Power policy

Bangladesh set a non-binding target back in 2008 for 10% of electricity demand to be met by renewables in 2021, which would necessitate 3.1 gigawatts (GW) of installed capacity. The country fell short of this goal, with less than 0.9 GW of installed renewable energy capacity at the end of last year.

Looking ahead, Bangladesh’s updated NDC aims to deploy around 0.9GW of renewable energy by 2030, including 0.6GW of grid-connected solar and 0.1GW of wind power. It is also targeting 3.2GW of new combined cycle gas-based power plants, and to improve the efficiency of 0.6GW of existing gas turbine capacity.

With international assistance, the country’s NDC lays out a more ambitious plan to install over 4.1GW of renewable energy by the end of the decade, including 2.3GW of grid-connected solar and 0.6GW of wind, and to deploy 5.6GW of new combined cycle gas-based power plants.

Distributed solar systems, meaning on-site, decentralized generation, lead the development of renewables in Bangladesh. The government extends support to rooftop solar through its net metering policy, which was introduced in 2018. For commercial and industrial customers, the option of third-party power purchase agreements for renewables is not available as the utility board does not permit the usage of its infrastructure for third-party power supply. This means rooftop solar is the sole option.

More recently, federal organizations like the Bangladesh Power Development Board have been conducting utility-scale auctions for renewable energy.

Investment flows in Bangladesh’s renewable energy sector have mostly been steered by the government through international development finance institutions, such as the Asian Development Bank, and the country’s central bank. The financing of projects by commercial banks is constrained by unfavorable terms such as high interest rates or short tenors.

Power prices and costs

The Bangladesh Power Development Board is the country’s main power distributor and bulk power purchaser. Retail electricity tariffs for residential customers are cross-subsidized by industrial and commercial customers. In 2021, the average residential tariff was 27% lower than the average industrial tariff and 68% lower than the average commercial tariff.

As a result of the upheaval in the commodities market in 2022, which has resulted in elevated natural gas and oil prices, the government is set to raise the bulk electricity tariff in early October.

Power market

Bangladesh’s power market is heavily regulated. Electricity distribution is controlled by government-owned utilities and participation of private players is only allowed for generation. In September 2021, more than 40% of installed capacity was set up by independent power producers.

Gas-fired power plants have historically dominated installed generation capacity in Bangladesh, with a more than 50% share. The country’s natural gas reserves have been depleting and the government had plans to significantly raise coal capacity as an alternative. However, due to rising pressure to reduce dependence on dirty fossil fuels, it scrapped several coal projects in 2021.

The government is looking to scale up renewables-based power generation, mainly from solar and wind energy technologies.

Bangladesh has two types of rural electrification programs focused on extending the conventional grid to remote areas and installing solar irrigation pumps, solar mini-grids and improved cookstoves. In addition, the government-backed Infrastructure Development Company, a non-bank financial institution, also started a solar home system program in 2003 to supply electricity in areas where grid access is challenging. It is also running a solar mini-grid program to install renewables where grid expansion is tricky. These efforts have contributed to Bangladesh achieving 99% electricity coverage of its population in July 2021 and 100% in 2022.

Doing business and barriers

The slow progress of renewables in Bangladesh is due to a number of factors, including the lack of a well-defined regulatory framework, land constraints in a heavily populated country, and poor access to commercial financing. Incentives such as feed-in tariffs that could spur capacity expansion are either non-existent or have been pending approval for a long time.

Bangladesh is still heavily reliant on fossil fuels for electricity, which is hindering progress in deploying renewable and low-carbon energy technologies.

In early October 2022, a large extent of Bangladesh suffered power outages as the transmission lines were overloaded. Since the start of the year, the nation has resorted to power rationing as a result of ceiling-high gas and coal prices.

EV market

Road transport in Bangladesh is still heavily reliant on fossil fuels. The electric vehicle (EV) market remains at a very early stage, despite some targets to modernize and reduce net emissions from the sector.

In terms of public transport, a rapid bus route between capital Dhaka and nearby city Gazipur, which is due to launch in 2023, plans to trial the use of 130 electric buses.

EV policy

Bangladesh does not have an official target for the electrification of its road vehicle fleet, although there are reports that the government is aiming for 15% of registered vehicles to be electric by 2030.

The 2021 Automobile Industry Development Policy proposed measures to support the adoption and production of EVs in the country, such as tax breaks for investment in the assembly of energy-efficient vehicles. Initiatives for consumers include purchase incentives, a road tax waiver for a certain period and interest subvention on loans.

Buildings market

The buildings sector accounts for around 15% of electricity-related emissions in Bangladesh. Half of the total energy consumed by buildings is from air conditioning and 25% from lighting.

Buildings policy

Bangladesh’s Energy Efficiency and Conservation Master Plan (EECMP) aims to reduce energy intensity by 20% by 2030, relative to 2013 levels. Savings in the buildings sectors are based on measures such as more energy efficient air conditioning and lighting, and improved ventilation and insulation.

Specific energy conservation standards are included in the country’s National Building Code, which was revised in 2021. For example, the updated code stipulates that buildings should be designed such that indoor temperatures are not lower than 24 degrees Celsius for cooling, unless required for a special applications.

The country does not have any specific standards for heating. Most heating needs are met by traditional biomass sources, such as wood.