Indian Council of World Affairs

Introduction 

Ensuring energy security is crucial for Bangladesh as it navigates the complexities of a growing economy and a dense population. While Bangladesh faces rising energy demands, it is making efforts to address the challenges of securing its energy needs while mitigating environmental impacts. One way Bangladesh is doing so is by transitioning to renewable energy sources. Bangladesh's power sector mainly relies on non-renewable resources such as natural gas and oil. Approximately 62.90 percent of the country's electricity is produced from natural gas, 5 percent from coal, and a mere 2.93 percent from renewable sources. A shift to renewable sources has the potential to not only reduce Bangladesh’s reliance on fossil fuels but also help align with global efforts to combat climate change. 

For Bangladesh, as for many other countries, the future lies in investing in renewables, which enhance long-term sustainability, reduce carbon emissions, and foster energy independence, ultimately contributing to a resilient and sustainable energy framework. In line with these goals, Bangladesh has set an ambitious target to generate 40 percent of its total energy from renewable sources by 2040, reflecting its commitment to a greener and more sustainable energy landscape. This paper focuses on understanding the challenges Bangladesh is likely to face in its journey of transition to renewable energy sources and enumerates a few efforts Dhaka has undertaken to achieve its energy goals, including cooperation with its neighbours.  

Challenges in the Energy Sector 

Situated at the confluence of South and Southeast Asia, Bangladesh is endowed with a geographical landscape rich in renewable energy resources, including solar, wind, biomass, and hydropower potential. However, harnessing these resources to meet the nation’s energy needs has been limited due to infrastructural constraints, technological limitations, and financial impediments. Consequently, Bangladesh has historically relied heavily on conventional fossil fuels, primarily natural gas and coal, to fuel its energy-intensive sectors, thereby engendering concerns regarding energy diversification and environmental sustainability. Currently, Bangladesh’s energy mix includes 2.93 percent renewable energy, amounting to 650.14 MW, with a total installed power capacity of 22,215 MW.^[1] Natural gas contributes significantly to the total power generation, accounting for 48 percent, which equates to 10,678 MW.^[2] Bangladesh aims to increase its renewable resources in the near future as per its commitments outlined in the 2021 nationally determined commitment. Yet, Bangladesh's quest for energy security is beset by formidable challenges that warrant meticulous attention and concerted action. Some of them are identified below. 

Chief among Bangladesh’s energy challenges are the vulnerabilities inherent in the energy supply chain, exacerbated by geopolitical uncertainties, climate change-induced disruptions, and infrastructural bottlenecks. For example, the spectre of energy poverty looms large, with a significant segment of the population grappling with inadequate access to modern energy services, thereby impeding socio-economic progress and human development. Bangladesh's power sector mainly relies on non-renewable resources such as natural gas and oil. Approximately 62.90 percent of the country's electricity is produced from natural gas, 5 percent from coal, and a mere 2.93 percent from renewable sources.^[3]

Secondly, Bangladesh is facing a huge energy debt and a rising import bill. More recently, Bangladesh has faced significant challenges in financing imported fuel and gas due to declining local reserves, exacerbated by the geopolitical impacts of the Russian invasion of Ukraine. This financial strain led the country to seek a $4.7 billion bailout from the International Monetary Fund last year. Additionally, on February 7, 2024 the International Islamic Trade Finance Corporation (ITFC) formalised a $2.1 billion financing arrangement with Bangladesh to support the nation’s oil and gas import needs, as confirmed by energy officials.^[4] The agreement stipulates that the Jeddah-based ITFC will provide financing to the state-owned Bangladesh Petroleum Corporation for oil imports and to Petrobangla for the importation of liquefied natural gas (LNG).^[5] These loans add to Bangladesh’s financial burdens. 

Thirdly, Bangladesh is confronting its most severe electricity crisis since 2013.^[6] This crisis is attributed to erratic weather conditions and difficulties in financing fuel imports, exacerbated by declining foreign exchange reserves and the depreciation of the national currency.^[7] In simple terms, climate change is adding to Bangladesh’s energy woes. With predictions of additional heat waves and the peak electricity demand period from July to October approaching, the Minister of Power has recently warned that power outages may continue.^[8] This is a significant concern for the country, which has a population of 170 million. Take for instance the disruptions in the retail sector. As the world's second-largest exporter of garments, second only to China, and a key supplier to major global retailers like H&M, Zara, and Walmart, Bangladesh has faced the necessity of implementing power cuts. These power outages occurred over a span of 114 days within the first five months of 2023.^[9] The most extensive power cuts have occurred in the late evenings and early mornings, with residents and small businesses reporting unannounced outages lasting between 10 and 12 hours.^[10] Such episodes of power cuts have added to the disruptions in the country. 

Transition to Renewable Energy Sources 

The Government of Bangladesh has taken a few steps to deal with the energy crisis. It has embarked on an ambitious agenda to augment the amount of renewable energy in the country's overall energy mix, focusing especially on boosting solar power. The launch of the “Solar Home System” programme, one of the largest off-grid solar initiatives globally, has been instrumental in expanding energy access to rural communities, thereby fostering inclusive growth and poverty alleviation.  

