Appropriate Fuel Mix for Sustainable Energy: Bangladesh Perspective

Fuel supply crisis has created immense miseries in Bangladesh now. The situation aggravated significantly from the middle of December 2021, following forced suspension of operation of Summit LNG-owned FSRU at Moheskhali, Cox’s Bazar. RLNG supply dropped from 650 MMCFD to 350 MMCFD. The country has already been suffering from a chronic gas supply crisis for a long time. The forced suspension of FSRU operation has deepened the crisis. Local production of gas is steadily depleting, dropping from 2760 MMCFD to about 2300 MMCFD. Two FSRUs were supplying about 750 MMCFD. This was barely enough for catering coincident peak demand of about 4200 MMCFD. Experts for a few years have been suggesting for formulating and implementing appropriate fuel mix through taking political decisions for mining coal, expediting petroleum exploration and exploring all forms of renewable energy development. Bangladesh desperately needs sustainable energy security for achieving the cherished national vision of a developed economy by 2041. COVID-19 pandemic-induced new normal world, regional and global geopolitics have triggered huge challenges for countries relying on imported primary fuel. Against the backdrop, Bangladesh is working out a comprehensive Power and Energy System Master Plan. The country failed to implement the fuel mix prescribed in PSMP 2010 and PSMP 2016. 

Reasonably comfortable energy security of Bangladesh over the past decade leveraged achieving impressive growth of GDP consistently. The country already achieved recognition for promotion from LDC to developing economy. The nation aspires to achieve the status of developed economy by 2041. For it to happen, Bangladesh essentially requires sustainable energy security. For any country achieving sustainable energy requires a balanced, affordable mix of fuel. Till 2000 own natural gas almost exclusively dominated the fuel mix. But by utilizing the lower than economically priced natural gas, available raw materials and cheap labor, Bangladesh experienced an industrial boom, mostly higher energy-consuming primary industries. This has created stress on mono fuel natural gas. For different reasons it was not possible to take the political decision of exploiting discovered coal reserves. The exploration and development of petroleum resources also could not be done at expected pace. Consequently, our own fuel supply could not match the exponential growth of demand. The government had no option but to start importing primary fuel from the global market. Crude oil and petroleum products import was there all along. The new initiatives were importing LPG, coal and more importantly Liquefied Natural Gas (LNG) to cover the deficit of natural gas. In the present scenario of depleting natural gas reserves and hesitation of mining own coal, experts observe that Bangladesh may grow over 90% dependent on imported primary fuel by 2030 to achieve the targeted power generation and other usage. Moreover, a paradigm shift of fuel choice requires Bangladesh phasing down use of coal and retarding growth of use of other fossil fuel. Renewable energy and non-carbonized green energy is the future. Though Bangladesh has no obligation for reducing emissions for its negligible carbon footprint but as a leader of Climate Vulnerable Forum it has to remain extremely careful about fuel choice. 

In the new normal world during COVID-19 pandemic price, volatility in the global fuel market has created significant challenges for developed, developing and least developed countries alike. Bangladesh power sector performing admirably over the past decade could achieve a national vision of providing access to power for all. But to achieve SDG7 prescribed goals by 2030, Bangladesh needs to ensure access to affordable, reliable, sustainable and modern energy to all. For that to happen, it is essential to increase substantially the share of renewable energy in the energy mix. It is also essential to significantly improve energy efficiency.

