Today’s global energy use is 10 times greater than that in the early 1900s, when wood, coal and animal power dominated. The world has found a much more efficient fuel in oil. The rapid transformation from coal to oil post-World War II did not happen because of a shortage of coal but as a result of oil’s efficient and multiple usage options. The world’s population then started growing at an astonishing rate, supported by efficient housing and agriculture – a direct result of oil-based modern energy.

Oil is still the bedrock of modern society but, from the early 1980s, concern for the environment started shifting public opinion on the use of fossil fuels, especially coal and oil. Use of natural gas, the least polluting fossil fuel, and the new renewables (solar, wind and geothermal) began to increase. In the meantime, the world’s population has grown from a mere 2 billion in 1950 to more than 7 billion, in a span of only seven decades. This asymptotic growth has created more pressure on the environment. In this context, strong advocacy as well as action led by Europe has shifted the world towards a more sustainable development path. The growth rate of renewable energy has outpaced that of all fossil fuels combined in the 2010s. Meanwhile, there have been improvements in efficiency – and the human race has always opted for efficient fuel options not because of any supply shortage but as a lifestyle choice.

Achieving carbon-neutral development is a complex process. The opportunity and options vary widely from country to country. Geographic location, population density, economic strength, available technology, skilled manpower and presence of land, wind, sun, water and other resources create a wide range of favourability for an energy transition. In this effort, the objectives for carbon-neutral development shift to the least polluting action.

Bangladesh is a land-scarce country with one of the highest population densities in the world. It also has very limited natural resources. The only major natural resource – natural gas – has supported the country’s substantial economic growth since the mid-1990s. The availability of cheap energy and labour has catapulted the country to middle-income status, from being one of the poorest countries globally at the time of its independence five decades ago. Progress has been especially significant in the past decade. In this process, the country has exhausted a large portion of its natural gas resources and is currently importing liquefied natural gas (LNG) and coal. Within a 15-year period, the country has thus turned from being energy-independent into a net energy-importing country. The resource crunch, along with financial and environmental pressure, has forced multiple revisions of its long-term energy plan.

Power system master plans

Since the beginning of the domestic gas shortage in 2007, ensuring adequate and affordable primary energy has been a major challenge for Bangladesh. The country uses 46% of its primary energy to produce electricity.[1] Naturally, planning to meet electricity demand will thus need to forecast the type and amount of primary energy the country will require. Before 2005, 94% of electricity was produced by means of local natural gas; currently, actual net power generation through gas is at about 71% (BPDB Annual Report 2019/20), despite 34% oil-based generation capacity and 54% gas-based plants.

In the early years, the government body mandated to deal with electricity-related issues, the Bangladesh Power Development Board (BPDB), made short-term plans aligned with the major national plans of the country, Bangladesh’s Five Year Plans. The first long-term planning was undertaken from 2000 with the help of a development partner, the Asian Development Bank (ADB).

The Power System Master Plan (PSMP) 2005 was based on the assumption that Bangladesh would have an unlimited supply of gas in the foreseeable future. The entire plan was based on a gas-based scenario, with limited use of coal and liquid fuel. A 300 mmcfd shortage of gas within two years of the proposed start date of the PSMP was thus a blatant failure by Petrobangla, the government-owned national oil company, with regard to predicting future gas production. This also demonstrates a lack of communication between Petrobangla and other relevant government agencies, such as the Power Board.

The gas deficit was clearer in March 2007 when there was a shortage of supply despite the commencement of production in Bibiyana Gas Field in north-eastern Bangladesh.[2] A government-formed committee had raised the likelihood of a shortage scenario in 2001 yet the authorities (Petrobangla) took no precautionary measures. Bangladesh then had to abandon the 20-year PSMP 2005 within three years of its introduction.

