Energy security is now an investment imperative

Bangladesh's energy crisis is now becoming a much larger economic problem with the potential of affecting foreign direct investment (FDI), industrial growth, employment and, ultimately, national security.

For investors, reliable energy is a basic condition for doing business. The World Bank has repeatedly identified unreliable infrastructure and energy constraints as important obstacles to private investment and growth in Bangladesh. Its latest assessment again stresses that improving electricity reliability is critical to private sector investment and job creation.

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Industrial production is already being disrupted. Households are facing power cuts, while shortages of gas and fuel are affecting transport and other economic activities. For businesses, however, the greatest damage is uncertainty about the future.

An investor deciding whether to put up a factory in Bangladesh is not looking only at wages, market size, or tax incentives. They want to know whether the factory will have power throughout the year, whether gas will be available when required, how much energy will cost, and whether these conditions will remain predictable. If the answer is uncertain, Bangladesh becomes a less attractive investment destination.

This is particularly important at a time when Bangladesh needs more private investment to generate jobs and sustain economic growth. The country cannot aspire to faster industrialisation while allowing energy insecurity to become a permanent feature of the business environment.

The immediate priority is to stabilise supplies. But emergency measures alone cannot solve a structural problem.

The current crisis has exposed several weaknesses simultaneously: declining domestic gas production, dependence on imported LNG and fuel, inadequate storage, vulnerabilities in supply chains, and weaknesses in distribution. The disruption of LNG supplies has shown how quickly a problem at one point in the system can affect households, transport, power plants, and industries across the country.

The lesson is clear: energy security cannot depend on any single fuel, supplier, or supply route.

Bangladesh will continue to need imported LNG for some time. Domestic gas production is declining, and replacing all imported fossil fuels immediately is neither realistic nor economically feasible. The objective, therefore, should not be to eliminate imports overnight but to reduce the country's vulnerability to external shocks.

Domestic gas exploration—both onshore and offshore—must receive much greater attention. The Bangladesh Petroleum Exploration and Production Company Limited (Bapex) should be strengthened, while international companies should be encouraged to participate through transparent and competitive processes. At the same time, LNG and other fuel imports should be sourced from multiple suppliers and supported by adequate strategic reserves.

Renewable energy must also become another major pillar of this strategy. The government has set a target of meeting 20 percent of electricity demand from renewable sources by 2030 and 30 percent by 2040. However, currently, renewables account for only about 1.5 percent of national grid supply. Thus, the gap between ambition and reality is enormous.

Bangladesh should accelerate use of rooftop solar, utility-scale solar on suitable non-agricultural land, floating solar, and solar-powered irrigation. But amping up renewable generation alone will not be enough. The transmission and distribution network must be modernised, and battery storage and better grid management will increasingly be necessary.

The country should also treat energy efficiency as a source of energy security. Every unit of electricity or gas saved through efficient buildings, industries, appliances, and transport reduces pressure on supply and lowers the need for expensive imports.

Energy policy has too often been driven by immediate pressures. What is needed is a long-term, professionally prepared national energy-security framework that survives changes in government and is regularly reviewed against measurable targets.

An independent energy commission could play an important role in this process. Its mandate should include assessing energy security risks, monitoring supply and demand, evaluating fuel and LNG procurement strategies, overseeing strategic reserves, coordinating domestic exploration and renewable energy development, promoting energy efficiency, and publishing regular assessments of the country's state of energy security.

Such an institution would not replace the relevant ministries or regulators. Its purpose would be to provide an independent, technically informed assessment of whether the country's energy system is becoming more or less secure.

The government should also regularly publish reliable information on fuel and gas stocks, LNG arrivals, electricity availability and major supply risks. A public digital dashboard could make this information accessible and help reduce rumours and uncertainty during periods of shortage.

Bangladesh has reached a point where energy policy can no longer be treated as a narrow sectoral issue. It is directly connected to investment, exports, employment, inflation, foreign exchange reserves, and economic growth. This is particularly important for FDI, as Bangladesh needs to persuade international investors that it can provide a stable and predictable business environment. An unreliable energy system undermines that promise no matter how attractive other incentives may appear.

Bangladesh does not need another short-term response that lasts only until the next disruption. It needs an energy security strategy that combines domestic exploration, diversified imports, renewable energy, storage, efficient consumption, modern networks, and strong institutions. The cost will be substantial. But the cost of doing nothing will be greater: lost investment, disrupted industries, weaker exports, fewer jobs and continued pressure on the economy.

Energy security is no longer simply about keeping the lights on. It is about creating the conditions in which Bangladesh can attract investment, generate jobs and sustain economic growth. That is why building a secure energy system should now be treated as an investment imperative—not merely an energy-sector priority.

MM Shahidul Hassan is former professor at Bangladesh University of Engineering and Technology (BUET) and distinguished professor at Eastern University.