Bangladesh Defense
Saif
Senior Member
- Jan 24, 2024
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Power efficiency before expansion
THE power sector presents a difficult paradox. Over 15 years, Bangladesh has significantly expanded its electricity generation capacity, reaching 27,414 megawatts by June 2025 through billions of takas in public spending. On paper, the figures suggest progress and ambition. Yet, beneath the...
www.newagebd.net
Power efficiency before expansion
Rooppur Nuclear Power Plant. | Wikipedia
THE power sector presents a difficult paradox. Over 15 years, Bangladesh has significantly expanded its electricity generation capacity, reaching 27,414 megawatts by June 2025 through billions of takas in public spending. On paper, the figures suggest progress and ambition. Yet, beneath the impressive statistics lies a deeper institutional and structural failure that policymakers can no longer afford to ignore.
The crisis is not simply about how much electricity Bangladesh can generate, but about how much electricity disappears before it even reaches consumers. The Bangladesh Energy Regulatory Commission has set a benchmark of 2 per cent for system loss, yet actual losses remain far above that limit. According to the Bangladesh Power Development Board, the overall transmission and distribution system loss stood at 10.13 per cent in 2024-25, while distribution loss alone reached 6.68 per cent. These are not minor technical irregularities. They reflect a persistent governance failure that continues to drain public resources while weakening the reliability of the power system itself.
Overcapacity, underpayment
THE financial implications of this crisis are becoming increasingly difficult to justify. Bangladesh’s power sector is currently operating with nearly 40per cent overcapacity, far above the internationally accepted reserve margin of around 8–10per cent. In 2024–25, peak generation reached only 16,603MW against an installed capacity of 27,414MW, leaving almost 11,000MW sitting unused.
Yet, instead of gradually phasing out idle quick rental power plants, successive governments continued signing contracts for new plants, including additional rental-based generation. The result has been mounting financial pressure on the Bangladesh Power Development Board. The board’s net loss rose to Tk 17,021 crore in the 2024–25 financial year, almost double the loss recorded the previous year. Much of this burden comes from capacity charge payments made to private producers even when plants remain idle. Public money is being spent not only on electricity generation, but also on maintaining unused infrastructure that contributes little to solving the country’s actual energy problems.
At the same time, the country’s distribution infrastructure remains severely outdated. Ageing transformers, inadequate transmission networks, faulty metering systems, and widespread illegal connections continue to weaken grid stability. In practical terms, Bangladesh is paying twice for electricity: once to produce it, and again through losses that generate no economic return.
Economic, social consequences
THE consequences of energy inefficiency extend well beyond the power sector itself. International climate finance institutions such as the World Bank, the Asian Development Bank and the Green Climate Fund are increasingly linking concessional financing to measurable improvements in energy transition and efficiency. Bangladesh’s inability to reduce system loss weakens its credibility as a reliable borrower at a time when global competition for green financing is intensifying. Other developing economies are already improving grid efficiency and strengthening accountability mechanisms to secure long-term climate investment.
The economic impact is also visible domestically. Despite surplus installed capacity, industries and households continue to face recurring load-shedding and supply disruptions. For manufacturers, unreliable electricity raises production costs and undermines investor confidence in Bangladesh’s industrial sector. For ordinary citizens, especially lower-income households, the burden appears in the form of rising tariffs and declining service quality. The Tk 17,021 crore loss accumulated by the power board does not disappear in isolation; ultimately, the public bears the cost.
System loss also sustains a broader culture of institutional weakness. Illegal connections thrive where enforcement is weak, billing discipline collapses where accountability is absent, and corruption becomes embedded within distribution networks when theft is tolerated for years without consequence. In that sense, the crisis is not merely technical or financial. It reflects the gradual erosion of governance standards within the energy sector.
Arithmetic of efficiency
THE economic logic behind reform is straightforward. Reducing system loss is significantly cheaper than continuously expanding generation capacity. Even a 1 per cent nationwide reduction in transmission and distribution loss can create the equivalent practical benefit of adding hundreds of megawatts of usable electricity to the grid.
Bangladesh’s peak electricity demand in 2025 was approximately 17,000MW. If system loss could be reduced from 10.13 per cent to the 2 per cent benchmark set by the Bangladesh Energy Regulatory Commission, the amount of electricity saved would be enough to serve millions of additional households without constructing a single new power plant.
This is where investment priorities require urgent reconsideration. Grid modernisation through smart metering, transformer replacement, underground cabling in urban areas, and automated distribution management systems can deliver measurable benefits within a relatively short time. According to the USAID South Asia Regional Initiative for Energy Integration, investment in reducing system loss can produce five to eight times more usable electricity per unit cost compared to equivalent investment in new generation capacity.
