Bangladesh : Northwest Distribution Network Modernization Project

Sovereign Project | 57258-001

Project Details

Project Name
Northwest Distribution Network Modernization Project
Project Number
57258-001
Country / Economy
  • Bangladesh
Project Status
Proposed
Project Type / Modality of Assistance
  • Grant
  • Loan
Source of Funding / Amount
Loan: Northwest Distribution Network Modernization Project
Source Amount
Ordinary capital resources US$ 195.00 million
Operational Priorities
  • OP2: Accelerating progress in gender equality
  • OP3: Tackling climate change, building climate and disaster resilience, and enhancing environmental sustainability
  • OP4: Making cities more livable
  • OP6: Strengthening governance and institutional capacity
Sector / Subsector
  • Energy / Electricity transmission and distribution

Gender
Some gender elements
Description
Project Rationale and Linkage to Country/Regional Strategy

Growth and development inequality in Bangladesh. Bangladesh demonstrated strong economic growth with an average annual gross domestic product growth of 7.6% between fiscal year (FY) 2016 and FY2019. Despite the economic shocks of the coronavirus disease pandemic, the country has shown resilience by rebounding from a growth rate of 3.4% in FY2020 to 6.9% and 7.1% in FY2021 and FY2022, respectively. However, the post-pandemic recovery was disrupted in FY2023 with a decline in gross domestic product growth of 6.0% due to rising inflation, lower industrial activities, and fiscal constraints. Despite that robust economic growth has contributed to a significant decline in poverty from 48.9% in FY2000 to 18.7% in FY2022, the benefits of economic success have not been evenly distributed, and poverty reduction has been uneven across the country. The northwest region of Bangladesh (Rajshahi and Rangpur Divisions) faces significant economic vulnerability due to inadequate infrastructure and slow progress in industrialization. In particular, Rangpur division has the highest urban poverty rate with dense population, and it is also vulnerable to frequent natural hazards and extreme weather. The Eighth Five-Year Plan aims to achieve regional balance in development through distribution of industrial activities, enhancing farm productivity, and generating additional income opportunities. A reliable power supply is essential to achieve this goal through economic advancement in this region.

Rapid increase in electricity demand. The Northern Electricity Supply Company (NESCO) Public Limited Company (PLC) commenced its operation in October 2016 with a mandate to distribute and supply electricity in the northwest region. Since then, the demand for electricity in the NESCO area has increased at a compound annual growth rate (CAGR) of 12.6% from 439 megawatts (MW) in FY2017 to 896 MW in FY2023, and the total number of consumers has increased at a CAGR of 6.9% from 1.29 million to 1.92 million during the same period. It is projected that the demand for electricity will continue to increase at a high growth rate with a CAGR of 12.5%, reaching 2,037 MW by 2030, which calls for urgent expansion of the power distribution network in the northwest region. The high demand in the future is mainly from industrial consumers, which currently account for only 1.36% of the total load in the region as of FY2021 (28.4% in national average), which has a substantial potential to grow in the future.

Low reliability of power distribution network. Bangladesh including the NESCO operational area has achieved remarkable progress in expanding access to electricity and increasing power generation capacity. The national electricity access rate, which was one of the lowest in the world at 55% in 2010, had risen to 100% in 2022. During this period, the power generation capacity surged, increasing more than fourfold from 5,271 megawatts (MW) to 22,482 MW. However, the transmission and distribution systems are not commensurate with the expansion of power generation capacity. While the number of electricity consumers in the northwest region has grown steadily, the distribution network in the region is aged and overloaded, resulting in poor reliability of power supply with frequent load-shedding, power cuts, and voltage drops. The aged distribution network is also highly vulnerable to theft, fires, floods, and fatal accidents caused by contact with tree branches and other objects. It is, therefore, crucial to modernize the power distribution network in the region to improve the reliability, quality, safety, and efficiency of power supply.

Urgent need to enhance climate resilience of power distribution network. The acceleration of climate change impacts poses additional challenges to safety and reliability of power supply. More frequent and severe extreme weather events lead to increased disruptions in the grid system. Bangladesh is recognized as one of the worst affected countries when it comes to the impacts of climate change. The northwest region is highly prone to natural hazards such as cyclones, floods, landslides, thunderstorms, and earthquakes. In particular, two major cities (Rajshahi and Rangpur) in the region have experienced significant damages to its existing power distribution network due to cyclones, causing distribution poles or transformer to fall, overhead lines to break, and conductors to snap. Consequently, climate change has placed increased pressure on the structural stability of aging grid infrastructure in the region. Since critical infrastructures such as telecommunications, transportation, energy supply, and healthcare rely on a reliable power supply, a widespread and prolonged power blackout could lead to significant disruptions, economic losses, and public safety risks. Therefore, it is imperative to build climate-resilient distribution infrastructure and improve the adaptative capacity to quickly respond to natural disasters. Given the country's exposure to the increased adverse impacts of climate change, investing in a safe and resilient power supply system is beneficial for the more vulnerable sections of society.

Low-carbon energy transition. Under its updated Nationally Determined Contributions (NDC) in the Paris Agreement (Article 4, paragraph 2), Bangladesh has set a target to implement 4.1 giga-watts (GW) of renewable energy projects by 2030. Amid the escalating energy prices and increasing climate change risk, the government has committed to developing renewable energy sources while canceling plans to construct coal-based power plants. In February 2023, the government also approved the Mujib Climate Prosperity Plan, which commits to renewable targets to 40% by 2041. The Plan also highlights the importance of energy storage infrastructure and calls for the development of an Energy Storage Roadmap. However, the transition to green energy requires a fundamental transformation of power systems with significant investment. The aged distribution network in Bangladesh can support no more than 10% renewable energy. Thus, electricity distribution network transformation with digital technologies is essential for decarbonizing the electricity system.

Impact

Sustainable and improved disaster- and climate-resilient infrastructure developed

Outcome

Outcome: Quality, efficiency, reliability, and sustainability of electricity supply in Northwest region improved.

Outputs

Output 1: Distribution grid modernized and digitalized and readiness to integrate renewable energy resources increased.

Output 2. Climate resilience and adaptive capacity to respond to natural hazards enhanced.

Output 3. Institutional capacity for disaster preparedness and gender mainstreaming increased.

Geographical Location
Nation-wide

Safeguard Categories

Environment
B
Involuntary Resettlement
B
Indigenous Peoples
C

Summary of Environmental and Social Aspects

Environmental Aspects
Involuntary Resettlement
Indigenous Peoples

Stakeholder Communication, Participation, and Consultation

During Project Design
During Project Implementation

Contact

Responsible ADB Officer
Son, Jongmi
Responsible ADB Department
Sectors Group
Responsible ADB Division
Energy Sector Office (SG-ENE)
Executing Agencies
Northern Electricity Supply Company Ltd.

Timetable

Concept Clearance
14 Feb 2024
Fact Finding
15 Jul 2024 to 15 Jul 2024
MRM
09 Oct 2023
Approval
-
Last Review Mission
-
Last PDS Update
22 Feb 2024

Funding

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Safeguard Documents See also: Safeguards
Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.

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Evaluation Documents See also: Independent Evaluation

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Related Publications

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Tenders

No tenders for this project were found.

Contracts Awarded

No contracts awarded for this project were found

Procurement Plan

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