Economy First: Bangladesh To Increase Coal Power Generation From 2% To 50%

  • Date: 10/03/14
  • Joseph Allchin, The New York Times

The government hopes that by 2030, 50 percent of Bangladesh’s power will be generated by coal, up from about 2 percent now.

Like most poor countries, Bangladesh needs a lot of energy to develop its economy, the cheaper the better. About 80 percent of its electricity now comes from natural gas. But with gas resources waning and an entrenched, inefficient subsidy system, the government has decided to promote coal instead. This shift comes with great risks: Coal power pollutes, and Bangladesh is at once the most densely populated country on earth and one of the most exposed to the effects of climate change.

Under its 2010 master plan for developing the energy sector, the government hopes that by 2030, 50 percent of Bangladesh’s power will be generated by coal, up from about 2 percent now. (Bangladesh currently has one small plant, which runs on local coal.) It expects to accomplish this by building a dozen new coal-run electricity-generating plants, including a controversial one at Rampal, in the southwest of the country. That facility alone is expected to have a capacity of 1,320 megawatts, or about one-fifth of the country’s total current production of electricity. [...]

Electricity production has doubled over the past five years, but Bangladesh is struggling to keep up. Domestic production of natural gas falls about 200 billion cubic feet, or about 20 percent, short of demand for electricity-generation every year: After decades of selling the commodity to consumers and the industrial sector at exceptionally cheap subsidized rates, the country is running out of gas, and state-owned energy companies are operating at a loss.

In a merry-go-round of fiscal irresponsibility, state-owned banks hand out bad loans to insolvent companies, which only keeps the gas flowing cheaply and wastefully. All in all, the subsidies system cost the state approximately $3.4 billion in 2012, or nearly one-quarter of the budget, according to the Economist Intelligence Unit.

Bangladesh has gas reserves in the Bay of Bengal, but exploration has been slow. The state-owned exploration company doesn’t have the capacity or know-how to exploit those resources. And foreign multinationals don’t have the economic incentive: They wouldn’t recoup enough of their investment selling on the massively subsidized local market. At recent auctions, no companies bid on deep-sea blocks, and only two companies bid for the shallow-water blocks.

One result is that in recent years the country has had to import liquid fuels to power stopgap plants. This has increased the impoverished nation’s annual imports bill by around $2 billion, out of around $30 billion, according to Mohammad Tamim, a professor of engineering at the Bangladesh University of Engineering and Technology.

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