Bangladesh’s Energy Sector: Renewable Energy Potentials and
Challenges
Energy is a fundamental driver of economic growth, social development, and
technological progress. For developing countries such as Bangladesh, reliable
and affordable energy access is critical for poverty reduction, industrialization,
and human development. Since independence in 1971, Bangladesh has faced
persistent challenges in meeting its energy demand due to limited domestic
resources, rapid population growth, and infrastructural constraints.
Nevertheless, the country has achieved impressive gains in electrification, with
electricity access increasing from negligible levels in the 1980s to over 90
percent of the population in the 2020s (World Bank, 2023).
Despite this success, Bangladesh’s energy sector remains dominated by fossil
fuels. Natural gas accounts for the largest share of electricity generation,
followed by oil-based power plants and a growing reliance on imported coal and
liquefied natural gas (LNG). This fossil-fuel-centric model poses serious concerns
related to energy security, fiscal sustainability, and environmental degradation.
Rising fuel imports have increased pressure on foreign exchange reserves, while
carbon emissions contribute to climate change—an issue to which Bangladesh is
particularly vulnerable due to its low-lying geography.
In this context, renewable energy offers a viable pathway for diversifying the
energy mix, reducing import dependence, and achieving climate commitments.
Bangladesh has considerable renewable energy resources, particularly solar
energy, due to its favorable geographic location. However, the share of
renewables in total electricity generation remains modest. This thesis seeks to
analyze the renewable energy potential of Bangladesh, examine the barriers to
its expansion, and explore policy options for accelerating the energy transition.
1: Overview of Bangladesh’s Energy Sector
1.1 Structure of the Energy Sector
Bangladesh’s energy sector is centrally governed by the Ministry of Power,
Energy and Mineral Resources (MPEMR), which is responsible for policy
formulation, strategic planning, and overall coordination of energy-related
activities. The ministry operates through two primary divisions: the Power
Division, which oversees electricity generation, transmission, and distribution,
and the Energy and Mineral Resources Division, which manages natural gas,
petroleum, coal, and other primary energy resources.
Electricity generation and bulk supply are primarily handled by the Bangladesh
Power Development Board (BPDB), a state-owned utility that plays a dominant
role in the power sector. Transmission is managed by the Power Grid Company
of Bangladesh (PGCB), while distribution responsibilities are shared among
, several entities, including the Bangladesh Rural Electrification Board (BREB),
Dhaka Power Distribution Company (DPDC), Dhaka Electric Supply Company
(DESCO), West Zone Power Distribution Company (WZPDC), and others.
Over the past two decades, Bangladesh’s energy sector has undergone gradual
liberalization, particularly in power generation. The introduction of Independent
Power Producers (IPPs) and rental power plants has significantly increased
generation capacity and attracted private sector investment. Public–private
partnerships have become an important feature of the sector, helping to address
supply shortages and reduce power outages. However, this rapid expansion has
also raised concerns regarding cost efficiency, fuel dependency, and long-term
sustainability.
Regulatory oversight is provided by the Bangladesh Energy Regulatory
Commission (BERC), which is responsible for tariff setting, licensing, and
consumer protection. Despite institutional progress, challenges remain related to
coordination among agencies, financial viability of utilities, and governance
efficiency.
1.2 Energy Mix and Demand Trends
Bangladesh has experienced rapid growth in electricity demand, driven by
population growth, urbanization, industrial expansion, and rising living
standards. As of the early 2020s, the country’s installed electricity generation
capacity exceeded 28,000 MW, marking a significant increase compared to the
early 2000s.
The national energy mix remains heavily dependent on fossil fuels. Natural gas
accounts for approximately 40–45 percent of installed generation capacity and
continues to be the backbone of electricity production. However, declining
domestic gas reserves have led to increasing reliance on imported liquefied
natural gas (LNG). Oil-based power plants, mainly diesel and furnace oil,
contribute around 30 percent of capacity and are often used for peak demand,
despite their high generation costs and environmental impacts.
Coal-based power generation has expanded in recent years, particularly with the
commissioning of large power plants, while imported electricity from
neighboring countries such as India provides a growing share of supply to
support grid stability. Although these sources enhance short-term energy
security, they increase exposure to international fuel price volatility and foreign
exchange risks.
Renewable energy, including large hydropower, contributes only about 4–5
percent of total installed capacity (BPDB, 2024). This relatively small share
highlights a significant gap between national renewable energy targets and
actual deployment. At the same time, electricity demand is projected to continue
rising sharply, placing additional pressure on fuel imports, generation costs, and
environmental sustainability.
