energy demand perspectives in bangladesh - AgEcon Search

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Bangladesh J. Agric. ... straw, jute stick, firewood, crop wastes, etc. ... utilized for soil fertility management, are used as energy for domestic uses, agro-based ...
Bangladesh J. Agric. Econs. XXI, 1 & 2 (1998): 39-57

ENERGY DEMAND PERSPECTIVES IN BANGLADESH: 1992/93-2019/20 AD Sanzidur Rahman A B ST R A CT The present paper attempted to forecast demand for primary energy broadly categorized into: (a) commercial (coal, petroleum, natural gas, and hydropower), and (b) non-commercial energy (rice hull and straw, jute stick, firewood, crop wastes, etc.) for the period 1992/93-2019/20 AD to facilitate in energy sector planning and development. Demand forecast, based on past time series data (1972/73-1991/92), is made by utilizing two methods: (a) "Market Penetration Theory" that uses trend extrapolation and inter-fuel substitution principles, and (b) "Trend Extrapolation Model" taking into account the exogenous variables, e.g., GDP and energy/GDP ratio. Results reveal that fractional share of commercial energy in total energy consumption will increase from 51 percent in 1991/92 to 85 percent by 2019/20 AD. Total primary energy demand for 2019/20 AD, by using "Market Penetration" model, is estimated at 1,465 PJ. The share of commercial and noncommercial energy constitutes 1,239 and 226 PJ, respectively. The annual compound growth rates for total energy, commercial energy and non-commercial energy for the period 1992/93-2019/20 AD is estimated at 3.23, 4.89 and -0.84 percent, respectively. This implies that commercial energy demand would increase four fold from its 1991/92 consumption level of 300 PJ while demand for noncommercial energy, being substituted by commercial energy over time, would decrease slightly instead. Within the commercial energy sector, demand for natural gas would dramatically increase six folds covering 97 percent of total commercial energy demand. Therefore, special attention is required to plan for commercial energy sector as it relates to direct depletion of a non-renewable natural resource stock, the natural gas. Energy demand forecasts made by utilizing "Trend Extrapolation" model also yielded a close estimate of total energy demand of 1,655 PJ by 2019/20 AD (a 13 percent variation from the estimate of "Market Penetration" model).

I. INTRODUCTION Energy, both commercial and non-commercial, serves as a major vehicle for development in Bangladesh as elsewhere in the world. For the past three decades, since the birth of Bangladesh, lopsided development efforts without proper concerns for the environment as well as productivity levels of the resource bases has lead to unprecedented crisis in various sectors of the economy. The energy sector also faces severe crisis in meeting the increasing demands for domestic, industrial, transportation and other uses (TFR, 1991). The degree of crisis deepened in the 1990s when power failure and loadshedding became a routine phenomenon in cities and rural regions alike, thereby disrupting civil life, agriculture (irrigation), industrial and commercial sector development. Development of energy sector is time bound and demands considerable information on dynamics involved in types of energy used by various sectors and its substitution over time. Also,

The author is Visiting Research Fellow, Department of Agricultural and Food Economics, University of Reading Reading, England

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The Bangladesh Journal of Agricultural Economics

energy consumption in Bangladesh involves an imported component, petroleum, petroleum products and coal. In 1991/92, the relative share of imported fuel is estimated about 42 percent of primary energy and import cost consumed about 21 percent of total export earnings (BBS, 1995). This dependency on imported energy makes the economy more vulnerable to external price shocks in the energy market. For example, during 1981/82 import cost of petroleum fuel alone consumed 90 percent of export earnings (TFR, 1991a). Therefore, it is important to determine future trends in the demand for primary energy with information on the dynamics of its substitutability that will provide useful insights in deciding on the growth path of energy development. The present study, based on past time series data, differs from other studies conducted so far in that the phenomenal changes of observed interfuel substitution (i.e., the shift from non-commercial energy to commercial energy), has been taken into account while estimating primary energy demand upto 2019/20 AD. More importantly, within the commercial energy sector, substitutability among primary energy sources, e.g., natural aas. petroleum, coal and hydropower, is analyzed. The paper proceeds as follows. First a brief on the energy consumption scenario is provided. Next the analytical framework that takes into account the phenomenal change in inter-fuel substitution is described. Also, a'Trend Extrapolation' model is utilized to estimate demand for total energy that took into account income as a determining factor. The purpose is to examine correspondence between total energy demand estimation obtained from two diverse methods. Finally, the result is compared with the demand projections made by the government of Bangladesh and is followed by a conclusion. II. ENERGY CONSUMPTION IN BANGLADESH In the energy consumption scenario of Bangladesh, non-commercial energy plays a dominant role. The domestic sector alone consumes about 65 percent of total energy and 92 percent of this is provided by biomass fuels (TFR, 1991a). The immense pressure on biomass fuels without proper measure for replenishment has resulted in massive deforestation, decline in soil fertility and/or reduced productivity in lands. Agricultural residues and animal wastes, that are supposed to be utilized for soil fertility management, are used as energy for domestic uses, agro-based industries as well as other uses. About 64 percent of total non-commercial energy come from agricultural residues whose future availability is dependent on future agricultural development plans. Also, such diversion of agricultural residues for energy use has raised concerns for the policy planners as yields of major crops (e.g., rice, wheat, jute) are showing a declining trend owing to declining soil fertility (Rahman and Thapa, 1999) and disparate access to required rural infrastructure. However, observation of past energy consumption data revealed that the share of noncommercial energy in total primary energy consumption has been declining steadily allowing for