Bangladesh RE Law/Policy

Table of Contents

Last updated Feb. 6, 2024.

Electricity Sector Overview

Bangladesh’s power sector is governed by the Power Division of the Ministry of Power, Energy & Mineral Resources (MPEMR) and regulated by the Bangladesh Energy Regulatory Commission (BERC). There is no merchant power market in Bangladesh accessible to private developers.

Generation: Electricity is generated by the Bangladesh Power Development Board (BPDB), Ashuganj Power Station Company Ltd. (APSCL), Electricity Generation Company of Bangladesh (EGCB), North West Power Generation Company Ltd. (NWPGCL), and Independent Power Producers (IPPs). BPDB, at the head of these entities, is a partially integrated public utility that purchases and sells power as a “single buyer.”

Transmission: The Power Grid Company of Bangladesh Ltd (PGCB) is the country’s sole transmission utility.

Distribution: Electricity is distributed by the Bangladesh Power Development Board (BPDB), Dhaka Power Distribution Company (DPDC), Dhaka Electric Supply Company Ltd (DESCO), West Zone Power Distribution Company (WZPDC), and Rural Electrification Board (REB) through Rural Co-operatives.

The relationship and structure of the aforementioned entities is illustrated in the chart below:

As of 2022, the majority portion of Bangladesh’s electricity mix is gas at 60.54%, followed by oil at 23.20% and coal at 14.31%. Solar makes up 0.76% of the energy mix and wind 0.01%. The following charts illustrate Bangladesh’s electricity mix:

Source: OurWorldinData.org. Click to access interactive graphs.

Other References

Summary of RE Laws/Policies

Bangladesh’s main laws and policies governing energy and renewables are:

Bangladesh’s renewable energy support mechanisms include:

  • Feed-in-Tariffs—currently in draft form, not yet implemented(?)
    • Draft rules are linked below
  • Power Purchase Agreements
  • Net Metering—2018 guidelines listed below
  • Other potential support mechanisms:
    • Typically lower rates of interest charged by local commercial banks for renewables projects
    • Consumer loan programs from local commercial banks may be available under a Policy Guideline for Green Policy of Bangladesh Banks
    • Potential financial support from SREDA for developing renewables technologies
  • Tax exemptions

The Electricity Grid Code, 2018 contains provisions on variable renewable energy (VRE) generators specifying standards etc. for connecting to the grid. The code is meant to promote transparent, non-discriminatory, and economic access and use of the grid.

Third-party power purchase agreements for renewables are not available to commercial and industrial customers, as the utility board does not permit the usage of its infrastructure for third-party power supply, meaning that rooftop solar is the only option in terms of decentralized generation.1Bangladesh, CLIMATESCOPE, https://www.global-climatescope.org/markets/bd/ (Accessed Aug. 25, 2023).

Other References

Initial Critique of RE Laws/Policies

Critique of and Suggestions to Improve Bangladesh’s RE Regulatory Framework

Although Bangladesh enacted the Renewable Energy Policy in 2008 to promote the expansion of RE, there are still some shortcomings in Bangladesh’s regulatory framework. Bangladesh published draft rules for a FiT system in 2016, but it has not yet been implemented. In addition, exclusions to VAT for the import of renewable energy equipment do not apply to all RE equipment across the board—importers of solar panels and related accessories still have to pay VAT, resulting in a market barrier for solar energy.2Shafiqul Alam, Toward a Sustainable Energy Pathway for Bangladesh, National Bureau of Asian Research (NBR) (Aug. 4, 2022), https://www.nbr.org/publication/toward-a-sustainable-energy-pathway-for-bangladesh (Backup PDF).

Sluggishness to increase renewable energy capacity has been attributed to heavy tax and duty on imports of solar panels and batteries, non-transparent tariff fixing, and a lack of planning and investment roadmap.3Clean energy goal far away, The Daily Star (Jan. 27, 2024), https://www.thedailystar.net/news/bangladesh/news/clean-energy-goal-far-away-3529101.

On the other hand, however, net metering guidelines were proposed in 2018 and revised in 2019 to promote solar rooftop systems, which some analysts have deemed effective.4NBR, supra.

