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Dhaka Tribune

Bangladesh's power crisis: Not just a national issue

Bangladesh's troubles with the energy crisis are caused by a variety of factors

Update : 22 Jul 2022, 02:08 PM

People saw flashes of the darkest period, when power outages were routine, as Bangladesh lurches into the darkness for the last few weeks, owing to periodic power outages. 

It was thought that Bangladesh had left its dark history far behind and that following a period of rapid progress, there was now enough power produced to meet demand. What was previously thought to be a limited power outage caused by a brief grid malfunction or a technological fault has now transformed into the first signs of an energy crisis. 

Not only Bangladesh, but many significant countries are experiencing power and fuel shortages. Aside from Covid, Russia's recent invasion of Ukraine has increased energy prices for consumers and companies worldwide, harming homes, industries, and entire economies -- most severely in the poor world, where people can least afford it. 

Most of Bangladesh's neighbours, including India, Pakistan, Myanmar, and China, are experiencing regular power outages and have been compelled to restrict their resources. The United States and the majority of European Union countries were also among the most impacted, with petrol prices breaking all prior records.

A pandemic, a war, Europe's abrupt transition, historically low global inventories, and uncertain temperatures have all contributed to the scourge's potential to linger and even intensify. All of these negative indexes are putting pressure on energy markets throughout the world. 

Bangladesh's troubles with the energy crisis are caused by a variety of factors.

One, warmer weather in Asia, especially in Bangladesh, has resulted in higher electricity use than before.

Two, Bangladesh currently does not have any long-term LNG contracts with any countries. Bangladesh purchases LNG on the spot market. 

Three, spot markets' prices have been rising since January 2022 owing to Russian LNG sanctions. The price of MMBTU LNG increased from $3 to $14. LNG prices are rising as a result of lucrative offers from European governments seeking an alternative to Russian gas supplies. Brent crude oil prices increased by 23% in November 2021, reaching $82 per barrel. It hit a high of $130 per barrel in early March. Thermal coal's price reached $160/ton. 

Four, due to US currency shortages in its banks, BPC banks were having difficulty opening LCs for BPC's petroleum imports on schedule. According to Bangladesh Bank data, fuel import expenses jumped 111% during July-May of 2020-21 and 2021-22. BPC has to open 16-17 LCs for oil imports every month in order to acquire crude and refined oil supplies for the country, and each LC settlement costs US$730-750 million. BPC is now dealing with budget and cash scarcity issues.

Five, according to BSS, the government has been paying Tk 280 billion in subsidies to the electricity industry, with an extra Tk 250 billion needed to cover import expenditures for LNG for power generation. Because of increased energy and fertilizer prices on the international market, the government will suffer a historic high subsidy that is 54% more than the previous fiscal year. This is severely taxing the government's ability to function.

Bangladesh has also made a number of initiatives to address the situation.

Firstly, to keep up with the rising oil costs, the BPC (Bangladesh Petroleum Corporation) has hiked domestic prices for all such fuels, including jet fuel, which was raised by Tk 5 per liter, and furnace oil, which was raised by 19.35% to Tk 74 per liter in March of this year. 

Secondly, the government declared load-shedding, but this time it was planned. To make up for the shortfall, the government plans to limit electricity through rolling power outages lasting up to two hours every day. Given the present global energy scenario, this is the most cost-effective alternative. Proper and planned load management of the present energy supply might alleviate people's suffering.

Thirdly, Bangladesh has gone to great lengths to preserve power. The government has adopted the practice of asceticism by minimizing superfluous costs and canceling non-emergency travels of public officials, using electricity sparingly in workplaces and public meetings, and closing shops and marketplaces by 8PM.

Bangladesh has enough power plants to meet its demands after a decade of infrastructure growth, but a worldwide energy crisis caused by the Russia-Ukraine war has prompted the government to reinstate continuous power outages. 

The situation is unprecedented and is predicted to last through September. However, LNG prices are expected to rise more in the approaching winter as European countries want additional LNG. Despite how depressing it may seem, the situation is not completely hopeless.

The government plans to increase the generation capacity of the nuclear power reactor to 10,000 MW in the future. A feasibility study unveils that the first unit of the Rooppur nuclear power plant (RNPP) in Bangladesh may start its commercial operation by 2024 and the second unit by 2025. The Rampal coal-fired power plant will contribute another 1320 MW to the energy mix once it starts generating electricity. 

If quality electric energy at an acceptable price is not secured quickly, a domino effect of energy shortages would undermine the country's overall economic management. 

To provide a more reliable supply of electricity in the near future, the government must assure the prompt completion of all current coal-based power plants, their coal supply and import infrastructure, and the completion of the essential power evacuation transmission lines. 

Every form of renewable energy, including rooftop, home, irrigation, lighting, and so on, need regulatory and financial backing. Most essential, the people must recognize the situation's uniqueness and recognize that it is a global catastrophe rather than a national one.

Anup Sinha is a researcher and academic specializing in South Asian affairs.

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