The next long-term plan, the new 20-year plan, the Power System Master Plan (PSMP) 2010, was produced with the assistance of the Japan International Cooperation Agency (JICA). This was a response to the previous gas shortage scenario, and a shift in primary energy supply planning took place. In this plan, 50% of power by 2030 would come from coal, of which 30% would be from local supplies. The plan put a heavy emphasis on coal to ensure energy security, in particular for reasons related to cost feasibility. Meanwhile, it missed out two major aspects: local coal promotion and the development of coal import infrastructure in the shallow seas off Bangladesh’s coast. Contracts for coal-based power plants of a total of about 12,000 MW capacity were awarded to both the public and the private sector. The PSMP 2010 again failed to predict the fuel mix, assuming 20% of power would come from coal in 2020, whereas in 2020 the fuel mix was dominated by gas and liquid fuel.[3]

Right after the introduction of the PSMP 2010, there was a need for a new plan for the power sector. The main reasons for this were as follows:

    1. A formal declaration by Bangladesh’s prime minister that no domestic coal would be extracted for the time being, indicating a policy shift;
    2. Higher economic growth projections (e.g. the 7th Five Year Plan of the time predicted 7.4% average growth between 2015 and 2020);
    3. Compensation for lost coal power by more power imports, additional nuclear and gas capacity and higher goals for renewables;
    4. Pressure from environmental groups to eliminate coal projects;
    5. Sector-wise demand growth planning that drew a more realistic picture of growth than in the PSMP 2010.[4]

Bangladesh’s power sector plans show that energy planning has evolved every five years, in terms of both primary energy usage and demand forecasts. They emphasise the dynamic nature of energy balancing. Changes to the context and the political vision, as well as unexpected events, can all drastically influence planning. And yet the power sector requires long-term investment commitment. For Bangladesh, the emphasis on coal in 2010 did attract some private sector investment but this was abandoned as a result of the change in fuel preference in 2016; meanwhile, difficulties within the country’s coal-importing infrastructure pressed power planners to reduce coal-based production in the renewed PSMP 2016.[5] For all this, despite the changes that have been made every five years, the actual energy mix has never matched the planned version. A revised PSMP is in progress.

The critical task of demand forecasting

The need to produce a plan every five years entails the difficult task of demand forecast. Conventional planning typically focuses on lowest cost options and is done from a purely financial perspective. Electricity demand is typically forecast with a time tag. Accordingly, a set of load power plants (peaking, intermediate and base) are planned, dominated by a few large power plants. Matching generation with actual demand is a challenge, typically ending with either a surplus or a shortage. Policy-makers are mostly concerned with megawatt (MW) units of installation instead of daily energy usage (MW/hour).

Looking at Bangladesh’s Power System Master Plans (PSMPs) for 2005, 2010 and 2016, we can compare 15 years of actual demand. The demand forecast in the PSMP 2005 was based on the historical correlation of electricity demand with gross domestic product (GDP). There were three forecasts of GDP growth through 2025.[6] In contrast, the PSMP 2010 assumed steady and sustained average economic growth of 6.9% for 20 years and projected a rather high estimate for generation requirement. The PSMP 2016 used average GDP growth of 6%.[7] This forecast conducted the best short-term matching with actual demand.

The tagging of the electricity growth with economic growth has multiple caveats. First of all, neither of the growths is linear.[8] Second, past correlations between GDP growth and electricity demand may not hold true, owing to policy changes. Undoubtedly, higher GDP growth will require increased electricity usage but the GDP growth prediction itself is subject to many uncertain components.

Another problem in Bangladesh relates to competition between energy sector plans. One big discrepancy is that Bangladesh’s 8th Five Year Plan (2021–2025) has allocated some $81 billion to the power sector and a mere $1.6 billion to the rest of the energy sector.

The PSMP 2016, a plan that was finalised in 2016, is being revised in 2020 under the 8th Five Year Plan, with estimates of demand of more than 10,000 MW for the year 2025. During peak summer 2020,[9] actual demand for electricity was about 13,000 MW whereas the projected requirement for 2021 (beginning of the 8th Five Year Plan period) is at 24,000 MW. This paves the way for surplus capacity.

Bangladesh’s five -year plans must reconcile with the Power System Master Plans (PSMPs). Otherwise, the efforts made to generate the latter will go to waste. On current trends, the PSMP 2016 seems to be a much better predictor than the plans of the past.

Surplus capacity

In Bangladesh’s policy circles, interest lies in power generation capacity and actual usage of power. Government policy targeted 24,000 MW capacity in 2021. Peak power production during the winter of 2020 was around 11,000 MW, while the designated agency, the Bangladesh Power Development Board (BPDB), claimed to have grid production capacity of 21,000 MW.[10] In Bangladesh, there is seemingly high prediction of demand for power and a corresponding increase in the de-rated capacity.[11]/[12]

The clear mismatch between demand for and supply of power needs to be examined. When any plan predicts a demand, it warrants that actual generation capacity should be able to supply the required power. In an efficient system, a 10% surplus capacity is widely accepted industry practice. Bangladesh’s current 8th Five Year Plan target of achieving 24,000 MW capacity by 2021 is almost 7,000 MW more than the previous PSMP 2010 prediction of demand and 11,000 MW more than that in the PSMP 2016. This is thus a high target and may be driven by political ambition – but it was supported by a buoyant economy that grew at above 7.5% for several years before covid-19 hit in 2020.

