The new interim government of Bangladesh faces an urgent need to reform Bangladesh's power and energy sector. These reforms must address a broad range of areas, including policies, laws, and government bodies, as well as essential operational reforms. A critical component of this reform agenda will be significantly enhancing transparency and accountability across the sector. Some of the reforms include repealing the 'Quick Enhancement of Electricity and Energy Supply (Special Provision) Act, 2010' and amending the Bangladesh Energy Regulatory Commission (BERC) Act, 2003.

Government bodies like Sustainable and Renewable Energy Development Authority (SREDA) require major modification and upgradation, taking the precedence of other successful countries such as India, China, UK. It should become a fully functional authority, led by a full 'Secretary,' with dedicated wings for solar, wind, and other renewable technologies. Operational reforms should focus on phasing out inefficient and costly power plants. Restoring BERC's institutional power is crucial for a transparent and accountable sector. The government must ensure transparency in procurement processes by disclosing the bidding and procurement details of power plants and address financial irregularities in government entities by disclosing the financial accounts of public authorities.

These observations emerged at the media briefing titled 'Reforms in the power and energy sector: Recommendations of CPD' on Sunday, 18 August, 2024, organised by the Centre for Policy Dialogue (CPD). The media briefing was based on a study titled 'Power and Energy Sector Reform: Agenda for the Interim Government' conducted by CPD's power and energy study team. The keynote presentation was delivered by Dr Khondaker Golam Moazzem, Research Director, CPD.

In his keynote presentation, he called for a major revision of the Integrated Energy and Power Master Plan (IEPMP), emphasising that without revising it, the energy transition in the power and energy sector will not head in the right direction in the coming years.

"The Perspective Plan of Bangladesh (2021-2041), needs to be revised from the perspective of energy transition," said the research director. He elaborated that since the IEPMP needs revision, the Perspective Plan must be updated accordingly to remain relevant and effective. Some key objectives and targets in the Perspective Plan are now considered unrealistic. For instance, the goal of upgrading grid-based electricity generation capacity to 56,734 MW by 2041 is overly ambitious and risks leading to a misallocation of resources. Current estimates suggest that electricity demand will be significantly lower, making such expansion unnecessary.

Dr Moazzem underscored that the amended BERC Act of 2023 has significantly weakened the BERC by stripping it of most of its institutional powers. Previously, BERC had broad authority, including conducting energy audits, standardising equipment, introducing competitive bidding, issuing licences for energy-related activities, and enforcing regulations on private entities. Despite these powers, BERC often failed to enforce its responsibilities effectively. The current situation calls for a major revision of the BERC Act to restore its earlier powers and ensure it has the full authority and functionality needed to regulate the energy sector effectively.

"To reduce the fiscal and financial burden, the government should revise contracts with Independent Power Producers (IPPs) to adopt a 'no electricity, no pay' model without capacity payment clauses," recommended Dr Moazzem. This approach would also involve withdrawing subsidies and avoiding further electricity tariff increases, specifically by removing capacity payment provisions. Additionally, revising International Monetary Fund (IMF) conditionalities and reassessing the market-based pricing formula are essential for establishing a fairer pricing system. The power sector should focus on decarbonisation by promoting renewable energy sources.

The research director urged the interim government to take immediate action to gradually transition towards achieving a 40 percent renewable energy target by 2041. The transition can be divided into five stages, with key activities outlined for the short to medium term, or first three phases, by CPD.

The Phase 1 should focus on revising outdated policies like the National Energy Policy of 2004, amending the BERC Act to strengthen its capacity, and ensuring transparency in procurement processes. This phase will also emphasise phasing out inefficient power plants, revising the Annual Development Programme (ADP) allocation to prioritise renewable energy, and addressing issues with faulty prepaid metres.

Research, development, and demonstration efforts should be enhanced in Phase 2. This includes overhauling SREDA as the lead authority for renewable energy, establishing dedicated research institutions, and launching pilot projects to test renewable technologies. Public awareness campaigns and initiatives to attract foreign investment are also crucial in this phase.

The Phase 3 should focus on infrastructure development, including upgrading the existing grid to a Smart Grid, prioritising domestic gas exploration over Liquefied natural gas (LNG) imports, and scaling up renewable energy projects. The tax and incentive structure should be revised to support renewable energy-based power generation.

Commendable urgency

On his first day in office, Fauzul Kabir Khan, adviser to the Ministry of Power, Energy, and Mineral Resources, suspended ongoing activities under the Quick Enhancement of Electricity and Energy Supply (Special Provisions) Act 2010 (amended in 2021), according to a press release issued by the ministry.

Additionally, the government has suspended the power to set electricity and gas prices under Section 34 of the Bangladesh Energy Regulatory Commission (Amendment) Act, 2023.

The adviser, a former secretary to the ministry, indicated that, if necessary, these two laws would be reviewed and potentially revised or repealed. Going forward, all procurement processes will adhere to the provisions of the Public Procurement Act, 2006, and the Public Procurement Rules, 2008.

The interim government has sought budgetary support of the Asian Development Bank to pay outstanding dues to foreign energy companies and make more imports of power and energy.

The request was made by Power, Energy and Mineral Resources Adviser Muhammad Fouzul Kabir Khan when a delegation of the multilateral donor agency, led by its country director Edimon Ginting, met him at the ministry's conference room on Thursday.

Welcoming the ADB delegation, he informed them that he had made several decisions very quickly soon after taking charge. He said the interim government will take decisions based on facts rather than just relying on statistics.

He also informed the delegation that from now on, to ensure transparency, he has also given instructions to the ministry officials to go through a tender process to make any kind of procurement.

"The provisions of Public Procurement Act, 2006 and Public Procurement Rules, 2008 shall be used in all procurement processes," he told the delegation.

