Higher electricity tariffs should accelerate Bangladesh's clean energy transition

With domestic gas production declining rapidly, imported fossil fuels have accounted for an increasing share in Bangladesh’s energy system over the past four to five years, making energy significantly costlier. Frequent price shocks led by geopolitical factors since 2022 have further intensified the country’s vulnerability. Additionally, a gap of around BDT5/kilowatt-hour (USD0.041/kWh) between the cost of generating electricity and its selling price has prompted the government to increase power tariffs for different consumers, excluding those with very low levels of consumption, effective from June 2026.  

Industries and large energy consumers must prepare to insulate themselves from future energy price hikes. The presence of a whopping subsidy, despite the latest power tariff adjustment, may compel the government to opt for additional tariff hikes in the future. Against this backdrop, the best bet is to spearhead a transition to clean, low-cost energy to reap long-term economic benefits. 

Industries already facing pressure to remain competitive will try to minimise their energy costs and as inflationary pressures persist, so will households with higher energy consumption. Rooftop solar and energy-efficient technologies could help them achieve the goal and the good news is that the higher electricity tariffs provide an impetus for investments in such measures. Industries and large energy consumers, by enhancing their energy resilience, could also help improve the country’s energy security.  

Energy consumers bear the burden of high energy costs 

While cheap and affordable energy, supported by domestic gas, once helped industries operate at minimal costs, that era has come to an end in Bangladesh. Industries with a sanctioned load of up to five megawatts (MW) currently face steep rises in tariffs — from BDT9.75/kWh (USD0.079/kWh) to BDT11.56/kWh (USD0.094/kWh) for off-peak hours; and BDT13.62/kWh (USD0.11/kWh) to BDT16.06/kWh (USD0.13/kWh) for peak hours. Compared to December 2022, the tariff for industries within the mentioned sanctioned load increased by around 50%, mounting pressure on operational costs, and affecting their competitiveness.  

Households, excluding those with lower energy consumption and receiving the government’s protection, also find their electricity bills increased significantly. The ones with a monthly consumption beyond 75kWh have seen an increase in energy bills by at least 18.05%.  

Clean energy is more viable now 

With the levelised cost of energy (LCOE) from rooftop solar hovering at around BDT3.5–4/kWh (USD0.028–0.032/kWh), compared with the current daytime grid tariff of BDT11.56/kWh (USD0.094/kWh) for industries with a sanctioned load of up to 5MW, rooftop solar can likely help save at least BDT7.56/kWh (USD0.061/kWh). This means industries can now save BDT1.81/kWh (USD0.015/kWh) more compared to the previous daytime tariff of BDT9.75/kWh (USD0.079/kWh). Since they also pay 5% Value Added Tax (VAT) on bills against their grid-based electricity consumption, the savings per kWh will increase further.  

As industries encounter soaring energy costs and pursue environmental sustainability measures, they are likely to harness the increasing financial benefits that come from installing rooftop solar.  

Besides, the evening peak tariff of BDT16.06/kWh (USD0.13/kWh) will make rooftop solar with battery storage viable for industrial applications between 6PM and 9PM. This will prompt export-oriented industries to gradually take up battery energy storage systems alongside rooftop solar to meet their future goals for carbon reduction.   

The higher tariffs also reduce the payback period for investments in industrial energy efficiency measures, such as efficient motors (IE3 and IE4) and variable frequency drives. As motor and motor-driven systems consume around two-thirds of electrical energy in industries, high power tariffs could accelerate energy efficiency improvement in the sector.  

Likewise, households with higher electricity consumption will find investment in both rooftop solar and energy-efficient appliances more compelling.  

Consumers must prepare as energy costs may rise further 

Despite the latest round of electricity tariff hike, power sector subsidies will still reportedly reach BDT410 billion (USD3.33 billion). Unless the Bangladesh Power Development Board (BPDB) finds avenues to significantly reduce costs, the government will likely pass the cost on to consumers gradually to improve the BPDB’s financial health and ensure the power sector’s sustainability. 

While the government has not yet raised the price of gas despite the elevated cost of imported liquefied natural gas (LNG) following the West Asia crisis, a prolonged disruption in the global energy market may force it to consider a tariff adjustment.  

Consumers, be they households or industries, should therefore prepare to insulate themselves from the challenges of future energy price hikes, and assess the benefits of undertaking clean energy measures now to save more in an increasingly expensive future energy regime.   

Awareness is key 

Bangladesh has performed very well in its transition from energy-intensive bulbs to energy-efficient light emitting diode (LED) bulbs. Enhanced awareness about energy savings that outweigh high upfront costs motivated most industries, households, and businesses to replace T-8 and T-5 tubes, incandescent bulbs, and compact fluorescent lamps with LED bulbs and tubes. However, discussions with stakeholders reveal that similar awareness about energy-efficient fans is generally absent among people. Some are either not aware of the availability of brushless direct current (BLDC) fans, or do not understand the financial return on investment in BLDC fans.  

Likewise, resource-constrained small industries are not accustomed to conducting costly energy audits and have limited awareness about the available energy-efficiency opportunities that have a high return on investment.  

While rooftop solar offers immense potential, rural households, in particular, require enhanced awareness on the cost-benefit of this intervention for a rapid scale-up.  

The Sustainable and Renewable Energy Development Authority (SREDA), as the country’s nodal agency for clean energy drive, should organise national-level events to share knowledge and best practice cases to encourage learning and adoption of energy-efficient technologies across different sectors. 

While consumers may not have control over the energy tariffs fixed by the government, they can indeed control their bills, relying on clean energy technologies. 

This article was first published in The Daily Star.