Can Bangladesh meet its renewable energy target this time?

In 2008, Bangladesh pledged to generate 5% of electricity from renewables by 2015. It failed. It then pledged 10% by 2020. It failed again, reaching barely 3.5% of installed capacity. 

Now, in its February 2026 election manifesto, the ruling Bangladesh Nationalist Party (BNP) has promised 20% renewable electricity by 2030. The FY27 budget has taken the first serious fiscal step to this end. Furthermore, there are plans to generate between 30% and 50 % of electricity from renewable sources by 2050.

Under this plan, import duties, regulatory duties, and advance taxes on solar panels, inverters and key components have been waived until 2031. Battery storage systems also received tariff relief. On paper, Bangladesh has finally begun dismantling the tax structure that made clean energy more expensive than imported fossil fuel infrastructure.

So, will the result be different this time?

Bangladesh currently has roughly 1,700 MW of operational renewable energy capacity against a national installed generation base exceeding 30,000 MW. According to modelling by the Institute for Energy Economics and Financial Analysis (IEEFA), the country would need to add around 760 MW of renewable capacity every year until 2030 to realistically approach the target.

For Shafiqul Alam, Lead Analyst for Bangladesh at IEEFA, the central question is not whether the target sounds ambitious, but whether the underlying system is capable of delivering it.

"At the moment, the key question is what exactly this 20% target refers to. Is it 20% of installed capacity? Because that is one thing. But if it means 20% of total electricity consumption, then that is significantly more ambitious," he told TBS.

"If we are talking about installed capacity in the power sector reaching 20%, then Bangladesh would still need to add more than 5,000 megawatts beyond the current level to achieve that target. And considering there are only around four years and a few months left, that itself is a major challenge."

Shafiqul Alam said the target remains theoretically achievable if the projects already in the pipeline are successfully implemented.

Infograph: TBS

Khondaker Golam Moazzem, Research Director at the Centre for Policy Dialogue (CPD), said, "At the moment, there are two major active engagements underway. One is the National Rooftop Solar Programme, which is targeting around 3,300 megawatts. The other is utility-scale renewable energy projects, where the target is approximately 5,500 megawatts. Combined, these initiatives could generate nearly 8,800 megawatts of installed capacity.

"Of course, when we factor in load efficiency and capacity factors — which in Bangladesh are typically around 20% to 22% for solar — the actual effective output will be lower. So, to secure an active supply equivalent to 6,000 megawatts, additional capacity will likely still be required in the coming years," he added.

The regional comparison makes Bangladesh's challenge sharper. India already generates more than 30% of its electricity from renewables. Sri Lanka stands above 22%. Pakistan generates nearly 7%. Bangladesh remains below 3%.

The Asian Development Bank (ADB) and World Economic Forum's Energy Transition Readiness Assessment gives Bangladesh a score of just 39.9 out of 100 — among the weakest in South Asia.

"This is not a neutral tax structure. It is discriminatory, and it is costing Bangladesh its energy future," Moazzem said, referring to CPD's pre-budget assessment that found LNG imports faced a total tax incidence of only 9.5%, while lithium-ion batteries faced 61.8% and electric vehicles faced duties of up to 93.2%.

He believes that the FY27 budget partially corrects that imbalance, but fiscal incentives alone cannot solve deeper institutional weaknesses.

"If the government genuinely wants to achieve these targets, then investor confidence must not be undermined through abrupt cancellations or sudden policy reversals. Stability and predictability are essential if Bangladesh wants to retain, rebuild, and regain investor trust," he noted.

"Bangladesh's sovereign credit rating remains relatively weak. Moody's currently rates the country at B2 and that inevitably shapes investor perceptions. Foreign investors have longstanding concerns, and those concerns need to be acknowledged and addressed seriously," Shafiqul Alam said.

That concern is rooted in recent history. During the interim government period, 31 renewable energy projects were cancelled after scrutiny over non-competitive procurement practices. While the move was defended on governance grounds, it also froze large parts of the sector's investment pipeline.

Moazzem warns that the aftermath still lingers.

"There is still some confusion surrounding utility-scale renewable energy projects, particularly regarding implementation agreements. Investors need confidence that payments will be released on time and that revenue shortfalls will be managed properly. Timely payment mechanisms are absolutely critical for large-scale project financing," he said.