So why has electricity demand not grown with the pace of the economy? If we look into sector-wise energy growth along with GDP growth, then the correlation between actual electricity demand growth and GDP becomes clear. Industrial growth has not matched GDP growth. While residential demand for power has grown steadily, industrial demand has stagnated since 2017.[13] Meanwhile, residential growth has not had any measurable impact on the economy. In the absence of industrial growth, it is public sector investment that has made a major contribution to GDP growth.[14]

In the Bangladeshi context, there is a serious gap in power generation that varies by season. A close examination of a summer day’s production helps illustrate the true situation of generation capacity. Let’s pick the day that saw the highest power generation in 2020, 6 September, with 12,892 MW during the evening peak hour.

On 6 September 2020, out of nearly 20,000 MW capacity, effective capacity was around 15,000 MW.[15] This means there was 13% excess capacity. As such, if Bangladesh is not able to generate 5,000 MW during the peak consumption season, this is a red flag for policy-makers. Measures have to be taken to ensure an adequate fuel supply and to retire inefficient units before starting new power plants. Otherwise, the Bangladesh Power Development Board (BPDB) will have to carry a hefty capacity cost that the consumers will eventually have to pay.

During the winter in Bangladesh, the excess power generation situation looks worse. The lowest demand in 2020 was on 4 January, at just 7,537 MW. Comparing Bangladesh’s highest and lowest demand of 2020, there is a gap of 5,500 MW. In other words, there is an enormous gap in demand between summer and the winter.

The average variation in seasonal demand ranges from 3,000 to 3,500 MW. The difference owes to the cooling load from air-conditioning and fans and the low efficiency of power generation during the hot summer. Currently, Bangladesh has no other option but to keep this excess capacity on standby during the four to five months of winter. This problem has existed for several years now.

Meeting the challenge

The foremost challenge for Bangladesh’s power sector lies in demand forecasting. Supply planning must be driven entirely by this without any influence from political or vested interests. If the long-term 20-year master plan is revised every five years, this means there is really no merit in the original plan. Unfortunately, it has been seen that plans based on economic elasticity have not been able to reasonably predict electricity growth, even for a five-year period. In Bangladesh, current power sector growth is dominated by residential demand as a result of urbanization.

Social scientists monitor urban migration, housing growth and purchasing capacity. A model could be developed to simulate electricity demand growth in the domestic sector more precisely. This could target the next five years. Similarly, a sub-sectoral analysis of industries could accurately predict the total industrial demand for the next five years. For example, Bangladesh’s Ministry of Industries, with the help of the business associations, could identify the number of new projects in major sectors.[16] Once a sub-sectoral assessment for the country has been conducted, it would be possible to track both power and energy demand by industry. Agricultural, commercial and other demands can be assessed by means of a trend analysis.

Meanwhile, the power sector’s planning should be reoriented. A 10-year moving plan with a five-year outlay of actionable details could be formulated. This could include an additional five years of layout, including probable fuel mix and financing options. It could inculcate a close monitoring mechanism to accommodate changes.[17]

Bangladesh may consider taking up Integrated Resource Planning (IRP) to prepare its energy options. This is a bottom-up energy sector planning strategy that prioritises public goods, developed by consulting all community-level stakeholders. In many countries, IRP features are a requirement by law. In Bangladesh, unfortunately, there has not been an efficiency drive – on either the supply or the demand side. Only recently, after the creation of a government agency for promoting renewable energy, the Sustainable and Renewable Energy Development Authority (SREDA), was a serious study carried out for the national Energy Efficiency and Conservation (EE&C) Master Plan.

In the context of IRP, an examination of electricity demand forecasting for Bangladesh reveals a huge knowledge gap in planning. This gap exists because of a lack of ground-level data. There is no systematic analysis of consumer usage.[18] IRP takes a ground-up approach that independently predicts energy demand growth.

