As of October 2024, the power sector's reserve margin in Bangladesh stands at an extraordinary 61.3%, underscoring the nation’s excessive electricity generation capacity.
This overcapacity has significantly contributed to the rising subsidy burden borne by the Bangladesh Power Development Board (BPDB).
A recent study by the Institute for Energy Economics and Financial Analysis (IEEFA), unveiled on Wednesday (4 December) brought these findings to light.
Between June 2016 and October 2024, BPDB’s electricity generation capacity surged by 125%.
However, a combination of slow demand growth, reliance on costly fossil fuels, limited success in renewable energy, and adverse economic conditions has led to unsustainable financial losses for BPDB.
The report projects that the reserve margin will climb further to 66.1% by December 2024.
This figure, deemed excessive for Bangladesh, reflects a lack of sufficient renewable energy integration into the national grid.
IEEFA estimates that by 2030, the country’s peak electricity demand will reach 25,834 MW, requiring only 35,239 MW of generation capacity.
This would bring the reserve margin down to 36.4%, a more manageable level.
To mitigate financial strain, the report suggests integrating half of the industrial sector’s captive power demand into the national grid, adding 3,000 MW of renewable energy to the grid, reducing load-shedding to 5%, and limiting supply and distribution losses to 8%.
Between FY2019–20 and FY2023–24, BPDB's annual revenue grew by 1.8 times, but its total annual expenditure rose by 2.6 times.
This imbalance compelled the government to allocate Tk1,26,700 crore ($10.64 billion) in subsidies over the five fiscal years.
Yet, BPDB still reported an accumulated loss of Tk 23,642 crore ($1.99 billion) during this period.
In FY2023–24 alone, the government provided Tk 38,289 crore in subsidies.
Shafiqul Alam, IEEFA’s lead energy analyst for Bangladesh, remarked, “Despite periodic adjustments in electricity tariffs for consumers, the surplus generation capacity will continue to exacerbate revenue deficits and subsidy dependency in the foreseeable future.”
The report outlines a roadmap for addressing the power sector’s challenges, recommending reduced investment in fossil fuel-based plants and a strategic focus on renewable energy.
Alam further highlighted the necessity of modernising the national grid and limiting load-shedding to encourage industrial sectors to transition from gas-based captive power plants to grid electricity.
The report also proposed achieving 4,500 MW of integrated grid-connected renewable energy capacity by 2030.
This shift would reduce dependency on expensive oil-fired power plants during the day.
Additionally, a 500 MW renewable power plant with three-hour battery storage could minimise oil-fired generation at night. The report suggests exploring increased battery usage in the future, should costs decline.
Alam emphasised that the sustainability of Bangladesh’s power sector hinges on adopting favourable policies, incorporating energy efficiency into demand projections, modernising the grid, and addressing barriers to renewable energy expansion.
“Though opportunities are narrowing, with an appropriate roadmap, Bangladesh can still transform its power sector into a sustainable model,” Alam concluded.
