Bangladesh’s 2016 energy plan showed some 20 GW of coal power capacity to be developed in the next two decades. Now, the government is scaling back the coal-drive dramatically and capacity will peak at 7.3 GW in 2025, a Rystad Energy analysis shows, a development that will hurt Chinese and Japanese developers and cancel nearly 30 million tpy of expected coal imports towards 2040.
This is a blow for thermal coal exporters in Australia, Indonesia and South Africa who were hoping that a growing Bangladesh market post-2025 would help fill the void stemming from declining demand in more mature Asian economies such as Korea and Japan.
Based on its revised development outlook, Rystad expects that coal power generation in Bangladesh will increase from the current 6 TWh and peak at 46 TWh by 2025. Annual thermal coal demand for power generation is forecast to rise from the present 2.3 million tpy to 18 million tpy by 2025 to fuel the new plants that were not scrapped.
“While this is still a significant increase above the existing low coal demand levels, had the coal power generation pipeline been developed as per the 2016 master plan, annual coal demand growth would have been almost three times greater, potentially reaching 50 million t by 2040,” said Steve Hulton, Rystad Energy’s Senior Vice President and Head of Coal Research.
Over the past 10 years, some 36 different coal-fired generation projects were proposed. The government will now abandon all but five of the new coal projects; keeping only those that are either currently operating or under construction.
These include three major government-backed projects; Payra Phase 1 (1320 MW), Rampal (1320 MW), and Matarbari (1200 MW) thermal power plants; and two private independent power producer projects Barisal (350 MW) and Banshkhali (1224 MW) thermal power plants.
Payra Phase 1, the country’s first imported coal-fired power plant, began commercial operation of its first 660 MW unit in May 2020 and is currently test firing the second 660 MW unit which completes Phase 1 with 1320 MW of capacity at a cost of close to US$2 billion. The plant is owned by the Bangladesh-China Power Co. Ltd (BCPCL), a joint venture between Bangladesh's state-run North West Power Generation and China National Machinery Import and Export Corp. The plant has a planned theoretical efficiency of 48% and is expected to consume around 4.5 million tpy of thermal coal sourced from Indonesia and Australia.
Even with the government pullback from coal, Rystad Energy believes that that Payra Phase 2 (an additional two units totalling another 1320 MW) will also proceed. The Bangladeshi government has already reportedly agreed to take a hard loan of US$1.5 billion from China for development funding. In total, coal-fired electricity generation capacity in Bangladesh is predicted to reach 7.3 GW by 2025 and stay flat at this level. This is approximately 75% less by 2040 compared to what would have been built under the previous plan.
There is only very limited coal mining carried out in Bangladesh, but the northern districts are estimated to contain more than 2.5 billion t of good quality, bituminous coal. However, there is major opposition to large-scale developments due to competing land interests with agriculture and water supply concerns.
Bangladesh, the world’s eighth-most populous nation, has traditionally been powered by gas and oil. Roughly 70% of the country’s electricity demand is currently met by natural gas, but a slew of previous ill-fated policies stranded the country with a power sector utilising costly and inefficient imported fuel oil run thermal power plants, which form approximately 15% of its energy mix.
The country also imports approximately 10% of its electricity directly from neighbouring India, Myanmar, and Bhutan. Its government had viewed coal power as a relatively low-cost solution in a bid to reduce dependence on expensive, government-subsidised fuel imports, and to provide more diversity and energy security in the power mix.
With the signalled change in energy policy direction, the big question for Bangladesh is how to replace the planned coal-fired power generation with alternative sources. A possible solution could be increased gas-for-power projects on top of what is already planned, therefore driving even higher LNG imports, or developing greater renewable energy generation capacity and associated grid transmission infrastructure investment. Currently, Bangladesh’s plans for renewable energy are definitely more modest than many of its regional neighbours and there is plenty of room for growth in this sector.
Read the article online at: https://www.worldcoal.com/coal/12102020/rystad-bangladesh-to-scale-back-coal/
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