Power crisis looms as demand soars

Bangladesh is facing power crisis as the demand is expected to surge this summer while financial constraints and import challenges threaten to hamper generation, raising fears of load-shedding.

The demand for electricity has been steadily increasing since February and is projected to cross 17,000 megawatt this summer, according to Power Division. This will require a huge amount of oil, gas, and coal. There are also concerns whether it will be possible to import required fuel and generate required electricity amid the ongoing dollar, gas and financial crises.

Power Division officials said that irrigation for Boro paddy cultivation, Ramadan, and summer heat are going to increase the demand for electricity this year. Private power plant entrepreneurs, energy experts and economists believe that it will be a big challenge to ensure uninterrupted power supply this year. For this reason, load-shedding of 500 to 1,500 megawatt may occur.

PDB in financial crisis

Power Development Board (PDB) purchases all electricity from state and privately-owned power plants and the imported portion as a single buyer. PDB then sells that electricity to distribution companies. However, PDB has to sell it at a lower price than it buys it. That is why PDB is facing a big financial crisis.

PDB has not been able to pay the private power plants on time. The private power plants claim that although they are supposed to get their dues every month from selling electricity to PDB, arrears have remained pending for about one and a half years.

Imran Karim, former president of Bangladesh Independent Power Producers Association, said that for not getting outstanding money, they have to run plants on loans. Many power plants are in severe crisis. Now arrears have gone up to the range of Tk 30,000 crore.

PDB said that the financial crisis has become evident in the last two years. The government has now started issuing special bonds to pay for subsidies and arrears in the power sector. Besides, there is a move to increase the price of electricity to reduce the subsidy in the future.

Mohammad Hossain, director general of Power Cell, said that the power sector will have to come out of the subsidy gradually.

Dollar crisis and LC complications

According to PDB, there are 78 private sector power plants in Bangladesh. Their total production capacity is 8,778 megawatt. Of these, 47 oil-based plants have a capacity of 5,360 megawatts. Private power companies say that they are facing problems importing oil for power plants and even buying from Bangladesh Petroleum Corporation in some cases.

Imran Karim said that dollar support is urgently needed to ensure production for next three months. If the dollar crisis and LC (Letter of Credit) complications are not resolved, power generation may be affected this year. The private power plants need a support of two and a half to three hundred million dollars for oil import for next three months.

Fuel and import dependence

A few years ago, Bangladesh was dependent on gas for power generation. Currently, gas dependency is less than 50 per cent. Not enough gas is available from domestic gas fields for power generation. Bangladesh is now trying to overcome the gas crisis through LNG imports. In addition to gas, the use of oil and coal has increased in power generation. Most of this oil and coal has to be imported from abroad.

According to PDB data, their fuel cost in the power sector exceeded Tk 61,000 crore in the fiscal year 2022-23, including electricity imports from India and Adani. A large part of this is the fuel cost of oil and coal-fired power. Analysts say that due to import dependence, fuel costs are increasing in power generation and it is putting direct pressure on the dollar.

State Minister for Power, Energy and Mineral Resource Nasrul Hamid said that the current demand for gas in the power sector is 2,000 MMcf/d (million cubic feet per day) but only 1,000 MMcf/d is being supplied. If gas could be supplied as per demand, the subsidy burden in this sector would be reduced by 70 per cent. He mentioned that the cost of power generation is much lower in gas.

Looking at the power sector plan, analysts said that Bangladesh is becoming increasingly dependent on imports for power generation, which is putting pressure on the dollar. According to the Ministry of Power Energy and Mineral Resources, an additional $13 billion was spent on fuel imports in FY2022-23.

In a report, the Centre for Policy Dialogue said that to reduce the financial pressure on the power sector, quick rental and inefficient power plants should be shut down. It has also been said that capacity payment should not be made when the power plants do not generate power.

Load-shedding may be necessary

PDB said that if fuel cannot be imported according to the demand for electricity, some power plants will have to be shut down. In that case, load-shedding will have to be done.

PDB has estimated that load-shedding of 500 to 1,500 megawatts may occur during the peak hours in summer.

However, State Minister for Power Nasrul Hamid told this reporter that diesel-fired power plants will not be operated this time. Efforts will be made to ensure fuel supply to the large power plants.

He hoped that there will be no crisis this summer.