What a difference a week makes. Just before Eid ul Azha, Bangladesh had gotten wind of the possibility that difficult days lie ahead, in the face of the post-pandemic situation in conjunction with war in Ukraine. There was the return of loadshedding for a few days in the first week of July. But things seemed to improve quite quickly.

This week however, it all seemed to fall apart just as quickly, as panic stations set in over excessive spending, particularly on energy, and by the middle of the week, area-wise scheduled loadshedding was well and truly back. And further measures remain on the cards. The loadshedding can be up to two hours. And from now on petrol pumps in the country will be closed for one day a week.

The government has also decided to temporarily suspend the production of diesel-based power plants to curb costs. The prime minister's adviser on power, energy and mineral resources, Tawfiq-e-Elahi Chowdhury, said this on Monday (July 18). The power cuts started in earnest from the next morning.

This decision was taken at a coordination meeting on energy and power at the prime minister's office in the capital's Tejgaon area. Tawfiq-e-Elahi disclosed the decisions to newspersons after the meeting.

He said the government has decided to reduce power generation to curb costs. Production of diesel-based power plants would be suspended - although their contribution to the grid is minimal anyway.

The energy adviser said, "The world is passing through a war situation. The war in Ukraine is affecting us. This is a temporary decision. Everything will be back to normal after the global situation improves."

Tawfiq-e-Elahi further said, "Even the countries with adequate wealth are carrying out load shedding. It's been carried out even in the UK and Australia. We are trying to reduce the production to bring down the cost to a tolerable level. Diesel-based power production has been suspended for the time being. It will save a lot. We must keep it in mind that the price of diesel has skyrocketed."

He also said "We think there will be a shortage of 1000-1500 megawatts of electricity. This can lead to load shedding up to one to one and a half hours a day. There may be load shedding even up to two hours in some places. But for the greater interest of the country in this calamitous time in the world, we all have to come forward."

Speaking to the newspersons, State Minister for Power Nasrul Hamid said, "People in a specific area will be informed in advance in case of power cut in that area. We are giving highest priority to the industrial sector."

He also said that one to two hours of load shedding will be carried out in the next one week. The decision may change after assessing the situation.

The state minister further said, "From now on petrol pumps in the country will be closed for one day a week until further notice. But, how and in what process this decision will be carried out will be revealed later."

He said that the government is also thinking about closing the petrol pumps in the port areas for two days a week. It has also been decided to for government-private offices to work virtually save electricity. The prime minister's principal secretary Ahmad Kaikaus said the government is also considering reducing office time at government organisations. The Ministry of Public Administration will coordinate the issue of conducting office activities virtually.

Back to the old days

The country experienced a total of 1915 MW of loadshedding on Tuesday, the first day of a new era of area-wise planned power cuts announced by the government, that many believed they had left behind for good.

"We generated a total of 12,442 MW of electricity against a demand for 14,400 MW. The load shedding was planned to be 1915 MW to cover the gap between demand and supply," said Shamim Hasan, newly promoted director, public relations, of the state-owned Bangladesh Power Development Board (BPDB) on the first day.

Dhaka metropolis and its adjoining areas started facing power outages on Tuesday morning, with distribution companies (discoms) resorting to rationing of electricity to avert the energy crisis looming over Bangladesh.

A resident of the city's Tejgaon area said that they experienced an hour-long outage from 10am to 11am, while another resident of Niketon said that their area was without power from 11am to 12pm.

Mohammad Shahjahan, an executive with a leading company, said their office in Banani was without power for an hour from 12pm.

Following the government's decision, different power distribution entities - Dhaka Power Distribution Company Limited and Dhaka Electric Supply Company Limited - published their area-wise outage plans.

The government also announced a slew of measures for saving electricity, including the closure of shopping malls and markets by 8pm and the restricted use of air-conditioners. Plans are afoot to limit office hours and keep fuel outlets closed one day every week.

Residents of some areas, however, alleged that they had to experience frequent outages beyond the planned loadshedding.

Abdur Rahman Jahangir, a resident of the city's Rampura area, said his area witnessed power interruptions several times throughout the day.

"On some occasions, the outages continued for 10-15 minutes," he told our sister newsagency UNB. Similar allegations were received from some other areas as well.

Officials of the discoms said the 10-15 minute interruptions are not part of load shedding. These may occur due to poor distribution lines which tripped when a load increased beyond the capacity, they said.

And now, with the government feeling the pinch, the private power producers are insisting payment of the arrears owed to them to stay afloat. Despite an improvement in clearing dues, the government still owes $1.5 billion to the private power plant operators for purchase of electricity, according to official sources.

The sources confirmed to UNB that this week, the state-owned Bangladesh Power Development Board (BPDB), the single buyer on behalf of the government, partially cleared the account till February last.

"We have not received any payment against the electricity purchase bills of March till the current month," said Imran Karim, president of the Bangladesh Independent Power Producers Association (Bippa), the representative body of the private power producers in the country.

"Some of us received the highest 60 percent of the payments against the bills of February while many have not," he added. He hoped that there would be a major breakthrough in the bill settlements soon as their persuasion continued at the highest policy making level.

Normally, the BPDB purchases electricity worth Tk 4,000 crore per month.

Now, the payments against the bills of four months- March, April, May and June- are pending to be cleared. In addition, some partial bills of February have also not been cleared.

By this calculation, the total amount of the pending bills will be over $1.5 billion, said Imran, also the director of the Confidence Group, which owns a number of private plants.

