recent study has explored options for

developing a large-scale ICS program to reduce exposure to indoor air pollution in Bangladesh. A

recent study shows that a sustainable ICS program in Bangladesh should be based on a market-

driven model that would allow for the growth of entrepreneurs and micro-enterprises through

intensive training and capacity building. The recent mobilization on clean stoves and fuels

through the Global Alliance for Clean Cookstoves (GACC) and the United Nations Sustainable

Energy for All Initiative offers a unique opportunity that Bangladesh should explore to scale up

the dissemination of clean cook stoves and fuels.

Despite all the short and long-term efforts at increasing power generation and demand-side

management, it will take years to fully close the demand-supply gap. In a small way, even though

foreign and domestic Independent Power Producers (IPP) are keen to invest, the Government is

wary of excessive private sector participation in the sector, especially for contracts requiring all

payments in foreign currency.

Consequently, it will not be possible to achieve the government vision of universal access by

2020 relying only on the grid. Furthermore, the dispersed nature of rural settlements and the

numerous rivers that crisscross the country make grid electrification in many areas difficult and

expensive. Off-grid renewable energy appears to be the only near-to-medium-term option left for

millions of people in the remote areas of the country.

8.0 PRIVATE SECTOR INVESTMENTS AND ENABLING BUSINESS

ENVIRONMENT

Energy and power are capital-intensive sectors and GOB recognizes this relationship. As part of

the efforts to attract private sector and foreign investments, the government has organized several

"road-shows" at home and abroad. An infrastructure investment fund has just been launched with

seed money of Tk.16, 000 million in order to attract domestic and foreign investors. GOB also

recognizes that the energy and power supply deficit in the existing infrastructure has become an

impediment to achieve development goals. In the existing plan, infrastructure is also getting high

priority. The following lists GOB’s incentives for private sector, as of 2009/10:

A: Fiscal incentives

20

There is basically no access to LPG in almost all rural areas despite heavy subsidies for piped gas in urban locations,

according to the World Bank (2006).


27

1. The private power companies shall be exempt from corporate income tax for a period of

15 years.

2. The companies will be allowed to import plant and equipment and spare parts up to a

maximum of 10% of the original value of total plant and equipment within a period of 12

years of Commercial Operation without payment of customs duties, VAT (Value Added

Tax) and any other surcharges as well as import permit fee except for indigenously

produced equipment manufactured according to international standards.

3. Repatriation of equity along with dividends will be allowed freely.

4. Exemption from income tax in Bangladesh for foreign lenders to such companies.

5. The foreign investors will be free to enter into joint ventures but this is optional and not

mandatory.

6. The companies will be exempted from the requirements of obtaining

insurance/reinsurance only from the National Insurance Company, namely Sadharan

Bima Corporation (SBC). Private power companies will be allowed to buy insurance of

their choice as per requirements of the lenders and the utilities.

7. The Instruments and Deeds required to be registered under local regulations will be

exempted from stamp duty payments.

8. Power generation has been declared as an industry and the companies are eligible for all

other concessions which are available to industrial projects.

9. The private parties may raise local and foreign finance in accordance with regulations

applicable to industrial projects as defined by the Board of Investment (BOI).

10. Local engineering and manufacturing companies shall be encouraged to provide

indigenously manufactured equipment of international standard to private power plants.

B: Other facilities and incentives for foreign investors

1. Tax exemption on royalties, technical know-how and technical assistance fees, and

facilities for their repatriation.

2. Tax exemption on interest on foreign loans.

3. Tax exemption on capital gains from transfer of shares by the investing company.

4. Avoidance of double taxation in case of foreign investors on the basis of bilateral

agreements.

5. Exemption of income tax for upto three years for the expatriate personnel employed

under the approved industry.

6. Remittance of upto 50% of salary of the foreigners employed in Bangladesh and facilities

for repatriation of their savings and retirement benefits at the time of their return.