Challenges
Energy is a fundamental driver of economic growth, social development, and
technological progress. For developing countries such as Bangladesh, reliable
and affordable energy access is critical for poverty reduction, industrialization,
and human development. Since independence in 1971, Bangladesh has faced
persistent challenges in meeting its energy demand due to limited domestic
resources, rapid population growth, and infrastructural constraints.
Nevertheless, the country has achieved impressive gains in electrification, with
electricity access increasing from negligible levels in the 1980s to over 90
percent of the population in the 2020s (World Bank, 2023).
Despite this success, Bangladesh’s energy sector remains dominated by fossil
fuels. Natural gas accounts for the largest share of electricity generation,
followed by oil-based power plants and a growing reliance on imported coal and
liquefied natural gas (LNG). This fossil-fuel-centric model poses serious concerns
related to energy security, fiscal sustainability, and environmental degradation.
Rising fuel imports have increased pressure on foreign exchange reserves, while
carbon emissions contribute to climate change—an issue to which Bangladesh is
particularly vulnerable due to its low-lying geography.
In this context, renewable energy offers a viable pathway for diversifying the
energy mix, reducing import dependence, and achieving climate commitments.
Bangladesh has considerable renewable energy resources, particularly solar
energy, due to its favorable geographic location. However, the share of
renewables in total electricity generation remains modest. This thesis seeks to
analyze the renewable energy potential of Bangladesh, examine the barriers to
its expansion, and explore policy options for accelerating the energy transition.
1: Overview of Bangladesh’s Energy Sector
1.1 Structure of the Energy Sector
Bangladesh’s energy sector is centrally governed by the Ministry of Power,
Energy and Mineral Resources (MPEMR), which is responsible for policy
formulation, strategic planning, and overall coordination of energy-related
activities. The ministry operates through two primary divisions: the Power
Division, which oversees electricity generation, transmission, and distribution,
and the Energy and Mineral Resources Division, which manages natural gas,
petroleum, coal, and other primary energy resources.
Electricity generation and bulk supply are primarily handled by the Bangladesh
Power Development Board (BPDB), a state-owned utility that plays a dominant
role in the power sector. Transmission is managed by the Power Grid Company
of Bangladesh (PGCB), while distribution responsibilities are shared among
, several entities, including the Bangladesh Rural Electrification Board (BREB),
Dhaka Power Distribution Company (DPDC), Dhaka Electric Supply Company
(DESCO), West Zone Power Distribution Company (WZPDC), and others.
Over the past two decades, Bangladesh’s energy sector has undergone gradual
liberalization, particularly in power generation. The introduction of Independent
Power Producers (IPPs) and rental power plants has significantly increased
generation capacity and attracted private sector investment. Public–private
partnerships have become an important feature of the sector, helping to address
supply shortages and reduce power outages. However, this rapid expansion has
also raised concerns regarding cost efficiency, fuel dependency, and long-term
sustainability.
Regulatory oversight is provided by the Bangladesh Energy Regulatory
Commission (BERC), which is responsible for tariff setting, licensing, and
consumer protection. Despite institutional progress, challenges remain related to
coordination among agencies, financial viability of utilities, and governance
efficiency.
1.2 Energy Mix and Demand Trends
Bangladesh has experienced rapid growth in electricity demand, driven by
population growth, urbanization, industrial expansion, and rising living
standards. As of the early 2020s, the country’s installed electricity generation
capacity exceeded 28,000 MW, marking a significant increase compared to the
early 2000s.
The national energy mix remains heavily dependent on fossil fuels. Natural gas
accounts for approximately 40–45 percent of installed generation capacity and
continues to be the backbone of electricity production. However, declining
domestic gas reserves have led to increasing reliance on imported liquefied
natural gas (LNG). Oil-based power plants, mainly diesel and furnace oil,
contribute around 30 percent of capacity and are often used for peak demand,
despite their high generation costs and environmental impacts.
Coal-based power generation has expanded in recent years, particularly with the
commissioning of large power plants, while imported electricity from
neighboring countries such as India provides a growing share of supply to
support grid stability. Although these sources enhance short-term energy
security, they increase exposure to international fuel price volatility and foreign
exchange risks.
Renewable energy, including large hydropower, contributes only about 4–5
percent of total installed capacity (BPDB, 2024). This relatively small share
highlights a significant gap between national renewable energy targets and
actual deployment. At the same time, electricity demand is projected to continue
rising sharply, placing additional pressure on fuel imports, generation costs, and
environmental sustainability.
