Energy Transition

Here's how industrial energy efficiency can boost Bangladesh's economy

Studies show that Bangladesh's major industrial sectors have quite a high energy efficiency potential.

Studies show that Bangladesh's major industrial sectors have quite a high energy efficiency potential. Image: Reuters/Mohammad Ponir Hossain

Shafiqul Alam
Energy Analyst, Institute for Energy Economics and Financial Analysis (IEEFA)
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  • In a volatile international energy landscape, Bangladeshi industries must become more energy-efficient.
  • Increased efficiency would allow industries to become more globally competitive and enable the country to become more energy self-sufficient.
  • Mandatory energy auditing in industry will accelerate this process.

In the current context of highly volatile international fossil fuel prices and rising energy tariffs, Bangladesh has revised a directive on mandatory energy auditing, as included in the revised energy efficiency and conservation rules.

Prioritising energy efficiency across sectors is crucial for the country as it relies heavily on imported fossil fuels and has already experienced the shocks of the turbulent international fuel market.

The impact of successful energy efficiency interventions spans different sectors of an economy – with reduced energy demand, fewer energy imports and lower costs among the benefits.

For industries, in particular, cheap rooftop solar can reduce energy costs and emissions, but fully utilizing readily available energy efficiency measures carries enormous potential.

Bangladesh’s industrial energy potential

Studies show that Bangladesh's major industrial sectors have quite a high energy efficiency potential. For instance, the garments and textile sectors, which contribute over 80% of Bangladesh's export earnings and over 10% of the country's GDP, can enhance aggregate energy efficiency by 25-31%. Likewise, with targeted efficiency measures, steel and cement industries can reduce energy consumption by 22-32% and 21-28%, respectively. Other prominent industry sectors can achieve significant savings, too.

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Energy efficiency is vital for Bangladesh's industries, especially when meeting their global clients' ever-increasing environmental, social and governance (ESG) requirements. For instance, Bangladesh's garment manufacturers must fulfil international buyers' obligations to cut greenhouse gas emissions. The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) have signed the United Nations fashion industry charter for a 30% reduction in GHG emissions of the sector by 2030.

While rooftop solar is a cheap source of clean energy, its use for four to five hours daily will not take the apparel sector close to the 30% GHG mitigation target. This is because the industry consumes significant natural gas in processes and captive generation. So the mitigation target compels them to undertake energy efficiency measures.

Additionally, the record gas price hike in January 2023 and the increase in electricity tariffs three times in quick succession from January to March 2023 strengthen a strong business case to deploy energy-efficient technologies by all industries. The government may raise electricity prices again in June 2023 as challenges remain over electricity and other energy supply due to insufficient fuel imports. Such a cocktail of uncertainties provides strong motivation for promptly increasing efficiency in energy use.

Impact across industries

The maximum electricity demand served by the Bangladesh Power Development Board (BPDB) was 15,648 megawatts (MW) on 19 April 2023, compared to 14,782MW served on 16 April 2022, representing at least a 5% increase in peak demand. Additionally, some 97 new economic zones are in different stages of development and are likely to attract increased investment in manufacturing industries. As such, the demand for electricity and other energies may soar in the next few years.

In such a scenario, enhancing energy efficiency on the demand side would have a multitude of impacts on the economy. Notably, the existing industries consumed natural gas of approximately 191 billion cubic feet (bcf) in production processes and 176bcf in captive power generation, respectively, during the fiscal year 2021-22. This combined consumption of 367bcf represents a 36% share of national gas consumption.

On the other hand, Bangladesh reportedly imported 240bcf of liquefied natural gas (LNG) in FY2021-22. Even a 20% increase in the efficiency of industrial gas consumption could result in annual savings worth 73.4bcf of LNG. Industrial energy efficiency could thus help avoid 30% of Bangladesh's LNG imports.

Similarly, energy efficiency in existing industries would reduce grid-based electricity consumption, allowing the conserved energy to use in to-be-built industries. The BPDB will be able to manage electricity demand better, while the government would find itself in a more comfortable position by limiting costly fossil-fuel imports.

Industrial energy efficiency will also create job opportunities, both for technical and financial professionals. Private technology providers and financial institutions will then explore new business avenues. In addition, a rapid scale-up of this approach may lead to forming Energy Service Companies (ESCOs) that provide specialized energy efficiency services.

Additionally, competitiveness in the international market, particularly for export-oriented industries, is paramount. Energy efficiency and conservation would help these industries reduce energy consumption and associated costs and offer competitive prices.

Mandatory energy auditing

The government approved the energy audit regulations of Bangladesh on 2 August 2018. Further, it revised the energy efficiency conservation rules in February 2023, stipulating the timeline to initiate mandatory energy auditing by different sectors, including industries.

Designated consumers that use energy beyond some fixed thresholds will need to conduct energy audits and submit reports on annual energy consumption to the Sustainable and Renewable Energy Development Authority (SREDA). SREDA is also carrying out certification of energy auditors and energy managers, creating a pool of experts.

All these measures will develop an enabling environment for periodic energy auditing in industries. Mandatory reporting of the designated consumers of the selected sectors, based on energy audits, will help create a data repository at SREDA.

While the energy efficiency and conservation master plan has stipulated a goal of reducing 20% energy intensity per GDP by 2030, there are no sector-specific targets yet. To that end, an annual/periodic energy savings target for designated industrial consumers will be an important stepping stone to restricting consumption growth and containing energy wastage.

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Industries will then have an impetus to appoint energy managers to meet these savings targets, and mandatory checks will create jobs for certified energy auditors. Finally, Bangladesh can enjoy the dividends of its large industrial energy efficiency potential if industries gear up timely investment.

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The views expressed in this article are those of the author alone and not the World Economic Forum.

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