Set power, energy tariffs on market basis

Analysts tell CPD seminar

The country’s electricity and gas sector should go for a gradual shift in the energy tariff setting mechanism from an administered system to a market-based system, said experts at a seminar yesterday.

Saying that such a shift would yield better transparency and efficiency, the speakers at the seminar—titled ‘Power and Energy Sector: Recent Issues and Challenges’—said the time has come for Bangladesh to plan a sustainable energy mix to drive the growth of the energy and power sector.

The seminar was organised by the Centre for Policy Dialogue (CPD) at a convention centre in the Gulshan area of the capital.

But speaking on the occasion as the chief guest, Nasrul Hamid, state minister for power, energy and mineral resources, pointed out, “Our market is not ‘smart enough’ to have a market-driven price or adopt a market-based system to set electricity and gas tariffs.”

“If we go with that, then the tariff rate of electricity will be at least Tk. 10 per unit now. Then what will happen to the lifeline people who are paying Tk. 2 per unit?” he asked.

The people of the country first and foremost want reliable and continuous electricity supply, said Nasrul Hamid. “We first need to ensure that our supply side is all right, then the issue of efficiency comes. The government will gradually shift towards a market-based system to have more efficiency. But I can’t say the time is now ripe for that,” he observed.

About the future plans for the country’s power and energy sector, the minister said, “I want to move very fast. Our economy is moving very fast and it demands the country’s power and energy sector to move fast,” he said.

He said he wants USD 71 billion worth of investments in the power and energy sector by 2040. “I want to produce 60,000 gigawatts by that time. We have already attracted a lot of investments. The private sector is generating 56 per cent of our electricity now,” he said.

“Big financers and big companies are already here. Within 2023, we will be able to complete the deep sea port, which we call the ‘energy port’,” he added.

Nasrul Hamid said the country should have more “bankable companies”. “I am trying to create USD 2 billion worth of energy and power bonds and we want to sell these to other countries to raise the investment. This will yield two benefits. First, it will harness new finances for the power sector and it will brand Bangladesh as a country with investment opportunities,” he said.

The state minister said all the power companies are in good shape. “We are working on our capacity-building. We will be paperless in the next three or four years. We are already on the process of implementing an ERP solution in the Power Division.”

Answering a query about the potential of bringing hydropower from Nepal and Bhutan, Nasrul said India is on board, as are Nepal and Bhutan. “We are now negotiating terms and conditions. Within the next one year, we plan to form a joint venture company. We are planning to take 2,000 MW of electricity from our neighbouring country.”

Speaking on the occasion, Rehman Sobhan, the founder chairman of the CPD, said, “Prime Minister Sheikh Hasina is in charge of this ministry, so to take any major decision, the power and energy ministry does not need to waste any time.” “You can take the most effective and timely decisions here,” he said, addressing Nasrul Hamid.

Rehman Sobhan said the energy sector is one of the regime’s success stories. “Now the government should bring good governance here. For a better output, the government should make the whole bidding process more transparent.”

Khondokar Golam Moazzem, the research director of the CPD, while presenting the keynote paper, said, “In future, the quality of electricity and the users’ efficiency will help decide the success of the outcome of the power sector.”

“Power generation has increased by 279 per cent in the past one decade. Yet, the difference between the grid capacity and the highest generation is still over 40 per cent. Hence, it means that there is still a large amount of unused grid capacity,” he said, adding that the system loss has decreased but is still at the double-digit level.

Questioning the cost of the Rooppur power plant, Moazzem said Bangladesh needs to pay back Russia over USD 20 billion against the loan of USD 11.3 billion, which he termed a “huge payback”. He questioned the viability of the plant.

He also said 10 per cent generation from renewable by 2020 would be very difficult to achieve. “The LPG market is gradually growing but there is no projection about the LPG demand in the market. Also, the safety issue of LPG is not being addressed,” he said while presenting the paper.

Moazzem said this was the time to achieve a very optimum balance among the different accounts. “These include a balance between public and private sector power plants, balance between LNG and use of non-LNG for power generation, balance between overdependence on a single company for power generation, balance between overdependence on a single country in terms of generation transmission and balance between domestic power generation and import of power from neighbouring countries,” he said.

Dr M Tamim, pro-vice-chancellor of BRAC University, said the challenge is more complex in the energy and power sector. “Since the gas shortage, we have been struggling with the primary energy supply. We are yet to come up with an affordable alternative to the cheap natural gas that we are using right now,” he said.

“Within the next 10 years, over 90 per cent of our primary energy will be imported. The upcoming energy import bill is likely to dent our growth rate,” he said.

“A megawatt saved is much cheaper than a megawatt added, so we have to go for efficiency. There is huge scope for increasing energy efficiency,” he added.

Dr Badrul Imam, professor of exploration geology of Dhaka University (DU), said, “The core problem Bangladesh faces is a shortage of primary energy to run the rapidly growing industry and power installations.”

“Being a local gas-based mono energy nation for the past four decades, Bangladesh was caught unprepared with an energy crisis when the trend of depleting gas reserves was confirmed. Even though a good amount of coal reserves is known to occur in north Bangladesh, local coal could not be used immediately as an alternative to gas because of the absence of sufficient coal mining,” he pointed out.

