Five Years from the Gas Cliff

Executive Summary. Bangladesh has five years to choose whether its post-2030 power system runs on imported LNG or on domestic renewables, and it is currently choosing LNG by default. Domestic gas production has fallen to roughly 2,900 MMCFD against system demand above 4,000 MMCFD, a 27 percent shortfall now filled by imports, and Petrobangla's central trajectory takes production below 2,000 MMCFD by around 2031. The 3.84 GW coal fleet built over 2017 to 2024 is functionally stranded: Payra (1,320 MW) is shut on coal-supply failure, Matarbari (1,200 MW design) is dispatching a fraction of nameplate, and only Rampal runs near capacity. The fiscal cost of this system is already large: BPDB paid a record Tk 720.7 billion to private power producers in FY25, up Tk 146.9 billion year-on-year, and posted an operating loss of Tk 442.91 billion. Solar is the only substitution path that scales fast enough to hit the draft 2030 target of about 6,145 MW of renewables, but at the current pace of roughly 0.5 GW per year the country needs to more than double its build rate. The window to make this choice by decision rather than by default closes around 2031.

The constraint on the grid is no longer headline capacity; it is dispatchable fuel. In April 2026, three weeks after the Matarbari ultra-supercritical coal plant began full-scale generation, it was dispatching only a fraction of its 1,200 MW nameplate. The binding limit was coal, not turbine or transmission. The 1,320 MW Payra plant down the coast had already shut on its own coal-supply failure, and Matarbari shares the same import-coal logistics chain and the same subsidy regime. Since May 2025 the Finance Ministry has suspended subsidy disbursements to Rampal and Payra. Importing coal at international prices with no subsidy to bridge the gap to the contracted tariff does not clear. Rampal continues to run; Payra does not; Matarbari runs well below design. The country built 3.84 gigawatts of coal capacity over 2017 to 2024, and on the marginal kilowatt in spring 2026 that capacity is functionally not there.

The gas side is the same story one fuel over. Domestic gas production at approximately 2,900 MMCFD is meeting a system demand above 4,000 MMCFD, and the gap is closed by LNG priced in Brent-linked international markets and throttled by re-gasification capacity that is mid-expansion but not yet doubled. When LNG cargoes arrive on schedule the gap narrows; when a cargo slips by days, gas pressure at industrial meters drops and captive generators throttle below rating. The country imported its way out of the immediate 2024 reserves crisis and is now importing its way into a permanent fuel-import dependency that the next five years will deepen unless the substitution decision is made now.

What was built and what is operating

Bangladesh's installed generation capacity as of May 2026 stands at approximately 28,919 megawatts on the grid-connected fleet, rising to about 32,332 megawatts when captive industrial generation is included. Summer 2026 peak demand is forecast at 18,000 to 18,500 megawatts, growing roughly seven percent annually with the projection that peak crosses 25,000 megawatts by 2030. On the surface, headroom of nine to ten gigawatts looks comfortable.

The headroom is illusory because the dispatchable subset of the fleet is much smaller than the installed number. Roughly 3.84 gigawatts of coal sits in three plants that should anchor the baseload (Payra 1,320, Rampal 1,320, Matarbari 1,200) and is currently delivering, on a generous reading, perhaps 1,600 megawatts on aggregate. The 2010 to 2015 quick-rental boom built several gigawatts of oil and furnace-oil capacity that is uneconomic to dispatch at current fuel prices and that runs only at extreme peak; the rest of the year these plants collect capacity charges without delivering electrons. The fiscal weight is concentrated here. BPDB paid a record Tk 720.7 billion to private power producers in FY25, the highest on record and Tk 146.9 billion more than the year before, and capacity charges alone ran to Tk 5.24 per unit in FY24-25, about 40 percent of the wholesale cost of supply. The board's operating loss reached Tk 442.91 billion in FY25, up from Tk 62.08 billion in FY2017-18. Capacity charges are projected to consume roughly 80 percent of the FY25-26 power-sector subsidy allocation of Tk 370 billion.

Gas-fired plants carry the bulk of baseload dispatch, and the supply side of that arithmetic is the binding constraint. Petrobangla's latest published reserves figure is approximately 8.46 trillion cubic feet remaining recoverable as of June 2023, against historical extraction of approximately 20.33 TCF from a discovered base of 28.79 TCF. Domestic gas production is around 2,900 MMCFD; system demand exceeds 4,000 MMCFD, a structural shortfall of roughly 27 percent that has to be filled from elsewhere. The 2024 offshore-block auction may produce commercial discoveries on a decade-plus horizon; it does nothing for the second-half-of-the-2020s shortfall.

