The World Bank yesterday called for reforms in the power and energy sectors to achieve energy efficiency and meet Bangladesh’s commitment to decarbonize its economy.
Currently, the country’s electricity sector is dominated by fossil fuel-based generation. Nearly 70% of energy consumption in 2021 was natural gas and only 1% came from renewable energies.
For all the latest news, follow the Daily Star’s Google News channel.
“Energy tariffs and gas prices must adequately reflect cost to encourage energy efficiency and invite investment in less carbon-intensive generation,” the Washington-based multilateral lender said in a statement. report titled “Country Climate and Development Report for Bangladesh”.
Low tariffs hurt the financial performance of utilities and discourage investment in more sustainable or efficient energy sources.
Power plants with captive generators, having access to cheap gas, can produce their own electricity at less than 2.5 Tk per kilowatt hour (kWh), while industry pays 7.5 Tk per kWh for electricity from the network, says the report, which was unveiled yesterday.
Sub-optimal gas allocation practices magnify the problem, with allocation to inefficient public power plants and energy-intensive facilities, such as fertilizer plants, he said.
Rental oil-fired power plants, which are expensive and highly polluting, contribute about 8% to the electricity mix on an energy basis at tariffs four to six times higher than domestic gas-fired power plants that use new technologies.
Transmission bottlenecks prevent lower-cost electricity produced by less carbon-intensive power plants from reaching the end consumer and could prevent integration of the necessary high volume of renewable energy generation, according to the report.
While installed generation capacity has quadrupled since 2009, transmission capacity has only increased by 40% and more efficient high voltage lines represent a significantly small share.
Private participation in transmission sector activities can support improved operational and financial performance of distribution.
Short-term, cost-effective measures can be taken to improve energy efficiency, reduce the carbon intensity of the energy sector and improve carbon competitiveness.
Methane (CH4) and carbon dioxide (CO2) emissions in the upstream oil and gas sector (production, gathering, processing, refining, transportation and distribution) contribute significantly to Bangladesh’s greenhouse gas emissions.
Most of the country’s CO2 emissions come from the production and use of oil and gas, which generated nearly 84% of the country’s total emissions in 2020. CH4 emissions from oil and gas operations accounted for about 70 % of total CH4 emissions from the energy sector.
“Gas consumption in Bangladesh has never been metered for residential consumption. As a result, there are few incentives for efficient use of this resource and potential overcharging of the most vulnerable groups,” the report says.
In 2020, Bangladesh adopted a program to begin this process at the residential level.
“Progress has been positive but needs to be accelerated, with at least 2 million meters needed over the next 2-3 years.”
For industrial consumers who benefit from preferential tariffs, unauthorized connections from the meter add up to looting at advantageous tariffs for other purposes, according to the report.
While the government has recently increased gas tariffs, further work is needed to align incentives and monitoring capabilities to ensure more efficient use of the resource.
Accelerating the deployment of gas meters for residential consumers, piloting smart meters for industrial consumers and integrating better monitoring systems into the gas distribution network will help, while direct cash transfers for low-income deciles will help improve affordability.
“Until all gas consumption in the country is properly measured, it will be difficult to determine, let alone control, how and where gas losses and leaks occur in the system.”
The industrial sector must also be decarbonized, he said.
Bangladesh imports nearly all of its cement feedstock, including emissions-intensive clinker, and the industry is supported by a 21% tariff. Globally, cement companies are testing green and energy-efficient technologies.
Subsequently, the WB called for enabling policies such as phasing out energy subsidies; ensuring green codes and standards for the construction industry, solid waste management to encourage recycling and reducing import tariffs will increase efficiency and spur competition and innovation.
The steel industry is an energy-intensive industry, protected by tariffs and dependent on imported inputs.
Energy savings of 10-25% can come from switching to more efficient equipment and circular economy solutions could help decarbonize the steel industry.
The inland transport sector is the largest consumer of petroleum products, with a total share of 63%, and is supported by “implicit subsidies” on fuel estimated at $1.8 billion.
“As a result, the pump price in Bangladesh is lower than in India, Bhutan and Nepal.”
Removing price distortions can reduce inefficiencies in the trucking industry, such as empty hauling, which accounts for 35% of all trucks.
A carbon tax should be levied instead, he suggested.
As Bangladesh already has a fuel tax system, introducing an additional carbon tax on energy would only require limited administrative capacity with little scope for non-compliance, he said. declared.