Bangladesh's power costs rise manifold on fossil fuel dependency: report

• Primary energy imports rise to 62.5 percent
• Power generation costs surge by 83 percent
• Renewables account for only 2.3 percent generation

Bangladesh's reliance on primary energy imports rose from 47.7 percent to 62.5 percent in four years, leaving the country exposed to volatile global fossil fuel markets. As a result, power generation costs have gone up by 83%, according to a new report.

The report, "Fostering Bangladesh's Energy Transition," published by the Institute for Energy Economics and Financial Analysis (IEEFA), analysed data from FY2020-21 to FY2024-25.

A 290 percent surge in average coal prices between FY21 and FY23, compounded by elevated oil prices and sharp taka depreciation, drove generation costs sharply higher, the report finds.

Despite a 59.7 percent fall in coal prices since FY23 and subdued oil prices, costs did not ease in FY25. Capacity payments were a key factor.

"The average capacity payments of approximately Tk 9.5/kWh ($0.077/kWh) and Tk 5.9/kWh ($0.048/kWh) paid to private oil- and coal-fired plants, respectively, in FY25 raised overall generation costs," said IEEFA lead energy analyst and report author Shafiqul Alam.

Gas supply shortages added further pressure, with plants operating below 25 percent load factor generating power at Tk 16.85/kWh ($0.137/kWh), against Tk 6/kWh ($0.049/kWh) for those running at around 75 percent load.

Declining domestic gas output means Bangladesh must rely increasingly on imported liquefied natural gas (LNG).

The report estimates the country could pay $1.07 billion (Tk 131.34 billion) in LNG import subsidies between April and June 2026, based on import trends from the same period in 2025 and an import price of around $20 per million British thermal units (MMBtu), excluding regasification costs.

Renewable energy accounts for just 2.3 percent of grid-based generation against a global average of around 33.8 percent.

The report estimates 100 megawatts of combined rooftop solar capacity would save more than 30 times its one-off import duties over its lifecycle by cutting furnace oil use, and calls for a duty waiver on distributed renewable energy systems.

The report also urges Bangladesh to tap hydropower under the Bangladesh-Bhutan-India-Nepal (BBIN) framework.

A combined 6,000MW from Nepal and Bhutan during the peak March-September period could cut annual gas consumption by up to 257 billion cubic feet post-2030.
The IEEFA noted that industrial electricity consumption rose 4.8 percent in FY25, countering utility fears that open-access corporate power purchase agreements would erode revenues.

Bangladesh Power Development Board recorded revenue shortfalls of Tk 556.6 billion ($4.53 billion) in FY25.

"The pathway to energy transition hinges on prudent policy decisions supported by a favourable ecosystem, minimising continued reliance on imported fossil fuels and high subsidies," Alam said.