Energy crisis a threat to SDGs

More than 50 percent of the enterprises in Bangladesh identify the lack of consistent access to energy as the major barrier to higher production, according to a new report of the United Nations.

The industrial sector is responsible for 21 percent of the energy demand in Bangladesh, with the residential sector accounting for the lion's share, says the “Least Developed Countries Report 2017: Transformational Energy Access” of the United Nations Conference on Trade and Development.

“Productive use of modern energy is just as important as household use,” said Fahmida Khatun, executive director of the Centre for Policy Dialogue, while making a presentation on the report yesterday.

The CPD, which has been unveiling the Unctad LDC reports in Bangladesh since 2006, released the report at the Cirdap auditorium in Dhaka. The theme of this year's report is “Transformational Energy Access”.

In Bangladesh, access to electricity was nearly 60 percent in 2014, which is the lowest among all the nine Asian LDCs, according to the report.

The access to power rose to 76 percent on the back of an increase in power production by three times in the last nine years, according to the power division of the government.

When asked why the 2014 data was used, Fahmida explained that when many countries are compared data on all nations cannot be found. The 2014 data was used to make a comparison.

“Of course, I won't say that Bangladesh's progress has been properly reflected in the comparison. But there is a trend, which does not change overnight,” she said.

In Bangladesh, 53 percent of the companies said they face trouble because of a lack of electricity. It is 12 percent in Bhutan, 6 percent in Cambodia and 7 percent in Myanmar, according to the report.

“Energy access alone is not enough in LDCs. What is needed is transformational energy access,” said the report.

Fahmida said energy is a major component of production costs. “We will have to supply energy at an affordable cost. If we can make electricity available for all it will be helpful in attaining SDGs.”

According to the report, the LDCs are falling far behind the rest of the developing world in terms of getting power to homes and businesses.

While they have made great strides in recent years, achieving the global goal of universal access to energy by 2030 will require a 3.5 times increase in their annual rate of electrification.

Achieving Sustainable Development Goal-7 is not only a question of satisfying households' basic energy needs, Unctad Secretary-General Mukhisa Kituyi said in Geneva, ahead of the report's publication, according to a statement distributed at the CPD event.

“That in itself has valuable welfare implications, but we need to go beyond,” he added.

The Unctad said more than 40 percent of businesses operating in the LDCs are held back by inadequate, unreliable and unaffordable electricity.

On average, they suffer 10 power outages per month, each lasting around five hours, and this costs them 7 percent of the value of their sales.

Achieving universal access to modern energy in LDCs by 2030 will be costly. Based on previous global estimates, the report puts the cost at $12 billion to $40 billion per year. Transformational energy access would still cost more.

This far exceeds the resources currently available, the report says.

Total official development assistance to the energy sector is just $3 billion per year. Domestic resources for public investment are scarce in most LDCs, and most also face serious limits to borrowing without risking an unsustainable debt burden.

Private investors show little enthusiasm for investments in electricity infrastructure in LDCs, which entail large irreversible costs, long project cycles and slow payback.

Governments could raise extra capital by developing domestic debt markets or tapping into alternative sources of funding, such as impact investors, infrastructure funds and, in some LDCs, the population living abroad.

Better still, the report says, would be for international donors to honour their longstanding commitment to providing at least 0.15-0.20 percent of their national income in aid.

Renewable energy sources, such as solar and wind power, could have a revolutionary effect in rural areas -- the home to 82 percent of those without power in LDCs.

Utility-scale renewable technologies capable of feeding the grids and mini-grids are necessary not only to power homes but also to grow businesses and industries, according to the report. “They need to be deployed rapidly.”

Speaking at the report launch, Mustafizur Rahman, distinguished fellow of the CPD, said huge investment has been made in energy and power in Bangladesh in the last one decade, increasing production and availability, but challenges still remain.

The price of energy would play a critical role in Bangladesh's journey towards achieving the SDGs, he said.

“Financing has to be done in a way that we can produce energy cheaply and supply the energy at cheaper rates to producers and consumers.”

But if the energy price is higher the cost of production will be higher, which will erode competitiveness.

Bangladesh has to see whether it can make investment in the energy sector smartly and borrow cheaply from international sources, Rahman said.

“We will have to make the most of the investment through public-private partnership locally and we will have to see whether we can do it well, maintaining governance and completing projects in time,” he added.

According to the report, the urban area in Bangladesh dominates in terms of electrification rate, but it is still low compared to world average. On the other hand, half of the rural population has access to electricity.

“So, we will have to heed to the rural areas more,” said Khondaker Golam Moazzem, research director of the CPD.

“We may be able to ensure universal energy access in 2041 but pricing will be an issue at the time. We are already getting hints that energy prices will go up.”

LDCs such as Bhutan, Cambodia and Vanuatu have boosted their productivity significantly by using electricity whereas Bangladesh is in the midway.

“We have increased our electricity production. But, we are not being able to supply adequate and reliable electricity to companies so they can run their operations unhindered,” he added.

Bangladesh would be up for LDC graduation consideration next year and is due to leave the group in 2024, said Towfiqul Islam Khan, a research fellow of the CPD.