Present Situation

Bangladesh, unlike many other countries, is blessed with substantial reserves and significant prospects of primary fuel. But for different constraints, it was not possible to explore and exploit its own fuel for meeting the exponential growth of demand. In the wake of growing deficit, Bangladesh had no option but to start importing fuel (Coal, LNG, LPG and Petroleum Products). The present installed capacity of power including off-grid captive generation and grid-connected solar is 25,284MW. But for different constraints ranging from fuel supply deficits, issues of transmission and distribution and others, a significant portion of generation capacity remains idle. The highest demand served so far was 13,792MW on 27th April 2021. The present fuel per installed capacity is 52% natural gas, 32% liquid fuel, 8% coal, 6% power import, 1% hydro and 1% grid-connected solar. But for the deficit of gas and coal supply, the contribution of imported liquid fuel over the past two months has almost exceeded 45%. It is gathered from BPDB sources that over 2,000MW gas-based power generation remains idle for gas deficit. For the shortage of coal supply, only about one-third of the capacity is generated from Barapukuria mine mouth power plants. For various reasons, renewable energy generation remains far below the expected level. The present actual production of natural gas is 2310 MMCFD and depleting. The two FSRUs have supplied at one stage 800 MMCFD. But for a technical glitch in one FSRU, the present supply is about 350-400 MMCFD. The total 2710 MMCFD of gas supply is about 1500 MMCFD less than the demand.

Global Market Volatility of Primary Fuel

The world economy started recovering from the COVID-19 impacts in the final quarter of 2021 and suddenly created a huge surge of fuel demand. Extremely cold winter of the northern hemisphere and world community opting for natural gas as preferred interim fuel in transition from fossil fuel to renewable also caused gas and LNG price soaring. The price of coal and crude oil soared sky high also due to global and regional geopolitics. Coal prices climbed as high as US$260/ tonne, crude oil reached around US$ 90/bbl, spot price of LNG crossed US$50/MMBTU. Various research organizations forecast this higher trend of fuel price continuing at least till the third quarter of 2023. This price spiral is affecting Bangladesh's mission of achieving sustainable energy security. 

Bangladesh Challenges

The flat Bengal Basin for its shallow coastal region is not ideal for setting up import infrastructure like Japan, Korea, India and Pakistan. As such transportation of imported fuel at affordable cost is a major challenge. The price of energy and power in maturing market cannot also be made cost plus or market based. As such Bangladesh's going exclusively imported fuel-based from own fuel is a major challenge. Bangladesh cannot absorb price shock of volatile global market. It cannot also afford to absorb any disruption of supply chain of imported fuel. The penetration of renewable energy in energy mix is also low. The power and energy value chain are not yet modern and automated to minimize and restrict wastage. For different reasons the inordinate delays in exploring and exploiting own fuel resources is going to take at least 3-5 years.

Present Plan

The PSMP 2016 prescribed a target of 60,000MW generation capacity by 2041. The prescribed fuel mix is 35% coal (34% imported), 35% gas (own gas and LNG), 30% nuclear, renewable and power import. The Renewable Energy Road Map has a vision for 40% (24,000 MW) generation from RE by 2041.

Present Challenges

Rapidly depleting proven gas reserve has triggered an alarm bell. Own production steadily depleted from 2,750 MMCFD to 2,350 MMCFD over the past few years. Two FSRUs supplied 600 MMCFD RLNG on an average. These have created huge gas deficit causing issues for all end-users. In such a situation, the price surge of natural gas in global market shooting spot price of LNG from as low as US$2.0/MMBTU to US$50 stimulated concerns in the government. If we analyze, we find 78% of gas is supplied from own source and of the remaining 22%, only about 5% is required to be purchased from volatile spot market. This necessitates adjusting gas price. On the other hand, gas crisis required using about 4,000MW liquid fuel power generation keeping over 2,000MW gas-based power generation remaining idle. Bangladesh is in the catch 22 situation for ensuring affordable, sustainable supply of fuel and energy.

Bangladesh Options

Given the realities, Bangladesh cannot increase fuel supply from domestic sources significantly in less than 3-5 years. Apart from setting up additional FSRUs, all other options would take time. But there is a huge potential for growing big in RE and saving energy through enhancing energy efficiency. Bangladesh should also positively review mining of coal and expediting discussion for importing hydroelectricity from regional countries.