Bangladesh has made significant strides in bolstering energy infrastructure and enhancing energy efficiency across diverse sectors. Initiatives such as the construction of liquefied natural gas (LNG) terminals, the development of cross-border energy transmission networks, and the adoption of energy-efficient technologies underscore Bangladesh’s commitment to bolstering energy security through infrastructural upgrades and technological innovation. 

Additionally, notwithstanding Bangladesh’s energy import bill, in order to meet the nation's growing energy needs, on June 2, 2023, Bangladesh signed a long-term agreement to purchase LNG from Qatar.[11] Bangladesh aims to purchase 1.8 million tons of LNG from Qatar annually for 15 years, starting in 2026, as per the agreement. Further, at the Qatar Energy Headquarters in Doha, the Bangladesh Oil, Gas, and Mineral Corporation (Petrobangla) and Qatar Energy Trading, the company's LNG trading arm, inked a long-term LNG Sale and Purchase Agreement.[12] It has significant ramifications for the two countries involved, the local energy scene as well as for the international energy markets. The consistent flow of LNG will lessen Bangladesh’s over-reliance on conventional energy sources by helping to diversify its energy mix. The ability to access a consistent energy source is essential to maintaining industrial progress. The accord is expected to spur greater manufacturing output, help in the creation of jobs, and push Bangladesh’s general economic growth. There are certain environmental benefits to the switch from more polluting energy sources like coal and oil to LNG. This action supports sustainable development in Bangladesh and is consistent with international efforts to mitigate climate change.^[13]

In 2021, Bangladesh committed to cutting its carbon emissions by 21.8 percent by 2030, focusing on using more renewable energy and improving energy efficiency. As part of the Climate and Clean Air Coalition, Bangladesh aims to reduce methane emissions by 37 percent and black carbon emissions by 72 percent by 2040. A significant portion of the yearly budget, around 6-7 percent, is allocated to adaptation programmes that boost resilience to climate change impacts, with 75 percent of the funding coming from within the country. The Bangladesh Climate Change Trust Fund (BCCTF) supports over eight hundred projects geared towards effective climate adaptation and mitigation.^[14]

Cooperation with Neighbours: 

In its efforts at transition to renewable source, Bangladesh has sought to cooperate with its neighbouring countries, benefitting from engagements at both bi-lateral and multilateral levels. Take for instance the cooperations with India. Firstly, Bangladesh, India, and Russia signed a MoU for the Rooppur Nuclear Power Station, marking India’s first major international nuclear project with Indian companies supplying materials and training Bangladeshi experts.[15] At Rooppur Pabna, two nuclear power plant units with a combined capacity of 2,400 MW are currently under development and are scheduled to be put into service in 2024–2025.^[16] Secondly, India is involved in the 1,125 MW Dorjilung hydropower project in Bhutan, a trilateral venture with surplus power benefiting both India and Bangladesh.[17] Thirdly, a new power trade deal enables Nepal to use India’s transmission lines to send up to 500 MW of hydropower to Bangladesh, starting with 50 MW from the Upper Karnali project.[18] Fourthly, India and Bangladesh inaugurated the India-Bangladesh Friendship Pipeline, which transports 1 million metric tonnes of high-speed diesel annually, reinforcing their energy sector cooperation.[19]

In the recent visit of Prime Minister Sheikh Hasina to India on June 21-22, 2024, both India and Bangladesh reiterated their shared commitment to strengthen cooperation in the power and energy sectors and facilitate intra-regional electricity trade. India and Bangladesh have jointly committed to accelerating the construction of the 765 kV high-capacity interconnection between Katihar, Parbatipur, and Bornagar.[20] This project will be supported by appropriate financial assistance from India and is set to become a cornerstone of grid connectivity infrastructure. India and Bangladesh, as active members of both the International Solar Alliance and the Global Biofuels Alliance, have significant opportunities to enhance their cooperation in the renewable energy sector. By leveraging the platforms provided by these alliances, both nations can share technological advancements and best practices in solar energy and sustainable biofuels. Through this catalytic platform, India and Bangladesh can work together to advance and widely adopt renewable energy solutions, thereby contributing to energy security and environmental sustainability in the region.

Conclusion 

According to Bangladesh’s current energy plan, 3,600 MW of additional renewable energy generation will be installed by 2030. Bangladesh stands at a promising juncture in its quest for energy security, balancing economic development and environmental sustainability. The country is poised to achieve a resilient energy framework by harnessing indigenous renewable resources, enhancing energy infrastructure, and fostering technological innovation. Bangladesh continues to seek avenues of cooperation with its neighbours, especially with India. With strategic policy interventions, collaborative partnerships, and sustainable practices, Bangladesh is on a path towards a future marked by energy abundance, resilience, and sustainability.

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*Madhu shree Dwivedi, Research Intern, Indian Council of World Affairs, New Delhi
Disclaimer: Views expressed are personal.

