Bangladesh Government should focus on clean energy for power generation rather coal based one: CPD

Dhaka, 14 September 2020:

Bangladesh Government should focus on clean energy for power generation rather coal based one. Solar power could be an alternative along with other clean energies. Future power plants should not use coal as it pollutes environment and less cost effective. Solar and other cleaner power production should be undertaken for sustainable and efficient power generation.

These views came up from a webinar organized by Center For Policy Dialogue (CPD) on Monday titled Abandoning Coal in Power Generation: Government Initiatives & Way Forward.

Nasrul Hamid, State Minister, Ministry of Power Energy and Mineral Resources (MPEMR), Mohammad Hossain, Director General, Power Cell, (MPEMR), Dr M Tamim, Professor, Department of Petroleum and Mineral Resources Engineering, BUET, Imran Karim and President, Bangladesh Independent Power Producers Association (BIPPA) among others spoke in the webinar.

CPD in the webinar has recommended that the Government should redirect its focus from fossil fuel towards clean energy and should not only abandoning coal but also should create space for renewable energy.

CPD emphasized on the following measures to shift towards clean energy management.​

Dr Khondaker Golam Moazzem of CPD presented the key note paper.

According the report, COVID-19 has provided an opportunity to revisit existing approaches, operations, management, cost and return of the ongoing power generation including redirecting the power sector towards clean energy by 2030 and 2041.​

Growing overcapacity and inefficiency in the power sector have been creating fiscal-financial pressure on the Power Division particularly to the BPDB which need reprioritization of investment projects. ​

The Power Division needs to follow ‘go-slow’ policy in power generation related projects both under public and private sector given the huge amount of overcapacity currently exists.​

The power division needs to shifts its focus from generating electricity based on fossil-fuel to more by renewable energy- both under public and private sector.​

Government should negotiate with development partners and private sector about possible deferment/cancellation of the projects including those of coal-fired projects.​

A well-planned renewable energy led electricity generation through solar, wind, roof-top and other means could be a better option for the future.​

Analysis indicated that a total of 22 coal-fired projects are currently being implemented with a generation capacity of 23,236 MW.​

The projected distribution of energy-mix for 2041 does not match with what is mentioned in PSMP2016.

It is unclear how much renewable energy is considered under the new analysis till 2041.​

A share of 15% is mentioned for imported, biofuel and renewables by 2041.​

As per the current projection, imported electricity would account for 4.4% of total generation capacity of 2041.​

The think tank highlighted that as  per current plan, only 1520 MW electricity to be generated by renewable energy by 2037.​

Even within the current plan, LNG and gas would cross the target (35%) by 2037 (25525MW; 42.5%). ​

With the current initiative of abandoning coal to shifting to LNG would completely change the energy-mix in the power sector.​

From a moderately diversified to overwhelmingly dependent on single source, LNG (70%).​

The comparative assessment of alternate energy mix made by the government has provided important information about relative advantage and disadvantage of Coal and LNG.​

It should compare solar/renewable energy along with other two options.​

Huge capital expenditure would be required for regasification terminals that could very soon be supplying very expensive electricity compared to renewable alternatives.​

Environmental costs of LNG are not properly reflected. ​

LNG has about the same carbon emissions as coal when it takes into account fugitive methane emissions from fracked gas and the energy costs involved in liquidfication and regasification.

Solar is the best option in all accounts compared to that of LNG in terms of replacing coal except that of requirement of land​

Unit price of electricity from solar-based power plants is declining (a recent contract is signed at US7.48 cent/kwh or Tk.6.28 /kwh).​

The price of solar PV and wind is comparable to or cheaper than LNG in most major markets.​

Solar power plant requires more land compared to that of LNG based power plant (about 2.0 acre/MW vis-à-vis 0.4-0.5 acre/MW).​

Countries which expressed interest to go for joint venture for coal based power plants include India, China, Malaysia, Singapore and South Korea.​

A number of these countries have joint venture projects (either public or private) in solar energy in Bangladesh (e.g. India, China, Singapore).​

The ministry should go for negotiation requesting those development partners to shift their resources from coal to renewable energy. ​

The initiatives for renewable energy is also consistent with Bangladesh’s leading role in climate vulnerable forum (CVF).​

Government has made commitment to pursue for renewable energy led initiatives across the countries including Bangladesh. ​

This will also align with local and global demand as well as voices raised by the civil society for clean energy.​

According to the report, future power generation plan as recently published  by the BPDB in the state of progress of the power sector (6 September, 2020) has not taken into account the impact of COVID on demand for electricity and generation capacity in the upcoming years.​

Over generation capacity is a major challenge (45.8% in June, 2020) though it is partly eased in recent months (36.7%  in August, 2020). ​

