Five-year energy roadmap aims to cut capacity-payment burden, tackle gas crunch, and import costs

Highlights

• $1.5–1.8bn annual capacity-payment burden could be reduced through better policy and implementation
• Two new FSRUs, greater use of Bhola gas and new coal projects proposed to strengthen energy security
• Major grid upgrades, including 765kV double-circuit transmission lines, are recommended
• EV expansion, tariff reforms and demand management measures aim to better use surplus electricity

Bangladesh could reduce the power sector's annual capacity-payment burden of $1.5 billion to $1.8 billion through appropriate policymaking and effective implementation, according to the government's "Five-Year Strategic Framework for Reform and Development (July 2026-June 2031)."

The document is a five-year strategic planning framework that sets out a comprehensive roadmap for strengthening the country's energy security.

It outlines coordinated measures to address excess power generation capacity, gas shortages, high energy import costs and financial pressure in the sector.

According to the framework, Bangladesh currently has significant surplus power generation capacity. Even after factoring in 6% growth and a 15% reserve margin, the country's total power requirement could reach around 25,714MW over the next five years, while existing generation capacity is expected to remain above that level.

To increase domestic energy supply, the framework recommends accelerating both onshore and offshore gas exploration.

It also envisages two new floating storage and regasification units (FSRUs) in the Khulna-Barishal region to reduce geographical risks.

For better utilisation of gas from Bhola, the document proposes building a new power plant with around 400MW of capacity.

It also proposes transporting around 60 million cubic feet of gas per day from the Bheduria-Ilisha area to the Khulna region.

Removing the gas transmission bottleneck between Sylhet and Meghna Ghat has also been identified as an important priority, as the existing constraint is forcing the use of less-efficient power plants.

The long-term planning document was unveiled at a meeting of the Executive Committee of the National Economic Council (Ecnec), after being approved earlier at a meeting of the National Economic Council (NEC).

Coal, nuclear power and grid expansion

The five-year framework also proposes developing four new coal mines and strengthening international coal supply chains.

It envisages installing second units at the Matarbari and Payra power plants, alongside developing new coal-fired generation facilities on around 5,000 acres of land acquired by the Bangladesh Power Development Board (BPDB) in Moheshkhali.

The document says such additions to generation capacity would require major transmission infrastructure.

Separately, the framework recommends strengthening the grids in the south-eastern and south-western regions through 765kV double-circuit transmission lines.

It also proposes making load-flow studies mandatory for new power projects.

New nuclear power plants are also included in the roadmap to ensure sustainable baseload generation.

10,000MW solar target

The framework sets a target of generating 10,000MW of solar power in the shortest possible time, including both on-grid and rooftop solar.

However, considering grid stability, it recommends limiting large-scale solar projects to around 3,000-4,000MW.

Rooftop solar has been identified as a priority, with the framework calling for installations with battery backup at offices, industrial facilities, educational institutions and government buildings.

It also proposes developing floating solar projects and tapping around 4,000MW of wind power potential in coastal areas.

Tax exemptions on lithium-ion battery imports and a five-year tax holiday for rooftop solar projects have also been proposed.

Tariffs, subsidies and demand management

The framework recommends aligning electricity tariffs with actual costs and adjusting them on a real-time basis.

It also calls for financial restructuring to address BPDB's debt problems and for improvements in subsidy management.

On demand management, it proposes shifting auto-rickshaw charging to between 1am and 8am.

The framework also proposes differentiated tariffs during periods of high air-conditioner use and withdrawing government subsidies for electricity consumed by air-conditioner users.

To encourage the use of surplus electricity, the framework proposes expanding electric vehicle use to create an additional 3,000-4,000MW of electricity demand.

It also calls for redefining the roles of the Sustainable and Renewable Energy Development Authority (SREDA), Rural Electrification Board (REB) and Palli Bidyut Samitys, while strengthening coordination among BPDB, Power Grid Bangladesh and Petrobangla.

The framework also proposes a separate solar-based grid system to manage the intermittency of solar power.

Risks of rapid solar expansion

While the framework identifies rapid renewable-energy expansion as a key path towards sustainable development, it warns that moving too quickly without adequate preparation could create new risks.

It notes that many countries have successfully expanded renewable energy through integrated planning, timely development of transmission infrastructure and effective grid management.

However, the experiences of Pakistan and Vietnam show that rapid expansion of solar and other renewable generation can outpace transmission infrastructure.

In those countries, generation capacity increased faster than the grid's ability to deliver electricity to consumers, resulting in congestion and forcing some renewable output to be curtailed.

The framework also warns that unplanned expansion can make it harder to maintain balance in the power system.

Weak demand planning and grid limitations can reduce the efficiency of power plants and increase financial pressure because available generation capacity cannot be fully utilised.

The document says that if Bangladesh moves ahead with rapid solar expansion, transmission and distribution infrastructure, grid modernisation and demand management will have to be developed in parallel.

It adds that battery storage, smart-grid technologies and integrated energy planning will also be necessary to avoid similar risks.

The framework says that properly planned and phased renewable-energy expansion could strengthen the country's energy security, while poorly coordinated implementation could create new financial and technical challenges.