Bangladesh is turning to renewable energy to chart a more secure and sustainable energy future as mounting import costs, rising tariffs, and heavy dependence on foreign fuels expose the country’s energy sector to growing risks.
Highlights
- Renewable Energy Push: 20% by 2030, 30% by 2040
- Heavy Dependence on Imports Strains Energy Security
- Rising Tariffs and Supply Shortages Hurt Industry and Consumers
- Costly LNG Imports Highlight Need for Domestic Exploration
- Energy Efficiency and Renewables Key to Long-Term Stability
The government’s new Renewable Energy Policy, approved in June 2025, sets ambitious targets of generating 20 per cent of power from renewables by 2030 and 30 per cent by 2040. The plan emphasises reducing reliance on costly oil-fired peaking plants, promoting rooftop solar in the vital apparel sector, and finalising corporate power purchase agreement (CPPA) guidelines. These measures aim to reduce carbon emissions, lower costs, and enhance the competitiveness of Bangladesh’s industries in the global market.
The shift to renewables comes as Bangladesh struggles with the classic “energy trilemma” — balancing energy equity, security, and environmental sustainability. The country has made significant strides in energy equity, with near-universal electricity access and improved affordability. However, its performance in energy security has weakened due to an overreliance on expensive imports, while environmental sustainability remains under pressure from the increasing use of fossil fuels.
This vulnerability is evident in the latest World Energy Trilemma Index 2023, where Bangladesh ranks 83rd out of 99 countries, five places lower than in 2022.
The deterioration is linked to soaring import dependence: more than 60 per cent of power generation now relies on imported fuels, while 44 per cent of primary energy supply is sourced from abroad. Such dependence not only threatens supply security but also weighs heavily on public finances.
The fiscal burden is already significant. The government has allocated Tk370 billion (US$3.03 billion) for power generation and Tk90 billion (US$0.74 billion) for LNG imports in FY2025–26. Even at relatively low global prices of US$11 per MMBtu, the government incurs losses of about Tk32.7 per cubic metre of regasified LNG supplied to the power sector. The widening gap between average power purchase and selling prices, currently around Tk4.5 per kilowatt-hour, further strains fiscal space.
Rising import bills and global price volatility have translated into higher consumer costs. The government raised electricity tariffs four times between January 2023 and March 2024, pushing retail prices up by over 20 per cent. Despite surplus generation capacity, load-shedding occurred on at least 23 days in the first nine months of FY2023–24. The gas supply shortfall — around 1,000 million cubic feet per day against a demand of 4,000 MMcfd — continues to constrain industrial output.
Bangladesh’s reliance on LNG, which began in 2018 to offset declining domestic gas production, has proven costly. Between August 2018 and mid-July 2025, the country spent US$17.6 billion importing roughly 1,500 billion cubic feet of LNG — about 1.5 times the current annual domestic gas output. A series of gas tariff hikes followed, ranging from 14% to 179% in January 2023, with further increases in 2024 and 2025, pushing industrial costs even higher.
Experts argue that greater investment in domestic exploration could ease these pressures. State-owned BAPEX has demonstrated this potential, discovering gas worth Tk60 billion (US$492 million) in Bhola at a cost of just Tk1.9 billion (US$15.6 million), and another Tk25 billion (US$205 million) in Zakiganj for Tk0.78 billion (US$6.4 million). However, limited budgetary allocations and capacity constraints have held back exploration efforts. Expanding domestic gas supply would help reduce volatile LNG imports and limit costly infrastructure expansion.
While Bangladesh scores highest on environmental sustainability (57.8) among the three pillars of the energy trilemma, challenges remain. Natural gas provides about a third of primary energy, and generation efficiency has improved. Yet per capita carbon emissions increased by 31.49% between 2012 and 2019, and the share of coal in power generation has quadrupled since 2008 — trends that could undermine long-term sustainability goals.
Experts say that demand-side energy efficiency is key to easing pressure on the system. Cutting gas system losses to 2 per cent and improving efficiency in captive power generation could reduce LNG imports by 100 billion cubic feet per year, about 39 per cent of 2024’s total. A shift from gas to electric boilers and stronger energy efficiency measures in homes and businesses could further reduce import dependence.
As Bangladesh’s energy sector enters a new phase, the focus is shifting from rapid expansion to long-term resilience. The country’s journey from 47 per cent electricity access in 2009 to near-universal coverage today is a remarkable achievement. But unless it reduces import reliance, boosts efficiency, and invests in renewables and domestic resources, Bangladesh risks undermining its energy security and fiscal stability.
The article is reproduced from IEEFA’s analysis “Navigating Bangladesh’s Energy Trilemma”
authored by Shafiqul Alam