Yet Bangladesh’s policy focus continues to revolve around adding the next megawatt of generation while the system quietly loses vast amounts of electricity every day through inefficiency, theft and weak infrastructure.
Urgent reforms
BANGLADESH cannot stabilise its power sector simply by building more plants. The immediate priority must shift towards governance reform, infrastructure efficiency, and accountability. Several policy interventions deserve urgent attention.
First, the Bangladesh Energy Regulatory Commission must move beyond merely setting system loss thresholds and begin enforcing them rigorously. Distribution utilities that consistently exceed the benchmark should face automatic penalties, while quarterly public reporting should become mandatory. Transparency is essential if accountability is to mean anything in practice.
Second, the government should establish a dedicated enforcement unit under the power, energy and mineral resources ministry with legal authority to investigate electricity and gas theft. Mobile court operations, led by trained officers working under energy law, could target large-scale illegal connections across distribution zones. Enforcement alone will not solve the problem, but when theft carries real legal and financial consequences, the incentives sustaining illegal networks begin to weaken.
Third, Bangladesh should expand prepaid and smart metering systems beyond Dhaka into secondary towns and rural growth centres through co-financing arrangements with international lenders. Smart metering not only reduces theft but also improves billing efficiency and monitoring capacity.
Fourth, the government should impose a temporary suspension on new capacity contracts until plant utilisation rates improve substantially. With existing plants operating well below capacity, further expansion should require parliamentary review and a clear demonstration that demand cannot be met through efficiency improvements alone.
Finally, capacity charge agreements with private producers require revision. Payments should depend not simply on idle availability, but also on operational performance, efficiency standards, and maintenance reliability. Otherwise, the state will continue rewarding underutilised infrastructure at enormous public expense.
Bangladesh does not fundamentally suffer from a power generation shortage. It suffers from a governance and infrastructure crisis within the energy sector. Continuing to spend billions on new power plants while system losses remain alarmingly high represents a poor use of public resources.
The country cannot keep pouring water into a leaking bucket and call it progress. The lights will stay on not because Bangladesh builds endlessly at the top, but because it finally repairs what is broken underneath.
For policymakers, the real question is no longer ambition versus caution. It is whether development is producing genuine efficiency and public benefit, or merely the appearance of progress through increasingly unsustainable spending.
Abrar Azizul Hasan Buhiyan is an undergraduate teaching assistant at the economics department in the North South University.
Rooppur Nuclear Power Plant. | Wikipedia
THE power sector presents a difficult paradox. Over 15 years, Bangladesh has significantly expanded its electricity generation capacity, reaching 27,414 megawatts by June 2025 through billions of takas in public spending. On paper, the figures suggest progress and ambition. Yet, beneath the impressive statistics lies a deeper institutional and structural failure that policymakers can no longer afford to ignore.
The crisis is not simply about how much electricity Bangladesh can generate, but about how much electricity disappears before it even reaches consumers. The Bangladesh Energy Regulatory Commission has set a benchmark of 2 per cent for system loss, yet actual losses remain far above that limit. According to the Bangladesh Power Development Board, the overall transmission and distribution system loss stood at 10.13 per cent in 2024-25, while distribution loss alone reached 6.68 per cent. These are not minor technical irregularities. They reflect a persistent governance failure that continues to drain public resources while weakening the reliability of the power system itself.
Overcapacity, underpayment
THE financial implications of this crisis are becoming increasingly difficult to justify. Bangladesh’s power sector is currently operating with nearly 40per cent overcapacity, far above the internationally accepted reserve margin of around 8–10per cent. In 2024–25, peak generation reached only 16,603MW against an installed capacity of 27,414MW, leaving almost 11,000MW sitting unused.
Yet, instead of gradually phasing out idle quick rental power plants, successive governments continued signing contracts for new plants, including additional rental-based generation. The result has been mounting financial pressure on the Bangladesh Power Development Board. The board’s net loss rose to Tk 17,021 crore in the 2024–25 financial year, almost double the loss recorded the previous year. Much of this burden comes from capacity charge payments made to private producers even when plants remain idle. Public money is being spent not only on electricity generation, but also on maintaining unused infrastructure that contributes little to solving the country’s actual energy problems.
At the same time, the country’s distribution infrastructure remains severely outdated. Ageing transformers, inadequate transmission networks, faulty metering systems, and widespread illegal connections continue to weaken grid stability. In practical terms, Bangladesh is paying twice for electricity: once to produce it, and again through losses that generate no economic return.
