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Generation investments, especially large-scale variable renewable energy, requires careful scrutiny of the state of the power system. Power system planning and operations in a developing country like Bangladesh can often achieve significant improvements in economics and security of supply, through modest and prudent investments. A review of the Bangladesh power sector is presented in this paper that highlights: (a) changes to dispatch protocols to undertake fuel-constrained dispatch optimization and ancillary services co-optimization and pricing; (b) issues related to the allocation of natural gas between sectors; and (c) a technology neutral investment framework. The study uses an hourly dispatch and ancillary services co-optimization model that also optimizes short to medium term investment decisions. The results demonstrate Bangladesh can: (a) reduce its production costs by 63% through more efficient dispatch; (b) reduce production costs by 77% by using an additional natural gas quota of 212 mmcfd (or a 23% increase); and (c) should have invested in power import and baseload gas/coal rather than expensive solar PV projects (proposed in 2011 at substantially higher cost at the time). When a carbon price is imposed in the model, the implied break even cost to justify the solar program is very high – in excess of $150/tonne. [ABSTRACT FROM AUTHOR]

• COVID-19 has triggered acute power demand shock to the developing countries like Bangladesh. • Bangladesh may curtail expensive liquid fuel based generation dispatch by reducing the use of expensive peaking capacity. • Further capacity addition may perhaps be delayed for the intervening period up to 2025. • Prospects of using Battery storage to manage evening peak at the wholesale level in Bangladesh. • Balanced power import-export regime with neighboring countries possibly will be beneficial for Bangladesh. COVID-19 highlights impact of sudden and sustained periods of low demand that may have major ramifications for financial viability of utilities. However, these effects may be mitigated to some extent through efficient management of dispatch, adjustment of capital outlay for committed capacity and provides an opportunity to reshape longer term capacity development. These issues are particularly critical for developing countries like Bangladesh where the demand shock was acute from avg. 10 % per-annum (pa) to (−)12 % over April-June 2020. This analysis shows how Bangladesh can significantly curtail expensive liquid fuel based generation dispatch, eliminate the use of expensive peaking capacity and even delay some of its capacity addition for the intervening period up to 2025. Prospects of using Battery storage to manage evening peak at the wholesale level have been explored in the analysis and it demonstrates such investments in the present demand scenario is not economic. On the other hand, a more balanced import-export regime with neighboring countries may be beneficial to manage the seasonal capacity surplus that is likely to grow over the next five years. [ABSTRACT FROM AUTHOR]