Bangladesh Grapples with Energy Crisis, Eyes Renewable Transition for Stability

Bangladesh is confronting a significant energy crisis, revealing systemic weaknesses stemming from its heavy reliance on imported fossil fuels. More than 60 percent of the nation's energy demand is met through imports such as LNG, coal, and oil. This dependency leads to substantial financial burdens, with the government spending over BDT 200 crore daily on energy subsidies and annual energy import expenditures reaching approximately USD 12 billion, pressuring foreign currency reserves.

Global fuel market instability, driven by geopolitical tensions and supply chain disruptions, exacerbates Bangladesh's energy insecurity. Nearly 70 percent of the country's LNG imports originate from Qatar, making it vulnerable to supply interruptions. The power sector frequently experiences gas shortfalls exceeding 1,100 mmcfd, leading to peak-time electricity shortages of nearly 2,000 MW. Additionally, Bangladesh's Strategic Petroleum Reserve capacity is limited to 35-40 days, far below international benchmarks.

The impact is evident across various sectors. The readymade garments industry faces productivity reductions of 25-30 percent due to gas shortages and load shedding, jeopardizing export earnings. Rural areas, despite a declaration of 100 percent electrification in 2022, endure daily load shedding for 10 to 20 hours during summer. This affects education, small businesses, agriculture, and daily life, alongside incidents of long fuel station queues and reduced office hours.

Renewable energy, particularly solar power, is presented as a viable solution. A 1 MW HFO-based power plant costs nearly BDT 190 crore annually, largely in foreign currency, while a 5 MW solar project requires a one-time investment of approximately BDT 25 crore with virtually no subsequent fuel costs. Each 1 MW of solar power can save around USD 325,000 annually in foreign currency, offering stable energy for 15-20 years post-installation.

Currently, renewable energy contributes less than 5 percent to Bangladesh's power generation. Significant barriers hinder its expansion, including 50-60 percent duties and taxes on equipment imports, high financing costs, slow approval processes, and a lack of clear policies for various solar applications. Policy reforms, such as eliminating customs duties and VAT on renewable energy equipment, shifting to transaction-value-based assessment, and offering tax holidays, are crucial.

Bangladesh possesses substantial solar potential, with an estimated 300 GW from usable rooftop spaces. Recommendations include relaunching rooftop solar nationwide, supporting utility-scale solar through transparent tendering and grid readiness, and developing policies for floating solar, agrivoltaics, and hybrid solar-storage. Reassessing and reviving 31 suspended solar projects, totaling over 3,000 MW, could save approximately BDT 10,800 crore annually in import costs.

Integrating energy storage systems, reducing duties on lithium-ion batteries and BESS, and incorporating electric vehicles as mobile storage units are also highlighted. Financial reforms, such as providing long-term, low-interest financing (3.5-4.5 percent), expanding green refinancing funds, and simplifying net metering, are necessary to accelerate the transition. A phased national roadmap, focusing on short-term policy adjustments, medium-term infrastructure development, and long-term targets of over 10,000 MW solar power by 2030, is proposed.

According to Mohammad Ataur Rahman Sarker, a renewable energy entrepreneur and secretary of the Bangladesh Sustainable and Renewable Energy Association, and Md. Tanvir Siraj, a renewable energy researcher, this transition promises reduced energy import costs, eased pressure on foreign currency reserves, improved industrial competitiveness, and the creation of 20-25 jobs per MW through renewable energy development.