Bangladesh has made huge strides in expanding its power generation capacity, but needs to concentrate more on weaknesses in its transmission and distribution system.
That was the conclusion of a panel of local experts at FinanceAsia's 4th annual Bangladesh Investment Summit, held at the Ritz Carlton in Hong Kong on Tuesday.
The country's foremost power expert, Dr Tawif-e-Elahi Chowdhury said the improvement in generating capacity since 2009 had been nothing short of a 'miracle'.
Chowdhury attributed the transformation to "the audacious and visionary leadership" of Prime Minister Sheik Hasina, to whom he is an energy adviser.
Bangladesh certainly has ambitious energy targets as it tries to lift the world's eighth largest population to middle income status by 2021.
On the economic front, it has been consistently achieved high GDP growth, with rates above 6%. Some some economists believe it could achieve 8% if it can take full advantage of its demographic dividend (30% of the country's population is under the age of 24).
However, the world's 10th most densely populated country also lurks towards the bottom of the World Bank rankings for energy consumption per capita. Panel member and City Bank CEO Sohail Hussain said energy consumption per capita currently stood at 371 kWh per capita, compared to 731 kWh in India and 4,512 kWh in Malaysia.
Bangladesh will not hit its targets unless electricity supply can keep up with demand, although Finance Minister Abul Maal A Muhith told the conference that it should be recording surplus energy by 2018.
So far the country has been able to increase capacity from 4.9GW (gigawatts) in 2009 to 12.5GW in 2016. By 2021 it wants to get to 24GW according to figures Dr Chowdhury presented to the conference, then 40GW in 2031 and 60GW in 2041.
However, panel member Humayun Rashid from Energypac, said the government needed to address problems transmitting electrcity to its final destination. It is estimated that energy losses run to 10%, although that figure is down from 16% in 2010, while the transmission network has only been increased from 8,000km to 9,800km over the same period.
The government’s energy master plan has, so far, cost $21 billion according to Dr Chowdhury. He said that $13 billion had come from private sector investors and $8 billion from the public sector.
He forecast that implementing the plan over the next five years will cost $16 billion, of which $9 billion will fund generation, $4 billion will fund transmission and the remaining $3 billion to distribution projects.
The next phase through to 2031 will cost $24 billion, of which $13 billion will be for generation, $6 billion for transmission and the final $5 billion for distribution.
The final phase out until 2041 will cost $40 billion, of which $20 billion is earmarked for generation, $10 billion for transmission and $10 billion for distribution.
City Bank's Hussain spoke at length about how all of this was being funded.
Of the portion being funded by the private sector he said that roughly 60% had come from commercial banking loans and 40% from multilateral lenders like the IFC, which owns a 5% stake in the bank. City Bank has also been underwriting the implementation risk for the first eight or so years and then selling down to multi-lateral institutions.
However, the onset of much larger projects will require new ways of thinking he suggested. One solution might be to interest some of the world's big pension funds, such as the Canadians who have pioneered investments in unlisted infrastructure projects.
He also concluded that IPOs might be an option.
The build out is also altering the country's energy mix. At the moment 300MW is being derived from coal, 7.8GW from gas, 600MW from the regional grid and 3.8GW from other sources such as solar.
By 2021, the biggest percentage increase will come from coal, an irony that was probably not lost on the conference audience since the flood risk to Bangladesh makes it one of the world's most vulnerable countries to climate change.
Dr Chowdhury estimated that coal should account for 4.3GW of the energy mix by 2021, with gas rising to 9.8GW, the regional grid to 1.1GW and other energy sources 8.8GW. By 2031, the country also hopes to be generating 4GW in nuclear capacity.
In order to meet its growing energy needs, Dr Chowdhury said Bangladesh is about to tender for deep-sea production sharing contracts for offshore natural gas deposits. It is also doubling its energy imports from India this year from 600MW to 1,100 to 1,200MW.
But the area, which most excited panel members, was the development of renewable energy sources, particularly solar. Dr Chowdhury said Bangladesh would like to become an energy efficient nation as it develops further. He was unimpressed by Hong Kong's sea of lights, querying why major office blocks needed lights blazing on every floor all night long.
By 2021 Bangladesh hopes to be generating 10% of its energy needs from solar and has been running a programme called Infrastructure Development Co Ltd (Idcol) with World Bank funding that subsidises solar panels for low income families.
Before its recent energy infrastructure surge, only 47% of Bangladeshis had access to electricity. That figure has now risen to 76%.
But as more people connect to the grid, their consumption increases too. Once the desire for a fan and light bulb is satisfied, a TV is typically next on the list.
City Bank’s Hussain said one of the most exciting developments in the country has been the creation of an 8W solar-powered TV, which has a 16 inch screen and only costs $90.
It was dreamt up by a Bangladeshi entrepreneur Nessar Khan and his MAKS Group and road tested in China. Hussain says it is mainly being used by the 4.5 million Bangladeshis who have solar panels and live in areas, which have not been connected to the grid.
It underscores the successes emerging market countries have made in terms of frugal innovation, the term coined to describe the development of products suited to the bottom billion such as single sachet soap powders and the mini fridge pioneered by India’s Godrej Group.
Finance minister Muhith said this was one lesson middle income countries tended to forget, but he hoped Bangladesh would not. “They stagnate because they forget their main objective should be to increase domestic demand," he commented. "You can only do this if you increase your people’s capacity to earn and to spend.”