24 May 2021 (IEEFA Bangladesh): Clear understandings from the Bangladesh government’s recently released 8th Five-Year Plan must be incorporated into the new energy and power master plan currently under development by the Japan International Cooperation Agency (JICA) to drive zero carbon transformation and financial sustainability in the energy system, finds a new report from the Institute for Energy Economics and Financial Analysis (IEEFA).
Increased reliance on expensive imported coal and LNG is a burden
Author energy finance analyst Simon Nicholas says the new Integrated Energy and Power Master Plan, if aligned to the government’s five-year plan, will abandon coal and increased LNG commitment in favour of cheaper low emission renewables.
“The 8th Five-Year Plan clearly acknowledges Bangladesh’s power overcapacity problem as well as solutions to address it,” says Nicholas.
“The financial sustainability of the power system is currently seriously jeopardised by heavy subsidization and ballooning capacity payments to fossil fuelled power producers, stretching the power system’s already weakened financial position.
“Increased reliance on expensive imported coal and LNG is a burden the government simply can’t afford to wear going forward.
“Any increased reliance on coal and LNG risks seeing electricity costs for energy consumers rise even further at a time when ever-cheaper solar and wind power is available.
JICA should plan for the roll out of power storage technologies like batteries
“The Japanese developers of Bangladesh’s new Integrated Energy and Power Master Plan have the platinum opportunity to align their thinking with the insightfulness of the government’s 8th Five-Year Plan.”
Nicholas draws from the 8th Five-Year Plan targeting a least-cost power generation system to provide a blueprint for developers of the new plan, suggesting JICA should:
“Bangladesh’s five-year economic plan correctly identifies the various issues and opportunities faced by the power system. The new energy and power master plan being developed by Japan must now reflect this new energy reality,” says Nicholas.
“The previous power master plan also prepared by Japan is not fit for purpose and risks the financial sustainability of the power system. The new 8th Five-Year Plan recognises this.
“Japan must not prepare another power plan in its own interests rather than in the best interests of Bangladesh.”
Japan must not prepare another power plan in its own interests
Nicholas says JICA would be aware that Japanese trading houses and financial institutions have been accelerating their exit from fossil fuel financing.
Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group announced coal exits during April and May 2021, as did the Asian Development Bank.
The Japan Bank for International Cooperation (JBIC) has also announced a coal power exclusion policy.
“We are regularly seeing new energy policies from Japanese corporates and financial institutions following Japan’s Prime Minister Yoshihide Suga’s pledge in 2020 to reach net zero emissions by 2050,” says Nicholas.
“Coal and LNG are carbon-intensive fuel sources, and the most technologically and economically challenged by the current global energy transition to renewable clean energy.
“If JICA funds coal power and creates a plan for more high-cost LNG-fired capacity in Bangladesh it will be worsening overcapacity and increasing the likelihood of power tariff increases for consumers.”
Media contact: Kate Finlayson ([email protected]) +61 418 254 237
Author contact: Simon Nicholas ([email protected])
About IEEFA: The Institute for Energy Economics and Financial Analysis (IEEFA) examines issues related to energy markets, trends, and policies. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy. (www.ieefa.org)