Lights Out and Bills Up

Bangladesh's power sector has long been a study in contrasts. The country made impressive strides in electricity access over the past decade and a half, connecting millions of households to the grid. Yet the sector simultaneously accumulated significant financial stress — through a heavy reliance on expensive rental and quick rental power plants, large fuel import bills, and a subsidy structure that proved unsustainable as global energy prices rose sharply.

The result has been a combination of load shedding during periods of peak demand, escalating electricity tariffs passed on to consumers, and a Power Development Board carrying substantial debt.

How the Problem Developed

Bangladesh's rapid capacity expansion from around 2009 onwards addressed a genuine shortage — blackouts lasting many hours a day were a real drag on productivity and daily life. But the approach relied heavily on liquid fuel-fired rental plants that provided fast capacity additions at high running costs.

When global oil and gas prices surged following the disruptions of 2022, Bangladesh faced the full exposure of this model. Fuel imports became more expensive, foreign exchange reserves came under pressure, and the government found itself unable to fully subsidise electricity at previous levels.

The Reform Agenda

Several reform directions have been identified by energy experts and are reflected in ongoing policy discussions:

  • Renewable energy scaling: Bangladesh has significant untapped potential in solar energy, particularly rooftop solar and utility-scale solar farms. Accelerating renewable deployment reduces dependence on imported fuel and, over time, lowers the cost of electricity generation.
  • Gas sector investment: Domestic natural gas production has been declining for years. Accelerating exploration and production — as well as expanding LNG import infrastructure — is seen as important for the medium term.
  • Phasing out expensive rental plants: As longer-term capacity comes online, the high-cost rental plants that propped up capacity in an earlier era need to be wound down in a managed way.
  • Tariff rationalisation: Moving electricity pricing to cost-reflective levels — while protecting low-income consumers through targeted subsidies — is a direction the interim administration has moved towards, though it carries political sensitivity.

The Regional Dimension

Bangladesh has been expanding electricity trade with India, importing power through interconnections that have grown in capacity over recent years. Regional energy cooperation — potentially extending to Nepal's hydropower resources — could be an important long-term component of Bangladesh's energy security strategy.

What Consumers and Businesses Need

For households, reliable electricity at affordable prices is the bottom line. For industry — particularly the export-oriented garment sector — consistent, cost-competitive power is a key input into global competitiveness. Getting the power sector right is not merely a technical question; it is central to Bangladesh's continued economic development.

Reform will take time and will involve difficult decisions on pricing, investment, and the renegotiation of agreements with power producers. But the direction of travel — towards renewable energy, cost-reflective pricing, and reduced dependence on expensive liquid fuels — reflects a broad consensus among energy analysts about what a sustainable path forward looks like.