Dhaka, Bangladesh (CU)_ In the midst of a global increase in energy costs, Bangladesh suffers from expensive and insufficient natural gas imports. The South Asian nation has an electrification rate of 97%, indicating that almost the whole population has access to electricity, and has also raised its total power generating capacity to 25,700 megawatts (MW), to meet a high demand of around 15,000 MW. However, since June, the nation has been facing regular power disruptions, or load-shedding, as the government attempts to curb soaring fuel prices.
According to Nasrul Hamid, state minister for power, energy, and mineral resources, latest Facebook post, Bangladesh is currently facing a shortage in its gas supply, which is impeding electricity production as a result of the escalating energy prices on the global market caused by the ongoing war between Russia and Ukraine. According to analysts, the origins of the problem, however, predate Russia’s invasion of Ukraine and the subsequent oil and gas shortage.
According to Simon Nicholas, a researcher at the Institute of Energy Economics and Financial Analysis (IEEFA) based in the USA, Bangladesh’s power sector has become over dependent on fossil fuel imports, including Liquefied Natural Gas (LNG), which is a very volatile commodity that has become too costly for underdeveloped importing nations. Around 60 percent of Bangladesh’s electricity is generated from natural gas, with 25 percent of that gas imported.
In order to lessen the dependency on imported fuels, experts have recommended an increase in domestic gas production and exploration. The Bangladesh Power Development Board (PDB) has also experienced financial strain due to the overcapacity it generated by providing expensive support to independent power producers (IPP) in the private sector. They get capacity payments from the government, a fixed charge depending on the quantity of electricity that plants are capable of producing even while they are idle.
According to Nicholas, in fiscal year 2020-2021, the cost of power obtained from IPPs accounted for more than half of the PDB’s total operating expenditures for the first time. During the same year, the government also made capacity payments of 132 billion taka ($1.40 billion) to independent power producers (IPPs) and subsidies of the same amount to state-owned power companies.