Endnotes

[1] UN, B. (2024, february 17). UN Bangladesh. Retrieved from Bangladesh’s energy transition journey so far.: https://bangladesh.un.org/en/260959-bangladesh%E2%80%99s-energy-transition-journey-so-far

[2] UN, B. (2024, february 17). UN Bangladesh. Retrieved from Bangladesh’s energy transition journey so far.: https://bangladesh.un.org/en/260959-bangladesh%E2%80%99s-energy-transition-journey-so-far

[3] Islam, M., Irfan, M., & Shahbaz, M. (2022, January). Renewable and non-renewable energy consumption in Bangladesh: The relative influencing profiles of economic factors, urbanization, physical infrastructure and institutional quality. Renewable Energy, Volume 184, 1130-1149.

[4] Reuters. (2024, February 7). ITFC signs deal to fund $2.1 bln of Bangladesh oil, gas imports. . Retrieved from Reuters: https://www.reuters.com/business/energy/itfc-signs-deal-fund-21-bln-bangladesh-oil-gas-imports-2024-02-07/

[5] Reuters. (2024, February 7). ITFC signs deal to fund $2.1 bln of Bangladesh oil, gas imports. . Retrieved from Reuters: https://www.reuters.com/business/energy/itfc-signs-deal-fund-21-bln-bangladesh-oil-gas-imports-2024-02-07/

[6] Varadhan, S., & Chew, C. (2023, June 7). Bangladesh's worst electricity crisis in a decade. Retrieved from Reuters.: https://www.reuters.com/world/asia-pacific/bangladeshs-worst-electricity-crisis-decade-2023-06-07/

[7] Varadhan, S., & Chew, C. (2023, June 7). Bangladesh's worst electricity crisis in a decade. Retrieved from Reuters.: https://www.reuters.com/world/asia-pacific/bangladeshs-worst-electricity-crisis-decade-2023-06-07/

[8] Varadhan, S., & Chew, C. (2023, June 7). Bangladesh's worst electricity crisis in a decade. Retrieved from Reuters.: https://www.reuters.com/world/asia-pacific/bangladeshs-worst-electricity-crisis-decade-2023-06-07/

[9] Varadhan, S., & Chew, C. (2023, June 7). Bangladesh's worst electricity crisis in a decade. Retrieved from Reuters.: https://www.reuters.com/world/asia-pacific/bangladeshs-worst-electricity-crisis-decade-2023-06-07/

[10] Varadhan, S., & Chew, C. (2023, June 7). Bangladesh's worst electricity crisis in a decade. Retrieved from Reuters.: https://www.reuters.com/world/asia-pacific/bangladeshs-worst-electricity-crisis-decade-2023-06-07/

[11] Tribune, D. (2024, May 24). Bangladesh and Qatar ramp up energy cooperation: New SPA signed to import 1.8m tons of LNG annually for 15 years. Dhaka Tribune. Retrieved from Dhaka Tribune: https://www.dhakatribune.com/bangladesh/foreign-affairs/284665/bangladesh-and-qatar-ramp-up-energy-cooperation

[12] Tribune, D. (2024, May 24). Bangladesh and Qatar ramp up energy cooperation: New SPA signed to import 1.8m tons of LNG annually for 15 years. Dhaka Tribune. Retrieved from Dhaka Tribune: https://www.dhakatribune.com/bangladesh/foreign-affairs/284665/bangladesh-and-qatar-ramp-up-energy-cooperation

[13] Tribune, D. (2024, May 24). Bangladesh and Qatar ramp up energy cooperation: New SPA signed to import 1.8m tons of LNG annually for 15 years. Dhaka Tribune. Retrieved from Dhaka Tribune: https://www.dhakatribune.com/bangladesh/foreign-affairs/284665/bangladesh-and-qatar-ramp-up-energy-cooperation

[14] UN, B. (2024, February 17). UN Bangladesh. Retrieved from Bangladesh’s energy transition journey so far.: https://bangladesh.un.org/en/260959-bangladesh%E2%80%99s-energy-transition-journey-so-far

[15] Chaudhury, D. R. (2017). India plays major role in nuclear plant in Bangladesh. The Economic Times.

[16] BPDB. (2022-2023). Annual Report. Bangladesh Power Development Board, Governement of Bangladesh.

[17] CITEE, C. (n.d.). Energy Cooperation in the BBIN Region. Retrieved June 16, 2024, from Centre for International Trade Economics & Environment: cuts-citee.org/energy-cooperation-in-the-bbin-region/

[18] Kala, R. R. (2023). India, Nepal & Bangladesh working on a first-of-its-kind tripartite electricity trade deal in South Asia. New Delhi: The Hindu Business Line.

[19] PIB. (2023, March 18). PM Narendra Modi and Bangladesh Prime Minister Sheikh Hasina jointly inaugurated the India-Bangladesh Friendship Pipeline. Retrieved june 16, 2024, from PIB: https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1908377

[20] MEA. (2024, June Monday). Ministry of External Affairs. Retrieved from https://www.mea.gov.in/incoming-visit-detail.htm?37897/IndiaBangladesh+Shared+Vision+for+Future+Enhancing+Connectivity+Commerce+and+Collaboration+for+Shared+Prosperity