MM Rahmatullah: Bangladesh's growing dependence on imported fossil fuels has sharply increased electricity generation costs and intensified pressure on the country's economy, according to a new report that warns the existing energy strategy is becoming increasingly unsustainable.The report, Fostering Bangladesh's Energy Transition, published by the Institute for Energy Economics and Financial Analysis (IEEFA), says Bangladesh's reliance on imported primary energy has risen from 47.7 percent to 62.5 percent over the past four years. During the same period, the average cost of generating electricity increased by 83 percent, reflecting the country's greater exposure to volatile international fuel markets.The findings suggest that Bangladesh's power sector is facing mounting financial challenges as imports of coal, oil and liquefied natural gas (LNG) continue to rise while domestic gas production declines. The report argues that the country can no longer rely on imported fossil fuels to meet its long-term energy needs without placing a heavy burden on public finances.According to the study, renewable energy, including hydropower, contributes only 2.3 percent of Bangladesh's grid electricity generation, far below the global average of nearly 34 percent. The report says expanding domestic renewable energy would reduce dependence on expensive fuel imports while improving energy security and shielding the country from international price shocks.Shafiqul Alam, Leading Energy Analyst at IEEFA, said Bangladesh's energy challenges could not be solved simply by adding more fossil fuel-based power plants. Instead, he said, the country should focus on rapidly scaling up renewable energy and avoiding unnecessary additions to conventional generation capacity.While the depreciation of the taka and higher global fuel prices after FY2020-21 contributed to rising electricity costs, the report says another major factor has been the large capacity payments made to private power plants that remain underutilised.During FY2024-25, private oil-fired plants received average capacity payments of around Tk9.5 per kilowatt-hour, while coal-fired plants received about Tk5.9 per kilowatt-hour. These payments, made regardless of actual electricity production, have significantly increased the overall cost of power generation.The report also highlights poor utilisation of generating stations. Power plants operating at less than 25 percent capacity produced electricity at an average cost of Tk16.85 per kilowatt-hour, compared with around Tk6 for plants operating at nearly 75 percent capacity. Analysts say improving plant efficiency could substantially reduce overall generation costs.Bangladesh's dependence on oil-based electricity also remains unusually high by regional standards. Oil-fired generation accounts for around 10.7 percent of the country's electricity mix, compared with only 0.02 percent in India, 0.6 percent in Pakistan and 0.06 percent in Vietnam.The report further warns that declining domestic gas reserves are forcing Bangladesh to import increasing quantities of LNG. Based on current import levels and global LNG prices of around US$20 per million British thermal units, the country may require subsidies of nearly US$1.07 billion between April and June 2026 alone to support LNG imports for power generation. The estimate does not include regasification or terminal costs.According to the report, Bangladesh Power Development Board recorded a revenue shortfall of approximately Tk55,660 crore during FY2024-25, illustrating the growing financial strain on the power sector.To reduce future dependence on imported fuels, IEEFA recommends strengthening regional electricity trade under the Bangladesh-Bhutan-India-Nepal framework. It estimates that importing about 6,000 megawatts of hydropower from Nepal and Bhutan during the high-demand months after 2030 could reduce Bangladesh's annual gas consumption by as much as 257 billion cubic feet.The report also identifies rooftop solar as a cost-effective solution. It estimates that every 100 megawatts of rooftop solar capacity could generate savings worth more than 30 times the value of existing import duties by reducing furnace oil consumption over the lifetime of the projects. It therefore recommends waiving import duties on distributed renewable energy equipment and encouraging corporate renewable energy investments.Dr Iqbal Hassan of Bangladesh University of Engineering and Technology said Bangladesh must move beyond short-term fossil fuel solutions and focus on reducing system losses, improving efficiency, expanding renewable energy and strengthening regional power cooperation. The report concludes that unless Bangladesh accelerates structural reforms and implements its renewable energy commitments more effectively, rising dependence on imported fossil fuels will continue to undermine both the country's energy security and its broader economic stability.