Civic Vision Bangladesh
Power Sector Collapse in Bangladesh: Governance Crisis and a Roadmap to Recovery
বিদ্যুৎ খাতের বিপর্যয়: শাসনতান্ত্রিক সংকট ও উত্তরণের রূপরেখা
Executive Summary: A Structural Demand-Supply Mismatch
Bangladesh’s power sector is facing a deep structural crisis that cannot be explained away as a mere technical or financial deficit. It is, at its core, a governance failure. In August 2026, the country experienced an average daily load-shedding of 2,000 to 3,000 MW, with a peak of 3,757 MW according to official Power Development Board data — with the crisis most acute during daytime hours when economic activity is at its highest.
During this period, maximum grid supply from renewable sources stood at a negligible 650 MW against a national demand that regularly exceeds 16,000 MW. The root cause of this shortfall is directly traceable to a single administrative decision: within one month of taking charge, the interim government cancelled 37 renewable energy projects with a combined capacity of 3,287 MW.
Had these projects been retained and implemented as per their original 2025-2026 commissioning timeline, the current daytime crisis would have been significantly mitigated. This proves that the present collapse is not accidental, but the predictable result of planning failure — affecting both national energy security and citizens’ right to basic services.
Dual Standard: Selective Application of the Indemnity Act and the Crisis of Contract Governance
The central allegation in the investigative report is the inconsistent and selective application of the Quick Enhancement of Electricity and Energy Supply (Special Provision) Act, 2010 — commonly known as the Indemnity Act. On the sole decision of the then Adviser for Power, Energy and Mineral Resources, 37 pipeline renewable projects — encompassing government, private, and joint-venture initiatives — were cancelled on the grounds that their Letters of Intent (LOIs) were issued under the Indemnity Act.
Yet, other power plants — mainly fossil-fuel based — awarded under the exact same Act were retained. This raises a serious administrative and constitutional question: if decisions taken under the Indemnity Act are legally challengeable or voidable, why were only renewable energy projects targeted for cancellation?
This selective justice violates the fundamental rule-of-law principle of equality before the law and the requirement of consistent application. It signals to international investors that contractual security in Bangladesh is not above political transition. When the State’s contractual commitments change with a change in administration, it erodes trust and fundamentally hinders long-term development goals.
Cancelled Portfolio Composition (LOI period: Feb 2019 – May 2024)
- •27 solar projects — 2,404 MW across Rangpur, Chattogram, Mymensingh and other districts
- •3 wind projects — Sonagazi 30 MW, Ashashuni 100 MW, Chakaria 220 MW
- •1 waste-to-energy — Brahmanbaria 11 MW
- •Remaining 6 projects — mix of hybrid and pipeline renewables
Investor Confidence, Sovereign Guarantee and Tender Failure
Following the cancellation, the government floated a fresh tender for 55 new grid-connected solar plants with a combined capacity of 5,238 MW. The result was a market failure: only 11 bids were submitted for 900 MW, approximately 17% of the called capacity.
This outcome is not market-neutral. It is a measurable, quantifiable indicator of institutional distrust. The reason, as identified by sector analysts and developers, is the absence of a Sovereign Guarantee. In international infrastructure financing, a Sovereign Guarantee is near-essential for long-term revenue and contractual obligation assurance, particularly in emerging markets.
After experiencing arbitrary cancellation under the pretext of the Indemnity Act, investors rationally considered new tenders without such a guarantee as high-risk and unbankable. International lenders refused to finance projects without state-backed assurance.
Economic Loss and Impact on FDI
The economic magnitude of the cancellation is substantial. LOIs issued between February 2019 and May 2024 included 27 solar (2,404 MW), 3 wind, and 1 waste-to-energy project. The investor base was broad and geographically diversified, involving 14 countries — including Singapore (7 projects), China (4), India (1), USA (1), and others — demonstrating global confidence in Bangladesh’s renewable potential.
The combined planned investment for the cancelled portfolio was $6 billion USD, of which an estimated $300 million USD had already been spent on land acquisition, technical surveys, Environmental Impact Assessments (EIA), and preliminary infrastructure. Fifteen companies had already purchased land and paid taxes and duties to the government. That investment is now stranded, creating a massive opportunity cost and deadweight loss for the economy.
Private think-tank Centre for Policy Dialogue (CPD) has explicitly recommended re-evaluation of the cancelled LOI-based solar projects and ensuring adequate facilities to attract FDI. CPD’s position highlights a crucial point: administrative decisions driven by political considerations without economic rationality impose costs on both energy security and long-term growth.
From a human rights and governance perspective, reliable electricity is not merely infrastructure — it is a basic service intrinsically linked to health, education, SMEs, and quality of life. Daytime load-shedding disproportionately affects the marginalized, small traders, cold-chain dependent agriculture, and students. Thus, this policy failure must be seen not only as an economic misstep, but as a public interest and right-to-service issue.
Roadmap: Policy Recommendations
Bangladesh requires a transparent, institutional, and politically insulated framework to restore credibility and ensure energy security. The following recommendations offer a path forward.
5.1 Independent Re-evaluation Committee
Form an independent multi-stakeholder re-evaluation committee comprising legal experts, energy engineers, economists, and civil society representatives. Projects with demonstrable investment — land acquisition, tax payment, EIA completion — should be prioritized for reinstatement on objective criteria, not political affiliation.
5.2 Contract Continuity Law
Enact a clear legal framework ensuring that valid investment contracts cannot be unilaterally cancelled due to political transition. For special powers like the Indemnity Act, ensure consistency and transparency via a pre-judicial review mechanism to prevent selective application and retroactive penalization of investors acting in good faith.
5.3 Reinstatement of Sovereign Guarantee Framework
Introduce a predictable sovereign guarantee or effective alternative — such as a partial risk guarantee or a guarantee backed by multilateral development agencies — in line with international standards. The guarantee framework should enjoy constitutional or institutional protection above political change to provide long-term certainty for project finance.
5.4 Transparent and Competitive Tendering
Make market consultation mandatory before future tenders to identify investor concerns in advance. Include independent audit and public disclosure of evaluation criteria and results to ensure accountability both to the public and to investors.
5.5 Depoliticizing Energy Transition
The long-term national energy plan (Integrated Energy and Power Master Plan) should receive parliamentary endorsement to attain semi-permanent policy status, so that core strategy does not change with government. Link the renewable transition to climate justice and international commitments (NDC) to make it a state obligation, not a mere administrative priority.
Conclusion: The Inseparable Link Between Good Governance and Energy Security
The current crisis in Bangladesh’s power sector is fundamentally an institutional credibility crisis that demands governance reform more than a technical fix. The lack of policy continuity, contractual protection, and selective fairness has not only eroded investor confidence but has directly harmed citizens’ right to uninterrupted electricity.
The essential lesson for any future government is clear: energy policy must be treated as a matter of national interest above political identity, where transparency, consistent application of law, and continuity of long-term planning are the only sure paths to sustainable energy security and economic stability. Without restoring trust in contracts and institutions, no amount of new tenders will light the homes and factories that today sit in darkness.
“Energy security is not built in power plants alone — it is built in the credibility of the institutions that promise to keep them running.”
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