7. No restrictions on issuance of work permits to project related foreign nationals and

employees.

8. Facilities for repatriation of invested capital, profits and dividends.

9. Provision of transfer of shares held by foreign shareholders to local shareholders/

investors.

10. TAKA, the national currency, would be convertible for international payments in current

account.

11. Re-investment of remittable dividend to be treated as new foreign investment.

12. Foreign owned companies duly registered in Bangladesh will be on the same footing as

locally owned companies with regard to borrowing facilities.

Currently, around 63% of total production comes from public sector and the private enterprises

contribution is inadequate. To meet power shortages—current and projected—GOB is proposing

use of Public Private Partnership (PPP) and private investment, in addition to public investments.

It has taken several appropriate measures. Given unlimited availability of capital with the private

sector, and often much- higher outputs and efficiencies, GOB should consider increasing the


28

incentives to induce greater private sector investments. Electricity generation, transmission and

distribution require large financial investment. Given Bangladesh’s considerable gas reserves and

promising potentials, private sector can play a crucial role in tapping increased energy.

9.0 GAPS AND BARRIERS

The electricity sector of Bangladesh is presently beset with various problems. The immediate

problem is that the demand cannot be met. The forecasted electricity growth rate is 10% by most

estimates. The main demand growth is in the industrial sector. There are no plans to add this

amount of generation to the grid. BPDB is finding it very difficult to maintain uninterrupted

electricity supply since its generating units are mostly old—some are over 35 years old.

Moreover, a number of the generating units have become unreliable due lack of spare parts,

proper maintenance, etc. In addition, the power quality is also low. Given this situation, many

industries have adopted to captive generation. About 1100 MW, which is one-third of grid

(BPDB and IPPs) capacity, is captive generation. These captive generators run on gas and are

putting tremendous pressure on the gas grid especially in some industrial clusters. Furthermore,

shortage of electricity is not attributed to generation alone but the country’s transmission and

distribution systems are also responsible for the existing short fall.

To ensure energy security, the following measures are recommended:

Making the power sector financially viable and able to facilitate economic growth;

Increasing the sector’s efficiency;

Introducing a new corporate culture in Bangladesh’s power sector entities;

Improving the reliability and quality of electricity supply;

Using natural gas (including imported LNG), coal, and oil as the primary fuels for

electricity generation;

Increasing private sector participation to mobilize finance;

Expanding rural energy availability such as via min-grids, sustainable biomass use and

SHS; previous models and institutional arrangement have proven successful and can be

continued.

As part of the above activities, GOB should consider finalizing coal extraction plans, reduce

system’s losses, increase use of renewables, import LNG, increased availability and use of coal

will release gas for alternate economic uses.

10.0 CONCLUSIONS SE4LL GOALS aim is to provide reliable energy access at affordable prices and in a sustainable

and efficient manner. These goals are in harmony with GOB’s 2002 Vision and Policy Statement:

The Vision for power sector development is proposed in the government’s Outline Perspective

Plan of Bangladesh (2010-2021):

Electricity Generation in the country by 2013 - 8500 MW

Electricity Generation in the country by 2015 - 11,500 MW

Electricity Generation in the country by 2021 - 20,000 MW

Electricity for all by 2021

To meet these goals, the GOB needs to develop and implement a multi-pronged strategy. It

should increasingly look into developing hydropower and other renewable sources of energy.


29

Such an approach will also help diversify the energy supply, making Bangladesh less dependent

on imported oil and generate economically produced power, in most cases.

GOB would also need to improve its management and implementation capacity, in addition to

legislative framework as it relates to energy management and for attracting private capital. Such

and other measures, details beyond the scope of this study, will help Bangladesh meet SE4ALL

goals while assuring a sustainable supply of energy for its citizens. A well-developed approach,

and its sound implementation will:

Ensure adequate supply to meet demand and provide for expanding demand.

To build new transmission and distribution lines to evacuate new generation plants and

improve power service delivery to different areas of the country.

