Tackling energy problems will be tricky

The energy advisor has stated on the first day of joining office that the Speedy Supply of Power and Energy (Special Provision) has been put on hold with the promise of not raising tariffs on energy prices and alongside bringing past contracts under review. This is a welcome move but the fact remains that the country is presently burdened with a US$5.0 billion energy-debt and it is the task of the interim government to navigate the country out of this situation.

As stated, umpteen number of times by energy experts in the country, the open flouting of rules that the Act allowed in terms of public procurement had become the norm and it created the perfect opportunity for a total lack of oversight in procurement of energy supplies and power contracts. The full scope of the graft that had occurred over the course of more than a decade will remain a work in progress but that is a separate subject of discussion.

While arguments have been made both in last parliament and in the public sphere that there is nothing wrong with 'capacity payment', one cannot overlook the public disclosure made by the former minister for energy and power that the state had paid Tk 1.06 trillion as capacity payment to the private energy sector. The crux of the problem lies elsewhere i.e. correct demand forecasting. For years, policymakers went on building one power plant after another in what is now totally obvious - over and above the power needs of the economy! As capacity payment or charge takes into account return on investment, interest payments on loans (both domestic and foreign), capacity payment as a whole went on rising and today, by an average estimate the energy sector is burdened with around 10,000 MW (megawatts) of excess power generation capacity.

Again, as energy planners wilfully chose to divert energy sourcing from national to international at the expense of sustained exploration of own natural resources and concentrating on an import-driven fuel supply, external shocks like a war in Europe pushed the production cost of energy through the roof. None of this helps the present government though because it is now burdened with multi-billion-dollar debt in foreign currency because these energy supplies have to be paid in foreign exchange.

The question is what will the government do about these unnecessary power plants, particularly those that were commissioned after 2017? Since, there is no need for a lot of these plants, what will the decision about keeping them operational? Whatever may be the contractual obligation under the said Act, can the country afford to keep paying capacity charge? The answer obviously is a resounding NO! This is evidenced by events over the last one year when the previous government had resorted to taking short-term hard interest loans from foreign institutions simply to defray the payments to foreign suppliers of liquefied natural gas (LNG) and to meet import of fossil fuels. The situation today has taken years in the making and by putting a cap on energy prices for now will not make the problem go away.

Many years ago, Pakistan had followed the same path to prove power for its economy. It had landed in the same mess as Bangladesh. A skewed energy policy that was overly dependent on independent power plants which increasingly became the dominant suppliers of energy! That country too had reached a situation where it couldn't afford to pay off the producers of power or the suppliers of energy and indeed the country was going bankrupt and this was avoided by a generous bailout from the Kingdom of Saudi Arabia.

Bangladesh presently isn't on the verge of bankruptcy but it is in serious economic trouble. As pointed out by numerous energy experts in the country, there has to be a shift in policy to take energy exploration seriously. The country is now energy-starved. Entire sections of industry are now facing ruin because natural gas production in the country has been waning for some years now. With state-owned exploration companies effectively sidelined as policymakers had moved towards procuring energy supplies from the international market, natural gas can no longer be supplied to either industry or power generating plants. For more than a decade, we have become less energy-independent and that is where the focus must now return. The energy advisor is tasked with the unenviable job of rejuvenating the exploration of on-shore and off-shore natural gas. While it may be politically expedient for some in government to forgo the issue of coal extraction, can Bangladesh be choosy? Pragmatism demands that Bangladesh must explore all its domestic natural resources if it wishes to preserve the economy and move forward.

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