The closing-the-gap path the country has taken is imported LNG. Petrobangla contracts will roughly double LNG imports from 3.5 to 7.5 million tonnes per year starting in early 2026 under newly signed agreements.

Re-gasification capacity is climbing from 1.0 to approximately 2.20 billion cubic feet per day by year-end. A land-based LNG terminal is planned for the 2031-32 horizon, and a new USD 1.4 billion gas pipeline is under development. The substitution from domestic gas to imported LNG is a real engineering programme; it is also a permanent foreign-exchange commitment denominated in dollars at oil-linked prices.

The renewable build that is starting to register

The renewable share of installed capacity has moved meaningfully off the 2021 floor. Solar reached 1,451 megawatts of installed capacity by May 2026, equal to roughly five percent of the installed fleet, of which 1,073.5 megawatts are grid-connected and 377.17 megawatts are off-grid. Total renewables including small hydro and wind stand at 1,559 megawatts. The Renewable Energy Policy 2025, in draft form, targets twenty percent of installed capacity from renewables by 2030 (approximately 6,145 megawatts) and thirty percent by 2041 (approximately 17,470 megawatts). The Bangladesh Power Development Board floated a 2.65-gigawatt utility-scale solar tender in March 2025; 523 megawatts of PPAs were signed in January 2026; a further 77.6 megawatts of tenders were launched in April 2026.

The deployment pace is the part that matters. To reach 6,145 megawatts of renewable capacity by 2030 from approximately 1,559 megawatts today, the country needs to add roughly 1.1 gigawatts of renewable capacity annually for the next four-and-a-half years. The current pace, judged by the 523-megawatt PPA signing and the new 77.6-megawatt tender, is closer to half a gigawatt annually. The gap widens every year the lower rate holds.

The constraints have been studied repeatedly. Grid evacuation capacity at the points where solar resource is best (the southern coastal belt, Greater Faridpur, the western drought-prone districts) is insufficient and is not being expanded fast enough by the Power Grid Company. The land-acquisition pipeline runs through five agencies in series rather than in parallel. The power-purchase agreement template has been negotiated rather than standardised, with bespoke dispatch, curtailment, and currency-conversion terms in every project. Vietnam added more than 16 gigawatts of solar between 2017 and 2020 via a standardised feed-in tariff with statutory land-allocation timelines; that is the operational benchmark the Bangladesh policy machinery has so far declined to copy.

What the new government has said it will do

The Tarique Rahman government's published 180-day priority plan identifies "uninterrupted electricity and gas supplies" as one of four priorities, alongside law and order, essential-goods prices, and railway connectivity. The plan includes a power-deal renegotiation initiative that began within weeks of the February 17 inauguration, focused on the IPP capacity-charge book and on the Adani Power contract for the 1,600 MW Godda plant in Jharkhand. Bangladesh cleared roughly USD 437 million in Adani arrears in mid-2025 and supply was fully restored; a National Review Committee then recommended in January 2026 renegotiating the most fiscally damaging provisions of the Godda PPA, including the coal-pricing formula.

The Power Division estimates the reform programme will save about Tk 14,000 crore in FY2025-26: roughly Tk 11,450 crore from revising the Adani coal-pricing formula and Tk 2,600 crore from reassessing the PPAs of government-owned plants. Treat that figure as a government projection, not a banked saving. The Adani share depends on a renegotiation the counterparty has not agreed to and which the committee has flagged for possible Singapore arbitration if it fails, so the realised number could be materially lower; the Tk 2,600 crore from state-owned plants is the more secure component.

The renegotiation track is necessary and overdue. Even on the government's own estimate, Tk 14,000 crore is roughly a fifth of the Tk 720.7 billion paid to private producers in FY25, and it touches only the price of the existing fleet. Cutting the bill sustainably to a dispatched-megawatt-hour basis would be larger still. But the renegotiation does not address the substitution question on the supply side. Reducing capacity payments saves fiscal cost on the existing fleet; it does not replace the gigawatts of dispatch the country will need in 2028, 2030, and beyond as gas depletes and demand grows.

