Bangladesh may need to provide subsidies worth around $1.07 billion for liquefied natural gas (LNG) imports during April-June 2026, according to a report.
The estimate, based on current LNG prices of around $20 per million British thermal units and import trends, excludes regasification and terminal costs, said the report published by the Institute for Energy Economics and Financial Analysis (IEEFA).
The report warned that Bangladesh’s increasing reliance on imported fuel, coupled with limited progress in renewable energy generation, is exposing the economy to volatile global energy markets and pushing up electricity generation costs.
The report also showed that the share of imported primary energy rose from 47.7 per cent to 62.5 per cent between FY2020-21 and FY2024-25, while power generation costs increased by 83 per cent during the period.
The report said renewable energy, including hydropower, currently contributes only 2.3 per cent of Bangladesh’s grid-based electricity generation, far below the global average of around 33.8 per cent.
The findings underscore Bangladesh’s growing vulnerability to supply disruptions, mounting subsidy burdens and rising energy costs amid continued reliance on imported coal, oil and LNG.
According to the report, a 290 per cent rise in average coal prices between FY2020-21 and FY2022-23, coupled with sharp depreciation of the taka against the US dollar and a temporary spike in oil prices, significantly increased generation costs.
However, despite a 59.7 per cent decline in coal prices compared with FY2022-23 and relatively lower oil prices, overall generation costs did not fall in FY2024-25.
“Large capacity payments and fuel supply shortages continued to keep electricity generation expensive,” said IEEFA Lead Energy Analyst and lead author of the report Shafiqul Alam.
The report said private oil-fired and coal-fired power plants received average capacity payments of around Tk9.5 per kilowatt-hour and Tk5.9 per kilowatt-hour respectively in FY2024-25, adding significantly to overall costs.
Gas shortages also pushed up generation expenses.
Power plants operating at below 25 per cent load factor generated electricity at Tk16.85 per unit, while plants operating at around 75 per cent load factor produced power at Tk6 per unit.
The report also criticised high import duties on distributed renewable energy systems, arguing that such taxes discourage investment in clean energy.
According to the study, a combined rooftop solar capacity of 100 megawatts could save more than 30 times the one-off import duties over its lifecycle through reduced furnace oil imports.
It recommended that the government waive import duties on renewable energy equipment.
“The solutions to Bangladesh’s persistent energy problems lie closer to home,” Alam said, stressing the need to expand domestic renewable energy generation while limiting further fossil fuel-based capacity expansion.
The report suggested that the government could retain part of its oil-fired generation capacity under state ownership after existing contracts expire to avoid hefty future capacity payments.
It also highlighted the potential of regional energy cooperation under the Bangladesh-Bhutan-India-Nepal (BBIN) framework.
Importing 6,000MW of hydropower from Nepal and Bhutan during the high-demand March-September period could reduce Bangladesh’s annual gas consumption by up to 257 billion cubic feet after 2030, the report estimated.
The study further urged policymakers to keep open-access costs for renewable energy projects under Corporate Power Purchase Agreements (CPPAs) low to support industrial decarbonisation efforts, particularly in the apparel sector.
Although utilities fear revenue losses from such arrangements, the report noted that industrial electricity consumption grew 4.8 per cent in FY2024-25.
The report also pointed to widening financial stress in the energy sector, saying Bangladesh Power Development Board recorded a revenue shortfall of Tk556.6 billion in FY2024-25.
It warned that ongoing geopolitical tensions in West Asia could further strain the finances of Bangladesh’s energy utilities, reinforcing the need for realistic transition policies and reduced dependence on imported fossil fuels.
