Power policy

Bangladesh has a non-binding target which requires 10% of the country’s electricity demand to be met from renewables by 2021. This would require about 3.1GW of installed capacity. Even so, the development of renewables in the country has been slow and given the pace of development, it is unlikely that the country will meet its goal.

Distributed solar systems lead the development of renewables in the country. The government extends support to rooftop solar through its net metering policy which was introduced in 2018. For commercial and industrial customers, the option of third-party PPA is not available as the utility does not permit the usage of its infrastructure to wheel third party power. Hence, rooftop solar is the sole option.

More recently, federal organizations like the Bangladesh Power Development Board (BPDB) have been conducting utility-scale auctions.

Investments in the renewable energy sector have mostly come from international development finance institutions such as the Asian Development Bank. Financing of projects by commercial banks is constrained by unfavorable terms such as high interest rates or short tenors.

Power prices and costs

The Bangladesh Power Development Board (BPDB) is the bulk buyer of electricity and dominates the power distribution business. Retail electricity tariffs for residential customers are cross-subsidized by industrial and commercial customers. In 2020, the average residential tariff was 31% lower than average industrial tariff and 44% lower than the average commercial tariff.

Power market

Bangladesh’s power market is heavily regulated. Participation of private players is only allowed in the generation business. In September 2021, more than 40% of the installed capacity was set up by independent power producers. Distribution business is controlled by government-owned utilities.

Bangladesh’s installed capacity has historically been dominated by natural gas power plants. These power plants make up more than half of Bangladesh’s total installed capacity. However, the country’s natural gas reserves have been depleting. As an alternative, the government had plans to significantly raise its coal capacity. Due to the rising pressure to reduce dependence on dirty fuels, it scrapped several coal projects in 2021.

Bangladesh is running two types of rural electrification programs for extension of the conventional grid to remote areas and installation of solar irrigation pumps, solar minigrids and improved cookstoves. Apart from these, the government-backed NBFC, the Infrastructure Development Company (IDCOL), started a Solar Home System program in 2003 to supply electricity in areas where grid access is challenging. It is also running a solar mini-grid program to install renewables where grid expansion is tricky. As on July 2021, the country had a national electrification rate of 99%.

Doing business and barriers

The slow progress of renewables is due to a number of factors including a lack of a well-defined regulatory framework, availability of land, and access to commercial financing. Incentives such as feed-in tariffs that could spur capacity expansion are either non-existent or have been pending approval for a long time. Large-scale renewables also face land constraints in the heavily populated country.

EV market

The government has yet to implement any substantial policy support in the sector and the EV market remains at an early stage.

EV policy

Bangladesh does not have any official target for the electrification its vehicle fleet. There have been reports of the country possibly aiming for 15% of all vehicles on the road to be electric by 2030.

Policy-wise, the government has little support on offer. Although there is no official exemption in place, EVs enjoy lower taxation. This is because the Bangladesh Road Transport Authority (BRTA) cannot impose Advance Income Tax (AIT) on EVs due to absence of the required provision in the finance act.

Bangladesh set comprehensive emission standards for the first time in 2005. There are separate emission standards for vehicles powered by diesel, petrol and compressed natural gas. Bangladesh's emission standard for new diesel light-duty vehicles (LDV) is Euro I and for CNG LDVs it is Euro 2.

Buildings market

Bangladesh has an Energy Efficiency and Conservation Master Plan (EECMP) under which, it aims to improve its primary energy consumption per unit of GDP by 20% in 2030 compared to the 2013 value.

Buildings policy

In its action plan, the policy details an 'EE Building Program (EEBP) under which, the government aims to regulate the heat insulation and/or ventilation performance of building envelope, energy efficiency of building equipment (HVAC, lighting, fans, hot water supply, lift, escalator, renewable energy options), and water efficiency and management. This was done through the amendment of the Bangladesh National Building Code, which was revised and formalized in 2021. For energy conservation, the code stipulates that indoor design temperature shall not be less than 24 degrees celsius for cooling.

There are no heating-specific standards in this plan. Heating requirements in Bangladesh are met by traditional biomass fuel.