B Mirror Report: According to a recent assessment, Bangladesh’s reliance on imported primary energy has grown significantly over the last four years, from 47.7% to 62.5%. This has exposed the nation to fluctuations in the price of fossil fuels globally and boosted power generation expenses by 83%.

The results were released in the “Fostering Bangladesh’s energy transformation” report from the Institute for Energy Economics and Financial Analysis (IEEFA), which also identifies other structural problems that contribute to the rising cost of electricity.

According to the report, the depreciation of the Bangladeshi Taka against the US dollar, increased import costs for fossil fuels, and large capacity payments in the face of sluggish demand growth have all contributed to a major increase in generation expenses.

Analyzing data from FY2020-21 to FY2024-25, the study shows that coal prices surged by 290 per cent between FY2020-21 and FY2022-23, while temporary spikes in oil prices and currency depreciation further escalated costs.

Although coal prices fell by 59.7 per cent from their peak and oil prices remained relatively low in FY2024-25, overall generation costs did not decline.

IEEFA researcher Shafiqul Alam said capacity payments remained a key burden, with private oil- and coal-fired plants receiving around BDT9.5 per kWh and BDT5.9 per kWh respectively in FY2024-25.

He added that inefficient gas supply utilization also increased costs, with low-load plants generating electricity at as high as BDT16.85 per kWh compared to BDT6 per kWh for higher-efficiency operations.

The report further warns that declining domestic gas output is forcing Bangladesh to rely increasingly on expensive liquefied natural gas (LNG). It estimates LNG subsidy costs could reach USD1.07 billion (Tk131.34 billion) between April and June 2026.

IEEFA also highlights that renewable energy accounts for only 2.3 per cent of grid power generation in Bangladesh, far below the global average of 33.8 per cent, limiting protection against international fuel price shocks.

The report calls for removing import duties on distributed renewable energy systems, noting that rooftop solar expansion could significantly reduce furnace oil imports over its lifecycle.

It recommends scaling up domestic renewable energy, retaining some operational oil-fired plants under public ownership to reduce capacity payment burdens, and exploring regional hydropower cooperation under the BBIN framework.

According to the analysis, importing around 6,000MW of hydropower from Nepal and Bhutan could reduce annual gas consumption by up to 257 billion cubic feet after 2030.

The report also emphasizes reducing costs under Corporate Power Purchase Agreements (CPPAs) to support industrial decarbonisation, particularly in the apparel sector.

IEEFA warns that Bangladesh Power Development Board (BPDB) faced revenue shortfalls of BDT556.6 billion (USD4.53 billion) in FY2024-25, adding further pressure on the energy sector amid ongoing global uncertainties.