Bangladesh should be cautious in approving megaprojects in the future. In the next five years, if power sector megaprojects that are in the pipeline[19] start supplying to the national power grid, Bangladesh will have to double its electricity consumption within the period in order to use it all. This scenario would be a nightmare situation. In reality, a huge amount of excess electricity will be sitting idle, costing an enormous amount to the exchequer. Bangladesh could save a vast amount of resources, ease an escalation in the power tariff and avoid embarrassment by undertaking micro-analysis for a bottom-up demand forecast. This will be a painstaking task and involve seriously considering the cheaper demand side of the national EE&C initiative.

Instead of adding large power projects, an integrated system could be set up. This could identify the present load centres and future growth areas for the least-cost option. A developing country like Bangladesh cannot afford conventional power development planning. The cost is too high. Meanwhile, by carrying out IRP, Bangladesh can follow a new path in the world community. This would truly be an opportunity to step into a new world, to leave a more liveable planet for the next generation.

Note: Some discrepancies in figures may be seen because of the use of different growth rates indicated in the respective policy document.

[1]  Excluding biofuel and imported electricity.
[2] Bibiyana Gas Field started producing 400 mmcfd in 2007 and yet there was a supply deficit of 300 mmcfd.
[3] With the addition of Payra Coal Power Plant in southern Bangladesh, coal power production increased the coal share to about 6–7%.
[4] The renewed PSMP 2015 went through a rigorous exercise of sector-wise analysis, learning from the mistakes of the PSMP 2010, and was finalised as the PSMP 2016, again with the help of JICA. The new plan predicted an optimal fuel mix for 2041 as 35% gas, 35% coal, 15% power imports/renewables, 10% nuclear and 5% oil.
[5] The 35% coal-based production envisioned in the 2016 plan was replaced that with imported LNG-based power.
[6] The Base Case used GDP figures whose compound average annual growth rate was 5.2%. The Low Case GDP figures’ average annual rate was 4.5%. The High Case scenario is based on the government’s policy-based forecast with an annual average GDP growth rate of 8%.
[7] Assuming GDP growth of 8% in 2020 and 4.9% in 2041. This was done with a-sector wise bottom-up growth prediction that also correlated with an economic elasticity model.
[8] The elasticity factor cannot be applied uniformly across the timeline.
[9] Without covid-19 era suppression of electricity consumption estimated at 14,000 MW.
[10] If captive and all types of solar power are added to the total, the capacity almost reaches the projected target.
[11] De-rated capacity is reduced capacity, from installed or plate capacity, owing to ageing or other reasons.
[12] In 2019, there was about 5000 MW excess capacity over the actual peak summer demand.
[13] The GDP elasticity of 1.27 did not hold.
[14] The tariff difference between captive and grid power along with unreliability and lack of quality assurance have kept the industries from getting grid power connection. As a result, power demand forecast got decoupled from economic growth contributing part of the current surplus.
[15] On 6 September 2020, Bangladesh was unable to produce a total of 3,607 MW of electricity owing to fuel shortages or shutdowns. That leaves 16,285 MW capacity. If an average generation ability of 90% is considered, then a maximum of 14,859 MW of electricity could have been generated on the day. The potential demand on that day was 13,000 MW.
[16] Sectors such as ceramics, leather, pharmaceuticals, textiles and garments, cement, rerolling and steel mills. Various stages of planning, implementation and completion can be accounted for.
[17] Measures such as annual reviews or updates will be essential.
[18] Changes in technology, efficiency improvements, demographic changes, changes in the energy intensity of certain growth areas and many other factors make GDP to electricity elasticity prediction very uncertain.
[19] Payra Power Plant, Rampal Coal Plant, Matarbari Power Plant and Rooppur Nuclear Plant, along with the proposed Adani and Reliance power projects from India.


Photo ©️ Mahmud Hossain Opu
Mohammad Tamim
Mohammad Tamim is a professor at Bangladesh University of Engineering and Technology (BUET). He is an engineer and an energy policy analyst. He is a fellow at the Institute of Engineers, Bangladesh. He was Pro-Vice Chancellor of BRAC University. He worked as a consultant at the World Bank, JICA and USAID and also served as a special assistant on power and energy to the Chief Adviser of the Government of Bangladesh. He pursued his post-graduate studies in petroleum engineering at the University of Alberta.