ISLAMABAD, Aug 03 (Alliance News): Bangladesh is struggling with expensive and insufficient natural gas imports amid a global spike in energy prices.
According to foreign media, a 29-year-old citizen, Rubi Islam, while talking on the phone, said that for the past two months, we have been facing such power outages as we have never seen in a few years.
The South Asian country boasted a 97 percent electrification rate, meaning nearly all of its population has access to electricity, and increased its power generation capacity to 25,700 MW against a peak demand of about 15,000 MW. was extended.
However, since June the country has seen a return to frequent power outages, or ‘load shedding’, as the government tries to reduce rising fuel costs.
Minister of State for Electricity, Energy and Mineral Resources Nasrul Hamid wrote in a Facebook post that due to the ongoing conflict between Russia and Ukraine, Bangladesh is facing a shortage of gas supply due to the increase in energy prices in the global market. Which is affecting the power generation.
However, observers say the roots of the crisis go back even further to pressure on oil and gas as a result of Russia’s invasion of Ukraine.
Simon Nichols, a researcher at the US-based Institute for Energy Economics and Financial Analysis, said Bangladesh’s power sector is increasingly dependent on fossil fuel imports, including liquefied natural gas (LNG), which that is a ‘highly volatile commodity’ that risks becoming too expensive for poor importing countries.
About 60 percent of Bangladesh’s electricity generation comes from natural gas, a quarter of which is imported.
Experts have called for further exploration and expansion of domestic gas production to reduce dependence on imported fuel.
The Bangladesh Power Development Board (BPD) is facing financial pressure due to overcapacity created by expensive subsidies to independent power producers (IPPs) in the private sector.
Simon Nicholls said that in FY2020-21, the cost of electricity purchased from IPPs has for the first time exceeded half of PDB’s total operating expenses.
This year, the government also paid Tk 1.32 billion ($1.4 billion) in capacity payments to IPPs and an equal amount of subsidies to state-owned power utilities.
The government two weeks ago introduced austerity measures that included scheduled load shedding, curbs on air-conditioning use and reduced working hours to ease pressure on fuel imports.
President of Dhaka Chamber of Commerce and Industry Rizwan Rehman said that the cost of doing business will increase due to power outages and increase in energy prices.
He added that electricity and other energy, including diesel and gas, account for 15-20 percent of production costs in energy-intensive industries, particularly textiles, cement, steel, leather and plastic products.
He noted that electricity prices increased in both 2019 and 2020, while gas rates recently increased by about 23 percent — which will further increase electricity prices.