Power Market & Market Intermediaries in Bangladesh Dr. Muhammad Fouzul Kabir Khan Former Power Secretary, Bangladesh

Workshop on Cross Border Electricity Trade

Key Drivers of Regional Co-operation in Energy & Electricity Sector

Comparative advantages Arising from resource endowments

Complementarities In power demand

Bangladesh India Nepal Bhutan Pakistan

Gas (Tcf) 32.1 39 0 0 33

Coal

(Tons)

3.2

billions

260

billion

1

million

1.3

millions

17,550

Oil

(MMbbl)

28 5,906 0 0 324

Comparative Advantages: Energy Resources

Fossil Fuels

Bangladesh India Nepal Bhutan Pakistan

Hydro-power

potential (MW)

5,00 148,700 42,000 30,000 59,000

Solar Power*

(Kwh/sq. m per

day)

3.8 - 6.5 4 - 7 3.6 - 6.2 2.5 - 5 5.3

Biomass

(Million Tons)

0.08 139 27 26.6 NA

Wind (MW) * Very limited

potential

151,918 3,000 4,825 24,000

Renewables

Comparative Advantages: Energy Resources

Opportunities Arising from Daily Demand Differentials Across Countries

GMT Time 0-2 2-4 4-6 6-8 8-10 10-12 12-14

14

-

16

16-18 18-20 20-22 22-24

Bangladesh

(BGD)

India (IND)

Nepal (NEP)

Bhutan (BHU)

Potential for

Power Trade

arising from

demand

differentials

each day.

IND &

BGD

can

support

NEP &

BHU.

BGD

can

support

NEP,

IND &

BHU.

BGD, IND & NEP can support BHU.

No Trade opportunity.

BHU can support BGD, IND, NEP & BHU

No Trade opportunity.

BHU can support BGD, IND, NEP & BHU

IND, NEP

& BHU

can

support

BHU.

No Trade opportunity.

Opportunities Arising from Seasonal Demand Differentials Across Countries

Month Jan Feb Mar April May June July Aug Sep Oct Nov Dec

India (IND)

Bangladesh (BGD)

Nepal (NEP)

Bhutan (BHU)

Potential for Power

Trade arising from

demand

differentials within

the day.

BGD &

IND can

support

NEP &

BHU.

BGD can support NEP, BHU & IND.

NEP, BHU & BGD can support IND.

NEP &

BHU can

support

BGD &

IND.

NEP & BHU can support IND & BGD.

IND, NEP & BHU can support BGD.

IND, NEP & BHU can support BGD.

NEP & BHU can support BGD & IND.

NEP &

BHU

can

support

BGD &

IND.

IND can support NEP, BHU & BGD.

BGD &

IND can

support

NEP &

BHUT

BGD &

IND

can

support

NEP &

BHUT

Benefits from Power Trade in South Asia

Direct benefit (discounted) of USD 20 billion over 2015-2040.

Sub-regional trade among India, Bangladesh, Nepal & Bhutan may be more cost

effective.

Stimulates economy

Investments of USD 11 billion (undiscounted) in generation and T&D Benefits of USD 28 billion (undiscounted) in operational cost savings Benefits from closing supply demand gaps in the short run Important source of foreign currency for Nepal and Bhutan.

30 GW of new hydro power

In Long run, reduced electricity costs from cheaper imports, efficient fuel use and

sharing of spinning/maintenance reserve

Reduction in CO2 emissions by 3%

Policy & Regulatory Framework

Power Sector

Policy Formulation

Power Division

Regulation

Bangladesh Energy

Regulatory Commission

Market Structure

Power Transmission

Power Purchase Agreements

Energy Sales Agreement

Generation

• 5 Public generation

companies • 28 IPPs, SIPPs, Rental

& QRPPs

Transmission

Single transmission company, PGCB

Power Imports from India

Distribution

5 DISCOs

Consumers

•Regular consumers •Bulk consumers (≥ 5

MW)

Power Purchasers

Wheeling Charges

BPDB

REB

Wheeling Charges / Tariffs

Sellers Market Intermediaries Buyers

Electricity Tariffs

Generation

Public 5880 MW

58%

Private 4238 MW

42%

Total Capacity (August, 2014): 10,118 MW

Total Generation (FY 2013-14): 38031.07 MKWh

Public 19,645 MKWh

52%

Private 18,387 MKWh

48%

Power Imports from India

Capacity of 500 MW

Usual supply between 350 – 450 MW

Average costs of import at of USD 0.0739 /KWh

PTC (private source): USD 0.0858 / KWh

NNVN (public source): USD 0.0616/KWh

Generation Costs of Power in Bangladesh

0.0346 0.0737

0.2278

0.3736

0.0114

0.0858 0.0616

Gas Coal FO Diesel Hydro Import from PTC

(India)

