The Centre for Policy Dialogue (CPD) has cautioned that Bangladesh’s power and energy sector faces mounting fiscal pressure and long-term structural risks unless urgent reforms are undertaken to curb overcapacity and improve transparency.
Presenting a study at its Dhanmondi office on Saturday, CPD Research Director Khondaker Golam Moazzem said inflated electricity demand projections and continued reliance on fossil fuels could leave the country burdened with stranded assets, high tariffs and growing subsidy obligations.
The research paper, titled “New Government’s Priorities in Addressing Socio-economic Challenges: Introducing Knowledge-based Decision Making in the Executive and Legislative Process", identified the power and energy sector as a key reform priority for the new government.
According to CPD, official master plans project electricity demand to reach 40-50 gigawatts (GW) by 2040. However, independent estimates suggest the actual requirement may be closer to 30 GW. The think tank argued that aggressive expansion targets have been driven by GDP-linked projections rather than verified industrial consumption data, raising the risk of surplus capacity that would be costly to reverse.
It also highlighted the burden of capacity payments to independent power producers (IPPs), including payments to idle plants. Despite tariff increases – reaching Tk8.95 per unit in 2024 – financial stress persists in the sector.
CPD pointed to limited transparency regarding plant-level payments and tariff adjustments, noting that public hearings by the Bangladesh Energy Regulatory Commission (BERC) have often been bypassed.
The organisation proposed introducing a “No Electricity, No Pay” clause in future power purchase agreements and urged renegotiation of rigid “take-or-pay” contracts where feasible.
CPD further recommended a halt to new fossil fuel-based power plants and a reassessment of planned coal projects, including Matarbari Phase 2.
It warned that increasing reliance on imported LNG and coal could heighten exposure to global price volatility and fiscal instability, especially amid a daily gas shortfall of around 1,200 mmcfd.
While welcoming the Renewable Energy Policy 2025, CPD observed that grid absorption capacity for variable renewable energy remains capped at 20 per cent.
It called for grid stress tests, accelerated upgrades to accommodate at least 30 per cent renewable energy by 2030, and the creation of an Independent System Operator to separate grid management from the Bangladesh Power Development Board (BPDB).
Central to the study was the need to embed knowledge-based decision-making and strengthen parliamentary oversight.
CPD urged the Parliamentary Standing Committee on Power and Energy to review major generation and procurement decisions to ensure accountability.
For the next 180 days, CPD advised suspending approvals for new fossil fuel projects, independently validating demand forecasts and institutionalising parliamentary scrutiny.
Without structural reforms, Moazzem warned, the sector risks repeating past cycles of overcapacity, high tariffs and fiscal strain.
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