Power sector must belong to us, not conglomerates and foreign actors

Moshahida Sultana

After becoming heavily indebted to foreign countries by introducing coal, nuclear, and liquefied natural gas (LNG) into the energy mix, the country began to understand that the installed capacity exceeded our needs. As a result, people are well aware of the capacity charge, which gradually transfers their money to the private sector. Although the process began in early 2010, public sentiment against capacity charges grew in recent years, as increasing installed capacity failed to alleviate the crisis, owing mostly to the over-reliance on imported energy sources such as coal, LNG, and oil.

With the collapse of the autocratic regime and appointment of a pro-renewable power and energy adviser, there is no longer a need to emphasise the importance of renewable energy sources. Instead, the current challenge lies in effectively implementing this goal. With 6,604 MW (21.39 percent of the energy mix) coal-based, 6604 MW (21.39 percent) oil and diesel-based, and 12,194 MW (39.5 percent) natural gas and LNG-based power capacity, Bangladesh already has excess capacity. In addition, a 2,400-MW nuclear power plant is currently under construction and scheduled for commissioning in 2026. When we focus on adding new solar capacity, we also need to consider the existing capacity.

We must reflect on past events to understand the reasons behind the adoption of coal, oil, LNG, and nuclear power. This will enable us to clearly formulate short-term and long-term strategies to overcome the current crisis and break the vicious cycle of energy insecurity.

We can attribute the current situation to a series of incremental policies implemented to address crises at different stages. Since independence, the country has never had a clear vision for implementing a long-term power and energy plan. When the power sector reform in the 1990s failed to resolve the electricity crisis, despite Bangladesh's abundant gas resource potential at that time, the government recognised the necessity for a plan. As a result, Bangladesh commissioned Japan International Cooperation Agency (JICA) to create its first master plan in 2005. This plan included proposals to diversify energy sources by incorporating LNG and domestic coal extraction. The same agency prepared successive master plans in 2010, 2016, 2018 (a revised one), and 2022 (latest). The common policies suggested in those plans primarily focused on increasing reliance on imported energy.

Even throughout the 2010s, when the cost of solar was declining worldwide, the JICA plans did not stress on the need for solar adoption. Bangladesh adopted a systematic planning approach that led to its reliance on imported energy and energy infrastructure, such as oil, LNG, coal, and nuclear power. Japan particularly had an interest in promoting coal and LNG because of its strategic decision to create a market for coal technology as well as LNG trade and shipping.

Meanwhile, despite strong opposition from people, Bangladesh built the Rampal power plant near the Sundarbans. The autocratic government, backed by India’s strategic interest in coal projects, remained stubborn throughout the entire period. It initially emphasised the cost-effectiveness of coal, the environmental benefits of super-ultra-critical technology, and an environmental management programme to reduce environmental risks. But the administration failed to establish a firm consensus with society. Eventually, it turned out that coal became expensive, and coal supply got uncertain due to scarce foreign exchange reserves. The current predicament involves determining the course of action for this project, given the substantial financial investment.

I believe we should address not just the invested funds but also the project's future operational expenses, coal import payments, environmental management expenses, and above all, the impact of the coal power plant on the Sundarbans. The government may consider cancelling the project and replacing it with large utility-scale solar power. This will not only save the Sundarbans and foreign currency, but it will also set an example of a carbon-free initiative.

The Rooppur power plant is another questionable project that started during the Hasina government's tenure. A report from the website “Global Defense Corp” has raised a new controversy about embezzlement of about $5 billion from the $12.65-billion project. The report lacks credibility because it claims that funds were transferred to a foreign account without providing any tangible proof of embezzlement. The Russian ambassador has also denounced it as a rumour.

However, due to the questionable cost escalation, the report, coupled with the ambassador's subsequent reaction, prompts a review of the project's expenses. In February 2011, when the first agreement was signed, the initial estimated cost was $1.5 billion - $2 billion for each unit. In 2014, the Ministry of Science and Technology proposed a cost of $6 billion. In May 2016, the cost reached $12.65 billion. This unprecedented change within just five years is questionable. Therefore, the government's lack of accountability and transparency during the project's inception necessitates an investigation into this case.

The interim government can form an independent committee to investigate the cases of overpricing. All relevant authorities must examine the records of purchase orders, invoices, and money transfers in a transparent manner. Even the pillow corruption, despite its meagre amount, warrants scrutiny to prevent overpricing. It is a serious issue because people will have to pay the extra money to Russia in the future. The nation must witness a trial of all those involved in this project's corruption.