The following measures have been suggested to improve Bangladesh’s regulatory framework for renewable energy5Alam, supra.:

  • Estimate future demand in consideration of factors including current suppressed demand for electricity, rising disposable income and demand in the future, and future energy efficiency gains
  • Modernize (make reliable) electrical grids and address energy price distortions
  • Improve energy efficiency
  • Set realistic renewable targets
  • Reduce dependence on imports
  • Promote cross-border electricity trade
  • Encourage green investment
  • Develop holistic energy and power sector policies—currently Bangladesh’s power and energy policies are developed separately. The policies should be integrated to address supply and demand issues for both energy and electricity

An IEEFA report recommends that Bangladesh’s government create a year-wise action plan backed by a monitoring mechanism to realize its renewable energy targets.6Shafiqul Alam, Charting an electricity sector transition pathway for Bangladesh, IEEFA (Apr. 5, 2023), https://ieefa.org/resources/charting-electricity-sector-transition-pathway-bangladesh. The report also suggests policy changes such as lifting the current cap on rooftop solar installation capacity, waiving duties on equipment for rooftop solar projects, and mapping funding channels.7IEEFA, supra.

Bangladesh’s challenges include difficulty in obtaining permits and approvals, uncertainty in auction/tender timings, an underdeveloped local supply chain, and financing difficulties.

Reliance on LNG

The Power System Master Plan 2016 focused on coal and LNG without anticipating the drop in cost of renewable energies and the diminished demand for coal, so now Bangladesh has a surplus installed capacity of fossil fuel plants.8Alam, supra. Bangladesh does not have concrete fossil fuel phase-out policies.9CLIMATESCOPE, supra.

Within the past five years, there has been a policy shift in Bangladesh in favor of increased importation and usage of LNG.10Bangladesh’s reliance on LNG increases heat stress, finance and energy risks, Zero Carbon Analytics (May 9, 2023), https://zerocarbon-analytics.org/archives/energy/bangladeshs-reliance-on-lng-increases-financial-energy-and-climate-risks. In 2023, Bangladesh’s state-owned PetroBangla signed a 15-year contract with Qatar to supply Bangladesh with LNG.11Bangladesh-Qatar sign long-term LNG deal, AA (Jun. 2, 2023), https://www.aa.com.tr/en/economy/bangladesh-qatar-sign-long-term-lng-deal/2912446; Bangladesh Secures LNG Supplies from QatarEnergy, Energy Intelligence (May 31, 2023), https://www.energyintel.com/00000188-71e7-d2a5-a7de-71ef2dca0000. Bangladesh also signed an LNG deal with Oman.12Bangladesh Approves Two New LNG Term Contracts, Energy Intelligence (Aug. 11, 2023), https://www.energyintel.com/00000189-e4d9-d0bd-a9df-f7fb75110000; Bangladesh Secures Long-Term LNG Supplies from Oman, Energy Intelligence (Jun. 19, 2023), https://www.energyintel.com/00000188-d215-d8a0-a5aa-d3bfceb90000. In addition, Bangladesh’s government resumed importing LNG from the international spot market in 2023.13Ramping up clean energy will help Bangladesh reduce its reliance on imported fossil fuels, IEEFA (Feb. 16, 2023), https://ieefa.org/resources/ramping-clean-energy-will-help-bangladesh-reduce-its-reliance-imported-fossil-fuels; Govt Resumes Importing LNG from Int’l Spot Market, Energy & Power (Feb. 1, 2023), https://ep-bd.com/view/details/news/MjU0OQ==/title?q=Govt+Resumes+Importing+LNG+from+Int%27l+Spot+Market.

On the other hand, the FY2023 budget did not give due importance to renewable energy.14Energy and Power Sector in the National Budget for FY2022-23, Centre for Policy Dialogue (Jun. 26, 2022), https://cpd.org.bd/wp-content/uploads/2022/06/Presentation-on-Power-and-Energy-Sector-in-the-Naitoanl-Budget-for-FY2023.pdf. If all ongoing projects detailed in the Bangladesh Power Development Board’s 2022 Annual Report are completed, Bangladesh’s renewable energy installed capacity will only reach 7% by 2027.15Reviewing Bangladesh’s energy transition, East Asia Forum (Aug. 19, 2023), https://www.eastasiaforum.org/2023/08/19/renewing-bangladeshs-energy-transition/.

The lack of investment in RE can be attributed to increasing dependence on imported fossil fuels such as LNG.16Policy Brief: Volatile Global LNG Market and Its Impact on Public Spending in Social Sectors, Centre for Policy Dialogue (2022), https://cpd.org.bd/resources/2023/01/Volatile-Global-LNG-Market-and-Its-Impact.pdf.

Critique of Bangladesh’s Energy and Power Master Plan

In 2023, Bangladesh’s government released a new Integrated Energy and Power Master Plan (IEPMP), prepared by Japan International Cooperation Agency (JICA) and the Institute of Energy Economic of Japan (IEEJ), laying out a plan for developing the energy sector up until 2050. The plan has been critiqued for a lack of sufficient details about its methodology and data sources to review the energy demand forecast.17The many holes in Bangladesh’s energy master plan, The Daily Star (Oct. 7, 2023), https://www.thedailystar.net/opinion/views/news/the-many-holes-bangladeshs-energy-master-plan-3436956. Moreover, the plan assigns a significant role to hydrogen, ammonia, and carbon capture and storage (CCS), while giving a smaller share to solar and wind.18The Daily Star, supra.

