Bangladesh’s looming energy crisis and the choices ahead

Mashref Hoque Bangladesh is facing an acute energy challenge intensified by Middle East geopolitical tensions. Rapid industrialisation and economic growth have driven electricity demand to unprecedented levels, with peak demand reaching around 18,000 MW, and daily average demand ranging between 11,000 and 15,000 MW. However, Bangladesh's power sector has become critically vulnerable to external shocks. As of 2024, fossil fuels accounted for 98% of electricity generation, with natural gas at 67%, coal at 20%, and oil at 10.73%. The ongoing Middle East conflict has severely disrupted the energy supply chain. Qatar, which provides 75% of Bangladesh's LNG requirements, is experiencing significant production cuts due to the war. Consequently, Bangladesh's annual fossil fuel import bill is projected to surge by $4.8 billion (a 40% increase from 2025 levels) due to Middle East tensions. Meanwhile, renewable energy remains underdeveloped, constituting only 1.3% to 5.6% of installed capacity, leaving the country heavily dependent on imported fossil fuels. In this context, Energy Efficiency (EE) is not only cost-saving but also a sustainable solution. Efficient energy use reduces pressure on imported fuels, stabilises electricity demand, lowers environmental impact, and strengthens economic resilience. Recognising this, the government has adopted the "Energy Efficiency and Conservation Master Plan," which aims to reduce national energy intensity by 20% by 2030 compared to 2013 levels. However, policy alone cannot achieve these targets. Implementing energy efficiency in industrial, commercial, and public sectors requires significant financial resources. Limited government budgets and bureaucratic complexity make private-sector participation essential. Hence, Public-Private Partnerships (PPPs) provide an effective solution, combining government oversight and regulatory support with private financing, technology, and operational expertise. Bangladesh has huge opportunities to save energy across all sectors. Our industries consume nearly half of the country's energy, and much of it is wasted due to outdated machinery and inefficient operations. By upgrading equipment and improving management, factories could cut their energy use by about 21%, which is almost 10% of the nation's total consumption. In homes and businesses, switching to energy-efficient lighting, inverter fans, and modern air conditioners could reduce electricity bills by 30–70%, saving families and companies alike money. Even our public buildings, such as government offices, schools, hospitals, and municipalities, can make a big difference. Retrofitting Public Works Department (PWD) buildings alone could cut electricity use by 26%, saving 1,150–1,550 MWh a year, while schools and colleges that adopt LED lighting and efficient air conditioning could also reduce consumption by 30–70%. Despite the opportunities, challenges remain. Financial constraints, outdated infrastructure, regulatory gaps, and low awareness hinder progress. Life-cycle cost assessments are rarely considered in public procurement, which discourages long-term investments. Many government buildings are old and not equipped to accommodate modern EE technologies. Therefore, PPP models can address these challenges. PPP Contract structures such as Shared Savings, Guaranteed Savings, Super ESCO, and First-Out Contracts effectively distribute risk, attract investment, and improve operational efficiency. The Super ESCO approach consolidates projects across multiple public buildings, enabling private ESCOs to implement performance-based financing initiatives while mitigating risk exposure. Domestic green financing policies and blended finance strategies further unlock potential. Instruments such as the Green Transformation Fund (GTF) and Green Refinancing Scheme from Bangladesh Bank provide concessional loans to industries, making EE projects bankable and reducing investment risk. Additionally, local and international development finance institutions and funds, such as IDCOL, IFC, the Green Climate Fund (GCF), and leading local banks, can provide innovative financing solutions to implement such projects. International best experience further reinforces the viability and justification of such approaches. PPP-based EE initiatives in India's Bhubaneswar and Jaipur municipalities, as well as public building retrofits in China, demonstrate that such models can deliver financial savings, reduce energy consumption, and generate measurable environmental benefits. To realise the full potential of energy efficiency, Bangladesh needs clear policy frameworks, ESCO accreditation, performance-based budgeting, and robust monitoring systems. Strong measurement and verification mechanisms are crucial for validating energy savings, building investor confidence, and ensuring project effectiveness. In conclusion, investing in energy efficiency is not just a cost-saving measure. It is a strategic necessity for Bangladesh's energy security, economic stability, and environmental sustainability. With strong government oversight and the financing and expertise of the private sector, PPP can play a vital role in helping the country achieve its 2030 energy efficiency targets while ensuring long-term energy security. Writer: Mashref Hoque is a project finance specialist in renewable energy, energy efficiency, and PPP. He can be reached at mashrefm888@gmail.com