Shifting power mix exposes economy locked in cheap labour, stalled industrial dreams

Bangladesh’s national power mix has tilted sharply away from industry and agriculture over three decades, laying bare an economy still driven by cheap labour rather than productivity, innovation or reliable energy supply, an analysis of government data from 1994 to 2025 shows.

Agricultural power use now makes up a smaller share of total annual electricity sales than ever, even though its absolute consumption has increased over the decades.

Considered the lifeline of Bangladesh’s economy, the two sectors’ declining share in the national power mix is revealing, suggesting less productive use of electricity and gaps in planning and execution, energy experts said.

They advised revisiting the national power mix to detect shortcomings and set future priorities, which is essential -- yet successive governments have failed or refused to do so.

“One thing is clear: heavy industrialisation was not supposed to happen in Bangladesh. And this is unlikely to happen anytime soon,” said Khondaker Golam Moazzem, research director, Centre for Policy Dialogue.

The first obstacle to heavy industrialisation, energy experts said, was the mindset of relying overwhelmingly on cheap labour. Industry owners did not innovate and diversify or try to increase workers’ skills either.

A constant shortage of energy, regulatory unpredictability and a lack of infrastructure also stood in the way of heavy industrialisation, energy experts noted.

Still, without taking the odds into account, Bangladesh followed an ambitious economic target and tried to match it with a power and energy plan that proved disastrous, energy experts said.

Some power and energy decisions contributed to ruining the chance of sustained progress that Bangladesh could have achieved by focusing on a less energy-intensive industry, energy experts said.

With a plan to achieve robust economic development by 2041, the past government adopted power and energy plans, overwhelmingly import-dependent, eventually running the foreign exchange reserve dry in a few years, energy experts said.

Excessive installed power generation capacity has become a big burden, generating massive capacity charges for power plants that produce no electricity. Power overcapacity cost Bangladesh Tk 1 trillion during the past Awami League regime. The power sector's annual debt obligation rose to about $2 billion.

Moazzem projected that Bangladesh’s power demand will reach 29GW by 2040, meaning an installed capacity of about 35GW should be sufficient. The country now has 28.35GW of installed capacity, not counting 2,800MW of captive generation.

“Captive power prevented electricity demand from growing in the industry sector,” said Hasan Mehedi, member secretary, Bangladesh Working Group on Ecology and Development.

Captive power refers to the industry’s own power production capacity. Using subsidised energy, industries generate their own power, as they do not receive a reliable supply of electricity through the national grid.

The national grid is still unable to supply reliable electricity, with frequent power outages happening around the year, even in winter, when overcapacity reaches 60 percent or more.

Despite spending over $30 billion in power sector alone and building scores of expensive power plants, Bangladesh failed to ensure a smooth power supply even to its readymade garment factories, which are not considered energy-intensive.

The readymade garment sector employs about four million people. The agriculture sector, on the other hand, accounts for employing about 40 percent of Bangladeshis.

Our World in Data, an online provider of data and statistics, puts Bangladesh among countries, such as conflict-torn Tunisia and Syria, with below-average energy consumption.

“Bangladesh is surrounded by crises. The economy is struggling, energy supply is weak, and foreign currency reserves are far from adequate,” said energy expert Ijaz Hossain.

“Anyone can see the problems. We don’t need complex analysis. People simply don’t have enough jobs,” he said.

LESS PRODUCTIVE USE OF ELECTRICITY

Domestic power consumption has steadily grown over the years.

Domestic power is subsidised, implying power is sold to houses at prices lower than its cost of production.

Part of the growth in domestic power consumption was driven by the campaign of 100 percent electrification by the past AL government. The target was achieved in 2022, stalling renewable energy expansion. In fact, in some remote areas, the national grid supply replaced power from solar panels. The national grid gets about 98 percent of its power from fossil fuel-based power plants.

The other two major sectors where power sales increased included EV charging and commercial. Bangladesh failed to exploit the opportunity to benefit from these areas because of a lack of policy to regulate EV charging.

Power theft is widespread in both EV charging stations and the commercial sector.

POWER CONSUMPTION IN NUMBERS

In 2025, the PDB data showed that 26.79 percent of the overall electricity produced -- 90,939.40 units -- was sold to the industrial sector, down from 45.72 percent sold in 1994 out of 6,148 units produced. Last year, industrial power consumption accounted for 26.94 percent of the overall power consumption of 86,255 units.

The PDB has sector-wise consumption data available from 1994.

In 2025, the agriculture sector accounted for 2.22 percent of power sold by the PDB. In 1994, agricultural power consumption share stood at 4.37 percent. In 2023, the agriculture sector accounted for 2.53 percent of all power sales.

The use of electricity in the agricultural sector greatly varied year to year, fluctuating between 6 percent and below 3 percent. The poor power consumption in the sector is indicative of its mechanisation initiatives yielding no result, energy experts said.

Domestic power consumption increased by about 20 percentage points in 2025 to 57.13 percent from 37.66 percent consumed by households in 1994, the PDB data showed. In 2024, households accounted for 56.53 percent of all power sales.

The commercial power sector made up 9 percent of the power mix in 1994, which increased to 10.83 percent in 2025.

EV charging emerged as a potential new power consumer for the first time in 2022, accounting for only 0.65 percent of the power mix. In 2025, EV charging’s share in the power mix exceeded 1 percent.

“Industrial reluctance to source power from the grid is a major concern,” said Shafiqul Alam, lead energy analyst, Institute for Energy Economics and Financial Analysis.

Industry is the power sector’s highest-paying customer, and energy experts warn that the PDB will struggle to absorb its rising production costs if it fails to attract its most valuable clients.

“Reliable power supply remains a distant prospect. Industry cannot afford to operate without it,” he said.