AS 2025 dawns, Bangladesh is shaping up its commitment to cut emissions under the Paris Agreement. While the South Asian country is trying to bring its economy and governance back on track, the moment is ripe to drive a major reorientation in the country鈥檚 energy and power sector. Reforms are critical in this particular sector as its future pathway will have enormous consequences for our economy, environment and governance.
The needed shift involves transitioning from a fossil fuel-based energy mix to a green, renewable-based system. The economic case as well as the environmental rationale behind such a shift is indisputable. While Bangladesh has multiplied its power generation capacity over the years, surpassing the demand, the subsidies have become a drain on the national exchequer. Bangladesh has provided more than Tk 1,50,000 crore ($12.61 billion) as a subsidy to the power sector in the last decade 鈥� mainly due to poor planning and a faulty fuel mix.听
At present, about 25 per cent of our electricity generation capacity and 12 per cent of total generation come from liquid fuels. The cost of power from these liquid fuel-based power plants is more than Tk 25 ($0.21) per unit, whereas the Bangladesh government sells bulk power at Tk 7 ($0.0588) per unit, marking a huge gap that is being met by subsidies. Moreover, the government has to pay the power producers an agreed amount of 鈥榗apacity payment鈥� even when the power plants sit idle. The high costs of imports, the subsidy burden and the exorbitant capacity charges all make liquid fuel-based power an all-too-costly option for Bangladesh, in addition to their negative environmental footprint.听
Renewable energy sources with adequate storage capacity could help Bangladesh get rid of a significant share of the costly liquid fuels. Solar and wind are proven to be the best renewable energy solutions for Bangladesh, with particular potential in the southern part of the country. All the studies show that solar photovoltaic technology will be the cheapest and largest contributor to electricity in the future for the whole world.
But for making that transition, three key bottlenecks 鈥� grid, incentives and policy 鈥� need to be urgently addressed.
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Strong, smart, regional grid
A STRONG and smart grid infrastructure is essential for energy transition, whereas Bangladesh has a weak grid infrastructure for power evacuation. Vested interests often argue that liquid fuel-based plants are indispensable in light of the low voltage problem. We should instead ask the question: Did we delay enhancement of transmission infrastructure to support the liquid fuel plants?
With more variable renewable energy variable renewable energy being injected, grid stabilisation is a concern. Our grid flexibility study shows that we can have up to 20 per cent VRE without power cuts or hampering the grid stability significantly.
With a high-voltage transmission network, smart grid and energy storage, we can easily eliminate the grid-related problems.
Moreover, connecting with the regional grid will increase the flexibility of the national grid. Considering the current geopolitical situation, it is challenging to realise regional connectivity, but we should keep working. Apart from increasing the grid flexibility, the regional grid will support optimising the regional renewable energy potential.听
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Incentivising energy transition
HEAVY duties hinder the growth of solar photovoltaic in Bangladesh, which is becoming the cheapest source of electricity the world over. There is an 11 per cent import duty on solar panels, 38 per cent on inverters and 58 per cent on mounting structures and lithium batteries. There is a compelling case why these duties should be waived:听
Bangladesh receives around Tk 50 crore ($4.20 million) as import duty from a 100MW solar photovoltaic equipment, which is a pittance compared to our present annual subsidy worth Tk 40,000 crore ($3.36 billion), going mainly to fossil fuel. A 100MW solar photovoltaic system will produce 2.4 TWh of electricity in its project life of 20 years. To produce the same amount of electricity from diesel, we need Tk 6,000 crore ($504.20 million) worth of diesel or Tk 4,000 crore ($336.13 million) worth of furnace oil or Tk 1,000 crore ($84.03 million) worth of coal at current market prices. Waiving import duties on imported solar PV equipment could help us replace the need for importing so much fossil fuel with our hard-earned foreign currency. Such a waiver would only be fair since fossil fuel-based power plants enjoyed duty-free import of equipment and 15 years of tax holidays in the past.
Other countries are sparing no means of incentivising renewable energy growth. Take the case of Vietnam, for example. The Southeast Asian country installed around 9,000MW of solar photovoltaic systems in 2020 alone, mainly from rooftop systems, by giving incentives in the form of feed-in tariffs. If this is not possible for us, we can consider other incentives.
We should inspire and allow all consumers, irrespective of phase or voltage level, to avail themselves of the facilities of the net energy metering guideline, including the 132kV and 230 kV consumers who are currently barred from net energy metering connection. The net energy metering guideline should include the following benefits: like the independent power producers, OPEX operators of net energy metering systems should enjoy tax holidays; the capacity limit of the net energy metering systems should be updated to its sanctioned load instead of 70 per cent of the sanctioned load; prosumers should be allowed to install RE systems at any part of the country and use electricity by providing a wheeling charge to the utilities; and industries inside the economic zones and export processing zones are not allowed to avail the benefits of net energy meterings. The economic zones and export processing zones now purchase power from utilities and sell it to the industries inside while keeping a certain profit margin. Rather than holding onto this profit, the zone authorities could get wheeling charges from the net energy metering users that could partly compensate for their current earnings from the current arrangement.
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Enabling policies and ambitions
EVIDENCE-BASED and coherent policy will send a clear signal to investors, the industry and the citizens alike about the ambition, speed and modalities of Bangladesh鈥檚 energy transition. We should revise our policy documents to have coherent targets for renewable energy. The existing integrated energy and power master plan, IEPMP, which is replete with flaws like estimation of future power demand, lack of genuine renewable ambitions and promotion of questionable solutions, must be thoroughly revised.
In 2019, the UN Development Programme drafted a national solar energy roadmap and in the high case scenario, 30,000 MW solar photovoltaic capacity development by 2041 was recommended. This roadmap was not approved. We can revisit this document and with necessary revisions, we may approve it so that we can have a concrete, ambitious target. We should prepare a similar document for wind.
The plans and policies should also clarify how we will solve the land scarcity challenge. For example, each ground-mounted solar project should have a mandatory plan for other uses of land beneath it. Moreover, the policies should spell out enabling provisions like developing solar power hubs and transmission infrastructure up to the hubs that could significantly reduce the costs.
The last but no less important point is to stress on energy conservation and achieving energy efficiency, which is far easier than generating new power, while being a key pillar to achieving our net zero targets.
The energy and power sector lays the foundation for achieving Bangladesh鈥檚 economic aspirations as well as delivering better governance. Achieving a green and inclusive energy transition is essential for Bangladesh, a leader of the global south in global climate actions. No fossil fuel-based plants anymore 鈥� support renewables for our clean and green future.听
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Md Shahriar Ahmed Chowdhury is the founding director of the Centre for Energy Research at United International University.