The published plan also does not yet contain the items the substitution requires. There is no announced renewable-deployment target faster than the SREDA roadmap. There is no published programme to retire, rather than renegotiate, the worst-economics oil-IPP capacity. There is no commitment to a standardised solar PPA template with a statutory tender cadence. The energy file in the 180-day plan reads as cost-recovery on the existing system, not as substitution to the next one.

The five-year window, restated for the current decision

The substitution timetable is no longer abstract. The Petrobangla central trajectory for domestic gas takes production from current 2,900 MMCFD to a level meaningfully below 2,000 MMCFD by around 2031 as the mature fields deplete. The LNG doubling currently underway lifts contracted import capacity from 3.5 to 7.5 Mtpa by 2027 and on toward something approaching 10 Mtpa with the land-based terminal of the early 2030s. Re-gasification capacity is expanding accordingly. The infrastructure is being built to receive the imports.

The cost is the foreign-exchange commitment. At current Brent-linked contract pricing, 7.5 Mtpa of LNG runs to approximately USD 5 to 6 billion annually; doubling beyond that adds roughly USD 4 to 5 billion more. These commitments fall on the same balance-of-payments line as the remittance inflows that have stabilised the current account. They are senior to discretionary import compression, denominated in dollars, and indexed to oil. They form the structural floor of the trade deficit for the rest of the decade.

The alternative is the renewable-plus-storage build the country has not been willing to scale. Tender-cleared utility-scale solar PPAs in the recent Bangladesh round have priced below the variable cost alone of coal or LNG-fired generation at international prices. The 2.65-gigawatt March 2025 tender, the January 2026 523-megawatt PPA signings, and the April 2026 77.6-megawatt tender are operational evidence that the supply side responds when the demand is structured. The 180-day plan does not yet contain the demand structure that would scale this from sub-gigawatt to multi-gigawatt annual deployment.

The five years from May 2026 to mid-2031 are the window in which this choice is made by decision or by default. Made by decision, the substitution is renewable-led, the foreign-exchange exposure on energy import is bounded, and the post-RMG industrial diversification gets the kilowatt at the price it needs. Made by default, the substitution is LNG-led, the foreign-exchange exposure compounds, and the cost lands on the same fiscal envelope that has to fund the bank cleanup, the education investments, and the climate adaptation that the rest of this series describes.

What the next six months actually decide

Five energy-file decisions matter for the BNP government's next six months, each with an owner and a measurable signal.

First, on the existing coal fleet, choose. Either subsidise the coal supply to bring Payra back online and Matarbari to design output, or formally retire the plants and write off the liability through bondholders and the lender club. The current limbo is the worst option because capacity charges keep accruing while kilowatt-hours do not. Owner: Power Division. Signal: a published disposition decision for Payra and Matarbari by Q4 2026.

Second, on the IPP renegotiation, define the principle, not just the target. Capacity payments tied to dispatched megawatt-hours rather than nameplate availability; sunset clauses on contracts entered under the 2010 to 2015 quick-rental regime; conversion of the most stranded plants to storage-backup roles where their transmission interconnection retains value. Owner: BPDB. Signal: the realised, not projected, reduction in the FY26 capacity-charge line reported against the Tk 720.7 billion FY25 base.

Third, on solar deployment, set the cadence. A standardised PPA template, a calendar of quarterly tender rounds through 2030, a dedicated grid-evacuation capital programme synchronised to the renewable build, and statutory land-allocation timelines matching the Vietnamese template. Owner: SREDA and PGCB jointly. Signal: annual renewable additions rising from roughly 0.5 GW toward the 1.1 GW the 2030 target requires.

Fourth, on LNG, manage the foreign-exchange exposure. Long-term contracts at locked-in pricing rather than spot-market dependency, central-bank hedging where appropriate, and transparent reporting to parliament on the contracted LNG cost line in the budget. Owner: Petrobangla and Bangladesh Bank. Signal: the share of LNG volume on term contracts versus spot.

Fifth, on cross-border power, accelerate rather than negotiate. The Adani renegotiation should not slow the broader cross-border integration agenda with Nepal, Bhutan, and the eastern Indian states whose seasonal hydroelectric surplus matches Bangladesh's seasonal demand peak. Owner: Power Division. Signal: signed import or wheeling agreements added in FY26.

