Energy crisis is a predominant feature of all the underdeveloped nations across the globe. It is extensively acknowledged in empirical studies that the incompetence of these nations to meet their own demand for energy is one of the main factors hampering their development processes. Although Bangladesh, belonging to the group of developing nations, had some promising macroeconomic performances, notably maintaining an annual growth rate of about 6.34% on average since 2011, it still has not been efficacious in matching its demand for energy.
Thus, energy crisis mitigation is set to be one of the top most prioritized agendas of the current government. It has been unearthed in different studies that tackling energy crisis can effectively enhance economic development within a nation. Moreover, the government has also committed leaving no stones unturned in increasing access to electricity and achieve maximum electrification rate by 2021 but at present only 74% of the population has been brought under the national grid. In spite of rise in installed capacities, electricity generation in Bangladesh was inadequate as the increase in the installed capacities weren’t matched by a proportional increase in electricity generation.
A reason behind this mismatch was the fact that most of the power plants remained out of function due to maintenance or due to acute constraints in energy resources in the form of natural gas. Following extreme power crisis, the government in 2008 decided to refrain from providing new connections and had also imposed a restriction on the use of air-conditioners by new subscribers. However, these steps to reduce energy demand were unsuccessful to a great extent mainly due to a huge amount of power thefts in the form of illegal connections. Hence, it is a prime time for policymakers to come up with strategies to not only combat the prolonged energy crisis but also to ensure future energy security within the Bangladesh economy.
A possible way of resolving this crisis could be by increasing energy generation, but due to resource constraint, such enhancement is not always feasible. Thus, energy source diversification has to be brought into the limelight whereby energy generation can be increased using indigenous renewable energy resources.
As a part of the fuel diversification plan, Bangladesh can look forward to the development of markets for liquefied gaseous energy sources like Liquefied Natural Gas (LNG) and Liquefied Petroleum Gas (LPG) as alternative sources of energy. At present, use of these alternative energy sources are pretty much unattended mainly because of lack of awareness regarding the potential benefits that can be generated by using LNG and LPG both domestically and commercially. For instance, LNG is a relatively cheaper source of energy compared to traditional fossil fuels.
The lower cost of LNG makes it a preferred choice of an energy source that can be considered for partial fuel-diversification drives. Moreover, LNG has the high energy content which can effectively cut down energy demand to a huge extent. This is because it has been estimated that, combustion of a unit of LNG provides 600 times more energy compared to combustion of a unit of natural gas. The Bangladesh government imports a vast amount of petroleum products for electricity generation as well as to supply transport fuel within the economy. In addition, it also has to provide subsidies to keep the oil prices within the reach of the consumers.
However, such import-subsidization strategy not only exerts pressure on the nation’s balance of payments but also creates a possible crowding out of public investments in other productive sectors. Thus, imported LNG can be used for similar purposes relieving the government’s burdens arising from oil imports and subsidies due to LNG being relatively cheaper. The average spot price for LNG in Asia hovers around US$ 4.241 per million British thermal units while spot price of crude oil is as much as US$ 52 per barrel. It is to be noted that use of LNG to produce electricity in Egypt, Poland and Jordan commenced in 2015 and it is expected that electricity generation would be doubled in these nations by the end of 2017. The sub Saharan African countries are also on the verge of adopting LNG to produce power.
Moreover, LNG is being considered to be the main transport fuel in European countries in near future. Furthermore, LNG usage is comparatively more environmental friendly in nature. According to pioneer oil company Shell, LNG can emerge as a lower-carbon transport fuel all over the world. Employment of LNG can significantly reduce the emission of harmful greenhouse gases and nitrogen dioxide into the atmosphere. Conversely, burning imported fossil fuels aggravates environmental adversities in the form of depletion of the ozone layer and initiation of climate changes. In comparison to natural gas, LNG is comparatively easier to be transported across national boundaries.
On the other hand, LPG can be a potential energy for cooking purposes and reduce natural gas demands. Acute shortages in natural gas supply are one of the main reasons by electricity crisis in Bangladesh. Moreover, an unplanned transition to use of highly subsidized natural gas in Bangladesh has led to inefficient use of this energy source and as a result, Bangladesh is on the verge of exhausting its natural gas reserve by 2030. This is alarming from the perspective of the nation’s energy security putting attainment of its development goals into jeopardy.
However, use of LPG as an alternative energy source can solve this problem to a major extent. A unique property of LPG is that it readily burns and gives off heat instantly. The basic difference, apart from different physical states, between LPG and natural gas is that LPG is made from propane while natural gas is processed from methane. In addition, LPG accounts for low combustion emissions and does not produce black smoke either which makes it a comparatively better source of energy. More importantly, LPG is produced as a bi-product following processing of natural gas and petroleum refinery which keeps LPG costs low and within the affordable range of consumers.
A move towards replacing traditional energy sources with LPG could help improve the rural standard of living of people. In Bangladesh, the rural population is heavily reliant on traditional firewood’s, mud cakes, rice husks, etc. for cooking and heating purposes.
However, use of these energy resources leads to health hazards in women who are directly exposed to the heat and gases emitted. Thus, LPG usage solves problems like these which make it a potential energy source to look forward to. LPG usage considered by two-thirds of the rural population in India and the government recently had almost doubled its LNG subsidies to promote its usage further.
Energy is considered to be a strategic input that attributes to socioeconomic security, food security, health security and environmental sustainability. The socioeconomic costs of burning fossil fuels across the developing world are enormous and devastating. For instance, it has been estimated that exposure to indoor air pollution from combustion of fossil fuels causes around 4 million premature human deaths per year in the developing countries across the globe. Moreover, the use of biomass for energy generation leads to environmental degradation through deforestation causing natural calamities like floods, especially in tropical countries like Bangladesh.
Hence, keeping the huge prospects and economies of usage into consideration, a switch from the employment of traditional fuels to LNG and LPG would ideally improve the standard of living of the people of Bangladesh and would also help to attain the far-reaching social, economic and environmental benefits. However, in order to reap the complete benefits of using these two relatively eco-friendly energy sources, as alternative fuels, the concerned markets need to be developed properly. Moreover, favourable government regulations, improvement of infrastructure in port areas, awareness building and, most importantly, proper pricing of LPG and LNG are necessary to ensure effective energy diversification for resolving energy crisis in Bangladesh.
Results of different studies revealed that transition to use of LPG and LNG is one of the potential ways through which energy security in Bangladesh can be achieved. For instance, through providing access to clean cooking and heating solutions mainly via LPG, Bangladesh can gradually resolve its energy crisis to a great extent and can effectively establish security in its energy sector. The strategy of enhancing the use of LPG and LNG within the economy is very much in line with the United Nation’s Sustainable Development Goals (SDGs). Moreover, certain factors affecting the potential use of these energy sources and hampering development of the associated energy markets in Bangladesh need to be identified and appropriate policies have to be taken to rectify them.
Dr. Sakib B. Amin & Muntasir Murshed are respectively Assistant Professor and Research Assistant School of Business and Economics, North South University