The ousted Awami League (AL) government’s imprudent power and energy policy has left Bangladesh in a precarious state, with the country now grappling with a severe electricity shortage.

The country is currently facing this crisis due to its over-reliance on imported fuels for power generation, according to Power Division officials.

The heavy dependence on imported fuel has created a financial burden, with the country now requiring $5.7 billion annually to import power from India, as well as Liquefied Natural Gas (LNG), coal, and petroleum products for power generation.

The ongoing 2,000-megawatt (MW) load shedding is primarily attributed to financial mismanagement and an over-dependence on imports, which prevented the country from securing sufficient primary fuel to run its power plants over the last three years.

With a current electricity demand of 15,000-16,000MW, Bangladesh has the capacity to generate 24,000MW using natural gas, coal, fuel oil, and renewables, along with 2,500MW imported from India.     

However, due to fuel shortages, the country is currently generating only 10,500 megawatts of electricity domestically, leading to a shortfall of around 2,000MW.

The import costs are substantial, with $1.2 billion claimed by India’s Adani alone for 1,500MW of power imports, while an additional $400 million is spent on importing another 1,100 MW from India.

Meanwhile, the government faces debts totaling Tk35,000 crore, including significant amounts owed to private power producers, India’s Adani, LNG suppliers, and Chevron for domestic gas supplies.

The cost of power generation soared, rising to Tk11 per unit in the 2022-23 fiscal year, compared to an average sale cost of Tk8.

Although the AL government raised the power tariff multiple times in recent years, the increases were insufficient to bridge the gap between generation costs and sale prices.

When the Awami League assumed power in 2009, the average cost of power generation was just Tk2.5 per unit.

Analysts say, several factors contributed to the spike in power generation costs, including the growing reliance on imported fuels, the depreciation of the taka, the dollar crisis, and controversial power deals, such as with Adani Power and Beximco’s Teesta Solar project.

Furthermore, there has been a lack of investment in boosting domestic gas and coal production.

Experts argue that the solution to this crisis lies in increasing natural gas supplies, both through imports and domestic production, as gas remains the cheapest option for power generation.

During the AL’s early years in power, local gas accounted for 68% of electricity generation, keeping costs manageable until 2019. However, the country’s gas production peaked in 2018 and has since declined.

To tackle this shortfall, the government began importing costly LNG, which was initially blended with local gas to mitigate costs.

However, the surge in global LNG prices following the Russia-Ukraine war, which pushed prices to $54 per million thermal units in 2022, has had a lasting impact on Bangladesh’s energy prices.

Although prices have since decreased, the damage has already been done. Today, the country’s reliance on local gas dropped to 52% from 68% six years ago, making it increasingly dependent on expensive LNG imports.

To resolve the crisis, Bangladesh must prioritise increasing local gas production, while maintaining a balanced approach to energy imports, experts opined.

While the Hasina-led government succeeded in building the power infrastructure during its tenure, it failed to significantly boost primary fuel production.

Although Russian Gazprom was involved with Bapex to drill oil and gas wells, which led to a modest increase in gas production from certain fields, the government was unable to attract international oil companies for exploration in the Bay of Bengal.

Moreover, its onshore gas exploration efforts remained limited.

Instead, the government’s approach to resolving the gas crisis focused primarily on imports, with LNG imports costing Bangladesh around $2 billion annually.

Despite Bangladesh’s significant coal reserves, only the Barapukuria coal field is currently operational, with the Phulbari field being ready for development.

However, the government refrained from further developing coal fields due to environmental and social concerns.

But, this did not prevent the government from initiating large coal-based power projects in Rampal (near the Sundarbans), Payra, and Matarbari, all reliant on imported coal.

Rampal and Payra are now partially generating power, and coal’s contribution to the national energy mix has risen to 11% from 2% over the past five years.

The Russia-Ukraine war caused coal prices to surge to $400 per tonne, far exceeding the projected $100. As a result, the power generation costs at the Payra and Rampal plants rose to Tk15 per unit, compared to the expected Tk6-7.

Although Indonesian coal prices dropped to $120 per tonne, the ongoing dollar crisis—exacerbated by financial mismanagement—led the government to limit coal imports for these plants.

From 2019 to 2023, the use of furnace oil (HFO)-based power increased from 16% to 21%, while diesel-based power decreased slightly from 2.9% to 2.6%.

Diesel power generation remains expensive at around $30 per gigajoule (GJ), compared to less than $12 per GJ for HFO-based power, making HFO plants more economical.

Despite the financial crisis, the government did not fully shut down diesel plants until this year.

In 2017, Bangladesh struck a deal with Indian conglomerate Adani, which developed a coal-based power plant in Godda of Jharkhand. The plant began exporting 1,500MW of power to Bangladesh in 2023, using imported coal.

Initially, Bangladesh was to pay a capacity charge of $0.038 (Tk3.26) per unit, higher than for any other power plant in Bangladesh, with a power price of Tk9.09 per unit—56% higher than other imported electricity.

However, due to rising coal prices, Adani’s power costs surged to Tk14 per unit last year. Even if Bangladesh does not take the power, it is still obligated to pay $423.29 million annually in capacity charges.

Despite financial difficulties, Bangladesh prioritised power from Adani, allowing it to run at full capacity, while local Payra and Rampal plants were underutilised. As a result, Bangladesh now owes Adani $800 million in arrears.

Another controversial deal involved Beximco’s Teesta Solar power project, awarded in 2016 and finally operational in August 2023, despite a target of operation in 2018.

The project’s power price is 15 cents (Tk17) per unit, which is 2 cents higher than older solar projects.

The government could have renegotiated the price due to delays but chose not to.

Solar power in Bangladesh remains one of the costliest in the world, with prices significantly higher than India’s, where solar power costs just 3 cents.

Beximco’s solar project, worth Tk3,000 crore, earned Tk634 crore in its first year, projecting profits within five years—a stark contrast to legacy power projects, which typically take seven to eight years to recover costs.