Getting Bangladesh's renewable energy transition on track

Cost-competitive renewable energy can help Bangladesh slash its hefty fossil fuel import bills. The country could immediately reduce expensive oil-based peak power generation, both during the day and night, by deploying solar energy with battery backup. Industries and large companies operating in the country, as part of their sustainability goals, could also curb fossil fuel use by shifting to renewable energy. Yet, limited success in harnessing domestic renewable energy has pushed Bangladesh's energy sector import dependence to 57%, ratcheting up the financial burden (only commercial energy is considered here).  

The Bangladesh Power Development Board's payment backlogs, on account of power purchased from independent power producers, crossed Bangladeshi Taka (Tk) 270 billion ($2.21 billion) in November 2025. The country's credit rating also fell to B2 in November 2024, compounding challenges related to fossil fuel imports. As a result, the World Bank provided a repayment guarantee to support Bangladesh's liquefied natural gas imports. The country also signed a deal worth $2.75 billion (Tk336 billion) with the International Islamic Trade Finance Corporation to ease fossil fuel imports.

The energy sector's growing financial distress underscores the importance of deploying forward-looking strategies to scale up renewable energy at a faster rate. This requires fostering an enabling environment for utility-scale projects through allocating land and corporate power purchase agreements (CPPAs). Besides, the country should incentivise the uptake of rooftop solar systems to reduce stress on its limited land resources. 

Time to accelerate renewable energy projects

When Bangladesh approved its first renewable energy policy in December 2008, it had a combined renewable energy capacity of approximately 244.4 megawatts (MW) (hydro: 230MW and solar home systems: 14.4MW; other sources did not have a notable contribution). In December 2025, the country's renewable energy capacity stood at a meagre 1,690.7 MW, highlighting the slow pace of progress.

Bangladesh needs to deploy renewable energy projects of approximately 760MW per annum between January 2026 and December 2030 to achieve its 2030 goal of 20% renewable energy (current renewable energy capacity: 1,690.7MW; projects under construction: 358MW; capacity required for 20% target: ~5,851MW).

Allocating land through economic zones and mapping

In the last decade and a half, utility-scale solar projects have faced significant challenges arising from land scarcity in densely populated and agriculture-dependent Bangladesh. Yet, the country can allocate land through planned economic zones and resource mapping. For instance, the government-owned National Special Economic Zone (NSEZ) spans 33,805 acres (13,680.4 hectares), including 5,980 acres (2,420 hectares) designated as free space (17.7%). While the Bangladesh Economic Zones Authority signed a Transaction Advisory Services Agreement with the Asian Development Bank for a 100–200MW solar project, supported by a battery energy storage system in the NSEZ, the free space offers scope for further renewable energy expansion. By setting aside 1,000 acres (404.7 hectares) from the free space under the Private-Public-Partnership model, the NSEZ could accommodate roughly 350MW of solar capacity. This would bring the combined utility-scale solar capacity to around 550MW, covering about 17% of the NSEZ's estimated maximum demand of 3,248.7MW. 

The government could explore a similar approach in other special economic zones. Moreover, land-resource mapping will help the government earmark suitable public land for utility-scale projects under the same model, attracting private investment. Furthermore, the government should prepare tenders in phases for the previously identified char areas (islands) in Jamalpur district, capable of accommodating solar plants of up to 6,000MW capacity. These measures can help address the country's land-related constraints for renewable energy projects. 

Harnessing the potential of CPPAs

The increasing need to ensure environmental sustainability compels industries and businesses to seek alternative routes to green their operations given Bangladesh's limited share of clean energy on its grid. For instance, Pran-RFL, supported by the International Finance Corporation, envisions setting up a solar plant dedicated to providing green energy to H&M's selected apparel suppliers under a CPPA. Likewise, telecom operator Robi, in association with FloSolar Solutions Ltd and GreenPower Asia, is planning to establish a 100MW solar project to offset its carbon emissions. 

With the approval of the new Merchant Power Policy, Bangladesh has a broader framework for the CPPA. The next step would entail finalising the service-level agreement structure, covering key areas such as wheeling charges and dispute resolution mechanisms. This will pave the way for project implementation under the CPPA, delivering triple dividends — the on-grid renewable energy share will increase without significant involvement of government agencies in complex procurement processes; transmission and relevant distribution companies will earn wheeling charges; and industries and businesses will be able to meet their sustainability goals. The success of the first few projects could encourage other organisations to rely on CPPA to decarbonise their operations. 

Incentivising rooftop solar 

Rooftop solar is vital in addressing Bangladesh's land-related constraints, but its deployment is hindered by high import duties and limited access to finance. 

Solar panels and inverters for rooftop projects face 28.73% import duties. While export-oriented manufacturing industries can import these accessories at 1% duty under the capital expenditure model, projects under the operational expenditure model are subject to higher import duties, raising project costs. Besides, industries and commercial entities encounter a complex loan disbursement process in accessing Bangladesh Bank's low-cost green funds. For example, a financial institution first approves an industry's loan application at a commercial rate and then submits the documentation to Bangladesh Bank for access to the low-cost fund. This delays the approval and disbursement of low-cost green funds, often deterring industries from applying. Financial institutions are also reluctant to provide loans for small-scale rooftop solar projects. 

The Bangladesh government can consider waiving the duty on rooftop solar accessories for a limited period. By doing this, a 1MW rooftop solar plant could save the country approximately Tk22.4 million (USD0.18 million) per annum in fuel import bills, excluding capacity charges (taking furnace oil cost of Tk16/kWh (USD0.13/kWh) and the solar plant's operation of four hours per day for 350 days a year). 

To smooth the flow of low-cost finance, Bangladesh Bank can establish a dedicated fund for rooftop solar with single-stage approval, reducing disbursement delays.  

While the persisting energy sector crisis is a crucial test for Bangladesh, strategically deploying measures to address prevailing barriers can turn the situation around, along with active private sector participation.