BANGLADESH Trends and Developments Contributed by: Arunima Dutta Aurni and M. Imtiaz Farooq, Farooq and Associates
Introduction Bangladesh’s power sector has entered a period of significant transition. Over the last two years, the sec- tor has been shaped by changes in government, shift- ing economic priorities and a wider reassessment of how projects should be procured, financed and imple- mented. Following the political developments of 2024 and the subsequent transition in 2026, electricity has remained one of the key areas of policy, fiscal and commercial attention. For many years, planning in the sector was largely driven by the need to expand generation capacity and improve access to electricity. That priority was understandable at a time when Bangladesh was seek- ing to meet rising demand and support industrial and infrastructure growth. The present phase, however, appears to be different. The question is no longer only how quickly new capacity can be added, but also how projects are selected, priced, implemented and sus- tained over time. Against this backdrop, the sector has seen several major developments, many of which are still unfolding. The policy direction appears to be moving from rapid capacity addition towards a more balanced approach involving competitive procurement, renewable energy, fiscal discipline, tariff rationalisation, payment security and grid reliability. These changes are likely to shape the next phase of Bangladesh’s power generation, One of the clearest developments in Bangladesh’s power sector is the renewed focus on renewable energy and private-sector participation. This is no longer limited to general policy statements. Over the last year, a number of policies and guidelines have been introduced which, when read together, suggest a shift in how renewable power projects are expected to be developed, procured, financed and connected to the grid. transmission and distribution landscape. New Policy and Regulatory Direction The Renewable Energy Policy 2025 sets the overall direction. Its significance lies not only in increas- ing the share of renewable energy in the power mix, but in moving towards a broader renewable energy market. The policy refers to areas such as storage,
smart-grid integration, floating solar, electric vehicle charging infrastructure, renewable purchase obliga- tions, renewable energy certificates, open access and peer-to-peer trading. This indicates a move beyond traditional target-setting and towards a more struc- tured framework for renewable generation, trading and consumption. A more immediate development is the Policy for Renewable Energy-Based Commercial Electricity Generation/Setting up of Power Plants with Private Participation, 2025. The concept of private generation and direct supply is not entirely new in Bangladesh. Captive generation and commercial power plants have previously allowed private generation and sup- ply arrangements, including sales to large consumers through negotiated tariffs and wheeling arrangements. The recent shift, however, is that this model is now being reframed around renewable energy, storage- backed capacity and industrial demand for green electricity. Under the new framework, private renewable power producers may sell green electricity, available gen- eration capacity or storage-backed capacity directly to large consumers or bulk power consumers under negotiated contracts. Transmission and distribu- tion networks may be used through open access or wheeling arrangements. This is particularly relevant for export-oriented industries, including garments and textiles, which are increasingly required to demon- strate access to cleaner electricity as part of carbon- footprint and supply-chain requirements. From a commercial perspective, the important point is the change in risk allocation. In a conventional IPP model, the government or a government-owned util- ity usually assumes the offtake obligation, often sup- ported by sovereign or quasi-sovereign credit sup- port. Under a merchant model, the government’s direct offtake exposure is reduced. At the same time, the framework appears to recognise that projects will still need to be bankable. It contemplates pay- ment security, direct agreements, lender step-in and cure rights, termination payments, compensation for certain grid-related delivery failures and change-in- law protection. These features suggest that while the government is seeking to limit direct fiscal exposure,
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