CPD raises concerns over power overcapacity, pushes for 'no new fossil' fuel policy
According to the study, plant-by-plant payment details and the rationale behind tariff adjustments lack transparency, while public hearings by the Berc have often been bypassed.
The Centre for Policy Dialogue (CPD) has urged the government to halt new fossil fuel-based power projects, revise what it called inflated demand projections and bolster parliamentary oversight to put Bangladesh's power and energy sector on a fiscally sustainable and climate-aligned path.
CPD said Bangladesh's power and energy sector is at risk of fiscal stress, stranded assets and stalled renewable energy transition due to overestimated demand projections, fossil fuel lock-in and weak regulatory transparency.
Presenting a research paper titled 'New Government's Priorities in Addressing Socio-economic Challenges: Introducing Knowledge-based Decision Making in the Executive and Legislative Process' at CPD's Dhanmondi office today (28 February), CPD Research Director Khondaker Golam Moazzem outlined a series of structural weaknesses in the sector and recommended urgent reforms within the first 180 days of the new government.
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The study identified 'Power and Energy: Reviving for Energy Transition' as the seventh priority sector and found that procedural transparency, accountability, and implementation efficiency remain the weakest pillars of decision-making in this sector.
CPD noted that existing master plans project electricity demand to reach 40-50 gigawatts (GW) by 2040, while independent estimates suggest a more realistic requirement of around 30 GW.
The study warned that inflated GDP-demand linkages, rather than actual industrial consumption data, have been used to justify aggressive expansion targets.
This could lead to massive surplus capacity that would be 'difficult to undo', increasing fiscal burdens through long-term contractual obligations.
Without structural reforms and parliamentary oversight, the sector risks repeating past mistakes of overcapacity, high tariffs and fiscal stress
Spatial planning mismatch was also highlighted, with Dhaka receiving disproportionately high projections compared to emerging industrial hubs such as Chattogram and Sylhet.
CPD recommended that Bangladesh Power Development Board (BPDB) and Power Cell adopt rigorous econometric forecasting methods and subject revised projections to independent validation and parliamentary review.
The report underscored the structural burden of capacity payments to independent power producers (IPPs), even for idle plants. Despite recent tariff hikes reaching Tk 8.95 per unit in 2024 — fiscal stress persists.
According to the study, plant-by-plant payment details and the rationale behind tariff adjustments lack transparency, while public hearings by the Bangladesh Energy Regulatory Commission (Berc) have often been bypassed.
CPD recommended introducing a 'No Electricity, No Pay' clause in future Power Purchase Agreements (PPAs) to eliminate unconditional capacity charges. It also called for renegotiation of rigid 'take-or-pay' contracts, though acknowledging the legal complexity involved.
The think tank warned of growing dependence on imported LNG and coal, raising concerns about stranded assets and fiscal instability.
It said long-term price volatility impacts are systematically downplayed and that insufficient assessment has been conducted regarding risks associated with new LNG terminals and coal-based infrastructure.
CPD proposed adopting a clear 'No New Fossil Fuel-Based Power Generation' policy and urged reassessment of planned coal projects, including Matarbari Phase 2, through parliamentary debate to ensure fiscal and climate accountability.
The study also called for scaling up regional power trading with Nepal and Bhutan to import hydropower and balance solar intermittency.
While the interim government approved the Renewable Energy Policy 2025, CPD observed that grid absorption capacity for variable renewable energy (VRE) remains capped at 20%, and smart grid implementation has been deferred to 2040-2050.
Private renewable energy developers face bureaucratic hurdles in securing grid interconnection approvals, the report said.
CPD recommended that Power Grid Bangladesh (PGB) conduct a technical grid stress test to determine upgrades required to absorb at least 30% renewable energy by 2030.
It also proposed establishing an Independent System Operator (ISO) to separate grid management from BPDB and ensure institutional neutrality.
A 'Resource-to-Grid Data Hub' integrating real-time renewable energy potential mapping across districts should be developed under parliamentary monitoring, the study added.
In the primary energy segment, CPD highlighted a persistent daily gas shortage of around 1,200 million cubic feet per day (mmcfd), with total demand at 3,800 mmcfd against supply of just over 2,600 mmcfd, including LNG imports.
The report argued that increasing LNG imports alone would deepen financial burdens and recommended prioritising domestic gas exploration instead.
It stressed that overemphasis on new LNG infrastructure and domestic coal exploration reflects weaknesses in evidence-based analysis and stakeholder engagement.
A central theme of the CPD study is embedding knowledge-based decision-making in both executive and legislative processes.
The report called on the Parliamentary Standing Committee on Power and Energy to review all major generation, fuel mix and procurement decisions to ensure statutory compliance and transparency.
It noted that suspension of the Quick Enhancement of Electricity and Energy Supply (Special Provision) Act 2010 by the interim government is a positive step toward restoring competitive procurement and judicial oversight.
CPD, however, warned that without institutional restructuring, real-time data transparency and structured parliamentary scrutiny, reform efforts may remain partial.
Immediate and long-term priorities
For the next 180 days, CPD recommended:
- No approval of new fossil fuel-based power plants
- Independent validation of revised demand projections
- Introduction of "No Electricity, No Pay" clauses in future contracts
- Engagement with export-oriented industries in designing a National Solar Rooftop Programme
- Institutionalising parliamentary review of all major sectoral decisions
Beyond 180 days, the study proposed grid modernisation, establishment of an Independent System Operator, zonal energy audits, smart grid pilots, and legislative-backed accountability frameworks.
Moazzem said the success of the new government would depend on its ability to align fiscal prudence, climate commitments and energy security through transparent, evidence-driven policymaking.
"Without structural reforms and parliamentary oversight, the sector risks repeating past mistakes of overcapacity, high tariffs and fiscal stress," Moazzem added.
