Background and Context

As Bangladesh moves forward, issues of energy transition are expected to assume heightened importance. Energy has emerged as a key factor for productivity enhancement, increasing competitive strength and raising quality of life and well-being of citizens. Ensuring affordable and clean energy for all has thus emerged as both a demand of the present times and a key challenge in going forward. Against this backdrop, developing a sound strategic framework for energy transition and ensuring energy security and long-term sustainability of growth have emerged as a major tasks confronting Bangladesh’s policymakers and concerned stakeholders.

Historically, Bangladesh has faced formidable challenges in providing adequate electricity to its population and meeting its developmental demands. The country experienced two major difficulties in view of this. First, till 2009, electricity demand has been higher than the installed capacity. Second, the overwhelming dependence on natural gas, accounting for more than 80 per cent of the country’s electricity generation, turned out to be unsustainable in the end. The growing demand and supply gap, in the backdrop of lack of attention to exploration of new gas fields, culminated in the emergence of the energy crisis experienced by Bangladesh in the early 2000s. This led Bangladesh to increasingly rely on liquid fuels to generate electricity.

To address the attendant challenges and the emerging gaps, Bangladesh initiated a number of reforms and put in place several measures. Core reform initiatives included sectoral restructuring of public utilities, encouraging private investment in the generation sector and establishment of an independent regulatory commission for the energy sector. Many of these date back to the 1990s.Significant investment in energy was made both in the public and private sectors to expand electricity supply capacities. Investment in electricity generation helped Bangladesh close the gap between the demand for and supply of electricity. Over the last decade, the number of power plants has increased significantly. Grid connectivity was also increased, which led to greater access to electricity for the broader population.

On the other hand, almost no initiative was taken to strengthen BAPEX and invest in offshore and onshore exploration of gas. Grid reliability has remained a concern. Concerns also remained in areas of quality and affordability of electricity and the emergent energy mix. As was noted above, exploration of domestic energy resources was neglected and share of renewable energy in primary and secondary energy mix was low. The cause of energy justice suffered because of the failure of the Bangladesh Energy Regulatory Commission (BERC) to take due cognisance of consumers’ welfare. These concerns have been persistently overlooked over the past years. Not surprisingly, successive Energy Master Plans and the embedded inconsistencies came under severe criticism from energy experts and energy activists.  Questions have been raised regarding the strategy and stance that inform the government’s plans in areas of energy security and energy transition over the medium to long term.

According to the World Bank, till 2014, Bangladesh’s per capita energy consumption continued to remain low compared to the South Asian averages. Energy experts in Bangladesh argued in favour of ensuring a threshold level of per capita energy consumption that corresponded to the demands of the accelerated economic development as also the needs of high levels of human development. They have been warning against the danger of falling into an energy poverty trap that could result in paying high penalties in the form of arrested socio-economic development and undermining of citizen’s well-being. They urged the policymakers to pursue the goal of energy security through the route of low carbon development.

In recent times, a number of factors have accentuated the challenges in undertaking the needed measures to ensure energy security, including the COVID pandemic, which necessitated a diversion of resources from energy-centric activities to rolling out stimulus packages and the hike in energy prices brought about by the ongoing geo-political contested environment. To note, compared to 2021, crude oil prices rose by 42 per cent in 2022. The price of LNG increased from 18.6 USD/MMBtu, on average, in 2021 to 33 USD/MMBtu in 2022 (rising to as high as 54.17 USD/MMBtu in August 2022). The average coal price in 2022 was 345 USD/MT (reaching  431 USD/MMBtu in September 2022), which was 117 USD/MT in 2021. The high primary energy prices have fuelled inflation, raised production costs and contributed to the depletion of Bangladesh’s forex reserves and the ongoing balance of payments difficulties.

Against this backdrop, there is a need to critically analyse the state of Bangladesh’s prevailing energy sector scenario and review the current policies for ensuring energy security through the lens of the goal of ensuring energy for all and transition to clean energy.

SDG 7, the implementation of which Bangladesh is committed to as part of its commitment to the SDGs, talk of ensuring affordable, reliable, sustainable and modern energy for all. As is known, access to affordable clean energy lies at the heart of SDG7. SDG 7.2 mentions about substantially increasing the share of renewable energy in the energy mix, and SDG 7.3 sets the target of doubling global rate of improvement in terms of energy efficiency. And in attaining the SDG 7, it is also crucial to ensure that energy is available at affordable price, and that no one is left behind in this regard.

Published: May 2024

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