Economic, social consequences
THE consequences of energy inefficiency extend well beyond the power sector itself. International climate finance institutions such as the World Bank, the Asian Development Bank and the Green Climate Fund are increasingly linking concessional financing to measurable improvements in energy transition and efficiency. Bangladesh’s inability to reduce system loss weakens its credibility as a reliable borrower at a time when global competition for green financing is intensifying. Other developing economies are already improving grid efficiency and strengthening accountability mechanisms to secure long-term climate investment.
The economic impact is also visible domestically. Despite surplus installed capacity, industries and households continue to face recurring load-shedding and supply disruptions. For manufacturers, unreliable electricity raises production costs and undermines investor confidence in Bangladesh’s industrial sector. For ordinary citizens, especially lower-income households, the burden appears in the form of rising tariffs and declining service quality. The Tk 17,021 crore loss accumulated by the power board does not disappear in isolation; ultimately, the public bears the cost.
System loss also sustains a broader culture of institutional weakness. Illegal connections thrive where enforcement is weak, billing discipline collapses where accountability is absent, and corruption becomes embedded within distribution networks when theft is tolerated for years without consequence. In that sense, the crisis is not merely technical or financial. It reflects the gradual erosion of governance standards within the energy sector.
Arithmetic of efficiency
THE economic logic behind reform is straightforward. Reducing system loss is significantly cheaper than continuously expanding generation capacity. Even a 1 per cent nationwide reduction in transmission and distribution loss can create the equivalent practical benefit of adding hundreds of megawatts of usable electricity to the grid.
Bangladesh’s peak electricity demand in 2025 was approximately 17,000MW. If system loss could be reduced from 10.13 per cent to the 2 per cent benchmark set by the Bangladesh Energy Regulatory Commission, the amount of electricity saved would be enough to serve millions of additional households without constructing a single new power plant.
This is where investment priorities require urgent reconsideration. Grid modernisation through smart metering, transformer replacement, underground cabling in urban areas, and automated distribution management systems can deliver measurable benefits within a relatively short time. According to the USAID South Asia Regional Initiative for Energy Integration, investment in reducing system loss can produce five to eight times more usable electricity per unit cost compared to equivalent investment in new generation capacity.
Yet Bangladesh’s policy focus continues to revolve around adding the next megawatt of generation while the system quietly loses vast amounts of electricity every day through inefficiency, theft and weak infrastructure.
Urgent reforms
BANGLADESH cannot stabilise its power sector simply by building more plants. The immediate priority must shift towards governance reform, infrastructure efficiency, and accountability. Several policy interventions deserve urgent attention.
First, the Bangladesh Energy Regulatory Commission must move beyond merely setting system loss thresholds and begin enforcing them rigorously. Distribution utilities that consistently exceed the benchmark should face automatic penalties, while quarterly public reporting should become mandatory. Transparency is essential if accountability is to mean anything in practice.
Second, the government should establish a dedicated enforcement unit under the power, energy and mineral resources ministry with legal authority to investigate electricity and gas theft. Mobile court operations, led by trained officers working under energy law, could target large-scale illegal connections across distribution zones. Enforcement alone will not solve the problem, but when theft carries real legal and financial consequences, the incentives sustaining illegal networks begin to weaken.
Third, Bangladesh should expand prepaid and smart metering systems beyond Dhaka into secondary towns and rural growth centres through co-financing arrangements with international lenders. Smart metering not only reduces theft but also improves billing efficiency and monitoring capacity.
Fourth, the government should impose a temporary suspension on new capacity contracts until plant utilisation rates improve substantially. With existing plants operating well below capacity, further expansion should require parliamentary review and a clear demonstration that demand cannot be met through efficiency improvements alone.
Finally, capacity charge agreements with private producers require revision. Payments should depend not simply on idle availability, but also on operational performance, efficiency standards, and maintenance reliability. Otherwise, the state will continue rewarding underutilised infrastructure at enormous public expense.
Bangladesh does not fundamentally suffer from a power generation shortage. It suffers from a governance and infrastructure crisis within the energy sector. Continuing to spend billions on new power plants while system losses remain alarmingly high represents a poor use of public resources.
The country cannot keep pouring water into a leaking bucket and call it progress. The lights will stay on not because Bangladesh builds endlessly at the top, but because it finally repairs what is broken underneath.
For policymakers, the real question is no longer ambition versus caution. It is whether development is producing genuine efficiency and public benefit, or merely the appearance of progress through increasingly unsustainable spending.
Abrar Azizul Hasan Buhiyan is an undergraduate teaching assistant at the economics department in the North South University.
