More than 1.8 billion people who reside in South Asia need economic solvency, improvement in social indicators and peace through political stability. Development is being impeded by the intensifying geopolitical competition, particularly between and among China, Russia, and the United States. This “great power competition,” which includes the dispute over the South China Sea, is entwined with regional rivalries (such as that between Iran and the United States; and India, China and Pakistan) having significant effects on the economy, the military, technology, and the environment of South Asia. As China pursues its expansive Belt and Road Initiative (BRI) infrastructure and trade vision, Russia uses arms sales and nuclear energy to increase its regional presence, while the United States is stepping up its open and free Indo-Pacific Strategy and Asia EDGE (Enhancing Development and Growth through Energy) initiative. Therefore, energy is a key strategic sector in this competition. Since the recent supply chain disruption caused by COVID-19 measures as well as the western sanctions on Russia for the war in Ukraine are pushing the global economy towards a chaotic future, Bangladesh must take adequate measures to face the impending energy crisis.
By 2041, Bangladesh’s electricity demand is anticipated to exceed 50 gigawatts. The government of Bangladesh intends to raise $127 billion in total investments in the power production industry by 2041 in order to increase power generation above predicted demand in order to support growth in the export-oriented economy and meet the needs of an expanding middle class.
Till last year, the electrical generation capacity had increased from around 5 gigawatts in 2009 to 25 gigawatts, giving roughly 95% of the population access to electricity. In order to support the ongoing development of business and industry in Bangladesh, it is crucial to increase energy supply while keeping costs affordable.
Natural gas predominates in the fuel mix utilized in Bangladesh’s power plants. As native natural gas fields are depleted, the government of Bangladesh expects to rely more heavily on imported liquefied natural gas. Prior to 2020, the Ministry of Power, Energy, and Mineral Resources planned to increase the proportion of coal in Bangladesh’s fuel mix, including by 2030, when it hoped to generate up to 50% of the nation’s electricity from coal-based power plants. However, the Bangladeshi government abandoned plans to construct 10 coal-fired power plants in 2021, citing the projects’ inadequate progress. Additionally, in response to criticism from environmental organizations and development financing partners including donor countries and development banks, the government is developing a new Power System Master Plan (PSMP) where the use of coal is anticipated to have a lower priority. The administration is also thinking about increasing the usage of renewable resources like solar and wind power and importing more electricity from nearby nations.
Fuel shortages are to blame for the country’s current load shedding predicament, as Bangladesh is purchasing less LNG on the international spot market due to rising prices. Recent price increases of more than $13 per unit, primarily brought on by the sanctions and countersanctions, have reduced LNG imports by almost half.
According to Electricity generation mix chart available on National Database of Renewable Energy, Gas and Heavy Fuel Oil (HFO) make up the bulk (68.82%) fuel source to generate electricity in Bangladesh. In April 2018, Bangladesh began importing liquefied natural gas (LNG) under long-term contracts from Oman and Qatar since its indigenous gas supplies are depleting and there has been little real progress in fuel exploration due to technological unavailability.
Prior to prices skyrocketing and developing nations finding it challenging to compete with LNG bids from wealthy European countries trying to transition away from Russian-supplied natural gas, reliance on imports of fuel was working well. As more LNG is sought after by European countries in the winter, energy analysts predict significant price increases. The crisis is not going to ease soon till the coal based power plants of Payra begin to run in full capacity and the Rampal plant begins operation. The Bangladeshi government is taking stringent measures to curtail the electricity crisis, while exporters claimed that regular power outages slowed output in a range of 30 to 60 percent, greatly worrying them about keeping shipment time for international trade. Power outages in the country are having a significant negative impact on trade, business, and the economy.
People venting anger due to frequent power outages, who were used to uninterrupted electricity supply for the last seven or eight years prior to national elections is not going work well for the incumbent government, which is already under visible pressure from Western countries to choose a side amidst the geopolitical turmoil.
By concentrating on gas, nuclear energy, renewable energy, to an extent coal, and improved energy efficiency, Bangladesh should continue to diversify its electricity mix but refocus its approach to give priority to lower carbon sources. High priorities should be given to boosting onshore and offshore gas exploration and nuclear energy- the most efficient technology to generate power.
As the government is seeking to curb foreign currency spending, Bangladesh can seek to draw new investments in oil refining sector. The sole refinery of Bangladesh is not capable to handle oil from diversified sources due to quality variation, which forced the country to overlook cheap Russian heavy crude oil offer. Therefore, new investments can save foreign currency in the longer run if cheap heavy crude oil is refined in capable refineries built inside Bangladesh, which can also export the surplus when needed.
In an effort to foster harmonious relations for economic development, Bangladesh should keep diversifying its purchases of power from neighbors. The national security, economic growth, and environmental sustainability of Bangladesh will depend on the government’s energy policies. Bangladesh’s energy needs have increased dramatically, and the nation is increasingly depending on imported oil, gas, and coal to maintain its economic growth. Although gas will continue to be the primary fuel for producing electricity, a more varied mix that includes nuclear, coal and renewable energy is emerging. While the World Bank and the ADB have supported transmission and distribution projects, China, Russia, Japan, and India have provided foreign financing totaling more than $20 billion to increase energy capacity. Political, economic, and environmental dangers are undoubtedly present given this high reliance on outside sources. From an economic and environmental standpoint, nuclear, gas, renewable energy, and energy efficiency should be prioritized in order to reduce debt and fiscal repercussions and meet Bangladesh’s obligations under the Paris Agreement. As the government moves forward with the implementation of its plan to create industrial and export zones, the potential for private investment in generation, transmission, and demand management should be extensively exploited.