Bangladesh hit by energy crisis as Russia-Ukraine conflict drags on

Rolling outages returned in the middle of the year after almost a decade while factories were shut down due to a gas shortage

Things were going well in Bangladesh. In the first quarter of the year, the country managed to bring its remotest regions under electricity coverage. It had finally achieved the milestone of 100 percent electrification.

But that joy only lasted for a short period. A distant war broke out in Ukraine and its impact was felt thousands of miles away.

In the middle of the year, rolling outages returned and factories were shut down due to a gas shortage. Then a sudden power grid failure plunged the country into total darkness.

The power situation has improved now, but it was horrible only a few months ago. Frequent load-shedding throughout the day caused a great deal of suffering among the public.

Gas and electricity crises dominated discussions in the services sector for much of 2022, driven by rising energy prices in the aftermath of the Russia-Ukraine war.

The power crisis somewhat eased towards the end of the year. Work is underway to transfer electricity generated at the Payra Power Plant to the national grid.

The government's policymakers are hoping that falling energy prices in the global market will pave the way for a solution to the gas crisis in the new year.

Like other countries, Bangladesh’s economy picked up pace as pandemic-induced restrictions began to lift and imports increased.

Commodity prices also surged in the global market due to greater demand. As a result, the import costs for Bangladesh rose while the foreign exchange reserve became strained.

The Russia-Ukraine war, which began in March, also affected the energy market. Crude oil topped $100 a barrel, while the open market LNG price rose more than sixfold to $38 a unit.

The government subsequently stopped buying LNG from June onwards. This led to a gas crisis in mid-July, causing problems in power production.

100% ELECTRIFICATION

The government announced 100 percent electricity coverage across the country on Mar 21 during the inauguration of the 1,320 MW coal-fired power plant at Patuakhali's Payra.

In Rangabali Upazila, power connections were ensured for 25,000 using submarine cables. Power was provided to Sandwip Island, in the same manner, a few years ago.

A power plant with a production capacity of 15 MW has been constructed on Noakhali’s Hatia Island. Several remote corners of the country have been illuminated with the help of electricity in this manner.

According to the government agency Power Cell, electricity is now being supplied to 43.9 million consumers in the country from the national transmission line.

Apart from this, 6 million residential customers are meeting their needs through solar power. In 2009, the total number of customers was 18 million.

Bangladesh also recorded its highest electricity production of 14,782 MW during peak hours on Apr 16. It marked the highest demand for electricity that day.

As the price of energy in the world market continued to rise, the production at diesel-powered rental power plants was halted, causing an imbalance in demand and supply.

GAS SHORTAGE

Demand for open-market LNG increased in mid-2021 as the global economy started to recover after breaking the pandemic deadlock.

The price of LNG increased to $41 per unit from $7. Due to the dollar crisis and the high price of LNG, the government stopped buying LNG from the open market in June.

As a result, a gas crisis began to grip the country from the beginning of the fiscal year 2022-2023. Gas supply to power plants was subsequently curtailed to balance demand and supply and to maintain a regular supply to industrial plants.

This in turn led to a power crisis. Although there has been a reduction in load-shedding due to a fall in electricity demand during the winter, the gas crisis still continues.

According to Petrobangla, 2,837 mmcfd of gas was obtained from domestic wells and LNG at the beginning of the year. Of this, 541 mmcfd of gas was received from two floating LNG terminals in the Bay of Bengal.

The total supply on Dec 1 was 2,588 mmcfd. Of this, the LNG figure stood at 380 mmcfd. The situation was worse in the middle of the year.

Nazmul Ahsan, chairman of Petrobangla, said that a total of 56 shipments of LNG were brought from Oman and Qatar in FY22 under a long-term contract. Despite a price hike, 18 more shipments of LNG were purchased from the open market.

About nine shipments failed to arrive over the past six months. This is one of the reasons behind the supply crunch.

