Bangladesh's Power Sector Faces Fuel Security Crisis Amid Rising Import Dependence

Bangladesh's power sector is grappling with long-standing vulnerabilities, exacerbated by decisions made under pressure, including the introduction of rental power plants and substantial capacity charge payments. These payments, for available capacity even when plants are not generating, could cost the sector over Tk 48,000 crore this fiscal year, according to estimates reviewed by the Bangladesh Energy Regulatory Commission.

Concerns about fuel dependency have also intensified. As Bangladesh rapidly increased its installed capacity by building coal-, oil-, and LNG-based plants, a fundamental question arose: what would fuel them? The country's reliance on imported primary energy has surged from 47.7 percent to 62.5 percent in just four years, according to the Institute for Energy Economics and Financial Analysis (IEEFA).

This increased dependence has led to significant energy security issues. Earlier this month, 62 generating units faced fuel shortages, resulting in an average daily generation shortfall of nearly 1,500MW during one week. The core problem, as highlighted by Professor Taifur years ago, is that adding generation capacity does not equate to energy security if the means to keep those plants running are beyond the country's control.

A senior executive from a major Chinese power equipment manufacturer echoed these concerns, recalling similar discussions about Bangladesh's fuel-dependent generation system years ago. The situation underscores a critical distinction: Bangladesh has added generation capacity, but it has not necessarily secured the energy required to operate that capacity reliably, leaving it exposed to international price volatility and supply disruptions.