Since the last week, power cuts have been taking place in Bangladesh amid the summer heat. Ordinary people are finding it difficult as power cuts have become a recurring event of the day. On average, 2-3 hours of load shedding is taking place in households. The issue has also become a national phenomenon. The government also responded and stated that considering the current energy crisis, power cuts are inevitable, and the country should adjust to it. Other South and Southeast Asian countries are also experiencing power cuts in the last months as the energy crisis is looming worldwide. So, why is Bangladesh facing sudden power cuts? And how is it linked to current global crises?
Power cuts in Bangladesh
Bangladesh has enriched its electricity production capacity to 25000 Mega Watt (MW). The regular demand is around 13000-15000 MW per day. As the demand is within the capacity of production, Bangladesh used to meet this demand most of the time. As a result, during the last 5-6 years, power cuts became an unusual scenario.
Bangladesh’s main energies to produce electricity are oil, gas, and coal. But since the pandemic and Ukraine crisis, oil and gas costs have increased drastically. The most recent hike increased the gas price from $25 to $38 in the world market. So, the import of gas has decreased. Hence, the gas supply to the national grid dropped from 2,824 million cubic feet (mcf) to 2,800 mcf. As a result, the power stations are not performing to their full capacity resulting in a decrease in power generation by 2000 MW per day. For instance, on Tuesday, June 28th, the aggregated demand was around 13,500 MW, but the supply was 11,500 MW.
However, as gas prices are skyrocketing, this constrains the authorities with two options. Either reducing the production, allowing power cuts or maintaining the steady supply by increasing the cost of electricity at the consumer level.
Why is a gas shortage taking place?
Bangladesh’s electricity production primarily relies on oil, gas, and coal. Bangladesh has gas fields, but domestic extraction is insufficient as it is also used in households and industries. So, it imports a large quantity of gas, primarily from Middle Eastern countries.
But the global energy market has been facing a severe downturn since the pandemic, the Ukraine crisis, and following sanctions. Since the Ukraine invasion, Europe has been trying to quit buying Russian gas. So, the pressure is increasing on other suppliers, including Qatar. The cost of LNG has surged by more than 1.000% in the last two years.
Very recently, the gas price has again surged by 60% at the end of June due to the temporary closure of a vital gas facility in Texas. On the other hand, the Nord Stream 2 pipeline between Russia and Germany shut down on July 11 for ten days for maintenance. Considering the current confrontation, there is skepticism that Russia may not open it again. As a result of such a volatile scenario, Germany even fears that an energy crisis is maybe on the way that could trigger a large collapse like the Lehman Brothers’ one of the 2008 financial crisis.
As Europe looks for an alternative supplier in the Middle East, pressure is increasing on the supplier. The excessive demand is also surging gas prices. As a result, countries from the Global South are finding it difficult to maintain steady imports. Hence, Europe’s demand is creating power cuts across Asia. The energy company Shell Plc’s Executive Vice President Steve Hill also recently remarked the same. Bloomberg quoted, “Europe is sucking LNG. But that means less LNG will go to developing markets.”
However, there is no denying that the Bangladesh government’s short-sighted energy plan, inefficiency in energy trading, indifference to renewable sources and corruption in the energy sector also led the country to this sudden crisis. The government also failed to predict the trend of energy markets and introduce necessary rearrangements in its policies.
Power cuts across the globe
As a result of soaring gas prices and the energy crisis, power cuts are taking place across the globe in many countries. South Asia, including Pakistan, Nepal and Sri Lanka is already facing a shortage problem. India also faced the same last month. Beyond South Asia, Japan also fears shortages and reduces its production. The Japanese government has also called on the general people to curb the use of air conditioners. South East Asian countries are also facing power cuts repeatedly.
Possible ways forward
Considering the current global scenario, it seems power cuts are likely for developing and least developed countries in the coming days. Bangladesh should also prepare for the reality as the crisis is looming globally.
Diversifying import destinations is required to ensure cheap and uninterrupted imports. In this regard, Myanmar could be a good option. Myanmar has a large gas reserve and geographically, it is a neighbor of Bangladesh. So, if gas lines are established from Myanmar to Bangladesh, it will be cheap considering the least transport cost.
On the other hand, Russian energy can be another solution to the power cuts. Russia sells oil and gas at a discounted rate cheaper than the global market. Pakistan, India, and Sri Lanka are already buying from Russia to meet their demand. But Bangladesh has a moral dilemma here.
From a liberal point of view, Bangladesh should not buy from Russia as it would contribute to the war itself. But a realist perspective suggests that Bangladesh should buy Russian energy to meet its demand at a lower price.
However, Bangladesh still has not followed this realist suggestion yet. Many other developing countries are also not buying from Russia. The West should acknowledge this stance and do more to let these countries reside within this resilience. Otherwise, they may also follow the realistic path in their geopolitical calculation to meet national demand in the near future. And lastly, austerity practices should be promoted in the Global South until the situation normalizes.
*The writer is a Doctoral researcher at the University of Groningen. Her areas of interest are Comparative Politics, Globalization, South Asian Studies, and Migration Studies.
July 26, 2022
*The viewpoints expressed by the authors do not necessarily reflect the opinions, viewpoints and editorial policies of Aequitas Review.
