Bangladesh Priorities: Energy, Gunatilake and Roland-Holst

Research by David Roland-Holst, University of California, Berkeley, and Herath Gunatilake, Asian Development Bank, and an addendum by consultant Bjorn Larsen, analyzes the smartest ways to power Bangladesh in coming years.

 

Strategy	Takas of benefits per taka spent
Import coal for more power	23
Imported and domestic coal for more power	24

Currently, natural gas accounts for more than 80 percent of fuel used for power generation, but a British Petroleum study estimates that those reserves could be exhausted in the next two decades.

Out of multiple energy policies considered, the analysis finds that reforming natural gas prices and making coal a primary energy source for electricity production would do the most social good for Bangladesh. Shifting toward coal would cut electricity costs across the economy, and the cheaper energy would raise incomes for households and businesses, while improving export competitiveness.

Over the next 15 years, replacing half of natural gas electricity with imported coal and expanding electricity production to meet demand would cost Tk 172 billion (Tk 17,200 crore). It would also increase CO2 emissions, at a social cost of Tk 7.7 billion (Tk 770 crore). But in total, the widely available and cheaper power would increase the economy by Tk 4.2 trillion (Tk 421,900 crore). In all, each taka spent would do 23 takas of social good. 

Investment to develop a domestic coal industry, however, would create even larger benefits in terms of economic growth. The cost of additional electricity production associated with this growth would be Tk 783 billion (Tk 78,300 crore) and lead to climate costs of Tk 46.2 billion (Tk 4,620 crore). The benefits from the investment, however, would be astonishing. The net worth over the next 15 years would be greater than Tk 20 trillion (Tk 2,000,000 crore)—equivalent to more than an entire year of GDP. By 2030, the average Bangladeshi will be 16 percent richer.

There has been significant political resistance towards the potential land disruption from coal mining, the siting of coal power plants, and concern about more pollution. But given such tremendous benefits, the authors point out there would be substantial resources available to address these concerns, even to the extent of including state-of-the-art technology to live up to the most stringent OECD clean-air requirements. The investment would give 24 takas of benefits for each taka spent.