He also noted he has suspended the ongoing operations under the Speedy Power and Energy Supply (Special) Act, 2010 and suspended the concerned provision of the Bangladesh Energy Regulatory Commission (Amendment) Act, 2023 that allows the government to raise power and gas tariff by executive order.

Fouzul Kabir, who is also advisor of the Ministry of Road Transport and Bridges and the Ministry of Railway, said that the current government has undertaken plans to increase the use of renewable energy.

Congratulating the adviser on his new role, the ADB Country Director in Bangladesh said that they are the biggest partner of the government in the power and energy sector.

He expressed interest in working wholeheartedly with the present government. They will seriously consider the current government's request for budgetary assistance in the power and energy sector.

The government has also formally requested $1 billion in budgetary support from the World Bank (WB) to fund the import of electricity and fuel.

He made the request during a meeting with a WB delegation at the Secretariat on Wednesday. Besides, he highlighted the substantial financial strain on the country, noting that the annual foreign exchange cost for electricity and fuel imports amounts to $2.2 billion.

He also informed the WB representatives that the current government has come with a strong mandate. He further stated that efforts to expand the use of renewable energy in the power and energy sector will be accelerated.

Additionally on his first day in office, Fouzul Kabir called for a departure from a culture of praise, emphasising that performance will now be measured using real indicators rather than statistics.

In a meeting on Sunday at the ministry's conference room with officials from the Energy and Mineral Resources Division and heads of various affiliated offices, the adviser stressed that evaluations will be based on customer service and satisfaction. He highlighted the need for a change in mindset, urging that the new generation bring fresh ideas to their work.

Paying tribute to the martyrs of the Liberation War and student movements, the adviser said: "If development stories were true, would people have to take to the streets? We need to understand how outsiders view us and act accordingly."

"We must adopt a policy of austerity, eliminating unnecessary expenses, but work output should not decrease. We need to achieve more with less money. Value for money is essential," he added.

Adani deal under the scanner?

Value for money certainly wasn't foremost on the previous regime's mind, when it signed the deal for power import from Indian conglomerate the Adani Group.

The government of Bangladesh urgently needs to review the deal with Adani Power, a subsidiary of the Adani Group, for the sake of the power sector in the current cash crunch. Most officials of the state-owned Bangladesh Power Development Board (BPDB) strongly believe this, noting that the government needs to pay $100 million every month to import electricity from the Adani power plant in Jharkhand.

"If the Adani deal is reviewed, and the tariff is reduced, the government can save upto 50 percent of the money it now pays to Adani," a senior BPDB official told our sister newsagency UNB, requesting anonymity as the issue is highly sensitive.

The government signed a 25-year power purchase agreement (PPA) in November 2017 with Adani Power under an unsolicited offer, to buy electricity from its 1600 MW power plant in Godda of Jharkhand. It started importing electricity from the plant in April 2023.

Besides the Adani plant, Bangladesh has also been importing about 1160 MW of electricity from India, of which about half is from the Indian private sector and the other half through the government arrangement. All are from coal-fired, or thermal power plants.

BPDB officials said currently this import costs about Tk 5.50 per unit (kilowatt hour) from Indian state-owned plants, Tk 8.50 per unit from Indian private sector while Adani's power costs about Tk 15 per unit.

"It means import of electricity from Adani's power plant costs almost double compared with the average cost of the import under the Indian government's arrangement," said the BPDB official.

If the government wants to review the deal, this is the time to do the job, he added, saying that the review will bring huge financial benefits for Bangladesh. Many energy experts in Bangladesh have also been criticising Adani's deal. They said that currently, the BPDB needs to pay over $1.2 billion a year and over 25 years, the payment will be $30 billion.

If the deal is reviewed, and the tariff is halved, the BPDB can save $15 billion in 25 years.

At present, the outstanding bills of the BPDB amount to Tk 45,000 crore because of its purchase of electricity from the private sector and also import from India at a higher rate.

Energy expert and vice president of Consumers Association of Bangladesh (BPDB) M Shamsul Alam said that the government should immediately take measures to review all unsolicited deals, including Adani's one.

Sources said that after huge criticism in Bangladesh, last year the Adani Group agreed to reduce the power tariff in exporting electricity. But the arrangement was made on an ad-hoc basis and every month the BPDB has to negotiate with the Indian company to set the power price.

"But we need a permanent solution to this deal through a review," the senior BPDB official told UNB.

Evolving needs in the sector

It should be acknowledged that the Awami League came to office in 2009 at a ti8me when the situation in the power sector was quite desperate, with loadshedding of upto 12 hours per day in some parts of the country. From there, it was able to turn the situation around using laws such as the Quick Enhancement of Electricity and Energy Supply (Special Provisions) Act, under which rental power plants were contracted, among other things. Eventually though, it became redundant and yet the Awami League government persisted with it, handing out contracts to some of its favoured business houses as crony capitalism ran amok.

As reported by the BPDB in 2023, there are grid connected installed power plants having a cumulative 28,089 MW power generation capacity. In addition, 2,656 MWs electricity is being imported from India under contracts with BPDB. It was reported that installation of 27 more power plants with a total capacity of 9,277 MW is nearing completion.

Generally, the average daily demand for power is around 14,000 MW during the peak hours. On April 30, 2024, there was the record high generation and consumption of 16,477 MW power in Bangladesh (during the peak hours). It is clear that a huge reserve margin of installed power generation capacity has been created during the recent years, even as thousands of megawatts remained unutilised, with no consideration given to how far the country would be able to pay the capacity charges to the private power plants. The challenge for the interim government will be rationalise the use of electricity, to clean up the tendering process, and set the long term direction in the sector towards one that utilises renewables, leaving behind the dependence on costly import of fossil fuels.