Future probable generation  portrays a maximum of 36,018 MW of electricity by 2025 when the demand is projected to be 24,952 MW.​

This would mean an over generation capacity of 11,066MW which would be 44.3%.​

During 2020, a maximum demand for electricity was projected to be 14,757MW while the maximum actual consumption is reported in July, 2020 (12,536 MW).​

Even in a normal business year 2019, maximum demand was 12,893 MW (in May, 2019).​

A gap between electricity demand and generation of about 1,864 MW is reported in 2019. The gap has further increased during the period of COVID (2221 MW in 2020).​

Thus, a downward revision of electricity demand will be required otherwise over generation capacity will further rise. ​

The estimates of  plant-wise added capacity in different years does not match with aggregate added capacity mentioned in BPDB data (Figure) ​

Aggregate data indicates that a gross total of 21,977 MW would be added between 2020-2025 through new generation.​

It is also reported that a net total of 12,298 MW would be added by 2025​.

This difference could only be possible if a significant number of power plants with a generation capacity of 9,798 MW are retired by 2025.​

If QRRs are retired by 2025 it would reduce only 1,958 MW worth of electricity. Hence the rest 7,840 MW worth of electricity to be exited from other power plants.​

If  this does not explain the difference , then the total generation would be significantly high and the over generation capacity would be much higher as estimated.​

If the coal is abandoned, the total generation capacity would be 31,881 MW by 2025.​

As per the current projection, the reserve margin would be 27.7% in 2025 which is the sizable reserve for a country like Bangladesh (other developing countries have a reserve of 15 per cent).​

This would not give opportunity to exit the power plants (with a capacity of 9798 MW).​

At present, a total of 18 coal-fired power plants with a total capacity of 21,241 MW which are at different stages of implementation.

Under implementation: 8,359 MW. LOI & NOA provided: 1,240 MW.​ Under planning: 9,820 MW​. A total of 10 projects related to coal are currently being implemented under the ADP 2201​. Total project cost: Tk.42,602 crore. Total spent up to FY2020: Tk.16,951 crore​. Allocation for FY2021: Tk.5,115 crore​. Probable rate of implementation up to June, 2021: 33.3%-104.1%. If the government decides to abandon coal-based power plants it would have major budgetary implications​

Without any allocation disbursed after June, 2020:  A total of Tk.25,650 crore could be saved of which government revenue will be saved by Tk.7,139 crore and project aid would be unspent by 18,511 crore. With allocation disbursed in FY2021: If the decision is made after the FY2021 (June, 2021), the total amount of savings would be reduced to Tk.20,535 crore  of which revenue and project aid would be Tk.5,596 crore and Tk.14,939 crore.​ JICA has provided support to two coal-fired projects at present which could be renegotiated for alternate renewable power plants.​

CPD stressed the scopes for renewable energy in the report. Despite all the potentials, renewable energy has never got adequate attention from the ministry.​ As per the latest BPDB document, about 1,482 MW renewable energy would be generated by 2025. ​ And there is no plan to add renewable energy after 2025. ​

Overall, a total of 1,552 MW renewable energy has been targeted which will be only 2.8% of total capacity of 2041.​

The data provided by BPDB does not match with that of SREDA (total generation: 2,111 MW).​

If the abandoned coal-based power plants have been shifted to solar power plants, those plants would generate a total amount of 4,779 MW of electricity.​

Together with the existing and other renewable energy projects, a total of 6,331 MW of electricity could be generated by 2041​

This amount of electricity would increase the share of renewable energy in power generation to 10.6% by 2041 ​

If Bangladesh wants to make 100% RE based power generation by 2050- this amount is not adequate.​

Government is planning to shift from coal-based power generation to clean energy. That is a bold political statement made by the minister in a public discussion. The ministry’s recent initiative indicates that the political statement made by the minister is going to be a major policy stance of the government on the power sector.​

The Ministry of Power Energy and Mineral Resources (MoPEMR) has recently sought approval of the Prime Minister’s Office to abandon use of coal in power generation.​

A total of 22 coal-based power plants (public & private) have been identified with a total generation capacity of 23,236 MW.​

CPD registers deep appreciation to the Ministry for its internal decision on abandoning coal-based power plants.  This internal position of the Ministry was shared by the Hon’ble State Minister of MoPEMR in a CPD webinar organized on 24 June, 2020.

Government is reviewing its earlier stance on coal-based power generation. Coal based plants usually require huge amount of land, its efficiency level is low and it is environmentally polluting. There are alternate sources for power generation which are cleaner than coal and more efficient.’  

