Interview with H.E. Nasrul Hamid, Minister of Power, Energy and Mineral Resources
Forecasts by the US International Trade Administration indicate the demand for electricity in Bangladesh will reach 30,000MW by 2030. How is Bangladesh preparing to meet this increase in demand?
When the Awami League got into office in 2009, Bangladesh’s power system was very poor, with an estimated capacity of 3,500MW. In less than a decade we have increased generation capacity to 16,000MW. We expect the steep increase in electricity demand to continue and we are taking steps to fill supply gaps. Over the next five to six years we will make about $30 billion in energy investments. We are building large power plants, setting up liquefied natural gas (LNG) terminals with the help of American investors, and continuing with our collaboration with Japanese, Chinese and German companies to design and implement more projects.
Additionally, we aim to connect our power systems to those of other countries in the region. This is a concept that has never been utilised before in Bangladesh, but we are seeing good progress so far. For example, we are currently taking 660MW of electricity from India and we intend to take an additional 2,000MW. Neighbouring countries such as Bhutan and Nepal have the potential to produce over 40,000MW of electricity from hydropower sources, but rivers dry out during winter. Regional connectivity is a win-win situation for all parties involved. In general, I would say we have made significant progress in terms of expanding our power-generation capacity and building regional connectivity.
Research suggests there is a relationship between electricity consumption and a nation’s Human Development Index. What has the government done to improve people’s access to electricity?
The per capita consumption of electricity in Bangladesh is about 450kW per month. This is quite low compared to typical middle-income countries which have per capita consumption of about 1,700kW. In 2014, Prime Minister Sheikh Hasina announced that, by 2021, every single household in Bangladesh should have access to electricity. In that context, I began working towards reaching 100% electricity coverage by December 2018, way ahead of schedule.
Financing is one of the most critical ingredients needed to achieve such an ambitious objective. Therefore, we put in place several highly attractive policies to persuade the private sector to invest in the power industry. Looking back, we can say that the strategy has been a success. The investment into our energy industry has increased tremendously. Currently, about 50% of our power generation comes from the private sector. All the big global power companies are investing in our power industry. For example, we have partnered with the German conglomerate Siemens AG to develop a 3,500MW project. When China’s President Xi Jinping visited Bangladesh in 2016, he signed agreements for a total of $5.5 billion. Over the last seven years, the investment portfolio of our power sector has increased from $1 billion to $21 billion.
The unique characteristics of our country, such as our vast wetlands and hilly areas, are not suitable for large-scale power generation. To overcome this challenge, we have deployed one of the world’s largest numbers of home solar systems, and now more than 4.5 million households in Bangladesh benefit from solar mini-grids.
Today, around 88% of the Bangladeshi population have access to electricity, up from 43% back in 2009. We are taking electricity to the rural areas, making power accessible to people who often have never seen an electric light bulb before. Improving access to electricity has led to other benefits. Thanks to electricity, women in rural areas have started to do nightshift work and students are reading more.
The low cost of electricity has been a major competitive advantage for Bangladesh. However, electricity prices don’t cover the costs of generating power. What does your ministry intend to do to ensure the sustainability of the model?
Right now, the government is allocating $500 million to subsidise power for the poor. In fact, most customers get their power at prices 40% or 50% below production cost. We intend to maintain this policy for another four or five years. We must not forget that we are not a developed economy. At this stage, the priority of the government is not to make a profit, but to provide power to its citizens. We are currently working together with respected global firms to make the transition of power from a merit good to a commodity.
What is your ministry doing to increase the weight of clean energy in Bangladesh’s energy mix?
Across the world, clean energy is receiving more and more focus. Many countries are working towards expanding production of renewable energy. It won’t happen overnight, but overall I don’t see why Bangladesh should be any different. We are building liquid-fuel power plants, gas-based power plants, high-tech coal power plants and nuclear power plants. We aim to generate 10% of our power from renewable energies by 2020. We also intend to implement the latest technological developments in terms of power generation. Looking forward, the success will lie in technology and innovation. All in all, we intend to progressively move towards cleaner ways of producing energy.
What would you say to investors?
We are making tremendous improvements in Bangladesh. I haven’t achieved all my goals for our energy sector, but we made great progress by developing important projects. There are still many growth opportunities in the power sector and Bangladesh is creating a conducive environment by designing many of the investments with sovereign guarantees. I would urge investors to consider investing in Bangladesh’s power industry because there is opportunity to make great returns.