Address new connection barriers (connection costs, regulatory and non regulatory

barriers)

Take advantage of new technologies and improvement in technologies (LED’s, solar

systems)

Use of decentralised generation, off-grid and stand-alone energy systems. Expand the

successful solar home systems program as well as biogas generation in rural areas. Use of

additional productive applications using renewable energy is a strongly recommended as

is the expanded use of the successful micro-finance programs.


30

Appendix A: Projects for Completion as of 2011.

Table 1: List of Projects for Potential Completion (2011/12)

SR

No.

Name of the Power

Station

Capacity

(MW) Fuel

Expected time

of Completion Current Status

Quick Rental

1 Khulna 100 Diesel Oil July 2010 Approved by Purchase

Committee

2 Ghorashal 100 Diesel Oil July 2010 Approved by Purchase

Committee

3 Shidhdhirganj 100 Diesel Oil September 2010 Approved by Purchase

Committee

4 Madanganj 100 HFO6 December 2010 Agreement Signed

5 Kodda, Gazipur 100 HFO December 2010 Agreement Signed

6 Khulna 115 HFO December 2010 Agreement Signed

7 Shikolbaha/ Madanganj/

Syedpur/ Meghnaghat 400- 600 HFO December 2010

Site selection and

Negotiation underway

Total 1015-1215

Other Projects

1 Shikolbaha 150MW

Peaking Plant (PDB7) 150 Gas/ Oil May 2010 GTGU Testing Started

2 Shidhdhirganj-2*120MW

Peaking Plant (EGCB8) 120 Gas

May 2010 (2nd

Unit) Erection Completed

3 Fenchuganj 90 MW

Combined Cycle Plant, 90 Gas July 2010

4 Ashuganj (3 Year-Rental) 62 Gas April 2010

Commercial

production started

since 07/04/2010

5 Fenchuganj (3-year

Rental) 50 Gas June 2010

6 Bogra (3 Year-Rental) 20 Gas --------

7 Veramara, New Initiative

(Rental) 100 Diesel June 2010

Contract signed on

04/02/2010

8 Thakurgaon New,

Initiative (Rental) 50 Diesel June 2010

Contract signed on

04/02/2010

9 Nawapara, Jessore, New

Initiative (Rental) 100 HFO November 2010

Contract signed on

04/02/2010

10 Barisal New Initiative,

(Rental) 50 HFO December 2010

Contract signed on

15/02/2010

Total 792

GRAND TOTAL 1807-2007


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Table 2: List of Projects for Implementation in 2011/12 Sl

No.

Name of the Power

Station

Capacity

(MW) Fuel

Expected time

of Completion Current Status

Public Sector (PDB)

1 Faridpur Peaking Power

Plant 50 HFO July 2011

Contract signed on

26/04/2010

2 Dohazari, Chittagong

Peaking Power Plant 100 HFO July 2011

Contract signed on

26/04/2010

3 Baghabari Peaking Power


NOA9 Accepted on

31/03/2010

4 Hathazari Peaking Power


Contract signed on

26/04//2010

5 Daudkandi, Comilla

Peaking Power Plant 50 HFO July 2011

NOA Accepted on

31/03/2010

6 Katakhali, Rajshahi

Peaking Power Plant 50 HFO September 2011

Contract signed on

04/05/2010

7 Bera, Pabna, Peaking

Power Plant 70 HFO September 2011

Contract signed on

26/04/2010

8 Gopalganj Peaking Power

Plant 100 HFO September 2011

Contract signed on

26/04/2010

9 Santahar, Naogaon

Peaking Power Plant 50 HFO September 2011

Retender floated on

04/05/2010

10 Sylhet 150MW Combined

Cycle Power Plant 150 Gas December 2011

Contract signed on

08/02/2010

11 Chandpur Combined Plant 150 Gas December 2011 Construction work

underway

TOTAL 920

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