Measures to improve energy efficiency could save Bangladesh US$460 million a year in the import of liquefied natural gas (LNG) to meet growing domestic demand, said a new report by the Institute for Energy Economics and Financial Analysis (IEEFA).
According to the report, the initiative to improve energy efficiency can help wean the country off its expensive import dependence as well.
The report surveys 51 industries with 124 gas-fired captive generators with a combined generation capacity of about 250 megawatts (MW) to find solutions to reduce the country’s increasing LNG demand.
“An insatiable appetite for gas could lock Bangladesh into a vicious cycle of spiralling prices and supply issues pertaining to LNG, and threaten to stall its economic transformation,” says the report’s author, Shafiqul Alam, Lead Analyst – Bangladesh Energy, IEEFA.
He examined the nation’s brief, turbulent relationship with imported LNG, and how the once cheap fossil fuel quickly became an economic burden.
Bangladesh started importing cheap LNG in 2018 and began to unravel a year later with COVID-19 and its supply-chain disruptions. Then came the global fuel price shocks brought on by Russia’s invasion of Ukraine in 2022, compounded by domestic economic woes, he said.
The report found that by replacing the vast stock of ageing, inefficient generators with more efficient models already available, and harnessing the waste heat produced by generators for other applications, Bangladesh could reduce the demand for imported LNG by a massive 50.18 billion cubic feet a year, or 21%, representing an annual saving of $460 million.
While replacing generators will require significant upfront investment, this capital outlay can be recouped within 1.5 to five years. The payback of investment in waste heat recovery is only about one year, the study found.
The alternative is to spend far more in building additional infrastructure to cope with the increasing local demand for fossil fuel imports against a global backdrop of tightening regulations to produce environment-friendly products.
Shafiqul Alam observed that the plan to import sufficient energy for development was not designed to cope with the high level of volatility in the international fuel market, depreciation of the local currency and weak fiscal conditions.
“Low efficiency in gas-fired captive power generation consumes a significant amount of gas annually. This is despite the average efficiency in captive generation increasing to 35.38% from 30% in the last decade,” he said. “Additionally, a significant percentage of industries do not utilise the waste heat released by these generators.”