Power sector can cut $1.8b

The government could reduce the power sector’s annual capacity-payment burden of $1.5 billion to $1.8 billion through appropriate policymaking and timely implementation of its reform plans, according to a new strategic framework.

The Five-Year Strategic Framework for Reform and Development July 2026-June 2031, prepared by the Power, Energy and Mineral Resources Ministry, sets out a roadmap to strengthen energy security while addressing excess generation capacity, gas shortages, high energy import costs and mounting financial pressure on the sector.

The National Economic Council approved the strategy at its latest meeting, and the framework was unveiled at a meeting of the Executive Committee of the National Economic Council.

According to the framework, Bangladesh currently has significant surplus power generation capacity. Installed capacity could reach around 25,714MW over the next five years, while generation capacity is expected to remain above the level required to meet demand, based on projected demand growth of 6 per cent and a 15 per cent reserve margin.

The strategy identifies rapid expansion of renewable energy as a key route to sustainable development, but warns that poorly planned growth could create fresh financial and technical challenges.

“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,” it said.

The framework says transmission and distribution networks, grid modernisation and demand management must be developed alongside solar expansion.

Citing the experiences of Pakistan and Vietnam, it warns that renewable generation can expand faster than transmission infrastructure, resulting in grid congestion and curtailment of electricity from renewable sources.

It also cautions that weak demand planning and grid constraints could reduce the utilisation of power plants and increase financial pressure as available generation capacity remains underused.

To improve gas security and reduce geographical risks, the framework proposes two new floating storage and regasification units in the Khulna-Barishal region.

It also proposes a 400MW power plant to make better use of gas from Bhola and transporting around 60 million cubic feet of gas a day from the Bheduria-Ilisha area to Khulna.

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

The strategy recommends accelerating onshore and offshore gas exploration to increase domestic energy supply. It also proposes developing four new coal mines and strengthening international coal supply chains.

The framework envisages second units at the Matarbari and Payra power plants, as well as new coal-fired generation facilities on around 5,000 acres acquired by the Bangladesh Power Development Board in Moheshkhali. It notes that such additions would require major investment in transmission infrastructure.

For renewables, the framework sets a target of generating 10,000MW of solar power as quickly as possible through on-grid and rooftop systems. However, to maintain grid stability, it recommends limiting large-scale solar projects to around 3,000MW-4,000MW. 

Rooftop solar has been given priority, with battery-backed systems proposed for offices, industrial facilities, educational institutions and government buildings. The strategy also proposes floating solar projects and developing around 4,000MW of wind-power potential in coastal areas.

It recommends tax exemptions on lithium-ion battery imports and a five-year tax holiday for rooftop solar projects.