According to CPD, renewable energy plants are currently being implemented under the Sustainable and Renewable Energy Development Authority (SREDA)​

Out of 36 projects, only 8 projects are being implemented by the government while the rest 25 projects are being implemented by the private sector.​

Government has less interest in investing in renewable energy projects.​

Only 4 projects are currently in operation while the 11 projects are in the process of implementation and 19 projects have been at planning phase (2 projects are rejected).​

It is to be noted that a large number of projects are behind the targeted timeline for commencing their operations (Table 2)​

Operation year 2016: Out of three projects none has gone in operation; two projects are still under planning and one project is rejected.​

Operation year 2017: Out of two projects one project is running and another one is still under planning. ​

Operation year 2018: Out of 8 projects only one project is running,, two under implementation, four under planning and one is rejected.​

Operation year 2019: Out of 11 projects, only 2 project is running, six projects are being implemented and three are under planning.​

Operation year 2020: Out of three project, no project is running, two project are being implemented and one project is under planning​

Demand Projections in the Post-COVID period and Implications for Ministry’s Decision. 

It is observed that power demand has not reached to the level as it is projected in normal business situation. The situation got worsened during the period of COVID-19 when demand for power has reduced further​

There is a gap of 15.1% even in the projected electricity demand during FY2020.​

The challenge would persist in the post-COVID period and the maximum demand as projected would not be attained.​

Without proper demand assessment, if the power generation initiatives continue the over capacity would rise further.​

Even without coal, if a 15% gap persists in maximum demand, then the over generation capacity would be as high as 69.8%.​

If the coal is abandoned, the total generation capacity would be 31,881 MW by 2025 (not considering exit of any plant).​

As per the demand projection, the reserve capacity would be 27.7% in 2025 which is the sizable reserve for a country like Bangladesh (other developing countries have a reserve of 15 per cent).​

If the demand gap in the post-COVID period is considered, the over-generation capacity would be much higher (i.e. 50.3%).​

 Government should not hurry for adding new generation capacity.​

The choice for energy-mix in the abandoned coal project lands should be solar and other renewable energy projects.​

This additional amount of renewable energy based power generation is not adequate to make 100% RE based by 2050.​

In this context, renewable energy should get priority over any other alternate option.​

The CPD report concluded that recent initiative of the Ministry of Power and Energy to abandon coal in power generation is a right move and CPD appreciates ministry’s move.​

However, the alternate of the coal should not be LNG. Shifting from coal to LNG will be a move from one form of fossil-fuel to another form of fossil-fuel use which is also environmentally polluting.​

Bangladesh’s leadership role in the CVF would be questionable if it promotes LNG instead of renewable energy.​

 Energy-mix data presented in the analysis of the government is not matched with PSRP (2016), particularly those of renewable energy. ​

LNG is not cleaner as it is claimed; rather it emits Carbon Dioxide, Carbon Monoxide, Nitrogen Oxides, Sulfur Dioxide, Particulates, Mercury.​

These countries should be convinced as almost all of these countries have investment (private investment) in renewable power generation in the country.​

Despite all the potentials, options for setting up renewable energy based power plants did not get attention from the policy markets​

The ministry should make a comprehensive assessment by adding renewable energy as an option and should help the PMO in taking right decision.​

Renewable energy is the most clean energy. ​

It can save a huge amount of foreign currencies – after establishment of the plant, regular maintenance cost is negligible. Supply electricity up to 20 years. Its efficiency level has been gradually increasing (lab tested 47% which need to be commercialized).​

SREDA which is the authority in implementing renewable energy projects, could not fully deliver the targeted renewable energy projects. ​

Only 4 projects are currently in operation while the 11 projects are in the process of implementation and 19 projects have been at planning phase.​

A large number of projects are behind the schedule in completion.​

Government showed lack of interest in setting up renewable energy projects under public sector.​

SREDA should strengthen its capacity to deliver projects on time. Government will come forward to set up renewable power plants in the sites of abandoned coal-fired power plants​

Development partners who had expressed interest/invest developing the sites would come forward to redirect their project aid for setting up renewable energy projects.​

Given the huge amount of over capacity, government need not require to hurry for power projects with immediate electricity demand.​

Bangladesh now has the chance to get ahead of the cost curve, use its remaining domestic gas resources to stabilize the grid while it works on rapidly increasing RE deployment to provide cheap and secure power​

A fresh demand for electricity is needed projecting 2030 and 2041 considering the revised projection of long term economic growth.​

The future power generation should focus on renewable energy. This should applied not only in abandoned coal-fired power plants but also in other fossil-fuel based power plants which are yet to be started implementation (e.g. projects under LoI, NOA, planning phase).

 Being the leader of the CVF Bangladesh needs to set precedence in renewable energy based power generation.​

It has committed to make 100% RE based power generation by 2050.​

A huge investment is required in renewable energy by replacing the existing conventional fossil fuel power plants, shifting from fossil-fuel based power plants which are at planning phase and is expected to design towards that direction taking into cognizance of long term targets for 100% clean energy.​