Sector-specific PPP landscape

The Ministry of Power, Energy, and Mineral Resources has two main divisions:

• The Power Cell was created to implement power sector reform and to manage the electricity business.

• The Energy and Mineral Resources Division manages the energy sector and has two corporations:

  (i) Bangladesh Oil, Gas and Mineral Corporation (PetroBangla), responsible for mining, developing, producing, and transporting natural gas and mineral resources; and

  (ii) Bangladesh Petroleum Corporation, responsible for import, refining, marketing, transportation, and storage of oil.

The Bangladesh Power Development Board (BPDB) operates most of the publicly owned generators and urban distributors (except in Dhaka and West Zone); it acts as a single buyer, purchasing from public and private generators and selling to distributors. In addition, it conducts procurement processes for independent power producers (IPPs).

The Sustainable and Renewable Energy Development Agency is mandated to promote renewable energy. It acts as the state nodal agency for all renewable energy programs and projects in Bangladesh. It is responsible for promoting and approving all renewable energy projects, developing an energy audit, and administering activities related to energy efficiency and conservation.

To create flexibility in the energy sector, the Government of Bangladesh has adopted various models specific to the energy sector:

• The government created a special status for IPPs—these public-private partnership (PPP) plants have been particularly successful in providing new generation capacity. Usually, IPPs sell energy to utilities under a PPA with one of the public companies, either the BPDB or the Power Grid Company of Bangladesh. As per the policies, such contracts benefit from sovereign guarantees.
• To meet Bangladesh’s energy needs, a special type of project was also developed—quick rental power plants, or “rentals.” These are typically small, oil-fired power plants established as an emergency measure to cope with power shortages in the short term and to be used during peak demand periods in the long term. With the exception of several rentals whose contracts last for a relatively long term of 15 years, most of the contracts are short (i.e., 3-5 years). Power generated from rentals is purchased by the BPDB under government initiatives. The BPDB usually purchases the rental power at high cost (due to the short term of the rental contracts) and sells the power at the regulated bulk tariff, with the negative margin incurred at the BPDB being the cost of the policy implementation.

There is a good level of activity in the power sector in Bangladesh and willingness to consider different delivery methods and incentives for the private sector to deliver a step change in energy supply. However, rentals are not considered to be the type of projects currently developing as typical PPPs as they lack long-term performance obligations. However, for the purpose of this report, and because this type of project represents a significant aspect of the local context, it has been decided to keep track of it. Rental projects, therefore, are counted in the assessment of the energy sector.

In general, a license is required for any power generation and energy transmission, distribution, supply, and storage project. Licenses are issued by the Bangladesh Energy Regulatory Commission.