None of these five components is novel. All have been studied in successive five-year plans and IEEFA working papers. The constraint is the political-economy bandwidth of a government in its first year, with a 180-day plan that has rightly prioritised the visible price-and-supply problem and has not yet got to the substitution architecture underneath it.

What would change the conclusion

Two developments would weaken the case for moving now. If the 2024 offshore-block auction produced a large, fast-to-market gas discovery, the depletion curve would flatten and the substitution clock would slow. On current geology and lead times that is a 2030s prospect at the earliest, so it does not relieve the second-half-of-the-2020s shortfall. And if global LNG prices fell durably and Bangladesh locked in long-dated term contracts at those levels, the foreign-exchange floor would be lower, though still dollar-denominated and still senior to discretionary imports. Neither development is in hand. Absent them, the renewable-led path remains the only one that bounds the energy import bill while meeting demand growth, and every year at half a gigawatt of solar narrows the room to take it.

The next decade's energy stack

The substitution problem shows up at both ends of the system at once: an industrial captive generator throttling on low gas pressure, and a coal plant dispatching far below nameplate for lack of fuel. They are connected. The gas an industrial user cannot get at the pressure it needs is the same gas that should be flowing into the LNG cargo that substitutes for stranded coal, and the substitution decision determines whether both problems get smaller or larger by 2030.

The Tarique Rahman government has bought the country time on the cost side through the IPP renegotiation and the Adani re-pricing. It has not yet bought time on the supply-substitution side. The 180-day window in which the substitution architecture can be set is half-gone by August. The country has the analytical capacity to know exactly what to do. Whether it does it is what the next six months decide.

Sources

• Matarbari coal shortage and Payra shutdown: Dhaka Tribune, "Matarbari power plant faces coal shortage after Payra shutdown," dhakatribune.com/bangladesh/power-energy/407241/matarbari-power-plant-faces-coal-shortage-after
• Payra power station status: GEM Wiki, gem.wiki/Payra_power_station_(BCPCL))
• BPDB FY25 payments to private power producers (Tk 720.7bn, record, +Tk 146.9bn YoY) and capacity charge per unit (Tk 5.24 in FY24-25, ~40% of wholesale cost): Bonikbarta, "BPDB pays nearly 40% of per-unit electricity cost as capacity charges," en.bonikbarta.com/bangladesh/O6gmvvfwruEX9VrP
• BPDB operating loss FY25 (Tk 442.91bn = Tk 44,291cr; up from Tk 62.08bn in FY2017-18) and Power Division estimated reform savings (Tk 14,000cr in FY2025-26: Tk 11,450cr Adani coal-price revision + Tk 2,600cr state-owned plant PPAs): The Daily Observer, "Bangladesh to scrap costly 'capacity payments' in power deals," observerbd.com/news/531873
• Power-sector subsidy allocation FY25-26 (Tk 37,000cr / Tk 370bn): Centre for Policy Dialogue, Power and Energy Sector in the National Budget FY2025-26 (2025)
• Power sector reform priorities: IEEFA, "What Bangladesh's New Government Must Prioritise to Tackle Power and Energy Challenges," ieefa.org/resources/what-bangladeshs-new-government-must-prioritise-tackle-power-and-energy-challenges
• 2.65 GW solar tender (March 2025): PV Magazine, pv-magazine.com/2025/03/24/bangladesh-launches-2-65-gw-solar-tender/
• 523 MW solar PPAs signed (January 2026): PV Magazine, pv-magazine.com/2026/01/28/bangladesh-signs-ppas-for-523-mw-of-solar-capacity/
• LNG structural dependency trajectory: Inspira-BD, "The Making of a Crisis: How Bangladesh Became Structurally Dependent on LNG," inspira-bd.com/the-making-of-a-crisis-how-bangladesh-became-structurally-dependent-on-lng/
• Tarique Rahman 180-day plan: BDNews24, bdnews24.com/bangladesh/0f845886b611
• Adani Godda dues cleared (USD 437m, mid-2025) and supply restored: Power Line Magazine, "Bangladesh pays Adani Power's USD 437 million dues," powerline.net.in/2025/07/03/bangladesh-pays-adani-powers-usd-437-million-dues/
• Petrobangla gas production and reserves: Gas Outlook, "Bangladesh Gas Production Plummets to Decade Low," gasoutlook.com/analysis/bangladesh-gas-production-plummets-to-decade-low/