Import from NNVN

(India)

USD/KWh

Power Transmission & Distribution

Transmission lines/Grid substations Quantities

Transmission lines (400 KV/ 230 KV / 132 KV )

9536 Ckt. Km

Distribution lines 302,760 Route Km

Grid substation capacity (400/230/132 kV)

500 MVA

Grid substation capacity (230/132 kV)

9325 MVA

Grid substation capacity (132/33 kV) 12893 MVA

Power Consumers (As of FY 2013)

Domestic 84.61%

Agriculture 1.56%

Industry 0.63%

Commercial 10.52%

Others 2.69%

Domestic

Agriculture

Industry

Commercial

Others

Distribution Company-wise Share of Power Sales (FY 13-14)

DPDC 18%

DESCO 10%

BPDB 25%

REB (through 72 PBS) 41%

WZPDC 6%

Electricity Tariffs

Consumer Category

Rate (USD/KWh)

Residential 0.0424 – 0.1236

Agricultural pump 0.0320

Small industry 0.0846 – 0.1147

Commercial 0.1040 – 0.1510

11 KV Lines 0.0844 – 0.1189

33 KV Lines 0.0835 – 0.1182

132 KV lines 0.0809 – 0.1171

Distribution Utility Rate (USD/ KWh)

DPDC, DESCO

132 KV 0.0679

33 KV 0.0689

REB 132 KV 0.0679

33 KV 0.0514

WZPDC 132 KV 0.0679

33 KV 0.0564

BPDB 132 KV 0.0679

33 KV 0.0634

Future DISCOs

132 KV 0.0679

33 KV 0.0634

Tariffs at consumer end Bulk sales tariff

Low Levels of Electricity Consumption in Bangladesh

Load Shedding forces students in Bangladesh to study with candle-light.

348 605 1073

3045

Bangladesh (2014)

South Asia (2011)

Vietnam (2011)

World (2011)

Per Capita Power Consumption in KWh

Demand Supply Gap

Year Peak Demand (Mw)

Shortage (as % of peak demand)

2012 7,083 10.3 %

2013 7,436 10.6 %

2014 7,819 6 %

2015 8,232 _

2016 8,680 _

2018 9,689 _

2020 10,868 _

11,492

15,883

20,062

14,943

19,249

22,509

2016 2018 2020

Generation Capacity Addition Lagging Behind PSMP 2010 Plans

Probable Capacity (MW)

PSMP 2010 Planned Generation Capacity (Mw)

Explaining the Investment Shortage

Inefficient Power Market Mistargeted Subsidies Privatization Without Market Liberalization Cross-ownership of Generation, Transmission & Distribution Facilities Constraining Regulation

Policy Promoting Merchant Power Plants

Policy guideline in place since 2008 – ‘’POLICY GUIDELINES FOR ENHANCEMENT OF PRIVATE PARTICIPATION IN THE POWER SECTOR’’ Key features

Merchant Power Plants (MPPs); Sell power directly to large consumers at negotiated price; Use facilities of transmission & distribution licensees paying wheeling charge set by BERC; PPP with public power sector utilities in new plants as well as rehabilitation of old plants.

Present Grid Code Distinction made between Grid Owner and System Operator There are prohibitions in direct transmission to end users(5.6.3). Section 5.9 provides for International and Inter-regional connection Provision for asynchronous or synchronous interconnection Provision for both HVDC and HVAC asynchronous interconnection

There is no requirement that distribution entities be a public company. Includes a schedule for Grid code revision. No mention of Electricity trade in the document.

Independent System Operator (ISO) ISO to ensure integrated market operation Ensure secure and economic operation of the national grid ISO should have the power to issue directions to electricity entities to call equipment into/out of service; to maintain the equipment in standby condition; change active or reactive power output; to shut down or vary operation & to shed or restore customer loads. ISO should be able to charge fines to ensure enforcement.

Why much is not happening?

Shortage

Investment Innovative financing

Domestic Power Sector reforms More competition

Governance Oblong multilateral grid connecting India, Nepal,

Bangladesh and Bhutan

Some Digression

Electricity for the unserved

Issues and Mitigation Strategies

Some Recommendations

Regional Infrastructure Fund

Supra National Body?

Direct Interconnection between Exporting and

Exporting Countries

Interconnection via Third country

Reforms

Demand Driven Reforms Demand Creating Reforms

Policy makers respond to private demands, e.g.

PPP Law

Policy makers enact favourable policies to entice private sector

investment e.g. matching energy and

power prices with opportunity cost