Due to the gas shortage, production has been disrupted since July in all factories that use gas as raw material and fuel, including export-oriented garment factories in Dhaka, Narayanganj, Chattogram, and Gazipur.

Many owners are running factory boilers and captive power plants by refilling cylinders with CNG as an alternative. Power generation in the national grid has also decreased by about 2,000 MW.

LOAD-SHEDDING

Recurring power cuts returned to Bangladesh after almost a decade when several diesel-powered energy plants were shut down during the summer due to the gas shortage and dollar crisis.

Tawfiq-e-Elahi Chowdhury, the prime minister's advisor for power, energy and mineral resources, urged the public to accept load-shedding for the greater good of the country in a press briefing on Jul 7.

At that time, the government took various initiatives, including closing shops and malls by 8 pm, reducing office hours, offering home office facilities, transporting more workers in government vehicles, and shutting down air-conditioners.

Efforts were made to reduce grid pressure by shifting weekly holidays in industrial areas.

None of these measures was able to reduce the suffering caused by load-shedding. Power distribution companies also published load-shedding schedules. But in reality, the power would be gone for longer periods than scheduled and returned very late.

According to PDB data, daily power generation at the beginning of the year ranged from 6,700 MW to a maximum of 8,193 MW. The capacity was there to meet a demand of 12,422 MW. The situation was good at the beginning of July. A peak demand of 13,126 MW was met in the evenings.

Later, the situation gradually worsened. A shortage of 1,195 MW per day was discovered on Aug 1.

The government thought that the power demand would decrease and the situation would return to normal after the heat subsided in September. But that did not happen. However, at the end of November, the demand for electricity fell slightly. Load-shedding slowly started to recede as well.

Power department officials are hoping that the two main coal-based power plants in the country, Payra and Rampal, will start production before winter ends. India's Adani Group will also start exporting electricity to Bangladesh.

GRID FAILURE

There have been two consecutive breakdowns in the national power transmission line within a month. On the afternoon of Oct 4, after the western and eastern junctions of the transmission line were disconnected, the imbalance at the two ends resulted in a grid failure. Almost half of the areas in the country subsequently lost power. The capital Dhaka and other areas were without power for almost eight hours as power plants shut off one after another.

As there was no electricity, mobile services were down. Treatment in hospitals and production in factories were disrupted. About a month or so before that, a fault in the national transmission line had led to a widespread power outage for a few hours.

RECORD FUEL PRICES

The government increased the prices of petrol, octane, diesel and kerosene to a record high this year, citing an increase in fuel prices in the world market due to the war in Ukraine. Such a large jump in prices was previously unheard of in the sector.

On Aug 5, diesel and kerosene prices were increased by 42.5% to Tk 114 per litre, petrol price was hiked by 51.16% to Tk 130, and octane by 51.68% to Tk 135.

This in turn led to an increase in all kinds of living expenses, including public transport fares. In the face of widespread criticism, the price of fuel was reduced by Tk 5 per litre after 23 days. The current price of diesel and kerosene is Tk 109 per litre, petrol is Tk 125 and octane is Tk 130.

INCREASE IN GAS AND POWER PRICES

The Bangladesh Energy Regulatory Commission on Jun 5 announced a 22.78 percent natural gas tariff hike for retail consumers across the country, from Tk 9.70 to Tk 11.91. That price adjustment at the retail level increased the cost of gas at all levels except for CNG used by vehicles. Later, the monthly bill for a kitchen double burner was increased to Tk 1,080 from Tk 975. For a single burner, the price was increased to Tk 990 from Tk 925. The price per unit was increased at all commercial levels, including residential prepaid metres.

On Nov 21, the wholesale electricity price was increased by 19.92 percent from Tk 5.17 to Tk 6.2 per unit. A day later, distribution companies started submitting applications to BERC to increase the price by adjusting the additional price at the retail level.

[Writing in English by Md Taif Kamal; editing by Shoumik Hassin]