United News of Bangladesh

Bangladesh’s primary energy imports rose from 47.7% to 62.5% in four years, exposing its vulnerability to the volatile international fossil fuel market and raising the power generation cost by 83%, according to a new report by the Institute for Energy Economics and Financial Analysis (IEEFA). Apart from expensive fossil fuels and depreciation of the Bangladeshi Taka (BDT) against the United States Dollar (USD), large capacity payments from low demand growth significantly influenced the rising power costs, according to ‘Fostering Bangladesh’s energy transition’, it said. Analysing data from FY2020-21to FY2024-25, the report finds that a surge in the average coal price by 290% between FY2020-21 and FY2022-23, along with an expensive oil price for a brief period and a sharp currency depreciation increased Bangladesh’s power generation cost drastically. However, despite 59.7% fall in coal prices as compared to FY2022-23, and oil prices remaining low during the time, generation cost did not reduce in FY2024-25. “The average capacity payments of approximately BDT9.5/Kilowatt hour (kWh) (USD0.077/kWh) and BDT5.9/kWh (USD0.048/kWh) paid to private oil- and coal-fired plants, respectively, in FY2024-25 raised overall generation costs,” said Shafiqul Alam, the report’s author and lead energy analyst at IEEFA. “Further, gas supply shortage increased cost—plants with load factor under 25% generated power at BDT16.85/kWh (USD0.137/kWh) while plants operating at around 75% load factor did so at a cost of BDT6/kWh (USD0.049/kWh).” In addition, declining domestic gas production means that Bangladesh needs to import expensive liquefied natural gas (LNG). The report estimates that the country could pay a subsidy of USD1.07 billion (BDT131.34 billion) on account of LNG imports from April to June 2026. This estimate is based on the import trend from April to June 2025 and the current import price of about USD20 per million British thermal units (MMBtu), excluding regasification and terminal costs. Additionally, the share of renewable energy remains just 2.3% of grid-based power generation, far below the global average of around 33.8%, limiting its ability to hedge against the volatile prices in international fossil fuel markets. Currently, however, high import duties are levied on distributed renewable energy (DRE) systems. The report estimates that a combined rooftop solar capacity of 100 megawatts (MW) will save more than 30 times the one-off import duties by reducing furnace oil imports over the lifecycle. Hence, it calls on the government to offer a duty waiver. “The solutions to Bangladesh’s persistent problems lie closer to home, such as in expanding domestic renewable energy at scale while limiting fossil fuel-based plants to contain overcapacity. Given the requirement of spinning reserve and grid balancing, the government may consider retaining part of the operational oil-fired plants in its ownership to avoid the hefty capacity payments once their contracts expire,” said Alam. To reduce its gas demand, Bangladesh could tap into the cost-competitive hydropower potential of the Bangladesh-Bhutan-India-Nepal (BBIN) framework. A combined hydropower capacity of 6,000MW from Nepal and Bhutan for the high-demand March-September period will likely help the country reduce annual gas consumption by up to 257 billion cubic feet (Bcf) post 2030. The report also seeks to draw policymakers’ attention towards the need to keep the open access cost of renewable energy projects under Corporate Power Purchase Agreements (CPPAs) at a minimum. This would enable the apparel sector and corporates to decarbonise their operations as part of their environmental, social, and governance (ESG) targets. While power utilities fear loss of revenue due to such projects under the CPPA, the analysis by IEEFA shows that electricity consumption in industries increased by 4.8% in FY2024-25. “BPDB recorded revenue shortfalls of BDT556.6 billion (USD4.53 billion) in FY2024-25. The West Asia conflict will likely add to the financial stress of other key energy sector utilities. Ultimately, the pathway to energy transition hinges on prudent policy decisions about implementing realistic targets on the ground supported by a favourable ecosystem, thereby minimising the country’s continued reliance on imported fossil fuels and high subsidies,” said Alam.    