The plan proposes a contribution of renewable energy by only 2.8% by 2041 and 4.4% by 2050, in contradiction of the Paris Agreement, Mujib Climate Prosperity Plan, and Renewable Energy Policy targets, reflecting a recent policy shift to promote “clean energy” instead of “renewable energy.”19Renewable energy: A nature-based sustainable solution for Smart Bangladesh, The Business Standard (Jan. 29, 2024), https://www.tbsnews.net/supplement/renewable-energy-nature-based-sustainable-solution-smart-bangladesh-783198. The following have been recommended to reduce fiscal burdens on the government and create room for secured and sustainable green energy:20The Business Standard, supra.

  • Consistent renewable energy targets
  • Optimal use of solar power potential
  • Establish a dedicated Renewable Energy Finance Taskforce (REFT)
  • Robust, competitive, de-risked and transparent funding
  • Competitive private renewable energy sector expansion
  • Efficient land acquisition
  • Competitive and transparent procurement process
  • Attractive incentives
  • Optimal tariff for RE-based sustainability and energy sovereignty
  • Meaningful accountability
  • Foster knowledge

Other References

Renewable Energy Targets

Renewable Energy Laws/Policies

General Laws/Policies

Institutional Framework

  • Sustainable and Renewable Energy Development Authority Act (2012)
    • Info / More Info / PDF / Backup PDF
    • Creates and specifies the responsibilities of the Sustainable and Renewable Energy Development Authority (SREDA), an independent authority to promote the development and use of renewable energy
  • The Bangladesh Energy Regulatory Commission (BERC) Act 2003

Procedural Framework

  • Electricity Grid Code, 2018
    • Info / Backup PDF
    • Specifies criteria, guidelines, basic rules, procedures, responsibilities, standards and obligations for operation, maintenance, and development of the electricity transmission system
    • Includes provisions in renewable energy (variable renewable energy generators aka VRE generators / VRE generating units)

Incentives for RE Development

  • Import Duty Exemptions for Solar and Wind of Bangladesh (Statutory Regulatory Order)
    • Info / PDF / Backup PDF
    • Regulatory Code 155 (SRO No.155-Law/2004/2047/Duty)
    • This presentation on Bangladesh’s legal framework and current Solar PV Development, published in 2020, mentions Regulatory Code 155 in a footnote regarding import taxes on solar panels.
      • Other mentions: PDF
  • Bangladesh Energy Regulatory Commission (Tariff for Roof Top Solar PV Electricity) Regulations, 2016 (Feed-in Tariffs Rules DRAFT)
    • PDF / Backup PDF
    • Note: Uncertain whether a final version of these draft rules has been released, it seems like they have not moved forward from draft stage
    • Applies to all new RE power plants for generating and promoting the sale of electricity
    • Proposes a universal FiT concerning special model of RE technology managed by BERC on a specific basis that is presumed to initiate assistance for new investors
  • Net Metering Guidelines 2018

International Cooperation

  • Agreement between the Government of the Federal Republic of Germany and the Government of the People’s Republic of Bangladesh on financial cooperation 2012

Encouragement of Certain Types of RE

Energy Efficiency

  • Action Plan for Energy Efficiency and Conservation (2013)
    • Info / PDF / Backup PDF
    • Lists other plans and regulations issued by the Ministry of Power, Energy, and Mineral Resources (MPEMR/MoPEMR)
  • Energy Efficiency and Conservation Master Plan up to 2030 (2015)

Encouragement and Facilitation of Community Based or MSMEs

  • Policy Guidelines for Small Power Plants in Private Sector
    • Info / More Info / PDF / Backup PDF
    • Not for RE specifically but allows for private sector entities to establish Small Power Plants (SPPs, up to 10 MW) to generate electricity for their own use and sell the excess to other users.
  • Private Sector Power Generation Policy of Bangladesh 1996
  • Draft Policy Guidelines for Enhancement of Private Participation in the Power Sector, 2008
    • PDF / Backup PDF
    • Uncertain whether these guidelines have been approved or not or whether this document is the most up-to-date.
    • States a preference for renewable energy sources for new power plants, in addition to coal, imported gas, or liquid fuel over domestic natural gas.
  • Private Sector Power Generation Policy (PSPGP) 1996 (Rev. 2004)

Background Laws/Policies

References