The Financial Express

Energy Trilemma: The options for Bangladesh

Energy Trilemma: The options for Bangladesh

Bangladesh is ranked 114th out of 128 countries in the 2019 World Energy Trilemma Index by the World Energy Council. Conceptually, 'energy trilemma' involves the complex tradeoffs among three core dimensions i.e.energy security, energy equity and environmental sustainability. For the specification, energy security can be defined as having a reliable and adequate supply of energy at reasonable prices. Energy equity, on the other hand, concerns accessibility and affordability of energy within a country. The third horn of the trilemma mainly focuses on climate change mitigation. In the reality of consistent energy insecurity and energy equity issues faced by developing countries, Bangladesh needs to seriously consider the environmental sustainability aspects in no times, given the rapid industrialisation and development work taking place.

Looking back to the World Energy Trilemma Index which ranks countries according to a score out of 100, the higher score represents better position. The 2019 index is special from the usual yearly index in that it captures the effects of policies countries have taken in the said dimensions over the past two decades. The overall Trilemma score for Bangladesh in 2019 is 41.1. Although the score in energy security and environmental sustainability remained almost at the baseline level of the year 2000, the score of energy equity increased by about 112% during the 20-year period. Thanks to the increased access to electricity, modern level energy and more affordability to energy that contributes to the positive improvement in the equity dimension. However, declined energy storage capacity and increasing dependence on energy imports negatively contribute to the security dimension. The positive indication in the sustainability dimension started in 2017 that can be further amplified through energy efficiency.

With the linked, fast and ever-changing energy systems worldwide, the task of balancing the dimensions of energy trilemma has become more complicated for the individual countries. Say for example, feeding the energy demand relating to rapid industrialisation in a developing country has the compulsory by-product of 'pollution' and no country can ignore such pollution in the name of a matter in its own territory, because the effect of pollution is no longer 'individual'. In this context, the discussion of energy trilemma from Bangladesh perspective necessitates starting the analysis by considering a energy profile of the country. 

Currently there are almost 90 per cent of the population of Bangladesh having access to electricity with the country's total installed electricity generation capacity of 21,009.28 MW where the share of Renewable Energy is only 1.46 per cent (SREDA, 2019). As stated in the Power Sector Master Plan (2016), the government looks to raise the generation capacity to 24,000 MW by 2021 and 40,000 MW by 2030. Moreover, 71 per cent of the commercial energy demand is met from the natural gas of the country having recoverable net of 12.11 trillion cubic feet. It is worth mentioning that Bangladesh has a reserve of about 13.21 million metric tones of fuel oil.

Although 'policy trilemma' (or impossible trinity) in international economics posits that all three policies i.e. fixed foreign exchange rate, free capital movement and monetary autonomy cannot happen at a time, the 'energy trilemma' demonstrates a country has to achieve energy security, energy equity and environmental sustainability simultaneously. Hence, Bangladesh has the following challenges to overcome for properly balancing the energy trilemma issues for the next decade:

1) Energy Security: the primary challenge in this dimension is to reduce the escalating energy import. One possible solution, in this regard, might be utilising local primary energy sources including local coal and exploration of more local energy sources. Geological evaluation suggests that Bangladesh has more unexplored gas wells than what we currently have. Alternatively, concentrating more on local energy is expected to reduce the pressure on foreign exchange reserve that can be used for the fulfilment of competing needs. Secondly, Bangladesh has the persistent drawback in the energy storage capacity. As a result, improving the infrastructure for energy storage is a dire need. For example, creating more microgrids in the power sector and constructing new refineries in the oil sector may be named the few of the possible available solutions. Moreover, Bangladesh has to seriously think about diversity of electricity generation by considering its strengths and weaknesses. 

2) Energy Equity: Notably, Bangladesh ranked one of the top 10 improvers in the energy equity dimension in 2019 World Energy Trilemma Index. To make the trend persistent, the authorities have more to do in the sector including ensuring quality energy access and affordability. Accessing the 'modern energy' by majority of its population requires prudent policies to make modern energy available at demand, market will do the rest. Furthermore, affordability of energy is an issue. It is important to think of affordability of energy prices by the different income groups rather than freeing the 'steering' fully to the market since a balance is believed to be more fruitful in emerging economies.

3) Environmental Sustainability: The contribution of renewable energy in the total electricity generation capacity of the country hints the available scope to work on environmental sustainability dimension. With the changing intensity of industrial sector, from labour-intensive to energy-intensive area and depleting energy reserves of Bangladesh, 'energy efficiency' may be a solution for sustainability. Besides, changing energy usage behaviour will have significant impact. On top of that we have to opt for environment-friendly technology for electricity generation to meet the rising demand, for instance, for the sake of future good. For attaining the goal of reducing the energy intensity by 20% in 2030 compared to the 2013 level as mentioned in the Energy Efficiency and Conservation Master Plan, Bangladesh needs to cut energy usage per unit of GDP consistently.

Picking the right choice of three trilemma dimensions requires a consideration of multifarious inter-linked factors. For example, whether countries should consider energy security and/or energy equity before addressing environmental sustainability issues is a classical question. Given the increasing dependence of countries on each other, an emerging economy like ours has to think of environmental issues while ensuring energy security and the required energy equity in parallel.

Muhammad Hasanujzaman is Deputy Director of the Bangladesh Bank.

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