Bangladesh's 2023 coal-fired power output tripled, easing shortages

Bangladesh nearly tripled its coal-fired power output in 2023, a Reuters analysis of government data showed, helping it tide over the worst power shortages in over a decade and slash rising generation costs.

Coal rose to prominence in Bangladesh's power mix in 2023 at the expense of cleaner fuels, as the government struggled to pay for costly natural gas, furnace oil and diesel imports because of shrinking dollar reserves and a weakening currency.

Power generation from coal surged to a record 21 billion kilowatt-hours (kWh) in 2023, up from the 7.9 billion kWh of electricity produced from coal in 2022, an analysis of daily operational reports by the Power Grid Company of Bangladesh (PGCB) showed.

"The share of coal is expected to increase further this year as a new unit is expected to get commissioned. Dependence on gas is expected to remain steady and use of liquid fuels will fall," a senior energy ministry official said.

Coal's share of the power generation fuel mix rose to 14.2% in 2023, from 8.9% in 2022, the PGCB data showed, while the share of natural gas rose to 55.2% in 2023, the first increase in four years and up from 51% in 2022.

However, natural gas's share last year was much lower than the average of about 66% in the ten years to 2022 as high international prices for the fuel limited its usage. Dwindling local gas reserves and LNG, mainly from Qatar, are the main gas sources for the country.

Coal and natural gas gained mainly at the expense of liquid fuels such as fuel oil and diesel, whose share in power generation slipped to 20.1% in 2023 from 29.6% in 2022, the data showed.

Bangladesh, home to over 170 million people and the world's second-largest garments exporter, supplying global retailers including Walmart (WMT.N), H&M and Zara, faced unscheduled power cuts during three out of every four days in 2023.

Overall shortages surged nearly 40% year-on-year to 2.7 billion kWh in 2023, or 2.8% of demand, PGCB data showed, with shortages easing in the second half of the year because of higher coal-fired output.

Along with other major Asian economies India and Vietnam, Bangladesh boosted its use of relatively inexpensive coal to meet it surging power demand growth, which rose over 5% in 2023.

Higher coal-fired generation also put the South Asian nation on track to cut average generation costs for the first time in four years.

The cost of power generation averaged 5.23 Bangladesh Taka (4.78 U.S. cents) per kWh during the 11 months ending November, about 9% lower than in 2022.

Bangladesh, among the top ten economies most dependent on fossil fuels for power generation, hopes to boost its green credentials this year by doubling its solar capacity additions and commissioning a long-delayed nuclear power plant.

However, fossil fuels will continue to dominate power generation in the coming years and renewables are not expected to make up more than 5% of overall output this decade, industry officials say.