Rental power plants added to Bangladesh’s fiscal liabilities: WB

Heavy reliance on rental and quick-rental power plants and capacity payment arrangements created significant fiscal liabilities for Bangladesh, the World Bank said yesterday.

Despite substantial gains in generation capacity, the structural foundation of the country’s energy sector has steadily eroded over the past decade due to weak governance and policy failures, the global donor said.

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The energy sector sits at the heart of Bangladesh’s development ambitions and challenges.

Domestic gas production, long the backbone of Bangladesh’s energy system, has steadily declined as mature gas fields became depleted and exploration activities failed to keep pace with rising demand, the WB said in its Bangladesh Development Update.

“The resulting supply gap was increasingly filled by imported LNG, and Bangladesh, once fully self-sufficient in natural gas in 2017, now relies on imports to meet one-third of its total gas demand.”

Over the past decade, power generation capacity expanded rapidly through a growing contribution from private-sector producers, whose share of total electricity generation stood at 43 percent, the WB said.

Although installed generation capacity improved, the sector continues to face critical constraints in fuel and gas availability, as well as transmission and distribution bottlenecks that limit the effective utilisation of available capacity, the report said.

“These structural weaknesses have contributed to the current gas and power crisis. Bangladesh now relies heavily on LNG imports to offset declining domestic gas production, making the sector vulnerable not only to international price volatility and FX pressures, but also to disruptions at a small number of floating storage and regasification units (FSRUs).”

Recent technical failures and operational disruptions affecting FSRU facilities at Maheshkhali significantly reduced gas supply to the national grid, worsening an already sizable gap between demand and available supply, it said.

“The disruption exposed the systemic risk of over-reliance on a small number of domestic gas fields and critical import nodes.”

The economic consequences of the crisis have been significant.

Reduced gas supply disrupted production across major industrial zones in Bangladesh, with many factories operating below capacity or temporarily suspending operations due to inadequate gas pressure. Power generation has also been affected, leading to widespread load shedding and periodic electricity shortages that have disrupted households and business activity, forcing many to rely on expensive diesel generators. This has prompted emergency government measures such as mandatory early closures for shopping malls and retail centres to curb peak electricity demand.

Gas shortages have also affected households and transport, with many consumers facing cooking difficulties and long queues at compressed natural gas filling stations, the World Bank said.

“The cumulative effect has been lower industrial output, higher production costs, and increased uncertainty for private investors.”