Japan’s energy agenda: Is Bangladesh paying the price
Ashraful Islam Raana
Since 2009, the government of Bangladesh has initiated major changes in the country’s power sector. They had opened the sector to various fossil fuels investments, both promising and questionable without proper risk analysis. To remove legal hurdles, the government passed the Quick Enhancement of Electricity and Energy Supply Act, 2010. Critics, both domestic and international, labelled it a “black law” as it concentrated power in the hands of a few and sidelined transparency and accountability.
The previous government faced accusations of awarding lucrative power business to close allies while the law blocked any scrutiny of these deals. This led to the construction of 150 power plants running on expensive fuel, with construction and plans for around 100 more. As demand was far below capacity, many plants remained idle, yet businesses received billions of dollars in capacity payments.
The sector’s unplanned costs severely strained Bangladesh’s economy. By 2022, importing costly fuel like LNG, coal and oil drained foreign currency reserves, while the government accumulated billions in debt to domestic and international energy businesses. To cope, it repeatedly raised electricity and fuel prices, triggering high inflation and worsening the hardships of a low-income population in Bangladesh.
Experts attributed the crisis to the previous government’s overly ambitious and poorly designed power plan, but their warnings were ignored. Instead, the government pursued an even more import-dependent and high-cost energy strategy.
In 2023, with Japan’s support, it finalized the Integrated Energy and Power Master Plan (IEPMP), sparking widespread criticism. This plan, deemed highly risky for Bangladesh’s fragile economy, also clashed with global climate policies. Consequently, demands to cancel or revise the plan are growing across society in Bangladesh.
Japan, a long-term beneficiary in Bangladesh’s power masterplan
Since 1986 Bangladesh’s Power System Master Plan (PSMP) has been updated several times, with Japanese institutions and experts playing key roles in most revisions. However, Bangladeshi experts have often criticised these plans, claiming they prioritise Japan’s business interests.
The first detailed power sector master plan with Japan’s involvement, known as the PSMP-2016, was developed by the Japan International Cooperation Agency (JICA) alongside Tokyo Electric Power Services Co, Ltd., and Tokyo Electric Power Company Holdings, Inc. This plan aimed to generate 60,000MW of power by 2041, with 35% from imported coal
While JICA worked on the PSMP 2016, Japan also secured loan agreements with Bangladesh to co-own two of the country’s largest coal-fired power plants. The 1,200MW Matarbari coal power plant in Cox’s Bazar, developed under the first phase, is now operational. JICA invested $4.2 billion for a 50% stake in the project .
When the loan agreement was signed, Bangladeshi environmental and energy experts raised concerns. They argued that JICA’s dual role in formulating the master plan and building power plants created a conflict of interest. Despite these objections, the previous government proceeded with JICA’s assistance.
Plan to buy $3 billion of LNG monthly
Bangladesh’s first Integrated Energy and Power Master Plan (IEPMP) aimed to increase the country’s power generation capacity to 111,600MW by 2050, with a projected demand of 71,512MW. Natural gas is identified as the main fuel for this expansion. By 2050, gas-powered plants are expected to produce 27% of the total electricity, or about 29,300MW. However, Bangladesh currently cannot supply enough gas to meet even one-third of this capacity.
To implement the plan, daily gas demand for power plants will need to rise by 5,000 million cubic feet (MMCFD). Domestic sources are expected to supply 2,500 MMCFD, while the remaining 2,500 MMCFD will have to be imported. In addition, industries and households will require another 2,500 MMCFD.
This means that by 2050, Bangladesh will need to import 5,000 MMCFD. Much of this will come from the spot market, where LNG prices are often high. Long-term LNG contracts, which are usually more affordable, are becoming harder for Bangladesh to secure.
As of January 13, Bangladesh Oil, Gas and Mineral Corporation (Petrobangla) reported that spot LNG costs $15 per MMBtu. If this price and the exchange rate (Tk120 per dollar) remain constant until 2050, the daily cost of LNG will reach Tk900 crore. Including taxes and VAT, this will exceed $100 million daily, or about $3 billion per month. If LNG prices rise, these costs will increase further. (Source: Financial Management Unit of Petrobangla).
Japan’s LNG export plan?
The claim that the IEPMP was designed to benefit Japanese LNG companies was even made by Japanese energy expert and campaigner Yuki Tanabe. Speaking at an energy summit in Dhaka last December, Tanabe, director of the Japan Center for Sustainable Environment and Society, argued that the plan prioritises profits for Japanese businesses. This claim is supported by trends in Japan’s LNG market. Known as the world’s largest LNG importer, Japan also plays a key role in LNG exports.
A report by the Japan Organization for Metals and Energy Security (JOGMEC) shows that Japan’s LNG re-exports to Asian markets hit a record high of 38.25 million tonnes in the 2023 fiscal year, surpassing the previous record of 38.11 million tonnes in 2021.
This rise in re-exports coincided with an 8% drop in Japan’s domestic LNG demand, which fell to 64.89 million tonnes in 2023. The Institute for Energy, Economics, and Financial Analysis shared these findings in a 2024 report, citing JOGMEC.
The data also shows that Japanese companies resold 37% of their LNG abroad in 2023, compared to just 16% five years earlier. Japan’s LNG re-exports in 2023 exceeded the combined exports of its main suppliers—Australia, Malaysia, Russia, the United States, and Papua New Guinea. According to Reuters, Japanese companies are involved in over 30 LNG projects across South and Southeast Asia, and Taiwan.
Bangladesh is a key target market for Japan’s LNG ambitions. For instance, Japanese company Mitsui & Co, Ltd. signed a memorandum of understanding to build a 500-630MW LNG-based power plant in Maheshkhali Cox’s Bazar.
A master plan overlooking renewables
Japan aims to generate 40-50% of its electricity from renewable sources by 2050, according to its Ministry of Economy, Trade, and Industry. However, in Japan’s IEPMP for Bangladesh, this target is set at 40%, using the term “clean energy” instead of “renewable source.”
Experts warn that the term “clean energy” allows electricity generation from coal and LNG with carbon capture technology. The IEPMP also targets 10% power generation from hydrogen and 5% from ammonia, sparking criticism. Both technologies are still in the research phase globally, and Bangladesh has made no progress in these areas.
The plan allocates only 6% for solar power, even though the IInternational Energy Agency: IEA predicts that solar energy will account for 80% of new renewable energy capacity added globally between 2024 and 2030. Experts highlight Bangladesh’s untapped potential in net metering, solar rooftops, solar irrigation, and floating solar projects. With proper financial and tax incentives, battery storage could further boost solar energy’s share. However, the IEPMP creates barriers to realising this potential.
Investment challenges
The IEPMP’s implementation will require $300 billion by 2050. However, during the previous government’s 13-year tenure, only $30 billion in foreign investment has entered Bangladesh’s power and energy sector.
The master plan outlines $179 billion for energy infrastructure by 2050, including $118.6 billion for power plant construction and nearly $2 billion for transmission lines.
A November 2024 report by Market Forces and Waterkeepers Bangladesh highlights that $50 billion will be needed for new LNG projects and terminals. Achieving this seems challenging for a country with an economy as fragile as Bangladesh’s.
