In our latest policy brief, we expand on the recent Orthonitir Barota podcast discussion by analyzing the structural bottlenecks behind Bangladesh’s ongoing power and energy challenges.
Summary
Bangladesh faces a complex energy bottleneck where power generation constraints, financial arrears, and grid limitations overlap. This brief breaks down the core structural challenges holding back the power sector and outlines realistic scenarios for reform.
- Capacity vs. Actual Generation: Installed power generation capacity crossed 30,000 megawatts (MW), yet peak demand typically hovers around 15,000 to 16,000 MW. Despite this massive surplus on paper, actual generation frequently falls short due to primary fuel shortages and foreign exchange constraints.
- Financial Arrears: Outstanding payment arrears to independent power producers (IPPs) and fuel suppliers have climbed past billions of dollars, creating severe liquidity stress across both the energy sector and the banking system.
- Capacity Payments: Over the past decade, cumulative capacity payments made to idle or underutilized power plants have drained billions from the public exchequer, constraining fiscal space for public investment and grid modernization.
- Transmission and Losses: System losses in transmission and distribution continue to sap efficiency, while variable renewable energy remains stalled at a fraction of total generation capacity due to underinvestment in modern grid flexibility and storage.
Fixing these deep financial and structural strains will require shifting away from short-term fixes toward transparent pricing and smarter grid investments.