Demand for electricity in Bangladesh is projected to reach 50,000 megawatts (MW) by 2041. The Government of Bangladesh has plans to increase power generation beyond expected demand to help propel growth in the export-oriented economy and meet the needs of a growing middle class by raising $127 billion in total investments in the power generation sector over the 20 years to 2041. Electricity generation capacity has increased significantly over the last decade, despite poor transmission and distribution infrastructure, inadequate thermal efficiency in a large number of aged power plants, and a mismatch between the types of energy needed by existing plants and the fuel mix available. Private power production units make up approximately half of total installed capacity.
Electrical generation capacity has increased from about 5 gigawatts in 2009 to around 25.5 gigawatts in 2022, and the government claimed in March 2022 that 100 percent of the population had access to electricity. Still, the reliability and quality of electricity remain major issues. Improving the supply and reliability of electricity and energy in general, while maintaining affordability is essential to supporting the continued growth of industry and commerce in Bangladesh.
The fuel mix of Bangladesh’s power plants is heavily based on natural gas. The Government of Bangladesh plans to reduce dependence on domestic natural gas and increase the use of imported liquified natural gas (LNG). Until 2021 the Ministry of Power, Energy, and Mineral Resources was reportedly reconsidering plans to shift Bangladesh’s fuel mix towards coal – including by generating as much as 50 percent of total electricity using coal-based power plants by 2030. However, in a major development, the Bangladesh government scrapped plans to build 10 coal-fired power plants in June 2021, citing unsatisfactory progress of the projects. In June 2022, Japan cancelled funding for the second phase of a coal-fired power plant in Matarbari. In addition, the government is framing a new Power System Master Plan (PSMP) where the use of coal will likely get a lesser priority in the face of pressure from environmental groups and development partners. The government is also considering importing more electricity from neighboring countries and expanding the use of renewable resources, including solar and wind power.
U.S. companies play an outsized role in the power and energy industry in Bangladesh. U.S. companies supply around 55 percent of Bangladesh’s domestic natural gas production and are among the largest investors in power projects. U.S.-origin power turbines currently provide 80 percent of Bangladesh’s installed gas-fired power generation capacity.
There are also opportunities for offshore gas exploration. Currently, 26 offshore blocks exist in the Bay of Bengal, including 11 shallow blocks and 15 deep sea blocks. Petrobangla, the state-owned oil, gas exploration, and production company, agreed in March 2020 to award U.S.-Norway joint venture TGS-NOPEC and Schlumberger a contract to conduct a 2D non-exclusive, multi-client seismic survey in the 26 blocks over two years. The Government of Bangladesh amended the terms of the Model Production Sharing Contract (PSC) in 2019 to attract greater international bidding interest, including reintroducing a provision to allow offshore drilling companies to export any gas Petrobangla refuses to buy. In 2021, Bangladesh, jointly with ONGC Videsh Limited, an Indian company, started to drill a new block in the Bay of Bengal under a PSC.
LNG Imports: Bangladesh has turned to liquefied natural gas imports in recent years to help meet its burgeoning fuel demands. The country set up its first floating storage and regasification unit (FSRU) in Moheshkhali in 2018, which a U.S. energy company developed and will operate for 15 years. Bangladesh currently has two FSRUs with a total LNG supply capacity of 1,000 million cubic feet per day (MMCFD). The Government of Bangladesh has plans to build two additional LNG regasification terminals in the southern coastal areas of Payra and Matarbari, at least one of which will be land based.
Solar Power: Bangladesh has successfully managed to implement a large-scale Solar Home System (SHS) project with over 4.2 million systems installed nationwide. Although Prime Minister Sheikh Hasina has publicly supported expanding renewable energy use in Bangladesh, renewable energy makes up less than one percent of the country’s on-grid electricity supply capacity. Scarcity of land, high renewable energy tariffs, and the relatively high initial cost of setting up renewable energy plants are among the obstacles to implementing large-scale, on-grid renewable energy projects, including solar power plants.
Bangladesh may have sizable reserves of untapped gas in its offshore blocks in the Bay of Bengal. Geologists have indicated prospects are good for locating gas, but commercially viable reserves have yet to be confirmed. More concrete information will be available after completion of a seismic survey.
In addition to offshore deep-water exploration, possibilities exist for reinvigorating aging brown fields; further developing onshore gas fields; overhauling roads, waterways, and infrastructure to facilitate fuel transport; and building terminals and pipeline infrastructure to carry imported LNG and drilled natural gas to distribution hubs. Long-term, changes in energy and business policies and regulations could provide commercial opportunities for deploying advanced energy technologies, including renewable energy, distributed energy resources, energy-efficient technologies, high-quality and reliable energy solutions, off-grid energy solutions, sustainable building technologies, and air pollution control systems. Moreover, there will be demand for electricity transmission and distribution equipment as the government plans to expand and modernize the transmission and distribution.
Incentives provided to foreign investors in the energy sector include:
- A tax exemption on royalties and technical know-how and assistance fees, and facilities for their repatriation.
- A tax exemption on interest paid on foreign loans.
- A tax exemption on capital gains from transfers of shares by the investing company.
- Avoidance of double taxation for foreign investors on the basis of bilateral agreements.
- Exemption from income tax payments for up to three years for the expatriate personnel employed in approved industries.
- Approved remittance of up to 50 percent of salary for foreigners employed in Bangladesh as well as facilities for repatriation of their savings and retirement benefits at the time of their return.
- No restrictions on issuance of work permits for project-related foreign nationals and employees.
- Facilities for repatriation of invested capital, profits, and dividends.
- Energy and Mineral Resources Division
- Power Cell (Power Division)
- Bangladesh Power Development Board
- South Asia Regional Initiative for Energy Cooperation and Development (SARI/Energy)