Looking back 2024: Energy sector crisis keeps growing

The power and energy sector is set to give the interim government a rough ride in 2025 with its financial burden growing even bigger, mainly due to further increase in power overcapacity and capacity charge. 

The 2,500MW power generation capacity to be installed in 2025, mostly based on fossil fuels such as coal and gas, will add to the existing power overcapacity, increasing the capacity charge burden by a third to about Tk 35,000 crore, compared with the previous year. 

Many of the new and existing power plants would remain unused because of the energy crisis, potentially bringing frequent power cuts throughout blistering summer and affecting life and business. 

Increasing energy prices would not solve the problem, energy experts warned, reminding that the interim government’s reform promises inspired strong expectations about energy prices coming down, which had not yet happened.

The ousted Awami League regime is accused of causing a huge financial crisis for the power and energy sector despite increasing the energy prices over a dozen times of energy price increase between 2009 and 2024, mainly due to flawed policies. 

The combined subsidy requirement of the power and energy sector is about Tk 50,000 crore. The power sector subsidy requirement, mainly caused by overcapacity and capacity charge, is projected to exceed Tk 39,000 crore in 2025.

‘The problems will remain the same as observed over the past several years,’ said Shafiqul Alam, lead energy analyst of the Institute for Energy Economics and Financial Analysis, Bangladesh. 

The government should clear outstanding power and energy bills and sort out a plan for releasing money for uninterrupted energy imports, keeping in mind that the fewer power plants sit idle the better. 

Bangladesh Power Development Board accounts showed that the outstanding bills in the power sector stood at nearly Tk 46,000 crore in September 2024.

Raising power consumption, however, remained a big challenge because of reduced economic activities and poor national grid capacity limiting power supply to industries.

Industries rely on captive power rather than depending on the national grid fraught with repeated power cuts.

The 1,320MW coal-based Patuakhali power plant is set to begin operation this year. The BPDB is also set to start paying capacity charges for the 1,200MW Matarbari power plant and 583MW gas-based Meghnaghat power plant, among others, with the power plants ending their test run in 2025. 

The delay in completing the first unit of the 2,400MW Ruppur nuclear power plant, which was supposed to be operational this year, would require importing a large amount of furnace oil.

Furnace oil-based power plants are predicted to run daylong during the summer, when the power demand is expected to reach 17,500MW, up by 1,000MW compared with 2024.

Bangladesh’s current installed capacity is over 29,000MW. The power demand dropped to less than 7,000MW during lean hours in the ongoing winter season. During the peak hours, the power demand remained around 10,000MW.

Power outages, however, continued even in the capital in the peak of winter.

‘Boro season is around the corner, reminding us about the diesel demand greatly increasing within the next two months,’ said Bangladesh Working Group on Ecology and Development member secretary Hasan Mehedi.

The setback in renewable energy expansion after the interim government cancelled over 1,000MW renewable energy projects, which had been allowed without bidding, might prolong the energy crisis for longer than expected, energy experts said.

Currently, Bangladesh can generate 700MW from renewable energy sources. 

The government recently floated a tender for about 350MW renewable energy projects but their implementation might take a while, particularly because of the negative impression sent to international investors by the recent cancellation of renewable energy projects.

The cancellation of the project of the third floating storage and regasification unit was welcomed but considered a setback in increasing capacity to import gas. Bangladesh’s current gas import capacity is 1,000mmcfd.

Bangladesh currently provides 2,700MW of gas, a quarter of it imported as liquefied natural gas, against the demand of 4,000MW. 

While the import capacity remained unchanged, the domestic gas supply would remain the same in 2025 as it was in 2024, if not dropped, energy forecasts showed.

Gas accounts for 60 per cent of primary energy consumption. 

Compared with the previous year, the gas supply to the power sector dropped to about 910 mmcfd in 2024 from 960 mmcfd in 2023. 

 

‘The sad news is that the initiative that could have minimised import dependency for gas is still not in sight,’ said energy expert Badrul Imam.

Convinced about substantial gas reserve in the Bangladesh delta, Badrul has been calling on successive governments to scale up exploratory activities.

The latest move to attract foreign investors for offshore gas exploration fell flat in 2024. The recent political unrest is believed to have been behind the unwillingness of investors to engage in the gas exploration.

Uncertainty loomed over ensuring the supply of coal as well for the absence of long-term contract with international suppliers. The coal capacity use was about 37 per cent in 2024. The installed coal-based power generation capacity increased by more than 45 per cent in December 2024, compared with the same month in 2023.

Coal accounts for a fifth of the overall installed power capacity.  

‘There is no guarantee the government can ensure uninterrupted coal supply this year,’ said Hasan Mehedi. 

The challenges in the power and energy sector remained the same despite some positive developments in the sector taken by the interim government in 2024.

The act under which the power and energy projects were taken without bidding by the Hasina government over the past 14 years has been cancelled. The power of fixing tariffs was reinstated to the Bangladesh Energy Regulatory Commission.

On several occasions, the interim government announced, to the relief of ordinary people plagued by a sticky inflation for about three years, no more increase in the power price for now. 

In about two weeks after winning its fourth term in office through a rigged election in 2024, the past AL regime had planned to increase the electricity price in phases by 81 per cent in 2024 to stop paying subsidy. The first phase of the increase by 5 per cent came in February 2024. 

The regime, however, did not have the time to fully implement the plan as it was ousted by a student-led mass uprising on August 5. 

The power price has been increased by 139 per cent since 2010-11 in 14 phases. But the overall comprehensive power sector loss is estimated to stand at Tk 79,720 crore at the end of the current financial year. 

‘We must not forget that price increases do not help much. We need to correct our course to come out of the current situation,’ said Shafiqul Alam.

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New Age | Looking back 2024: Energy sector crisis keeps growing