Fossil Fuel is Realistic for South Asia’s Sustainability

Fostering international relations and strategic collaborations for a brighter future, Muhammed Aziz Khan engages in crucial discussions with the US Ambassador to Bangladesh, H.E. Peter Haas, at the under construction Summit Meghnaghat II

November 30, 2023 in Energy Usage, Features, Fossil Fuel Transition, Oil & Gas

By Muhammed Aziz Khan, founder and chairman, Summit Group

In 1996, as a young man, I used to travel the length and breadth of Bangladesh for my business. In southwestern Bangladesh, which has the most fertile farmland, I saw felled trees that covered many miles. The locals informed me that these trees were cut to harvest the wood as domestic fuel. I felt a strong sense of loss that the lush land had been severely degraded and was becoming a barren desert simply because we were unable to provide more sustainable energy sources for our country.

It was imperative that we stop this rampant deforestation by providing better energy resources. Any solution would have to consider the practical challenges of Bangladesh, which is one of the most densely populated countries in the world with 170 million people living in 57,000 square miles, 30-40% of which goes underwater during monsoon seasons, and a workforce that grows by about 10 million annually.

Bangladesh has come a long way from that time and has now achieved nearly 100% electricity access rate. Many households have shifted to using Liquified Petroleum Gas (LPG) for cooking in that area while the nation’s longest Padma Bridge has now given the possibility of connecting the impoverished southwestern part of Bangladesh with its capital Dhaka which has access to the existing national gas grid. These improvements in southwestern Bangladesh hold personal significance for me as during my youth I had become concerned about the sustainability of the environment, and the kind of electricity needed for growth, through my experiences in that region.

Presently, we need more investment in both onshore and offshore gas storage infrastructure as well as nationwide power transmission and distribution lines. In the long run, we aspire for robust economic growth for social cohesion. From today’s US$2,800 per capita income we need to double it to US$5,000 in the next five years.

How can we generate sufficient cost-affordable electricity to propel this robust economic growth necessary to uplift millions of Bangladeshis?

Bangladesh requires a lot of stable, affordable power and energy for its burgeoning population. According to the Government’s Power Division, Bangladesh requires 33,000 MW of electricity by 2030 from base load power plants that can generate electricity continuously.

The Bangladesh government did well from 2010 till 2018, bringing electricity coverage to the entire nation. This enabled the country to improve its social and physical infrastructure, making Bangladesh a poster child of successful development economics. Our annual GDP growth improved to 7 – 8%, outperforming many other nations in South Asia, including India and Pakistan. Electricity is critical to sustain this impressive economic performance.

The Bangladesh government has taken a long-term view and made plans to cater for the country’s strong growth trajectory. However, these judicious plans have been disrupted by a series of unfortunate events.

First, the COVID-19 pandemic ravaged global supply chains with particularly devastating effects on poor countries that have limited financial resources. This was followed by the outbreak of the Russia-Ukraine war in February 2022, which resulted in disruptions in the oil and gas markets that were further compounded by economic sanctions.

The consequent commodity price spikes stoked the fires of inflation, which triggered major central banks, especially the US Federal Reserve, to commence aggressive interest-rate hikes that raised global borrowing costs significantly over a short period of time.

Again, the poorer countries were more vulnerable as their currencies depreciated sharply against the USD in the face of US rate hikes, which in turn raised the cost of fuel imports. Heavily indebted countries also found it difficult to service their debts due to significantly higher interest costs.

The independent power producers (IPPs) in Bangladesh are struggling to stay afloat as they are afflicted by the double whammy of not getting enough dollars to import fuel and delayed payments from the government.

In Bangladesh’s plan of achieving 40% clean energy use by 2041, gas is regarded as critical for the just energy transition process, whereby decarbonisation progresses equitably alongside continued socio-economic growth. Natural gas is a good replacement for oil and coal, which have higher emissions.

Yet, the reality for Bangladesh is that our natural gas is depleting fast. This brings us to the role of renewable energy in Bangladesh. However, we neither have enough space in such a densely populated country nor enough wind speeds to harness sufficient solar and wind electricity. There is also competition between agriculture and solar power for the use of fertile land in Bangladesh. Furthermore, the intermittent nature of renewables translates to the need for energy storage systems, which are still costly for developing countries to deploy in large-scale to supply stable electricity to the nation.

Hence, the current reasonable approach is to emulate Japan, Korea, Singapore and Hong Kong. These countries have explored various measures to ensure energy security, including reasonably priced long-term LNG supply contracts, LNG regasification, storage and transportation infrastructure.

Another possibility is cross-border electricity transmission. In my opinion, we have to consider the Indian subcontinent as a whole in developing a sustainable energy solution for the region. The Himalayas is home to the world’s largest reservoir of hydroelectricity generated by its mighty rivers. Indeed, Bhutan has benefited from selling power to India. We need to have a robust South Asian grid that connects India, Bhutan, Nepal and Bangladesh. For solar energy, we need to be able to import cost-competitive solar electricity produced in India. However, this requires regional and global support. 

Effective decarbonisation will also depend on the maturation of various new technologies to the level that becomes affordable to developing countries. These include energy storage systems, nuclear power, green hydrogen/ammonia and emissions abatement technologies, such as the Carbon Capture and Storage (CCS) process.

We need to have a holistic understanding of the local, regional, and global energy challenges and devise cost-affordable solutions that are tailored to local conditions for the benefit of Bangladesh as well as the Indian subcontinent.