Bangladesh's Energy Transition: Strategic Opportunities in Cross-Border Power Imports and Domestic Fuel Demand

Bangladesh's energy transition is at a critical juncture, shaped by a dual imperative: addressing surging electricity demand and navigating the complexities of domestic fuel shortages. As the country's population and economy grow, so does its reliance on cross-border power imports and fossil fuel imports. Yet, these dependencies also present strategic opportunities for investors in energy infrastructure and commodity markets.

Cross-Border Power Imports: A Pillar of Energy Security

Bangladesh's energy deficit has driven it to diversify its power sources through regional cooperation. Currently, the country imports 2,656 MW of electricity from India, a lifeline for its gridEnhancing energy security in Bangladesh through small...^[1]. A more recent development—a tripartite agreement with Nepal and India—has added 40 MW of hydropower from Nepal, delivered via India's grid from June to November 2025Bangladesh in 2025: Political and Economic Landscape...^[2]. This initiative, while modest in scale, signals a broader ambition: to leverage South Asia's resource complementarities. Nepal's hydropower potential, India's transmission infrastructure, and Bangladesh's demand create a symbiotic network that could expand further.

The Katihar-Parbotipur–Bornagar 765 kV transmission line is central to this vision. This high-capacity corridor, initially operating at 400 kV, is designed to facilitate larger volumes of cross-border electricity, including potential imports from Bhutan's 1,125 MW Dorjilung hydroelectric projectBangladesh reviews its energy projects after the Indian U-...^[3]. India has pledged financial assistance for the project, which is slated for completion by 2028Bangladesh likely to decline India’s proposal for high-voltage power corridor^[4]. However, Bangladesh's cautious approach—driven by concerns over debt sustainability and grid synchronization—highlights the political and economic risks inherent in such venturesBangladesh likely to decline India’s proposal for high-voltage power corridor^[4].

The European Union's support for regional energy integration, through initiatives like the ARISE+ programme, further underscores the geopolitical significance of these projectsASEAN Regional Integration Support by the EU (ARISE+)^[5]. By fostering connectivity, the EU aims to reduce South Asia's reliance on volatile global energy markets, a move that could stabilize commodity exposure for Bangladesh.

Domestic Fuel Demand: A Mixed Bag of Challenges and Opportunities

Bangladesh's domestic energy mix remains heavily tilted toward fossil fuels. Natural gas accounts for 46% of primary energy consumption, followed by oil (22%) and coal (9%)Bangladesh Energy Information^[6]. However, declining domestic gas production—from 28 bcm in 2017 to 27 bcm in 2023—has forced the country to import 7.5 Mt of coal in 2023 aloneBangladesh Energy Information^[6]. Oil imports have quadrupled since 2010, reaching 12.5 Mt in 2023, as domestic production remains negligible at 0.3 MtBangladesh Energy Information^[6].

The government's Renewable Energy Policy 2025 aims to counter this trend, targeting 20% renewable energy by 2030 and 30% by 2040Power Generation, Transmission & Distribution 2025^[7]. While progress is slow—renewables accounted for just 5.6% of energy in 2025—the policy includes incentives like tax exemptions and feed-in tariffs to attract investmentPower Generation, Transmission & Distribution 2025^[7]. A 55-plant solar tender and a rooftop solar program are early steps, but political instability and regulatory shifts, such as the cancellation of Letters of Intent for power projects, have dampened investor confidencePower Generation, Transmission & Distribution 2025^[7].

Infrastructure and Commodity Exposure: A High-Stakes Game

The interplay between cross-border infrastructure and domestic fuel demand creates a complex landscape for investors. The Dhaka and Western Zone Transmission Grid Expansion Project, supported by the Asian Development Bank, aims to address transmission bottlenecks and enhance grid reliabilityDhaka and Western Zone Transmission Grid Expansion...^[8]. Such projects are critical for integrating renewable energy and managing peak demand, particularly during summer months when imports from Nepal and India become vitalBangladesh in 2025: Political and Economic Landscape...^[2].

However, Bangladesh's energy strategy is not without risks. Regulatory changes in India—such as revised tariffs for cross-border power—have forced companies like Summit Group to reassess their investmentsBangladesh reviews its energy projects after the Indian U-...^[3]. Similarly, Bangladesh's reluctance to take on new debt for the 765 kV line reflects its broader fiscal constraintsBangladesh likely to decline India’s proposal for high-voltage power corridor^[4]. For investors, these dynamics highlight the need for flexibility and a long-term perspective.

Conclusion: A Strategic Crossroads

Bangladesh's energy transition is a tale of two strategies: leveraging regional cooperation to secure power and grappling with domestic fuel shortages. Cross-border infrastructure projects like the Katihar-Parbotipur–Bornagar line and Nepal-India-Bangladesh corridors offer transformative potential, but their success hinges on political stability, regulatory clarity, and financial discipline. Meanwhile, the push for renewables, though ambitious, requires sustained investment and policy consistency.

For investors, the opportunities are clear. Bangladesh's energy infrastructure is poised for expansion, and its commodity exposure—particularly in natural gas and coal—remains significant. Yet, the path forward is fraught with challenges. As the country navigates this transition, the interplay between regional integration and domestic reform will define its energy future—and the returns for those who bet on it.