Meghnaghat, near the Bangladeshi capital Dhaka, was once a rural backwater of fishing hamlets and paddy fields. Today, it is dominated by the red-and-white smokestacks of gas-fired power stations.
Few places illustrate the speed of the country’s energy transformation better. Several plants are already active and three more are soon to open at the site, including a 590 megawatt project by Bangladesh’s largest private power producer, the Summit Group. At least one more facility is planned.
But there’s a catch: it is not clear where the gas to power Meghnaghat’s turbines is going to come from, or whether there is sufficient demand for the electricity that they, and other facilities throughout the country, can generate.
Bangladesh is one of a growing number of developing countries in Asia and beyond to have bet heavily on natural gas as a “transition fuel” — a reliable, affordable and cleaner alternative to coal or oil that helps reduce carbon emissions while they develop more renewable energy capacity.
The International Energy Agency expects that with gas demand peaking in mature European and North American markets, countries such as Bangladesh, the Philippines and Thailand will henceforth drive much of the growth in gas consumption. Global Energy Monitor, a pro-renewables non-profit organisation, estimates that nations in south and south-east Asia plan to increase their gas-fired power capacity by more than 50 per cent.
But a surge in the price of liquefied natural gas (LNG) has put a substantial bump in the road, with gas imported for power generation now in short supply and much more expensive than originally envisaged.
After heavy investment in new gas power stations Bangladesh — a low-lying country, extremely vulnerable to climate change — is now contending with dwindling domestic gas reserves and fuel shortages triggered by the steep increases in LNG costs. This combination of factors has led to blackouts and falling foreign reserves, both of which threaten an economy celebrated globally for its rapid growth and development gains.
“We’ve developed our power sector based on the perception that [LNG] is cleaner and more widely available,” says a Bangladeshi government official. “Now it’s a real challenge . . . The question is how we’ll manage if we’re not even feeding our existing plants.”
Critics of the oil and gas industry argue that, at a time when renewables are becoming more competitive and attractive, countries like Bangladesh risk tying their energy future to a fossil fuel that is not only not as clean as its proponents suggest, but whose supply can be erratic and its pricing volatile.
“Whereas coal is essentially limited to China and India, we’re still seeing gas plants being announced in every single region,” says Jenny Martos, a researcher at GEM.
“Relying on gas without having the fuel, and being subject to LNG prices, just doesn’t make sense.”
Lower-carbon growth
Natural gas emits about half the carbon of coal for the same amount of energy, leading supporters to argue that it could help developing countries wean themselves off dirtier fuels like coal and oil while allowing their rapid economic growth to continue. Importing gas in liquefied form meant even countries with limited or no gas reserves of their own could use it.
That certainly appealed in Bangladesh, whose indigenous gas supplies could not support a big expansion in power generation. When Prime Minister Sheikh Hasina came to power in 2009, the country was suffering from severe electricity shortages.
To rectify this, her government rolled out incentives for private power producers to construct new generation plants powered by fossil fuels, which in addition to generous capacity payments protect them from legal challenges and prosecution. To ensure quick supply, the country also pivoted to imported fuel, buying its first LNG cargo in 2018.
It worked. Electricity generation capacity soared from 5.5GW in 2009 to 23GW currently, according to the Institute for Energy Economics and Financial Analysis, a think-tank. As a result, Bangladesh’s entire population of 170mn now has access to electricity, compared with less than half in 2009.
Prioritising gas helped limit the country’s dependence on coal. While coal imports have also grown, it accounts for 12 per cent of the country’s generation capacity compared to 50 per cent for gas, according to the BloombergNEF, a commodity research service. In 2021, Sheikh Hasina cancelled plans to build 10 new coal-fired power plants.
Yet Bangladesh now faces problems of a different nature. Electricity demand did not keep up with the building frenzy, and total capacity now exceeds demand by as much as 50 per cent. The lack of investment in new domestic…