Energy shortage is considered the most critical infrastructure constraint to Bangladesh's economic growth. The present maximum demand for electricity is about 5000 MW (Megawatt) and it is expected to rise to 7,000 MW in two years. But the maximum available generation is about 3,800 MW leaving a significant supply gap. The main causes for the supply shortage, among others, are (i) poor operational efficiency of thermal power plants (ii) inadequate supply of natural gas which forms the main source of primary energy for electricity generation (80 % of generation capacity is based on natural gas) (iii) slow progress on cross-border energy cooperation; and (iv) lack of diversification in energy supply. To address shortages, the power plants meant for peaking load operation are being used for base-load generation making their operation extremely energy inefficient. These issues have also been highlighted in the ADB's 2009 Bangladesh energy sector assistance program evaluation (SAPE) . In the absence of lack of private sector interest in recent times and considering the critical requirement of base-load power generation SAPE has recommended public sector investment in base-load power plants.
Government of Bangladesh (GOB) has declared its vision for power sector to make the country free from load shedding beyond 2010 and to make electricity available for all by the year 2020. In order to fulfill the vision, additional 9000 MW electricity generation will have to be installed within the next 5 years. Of this 5400 MW would be constructed by the private sector. In this regard GOB expects to increase the available generation capacity to 7000MW by 2015. Adequate transmission and distribution facilities would also be developed to complement generation development to increase access to electricity. Since the declaration of this policy, 586 MW of generation capacity has been added to the system while a number of approvals have been granted for new power plants. Also initiatives have been taken to diversify the energy sources including development of coal resources and renewable energy.
In line with the government policy, ADB country partnership strategy for Bangladesh (CPS) addresses the main issues in the energy sector. It emphasizes on (i) continuation of the policy, legal and regulatory reforms to create enabling business environment for the private sector; (ii) implementation of power transmission interconnections with India; (iii) investment in new power generation facilities and rehabilitation of old power plants for improved efficiency (iv) increased investment in clean energy such as wind and solar power through public private partnerships; and (v) transmission network strengthening for expected generation capacity additions.
The most important development in 2010 is the signing of the memorandum of understanding on energy cooperation between India and Bangladesh. Specific areas of cooperation include (i) India s agreement to supply on a fast track basis at least 250 MW of power to Bangladesh; (ii) joint development of thermal power generation facilities in Bangladesh. Facilitating this process ADB has approved a loan to construct the 500MW Bangladesh-India electricity transmission interconnection in the western border of Bangladesh.
The proposed loan will address three key areas in the electricity supply sector. They are, improving operational efficiency of thermal power plants, expanding the renewable energy base and improving the transmission network capacity. A project preparatory technical assistance (PPTA) has been undertaken to prepare the project for ADB financing. The project interventions will include: (i) replacing some of the old power plants at Ashuganj power station (260MW, consisting of one old combined cycle plant and two steam turbine plants) with a more efficient combined cycle power plant (450MW); (ii) conversion of less efficient peaking plants at Siddhirganj (2x120MW) to a combined cycle power plant (318MW); (iii) installation of a 5MW solar photovoltaic (PV) at Kaptai hydropower plant premises; (iv) installation of wind-solar hybrid systems in St Martin (0.75 MW) and Hatiya (1 MW) islands; and (v) construction of 400kV Aminbazar-Maowa-Mongla (192km), 230kV Mongla-Khulna South (40km) and 132kV Mymenshing-Bhaluka-Tangail (100km) transmission lines and accompanying facilities. Capacity development in the executing agencies in the form of implementation support and training related to operation and maintenance and gender mainstreaming will be provided. Capacity development of beneficiary communities on operation and maintenance of off-grid systems will also be undertaken.