Bangladesh's financing gap is enormous. IEEFA estimates the country needs between $933 million and $980 million annually in renewable energy investment until 2030. Bangladesh Bank's refinancing scheme remains too small to meet that scale.

The grid is another obstacle. Bangladesh's national transmission infrastructure cannot safely absorb high levels of intermittent solar generation without major smart-grid upgrades and battery storage integration. Yet the Power Division's development budget remains heavily oriented toward fossil fuel infrastructure.

Even now, more than 40 gas-fired power plants remain in the pipeline.

For Mohammad Subail Bin Alam, Chief Operating Officer at Rancon Infrastructure and Engineering, Bangladesh's renewable energy barriers are also deeply practical.

"No, the current measures are not enough," he said.

"At the moment, the tax waiver mainly applies to companies generating solar power for their own use. However, EPC companies — the engineering, procurement and construction firms that actually implement many of these projects — are not receiving the same tax waiver facilities. They still face applicable tax burdens, and that creates a major cost problem."

"If the government genuinely wants to achieve these targets, then investor confidence must not be undermined through abrupt cancellations or sudden policy reversals. Stability and predictability are essential if Bangladesh wants to retain, rebuild and regain investor trust."

Khondaker Golam Moazzem, Research Director, CPD

According to him, the economics of rooftop solar remain difficult for smaller firms because financing costs are too high and concessional financing remains inaccessible.

"Solar becomes truly viable when financing costs remain around 5.5% to 6% interest. But if companies are forced to take commercial bank loans at 15% interest, the projects become financially unfeasible," he said.

At the moment, soft financing is effectively available only through Infrastructure Development Company Limited (IDCOL), but accessing IDCOL financing is very difficult because of strict compliance requirements. Most Bangladeshi companies struggle to meet those conditions. As a result, many firms cannot secure financing, and a portion of available funds remain unused instead of reaching the market. 

Subail argued that Bangladesh's physical geography limits the viability of utility-scale solar.

"Large utility-scale solar power plants are not especially suitable for Bangladesh because they require enormous amounts of land. For a land-constrained country like Bangladesh, rooftop solar is far more practical and economically sensible," he said.

That land constraint is increasingly central to Bangladesh's energy transition debate. The country lacks the open terrain that enabled India's large-scale solar expansion in Rajasthan or Pakistan's projects in Sindh. Experts increasingly point toward rooftop solar, floating solar and distributed generation as the only scalable pathway forward.

The IFC estimates Bangladesh could generate up to 11,000 MW through floating solar across hundreds of suitable water bodies. But those projects still lack mature regulatory frameworks.

At the same time, electricity demand itself is changing rapidly.

"Demand is no longer being driven solely by conventional electricity consumption," Moazzem said. "Battery-powered three-wheelers are expanding, electric vehicles are entering the market, and all of these require charging infrastructure and electricity supply. Demand is also increasing in irrigation and agriculture."

"Future electricity planning cannot be based only on traditional power generation forecasts. Policymakers also need to account for the growing role of net metering and rooftop solar systems, where consumers are reducing their dependence on grid electricity."

Yet the economics for consumers remain distorted because Bangladesh still subsidises conventional electricity prices.

"The government produces electricity at roughly Tk12.5 per unit but sells it to consumers at subsidised rates," Subail said. "Meanwhile, solar electricity can now often be generated at around Tk8 to Tk9 per unit. Yet because end-user electricity tariffs remain artificially low, consumers do not experience sufficiently strong cost-saving incentives to aggressively shift toward solar adoption."

The FY27 budget has shifted Bangladesh's renewable energy policy further. It ended some of the fiscal discrimination that protected fossil fuel infrastructure while penalising clean energy imports.

Moazzem said, "In my view, renewable energy and electrification are likely to become increasingly viable options across multiple sectors in the years ahead. Industry will move in that direction, the transport sector will move more quickly, agriculture may progress more gradually, and even household-level adoption is likely to grow."

Alongside government initiatives, he believes, if private sector participation and investment continue to expand, then there is a strong possibility that these targets can ultimately be achieved.