With domestic gas production declining rapidly, imported fossil fuels have accounted for an increasing share in Bangladesh’s energy system over the 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 Tk 5/kilowatt-hour ($0.041/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, and against that backdrop, the best bet is to spearhead a transition to clean, low-cost energy so as 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 their goal, and the good news is that higher electricity tariffs already 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.
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 Tk 9.75/kWh ($0.079/kWh) to Tk 11.56/kWh ($0.094/kWh) for off-peak hours; and Tk 13.62/kWh ($0.11/kWh) to Tk 16.06/kWh ($0.13/kWh) for peak hours. Compared to December 2022, the tariff for industries within the mentioned sanctioned load increased by around 50 percent, mounting pressure on operational costs and affecting their competitiveness.
Meanwhile, 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 percent.
Clean energy more viable now
With the levelised cost of energy (LCOE) from rooftop solar hovering at around Tk 3.5-4/kWh ($0.028-0.032/kWh), compared with the current daytime grid tariff of Tk 11.56/kWh ($0.094/kWh) for industries with a sanctioned load of up to 5MW, rooftop solar can likely help save at least Tk 7.56/kWh ($0.061/kWh). This means industries can now save Tk 1.81/kWh ($0.015/kWh) more compared to the previous daytime tariff of Tk 9.75/kWh ($0.079/kWh). Since they also pay 5 percent 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 Tk 16.06/kWh ($0.13/kWh) will make rooftop solar with battery storage viable for industrial applications between 6 PM and 9 PM. 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.
Despite the latest round of electricity tariff hikes announced in June, power sector subsidies will still reportedly reach Tk 410 billion ($3.33 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 also 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.
Bangladesh, it should be noted, has performed 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 such 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 of the cost-benefit of this intervention for a rapid scale-up.
Given this reality, the Sustainable and Renewable Energy Development Authority (SREDA), as the country’s nodal agency for the clean energy drive, should organise national-level campaigns to share knowledge and best practice cases to encourage learning and adoption of energy-efficient technologies across different sectors. While ordinary consumers may not have control over the energy tariffs fixed by the government, they can indeed control their bills by relying on clean energy technologies.
Shafiqul Alam is lead energy analyst for Bangladesh at the Institute for Energy Economics and Financial Analysis (IEEFA).
Views expressed in this article are the author's own.
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