 

Set power, energy tariffs on market basis

Analysts tell CPD seminar

The countrys electricity and gas sector should go for a gradual shift in the energy tariff setting mechanism from an administered system to a market-based system, said experts at a seminar yesterday. Saying that such a shift would yield better transparency and efficiency, the speakers at the seminartitled Power and Energy Sector: Recent Issues and Challengessaid the time has come for Bangladesh to plan a sustainable energy mix to drive the growth of the energy and power sector. The seminar was organised by the Centre for Policy Dialogue (CPD) at a convention centre in the Gulshan area of the capital. But speaking on the occasion as the chief guest, Nasrul Hamid, state minister for power, energy and mineral resources, pointed out, Our market is not smart enough to have a market-driven price or adopt a market-based system to set electricity and gas tariffs. If we go with that, then the tariff rate of electricity will be at least Tk. 10 per unit now. Then what will happen to the lifeline people who are paying Tk. 2 per unit? he asked. The people of the country first and foremost want reliable and continuous electricity supply, said Nasrul Hamid. We first need to ensure that our supply side is all right, then the issue of efficiency comes. The government will gradually shift towards a market-based system to have more efficiency. But I cant say the time is now ripe for that, he observed. About the future plans for the countrys power and energy sector, the minister said, I want to move very fast. Our economy is moving very fast and it demands the countrys power and energy sector to move fast, he said. He said he wants USD 71 billion worth of investments in the power and energy sector by 2040. I want to produce 60,000 gigawatts by that time. We have already attracted a lot of investments. The private sector is generating 56 per cent of our electricity now, he said. Big financers and big companies are already here. Within 2023, we will be able to complete the deep sea port, which we call the energy port, he added. Nasrul Hamid said the country should have more bankable companies. I am trying to create USD 2 billion worth of energy and power bonds and we want to sell these to other countries to raise the investment. This will yield two benefits. First, it will harness new finances for the power sector and it will brand Bangladesh as a country with investment opportunities, he said. The state minister said all the power companies are in good shape. We are working on our capacity-building. We will be paperless in the next three or four years. We are already on the process of implementing an ERP solution in the Power Division. Answering a query about the potential of bringing hydropower from Nepal and Bhutan, Nasrul said India is on board, as are Nepal and Bhutan. We are now negotiating terms and conditions. Within the next one year, we plan to form a joint venture company. We are planning to take 2,000 MW of electricity from our neighbouring country. Speaking on the occasion, Rehman Sobhan, the founder chairman of the CPD, said, Prime Minister Sheikh Hasina is in charge of this ministry, so to take any major decision, the power and energy ministry does not need to waste any time. You can take the most effective and timely decisions here, he said, addressing Nasrul Hamid. Rehman Sobhan said the energy sector is one of the regimes success stories. Now the government should bring good governance here. For a better output, the government should make the whole bidding process more transparent. Khondokar Golam Moazzem, the research director of the CPD, while presenting the keynote paper, said, In future, the quality of electricity and the users efficiency will help decide the success of the outcome of the power sector. Power generation has increased by 279 per cent in the past one decade. Yet, the difference between the grid capacity and the highest generation is still over 40 per cent. Hence, it means that there is still a large amount of unused grid capacity, he said, adding that the system loss has decreased but is still at the double-digit level. Questioning the cost of the Rooppur power plant, Moazzem said Bangladesh needs to pay back Russia over USD 20 billion against the loan of USD 11.3 billion, which he termed a huge payback. He questioned the viability of the plant. He also said 10 per cent generation from renewable by 2020 would be very difficult to achieve. The LPG market is gradually growing but there is no projection about the LPG demand in the market. Also, the safety issue of LPG is not being addressed, he said while presenting the paper. Moazzem said this was the time to achieve a very optimum balance among the different accounts. These include a balance between public and private sector power plants, balance between LNG and use of non-LNG for power generation, balance between overdependence on a single company for power generation, balance between overdependence on a single country in terms of generation transmission and balance between domestic power generation and import of power from neighbouring countries, he said. Dr M Tamim, pro-vice-chancellor of BRAC University, said the challenge is more complex in the energy and power sector. Since the gas shortage, we have been struggling with the primary energy supply. We are yet to come up with an affordable alternative to the cheap natural gas that we are using right now, he said. Within the next 10 years, over 90 per cent of our primary energy will be imported. The upcoming energy import bill is likely to dent our growth rate, he said. A megawatt saved is much cheaper than a megawatt added, so we have to go for efficiency. There is huge scope for increasing energy efficiency, he added. Dr Badrul Imam, professor of exploration geology of Dhaka University (DU), said, The core problem Bangladesh faces is a shortage of primary energy to run the rapidly growing industry and power installations. Being a local gas-based mono energy nation for the past four decades, Bangladesh was caught unprepared with an energy crisis when the trend of depleting gas reserves was confirmed. Even though a good amount of coal reserves is known to occur in north Bangladesh, local coal could not be used immediately as an alternative to gas because of the absence of sufficient coal mining, he pointed out.