A case for mainstreaming battery energy storage in Bangladesh

Why does Bangladesh still face evening power shortages despite abundant sunshine? Why do factories fall back on diesel-run generators when we have time-shiftable solar generation potential during the day? Why is our energy supply still so vulnerable to shifting geopolitics? And why, even now, is energy storage treated as a future option rather than a present necessity?

Together, these questions point to a deeper issue in Bangladesh’s approach to planning its power sector. While the country has succeeded in expanding its generation capacity and achieving near-universal electricity access in binary accounts, metrics such as reliability, affordability, and resilience remain unrealised.

Bangladesh relies partly on indigenous natural gas and more heavily on imported fuels (mainly LNG, oil, and coal) for electricity generation. Primary energy import dependence surged from 47.7 percent in FY21 to 62.5 percent in FY25, leaving the economy dangerously exposed to fuel price volatility and geopolitical disruptions. As a result, average generation costs have jumped 83 percent over five years, from Tk 6.61/kWh to Tk 12.1/kWh, while annual subsidies have ballooned to around Tk 38,670 crore in FY25 from Tk 7,970 crore in FY19. The growing cost of fuel imports has also intensified pressure on foreign exchange reserves, contributing to depletion, currency strain, and inflation risks.

If geopolitical tensions persist, LNG price shocks alone are projected to require an additional $1.07 billion in subsidies until June this year.

Electricity demand is projected to rise by seven percent per year. But the policy response mostly focuses on adding generation capacity, thus misdiagnosing the problem. Bangladesh has an installed capacity of 27,424 MW against a maximum demand of only 17,000 MW, a reserve margin of 61.3 percent. Despite having such a high reserve margin, the country continuously fails to meet availability and reliability targets, while capacity payments to under-dispatched plants impose a fiscal burden annually. Clearly, expanded generation capacity is not the answer. The problem is rooted in import dependency, timing, variability, and system inflexibility.

Bangladesh has nearly 40 gigawatt-peak (GWp) of installable solar photovoltaic (PV) potential, part of an estimated 120 GW of total renewable energy potential. Yet, renewables contribute a mere 2.3 percent to the national generation mix. The limitation is not solar itself, but rather system design. Solar peaks during daylight hours, while demand peaks in the evenings. Without storage, surplus midday solar is curtailed or underutilised, forcing the grid to fall back on expensive LNG and diesel during peak demand hours.

Battery energy storage addresses this directly: storing electricity during low-demand periods and releasing it when demand peaks. Globally, lithium-ion battery costs have fallen nearly 90 percent since 2010, making grid-scale storage increasingly competitive with fossil fuel peaking plants. In Bangladesh, however, storage continues to be treated as a pilot intervention rather than essential infrastructure.

Bangladesh’s export-oriented manufacturing sector relies heavily on captive diesel generation to cope with outages and voltage instability. Electricity produced from diesel can cost three to four times more than grid electricity, significantly raising production costs and undermining competitiveness in a price-sensitive global market. At the system level, expensive oil-fired peaking generation remains a primary cost driver, accounting for 10.7 percent of total generation at Tk 27.5/kWh; significantly higher than regional peers India (0.02 percent) and Vietnam (0.06 percent). Capacity payments to under-dispatched plants also add an annual fiscal burden, running into hundreds of millions of dollars. While storage is not a cure-all, it can displace costly peaking generation, lower subsidy requirements, and improve utilisation of existing assets.

Unfortunately, Bangladesh continues to treat storage as a future option while the gap with regional peers widens each year. India’s renewable generation grew 24 percent in 2025, reaching 50 percent non-fossil installed capacity ahead of schedule. Thailand introduced Utility Green Tariffs to drive clean energy procurement. The Philippines uses preferential dispatch to displace diesel. Indonesia is deploying 320 GWh of battery storage for village solar.

Bangladesh has initiated over 150 MW of grid-scale battery storage projects and the Renewable Energy Policy 2025 formally recognises storage as part of the national power system. But the policy defines no targets, procurement pathways, or compensation mechanisms, leaving private investment fragmented and limited.

The Ministry of Power, Energy and Mineral Resources should integrate storage targets directly into national power planning. The BPDB must incorporate storage into least-cost dispatch to reduce liquid fuel dependence. Power Grid Bangladesh should prioritise grid-scale storage at congestion points and renewable-rich zones. BERC must define compensation frameworks, capacity payments, ancillary services, or hybrid mechanisms to unlock private capital. SREDA should prioritise storage in coastal and off-grid resilience planning. Multilateral climate finance could also be an option.

Millions of Bangladeshi households already rely on IPS battery units to cope with outages—an informal demonstration that the public will pay for reliability when the grid cannot provide it. The citizens of Bangladesh have already expressed their trust on battery storage and the government should act soon to fix the policy problems that stand in the way of mainstreaming this nationally.

Md Nasimul Islam Maruf is lead engineer at Avangrid in the US, specialising in clean energy policy, energy storage, and renewable integration.

ASM Mominul Hasan is lecturer at the University of Flensburg in Germany, specialising in solar PV systems, energy system modelling, and sustainable energy transitions.

Views expressed in this article are the author's own. 

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