Considering all above and keeping in view the commitments for Net Zero, we recommend a fuel mix for 2041: 

Suggested Fuel Mix for 2041: 60,000 MW + 15% Reserve Margin

RE, offshore petroleum resources exploitation and nuclear energy must be considered as priority options.

Exploring and developing prospects of all forms of renewable energy, expediting initiative for the expansion of nuclear power generation at Rooppur and another plant in the Southern region, launching new offshore bidding round for PSC would expand capacity of local energy supply significantly by 2041. Introduction of net metering has created opportunity for rooftop solar power generation (industrial rooftop, rooftop solar in urban areas for feeding into power grid). There is a reasonable prospect for exploiting offshore wind power, setting up grid-connected solar power plants in isolated char areas and connecting these to the grid by submarine cable, expand solar irrigation, developing floating solar plants, hybrid solar plants. Huge unused lands of Bangladesh Railway, medians along 4/6-lane highways can have solar power generation panels. Special areas of SEZs can be allotted for solar power generation. Bangladesh can adopt modern battery technology that has been developed in Australia and EU countries for storage.

RE development must be taken as a social movement creating incentives for local private sector entrepreneurs. it is very much possible generating up to 24,000-25,000MW power from all forms of renewable energy by 2041 as conceptualized by Mujib Climate Prescriptive Plan. However, SREDA must be strengthened as regulator and single point contact for RE and EE. Offshore wind prospects should be exploited. Offshore wind power would open avenues for extensive hydrogen and oxygen production through hydrolysis of water.

Offshore Exploration

USGS–Petrobangla study and Norwegian Agency HCU study identified prospects for significant gas resource prospects. Substantial data and information from offshore exploration campaign in 1970s, seismic surveys findings from time to time by IOCs (ConocoPhilips and others) must be unlocked and fresh round of PSC bidding for deep offshore exploration must be launched by end 2022 reviewing the gas price provision.

Recommended Fuel Mix For 2041

Balanced and smart fuel mix would be essential for Bangladesh for sustainable energy security. Domestic fuel resources must continue contributing at least 60% for its easier accessibility and price affordability. Stresses would be on green and clean energy.

Gas (own+LNG): 20,000MW, Coal (own+import): 10,000MW, Power Import: 10,000MW, Renewable Energy (solar, wind, hybrid, hydrogen): 20,000MW and Nuclear Power: 10,000MW. Suggest for providing about 20% reserve for margin for catering contingencies.

We must remember not only for power generation, Bangladesh would require substantial cleaner fuel natural gas for planned industries in Special Economic Zone. At the same time, it has to continue feeding energy efficient fertilizer plants.

Power generation has options like using modern ultra super critical technology and using superior quality own coal resource, renewable energy. Nuclear power is another green energy, which Bangladesh should further develop. But one must bear in mind that for evacuating nuclear power and RE to national grid required updating and modernizing power grid would be essential.

For achieving the above, Bangladesh requires taking urgent political decision for starting mining own coal, strengthening BAPEX and Petrobangla for exploring own fuel, strengthening SREDA for championing RE and EE development. The government must also consider integrating local private sector in all segments of power and energy value chain, grid integration of solar and upgrading grid are required providing seamless access to RE and nuclear. Without a smart fuel mix, Bangladesh cannot ensure sustainable energy security. Without sustainable energy security, Bangladesh cannot achieve national vision of developed economy by 2041. The developing economy of Bangladesh cannot afford growing into an exclusive primary fuel importing country. It must explore and exploit all probable and possible own fuel prospects. The proper mix of own and imported fuel would keep cost of energy and fuel within affordable limit. Failing this, expected investment would not come. The economy would not grow and job opportunities would not expand.

The fuel mix so far dealt with fuel required for power generation only. But significant amount of fuel would be essential for feeding growth on industries in Bangladesh's mission of graduation from developing to developed economy. Bangladesh should also plan for fuel-efficient second and third generation industries. However, energy efficiency and economic use of energy would also be the keys.