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Bangladesh to lean on more coal than natural gas in power generation to curb costs

Highlights

To add 4,365 MW of coal-fired capacity in coming months

Share of coal in electricity to double to 17%, thermal imports jump

Gas supply may be diverted to industrial sector

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  • Azizur Rahman and Eric Yep
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  • Wendy Wells
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Bangladesh is expected to see a huge ramp up in coal-fired power generation in coming months as new capacity comes online, which will boost the share of coal in its energy mix to its highest on record.

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The South Asian country will add around 4,365 MW of coal-fired capacity both within its borders and through imports from India, which will more than double the share of coal in its domestic electricity mix to nearly 17% from 8% and increase the share of imported power generation capacity to 11% from 4%, which is also mostly thermal.

This means that Bangladesh could see over a quarter of its power generation capacity based on coal, which is a significant shift; historically coal's share has been in the single digits and more than 50% of its power supply has been from natural gas.

While there are still some new natural gas and oil-fired power plants in the pipeline, the current price dynamics mean that generating electricity from gas has become too expensive, leaving room from high carbon emissions fuels like coal to fill the gap.

"We run power plants according to least cost generation," Bangladesh Power Development Board spokesman Shamim Hasan said Sept. 27. So the state-run BPDB, the sole buyer of electricity from power producers in Bangladesh, will chose the cheapest fuel for electricity generation to bring down the overall power generation cost, he added.

Favorable coal prices mean emerging LNG importers like Bangladesh will not drive LNG imports while prices remain high, and existing natural gas supply from domestic production and term contracts will be diverted to industries that can absorb higher prices.

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"We are yet to calculate how much natural gas we shall provide for electricity generation once the coal-fired power plants come online," Petrobangla chairman Nazmul Ahsan said, implying that more gas may be available for other industries if less is required for power generation.

Coal resurgence

BPDB's Hasan said it plans to cut the use of LNG, 0.005% sulfur gasoil and 180 CST high sulfur fuel oil for electricity generation by the end of the year.

He said three new coal-fired power plants with total capacity of around 2,765 MW are nearing completion in the country – the 1,234 MW Maitree Super Thermal Power Project, SS Power's 1,224 MW plant and Barisal Electric Power Co's 307 MW plant. Another 1,600 MW coal-fired plant in the Godda district of India's Jharkhand state will also supply electricity to Bangladesh.

Bangladesh's Prime Minister Sheikh Hasina and her Indian counterpart Narendra Modi jointly inaugurated the first unit of the 1,320 MW Maitree project during her visit to New Delhi in September, Hasan said. The project is being developed by the Bangladesh India Friendship Power Co. Ltd., or BIFPCL, a joint venture between BPDB and India's NTPC, and the plant will begin test runs soon.

India's Adani Group is developing the 1,600 MW Godda plant and its chairman Gautam Adani recently disclosed plans to commission the project with a dedicated transmission line to Bangladesh by Dec. 16 to mark Bijoy Dibosh, Bangladesh's Victory Day.

Of the 4,365 MW capacity, at least half is scheduled to come online by December as the bigger power plants plan to commission their first unit by year-end, while subsequent units will start within six months, Hasan said.

The plants in Bangladesh alone will require around 27,000 mt/day of imported coal, and have been delayed by a couple of years due to the pandemic and other issues, he said.

Bangladesh's total power generation capacity is currently 21,710 MW, according to official government data. The new plants will add almost 20% of new capacity, taking the total to 26,075 MW, and raise coal-fired capacity to 6,033 MW or 23.13% of the total from 1,688 MW or 8% currently.

In August, 51% of the country's power capacity was from natural gas-fired, 27% from HFSO, 6% from gasoil or diesel and only 2% from hydropower and solar, with another 5% imported from India.

Cheapest option

Bangladesh has had to shut 22 gas-fired power plants, with a capacity of around 3,376 MW, and operate others at low capacity due to gas shortages.

It has further reduced gas supplies to power plants over the past couple of weeks to 924 MMcf/d against demand of around 2.25 Bcf/d, according to its data Sept. 25. Its overall LNG regasification volume fell to around 471 MMcf/d Sept. 25 from around 850 MMcf/d in June.

Bangladesh has also been increasing its use of gasoil or diesel, although coal remains the cheapest option, said Mohammad Tamim, former energy adviser to the government. He said the power generation cost for coal is around Taka 12-13/kWh (12-13 cents), Taka 16-17/kWh for HSFO, over Taka 30/kWh for gasoil, or diesel, and more than Taka 50/kWh for imported LNG, despite the imported coal price tripling to over $400/mt recently.

Bangladesh is gradually decommissioning old power plants irrespective of their fuel type, but not all the oil-fired power plants will be decommissioned by 2025 as at least four dozen came online after 2018 and have a life span of 15 years.