Now, let us delve into the question of how the interim government will delegate decisions of phasing out existing plants and replacing them with solar and wind power. Can we just keep adding solar power plants and not care about the old establishments? Should we allow the market to determine which power plants to phase out? Mentionable, the need to balance demand and supply did not drive the construction of power plants during Hasina’s 15-year regime. The suppliers and their partners' rent-seeking motivations were primarily responsible. Conscious policy choice is necessary now, but this has become more difficult than ever because of the rapidly depleting foreign currency reserve and our diminishing ability to import expensive energy from the international market. We find ourselves firmly locked-in in the use of fossil fuels. The country has already invested billions of dollars and secured substantial loans for coal, LNG, and nuclear projects while neglecting exploration of domestic gas. Therefore, there is no scope for waiting to see the inefficient and expensive suppliers phasing out automatically without any government intervention.

Based on the aforementioned observations, I have identified several crucial tasks that the interim government can undertake. The first can be establishing a planning committee, which should include individuals from diverse backgrounds such as engineers, researchers, data analysts, accountants, and representatives from various organisations such as the Power Development Board (PDB), Sustainable Renewable Energy Development Authority (SREDA), Petrobangla, BAPEX, Power Cell, Hydrocarbon Unit, as well as academics, social scientists, entrepreneurs, politicians, civil society, and planners. Their job will be to deliver an immediate action plan to optimise energy use, subject to existing resource constraints (foreign currency and annual budget). This will allow us to maximise electricity generation by minimising foreign currency expenditure.

Even if the interim government does not assume responsibility for an extended period, it is its duty to establish an accountability structure and develop a check-and-balance mechanism to prevent various interest groups from exploiting the situation during a crisis. In the crisis period, we have witnessed various rental and quick rental owners take advantage of non-competitive bidding in the name of immediate crisis resolution, thereby benefiting from both subsidies and capacity charges. In this respect, we welcome the government's suspension of the quick enhancement of the Power and Energy Supply (Special) Act 2010.

However, this is not enough to ensure long-term energy security. To avoid having to rely on a foreign country to develop our own plan, the government must establish an institutional system for long-term planning. Our past experience shows that one incremental policy leads to another crisis, and a hurriedly taken incremental solution leads to the next crisis. Our power and energy sectors suffered a long, vicious cycle of crises. Only national capacity building may solve this problem in a systematic way. We need to develop the capacity of BAPEX with greater effort.

This year, the state-run oil, gas, and mineral corporation Petrobangla floated an offshore bid in 2024 to explore the country’s maritime area for hydrocarbons. This initiative, in response to the gas crisis, represents an attempt to explore domestic gas. Even if the interim government does not have the jurisdiction to sign a production-sharing contract, it may form an independent committee to explore whether, instead of signing a PSC with a foreign company, Petrobangla can lead the exploration by having full control over the management and contracting out some of the tasks to international companies. The same committee may reevaluate the contract with the Indian company ONGC and disclose the progress made since signing it in 2014. This committee must also re-evaluate the contracts with Gazprom, which was assigned to dig wells in the gas fields at a very high cost.

The government's decision to cancel S Alam Group's proposal to install Eastern Refinery Limited (ERL) Unit-2 is definitely a praiseworthy initiative. However, this should not lead to any other private company getting the contract. The public sector should have full control over the construction and management of the second refinery unit.

I welcome the government suspending a recent amendment of Bangladesh Energy Regulatory Commission (BERC) Act, which restricted people’s voice in price change. In addition to this, the government should also restructure BERC and identify a mechanism through which it can ensure democratic institutional practices in the decision-making process.

The interim government prioritises renewable energy generation, but it is also important to remember that implementing renewable energy should not come at the expense of the environment and society. The zero-carbon target should encourage no enforced evictions or unlawful use of agricultural land. Bangladesh needs to re-evaluate all the power and energy sector agreements with private and foreign entities and publish a report on why the cost of solar has been high. We learn from various sources that the cost of land, high tariffs, and costly panels are some of the reasons for the high cost of solar. However, there is no clear data on the existing solar plants to explain why the cost is high for utility-scale solar power. Should the government demonstrate a serious commitment to solar adoption, we must analyse the cost components of all existing solar plants to determine the justification of the existing purchasing power agreements.

A lack of societal trust stemming from previous unsuccessful rooftop projects can explain people's reluctance to install solar rooftops. The existence of syndicates selling low-quality rooftop solar panels also lowered public trust. The government needs to devise a strategy to cultivate this trust. We can encourage more people to use rooftop solar in residential, administrative, and industrial buildings by setting some good examples.

Society has been suffering from collective trauma for many years. People are deeply frustrated by the revelation of money leakage and costly and low-quality services. For an interim government to bring back trust is a real challenge. However, it is not impossible if the government stays on the right track and restructures the institutions to ensure mechanisms of accountability and transparency. Only by doing so can the government value the lives of hundreds of martyrs and many more injured in the July uprising. The debt to the martyrs is now much higher than the debt to the foreign countries and their banks. While taking future decisions we must not forget that.

Moshahida Sultana is assistant professor of Department of Accounting and Information Systems, University of Dhaka.

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