The Power Development Board (PDB) could save Bangladesh Tk 138 billion (US$1.2 billion) in annual losses, which are currently covered by government subsidies, through reforms in the electricity sector, according to a new report. Institute for Energy Economics and Financial Analysis (IEEFA) published the report on Wednesday. Bangladesh can achieve the savings by shifting half of the industrial demand, met by captive generators, to the grid, adding 3,000 megawatts (MW) of renewables, reducing load shedding to 5% from the fiscal (FY) 2023-24 level and limiting transmission and distribution losses to 8%, said the report. Writ petition filed against integrated energy and power master plan seeking climate justice The report found that during the fiscal year (FY)2019-20 to FY2023-24, the BPDB’s total annual expenditure increased 2.6-fold against revenue growth of 1.8 times, prompting the government to allocate a combined subsidy of Bangladeshi Tk1,267 billion (US$10.64 billion) to ensure power supply to keep the economy afloat. Yet, the PDB recorded a cumulative loss of Tk236.42 billion (US$1.99 billion). In FY2023-24 alone, the government gave a Tk382.89 billion (US$3.22 billion) subsidy to the BPDB. To bring the subsidy burden down to nearly zero, it recommended ensuring industries fully rely on the national electricity grid. “With the reserve margin hovering around 61.3%, Bangladesh’s power sector has an overcapacity problem which contributes to the BPDB’s persisting subsidy burden. Despite a series of power tariff adjustments, the hefty revenue shortfall and subsidy allocation will likely persist in the foreseeable future,” said the report’s author, Shafiqul Alam, lead analyst – Bangladesh Energy, IEEFA. No more IPP in power sector with govt guarantee to buy electricity: Adviser IEEFA’s proposed roadmap for reform suggests improving power demand forecasting methods by factoring in the role of energy efficiency to reduce overcapacity. “Our roadmap recommends limiting new investments in fossil fuels-based generation while promoting renewable energy deployment. Further, it suggests modernisation of Bangladesh’s electricity grid to encourage industries to shift to grid power rather than operate gas-based captive plants and minimise load shedding,” he added. “Besides, the country should gradually transition to electric systems from gas-driven appliances, like boilers. This will help increase the PDB’s revenue from selling additional energy while reducing capacity payments to idle plants,” said the author. As the first step of the reform, the report urged the government to forecast power demand from 2025 by factoring in energy efficiency gains and demand shift measures. IEEFA’s projection by factoring in such variables shows that the country’s peak power demand in 2030 is likely to be 25,834MW as against the Integrated Energy and Power Master Plan’s (IEPMP) forecast, made in July 2023, of between 27,138MW and 29,156MW. Simultaneously, the IEEFA roadmap also suggested halting investment in fossil fuel-based power and limiting the use of oil-fired plants to 5% of total power generation. Bangladesh seeks top international law firm for power deal review  If these steps are taken along with the anticipated 4,500MW of fossil-fuel-based power plant retirements, the report expects Bangladesh will have a system capacity of 35,239MW. “A system capacity of 35,239MW will help Bangladesh meet the peak demand of 25,834MW by 2030. It will bring the reserve margins down 66.1% in December 2024 to 36.4% (including variable renewable energy) and 20% (excluding variable renewable energy) in 2030. A reserve margin of 20%, excluding variable renewable energy, is comparable to countries like India and Vietnam,” the author mentioned. The report said Bangladesh can consider a conservative goal of installing a total combined grid-connected renewable energy capacity of up to 4,500MW by 2030 to help reduce mostly expensive oil-fired power generation during the day. The use of battery storage of 500MW with a backup for three hours will help reduce the operation of oil-fired plants in the evening, too. If batteries become more economical in the future, Bangladesh may consider their increasing use during the evening peak. IEEFA examines issues related to energy markets, trends and policies. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.

At the upcoming 29th Conference of Parties (COP29) in Baku, dubbed the “climate finance COP”, representatives of different countries should deliver key decisions to design policies and regulations and offer institutional support that encourages banks to lend more to the renewable energy sector, said a new briefing note by the Institute for Energy Economics and Financial Analysis (IEEFA). The note analyses global renewable energy investment trends and projected gaps to meet the goal of tripling renewable energy capacity by 2030 from 2023. It finds by reorienting capital from the fossil fuel sector to renewable energy, banks can bridge the International Energy Agency’s projected annual investment gap of US$400 billion from 2024 to 2030. “With only six years remaining, the 2030 goal for renewable energy seems a stretch too far, but enhanced cooperation between developed and developing countries and conducive local policies may bridge the gap,” says the note’s co-author Vibhuti Garg, Director – South Asia, IEEFA. “Negotiators at COP29 in Baku should back their ambition to triple renewable energy up with a consensus on additional climate finance, supported by the developed countries, to fill the gap of catalytic funds in the developing and least-developed countries,” she adds. The note finds that under different estimates, global investment in renewable energy has been growing, highlighting the attractiveness of renewable energy among investors. It rose from the range of US$329 billion - US$424 billion in 2019 to US$570 billion - US$735 billion in 2023, implying a jump of 73% - 78% during this period. However, the average annual investment to attain the goal of tripling renewable energy will require between US$1 trillion and US$1.5 trillion from 2024 through 2030. As such, the average funding gap between 2024 and 2030 will reach US$400 billion per annum. Read: New climate finance goal must empower small-scale farmers: IFAD President “While bank credit flows to the fossil fuel sector is declining, it was still a whopping US$967 billion in 2022. On the flip side, low-carbon development projects, including renewable energy, received US$708 billion in the same year. By reorienting more capital to the renewable energy sector, banks can bridge the projected investment gap,” says the note’s co-author, Shafiqul Alam, Lead Analyst – Bangladesh Energy, IEEFA. The note highlights several ways to encourage banks to change, like prioritising lending for renewable energy, offering banks credit enhancement support, integrating climate change into banks’ policies, interoperability of green taxonomies, making financed emissions disclosures mandatory and monetary policy tools.“Governments can create partial credit risk guarantee instruments to reduce credit risk, encouraging banks to accelerate credit flows to the sector. Multilateral Development Banks (MDBs) and bilateral financial institutions, with support from local governments, can provide risky and concessional capital to local banks and help create partial risk guarantee instruments,” says the note’s co-author Labanya Prakash Jena, Consultant – Sustainable Finance, IEEFA. Read: Govt, UNDP, IIX to launch “Orange Bonds" for inclusive growth and climate action Besides, the central bank can use moral suasion to nudge commercial banks to increase capital flows toward the clean energy sector while moving away from thermal power plants.

In the post Covid-19 era, renewable energy could be the best suitable option for Bangladesh to reset its power sector development policy to come out of the obligation for capacity payment to idle power plants, says a recent study.