Pitfalls of oil-based expansion of electricity generation in a developing context

Abstract

In the context of growing demand and the need to rapidly increase access to convenient forms of energy, developing countries face many challenges for the development and upgrading of national energy infrastructures. Constraints on primary fuel sources, lack of capital and socio–political dynamics often result in the adoption of sub-optimal strategies for the expansion and upgrading of the existing infrastructure. Bangladesh is one such example that recently initiated a 10-year expansion program in 2010 to treble its generation capacity to 20 GW by 2021. The majority of about 3 GW capacity increase in the last two years has been based on imported oil such as heavy fuel oil (HFO) and high speed diesel (HSD). Despite having surplus generation capacity in 2011–12, the country continues to experience blackouts almost on a daily basis. By analysing the profiles of electricity demand, generation and shortage, as well as fuel imports, this study on Bangladesh demonstrates that increasing oil-based generation capacity does not always result in a proportionate increase in net electricity production. Moreover, increased dependence on volatile international energy markets for sourcing of fuel results in greater macroeconomic risks. Such macro-scale stress in a developing economy can be counter productive for social and economic development, as it takes resources away from other important sectors. Outcomes of this study can be useful for other developing countries that are undertaking energy sector reforms.