BPDB has been in a cash crunch for the last several months which forced the organisation to move a proposal to the energy regulator to raise the electricity price at retail level.

The Bangladesh Energy Regulatory Commission (BERC) is yet to make any decision though it recently held a public hearing on the issue.

The BPDB, however, disagreed with the calculation saying that it normally gets 45 days to clear a bill after submission.

"If the due payment is calculated this way the amount will be equivalent for 2 and a half months", said Saiful Hasan Chowdhury, director, public relations of BPDB. He said BPDB has cleared most of the payments against the bills of February.

The BPDB official data shows the country's total generation capacity is 25,235 MW of which grid-connected generation is 22,348 MW up to April this year while the remaining 2887 is captive generation, mainly produced by industry owners, exclusively for running their own industries.

The country's highest generation was recorded 14,782 MW on April 16 meaning that the surplus capacity is 10,453 MW (about 41 percent).

Of the 22,348 MW, some 50.3 percent (11,240 MW) is being generated by public sector entities while the remaining 49.7 percent (11,108) MW is coming from the private sector. The BPDB documents reveal the government has to spend a total of Tk 71,878 crore in the 2021-22 fiscal for total power production, of which Tk 44,434 crore will be spent for purchasing electricity from the private sector.

Of this amount, Tk 37,963 crore will be required to purchase electricity from the independent power producer (IPP) and small IPP plants in the private sector which produce 38 per cent (8,807 MW) of the total generation.

Bippa officials said the delay in payment is not the only problem that the private power producers are facing.

"The shooting trend in dollar price, unavailability of the green backs with banks and counting penalties for delayed payment to foreign lenders and equipment suppliers have been the major problems," said Bippa president.

He noted that some of the letters of credits (LCs) were opened with the banks a few months back, calculating the US dollar at a lower rate like Tk 86.

"But after a huge spiral in dollar rates, we have to now calculate the dollar rate at over Tk 95," in settlements of the LCs, he said, adding that some banks do not even sell dollars at the government's fixed rates. He also mentioned that many foreign banks charge IPP operators for delay in their repayments while equipment suppliers are also doing the same practice.

How did it come to this?

The unusually long rally in energy prices and supply shortage are exerting tremendous pressure on all economies - developed, developing, and poor countries are facing a serious cost-of-living challenge. Even the US, which is relatively insulated from global energy prices, is experiencing record inflation. Food supply, shipping space/container shortage, and other supply chain issues along with the energy price are threatening recession in many countries.

Russia provided 40 percent of Europe's gas. It also supplies 12 percent of world's crude oil, and half of that went to Europe. The war in Ukraine and the subsequent sanctions have created a partial supply shortage in most European countries. As a result, gas and electricity prices have gone up by 40 percent in Europe. France, Denmark, Germany, England, Spain, the Netherlands, and other countries are paying direct subsidies to the poorer households. Some of them are putting a price cap on utilities, forcing them to bear the cost. Spain levied a windfall tax on energy companies that made record profits and planned to distribute 2.4 billion euros to the consumers out of that revenue.

Bangladesh faced increasing power outages throughout the decade of the 2000s. The BNP government came up with oil-based rental power plants to tackle the situation that was picked up by the caretaker government, and the first 10 rental power plants were awarded in 2008. Despite initial opposition, the Awami League government had to add more oil-based rental plants from 2010. There was no other alternative to addressing the severe loadshedding, which was hampering economic growth.

In the meantime, the power sector problem shifted from a lack of generation capacity, to a shortage of primary energy, according to energy expert Dr M. Tamim.

"In 2007, the gas shortage started with a 300 mmcfd shortfall that could never be mitigated. Today, the gas deficit is estimated at 1,300 mmcfd. Both the Power System Master Plan (PSMP) 2010 and PSMP 2016 accepted this deficit and, instead of emphasising local exploration, depended heavily on imported fuel," Dr Tamim says.

Although PSMP 2010 relied for 30 percent on its future power generation plan from local coal, this was abandoned in the 2016 plan. The government did not follow these plans, and fuel import dependency kept on increasing, putting the country at the mercy of international price and supply fluctuation risk."The legacy problem of generation got much more attention, putting the primary energy issue on the backburner. Every time the issue of high future energy import bill was raised, the growing economic strength was shown as a solution," according to Dr Tamim, who was involved in many of the decisionmaking processes.

The overcapacity dilemma, that has received a lot of attention in recent days, is a 'trap' created by the government, in the words of Dr Tamim. Out of 25,500MW of electricity generation capacity, 3,500MW is off-grid (solar home and captive), while 4,000MW cannot be operational because of forced/unforced shutdown and fuel shortage. Including derated capacity and plant availability, the true grid capacity is about 16,000MW.

Unless the government decommissions the idle 3,000MW capacity it is carrying on paper, the overcapacity question will not go away, Dr Tamim said. The other question of capacity payment is more complex. Every power plant is paid a capacity cost varying between Tk 1.25-2.4/kWh. This is part of the generation cost allowing investors to get their money back during the project period. The older long-term projects have a lower charge.

According to Dr Tamim, to secure a more certain supply of power in the immediate future, the government must ensure timely completion of all ongoing coal-based power plants, their coal supply and import infrastructure, and the completion of the necessary transmission lines for power evacuation.

"We are paying over Tk 100 crore capacity charges per month for over 1.5 years for one unit from the Payra power plant, because the transmission lines are still incomplete. We simply cannot afford to do that for other power plants," he said.