Bangladesh Needs Up To $980M/Year To Meet 2030 RE Goals

Bangladesh needs between $933 million and $980 million annually till 2030 to meet the targets laid down in its Renewable Energy Policy 2025, says a new analysis by the Institute for Energy Economics and Financial Analysis (IEEFA).  

After 2030, the annual investment will need to go up to between $1.37 billion and $1.46 billion until 2040; however, investment flows are hampered by policy uncertainty, financial risks, and land acquisition challenges. IEEFA makes these observations in its report titled Catalysing Renewable Energy Finance in Bangladesh.  

The current government has reportedly suspended 31 utility-scale renewable energy projects that had already received letters of intent (LOI) from the previous government via a non-competitive bidding process. It is now promoting a competitive solicitation process to select renewable energy projects (see Bangladesh Launches 2.6 GW Solar Capacity Tender). 

Such policy changes have shaken investor confidence in the market, note the report writers, at a time when the country needs huge funds to meet its growing power demand in the future.

Additionally, the market presents off-taker risk, technology and performance risk, weak project pipelines, a cumbersome loan disbursal process, land acquisition challenges, currency volatility, and a lower sovereign rating limit private sector investment in the sector, notes Co-Author of the report and IEEFA’s Lead Energy Analyst for Bangladesh, Shafiqul Alam.

Bangladesh’s current installed renewable energy capacity stands at 1.559 GW, representing 5.07% of the power system capacity, with another 461 MW of utility-scale projects under construction.

By 2030, it aims for renewable energy to account for 20% of the total energy mix, and 30% by 2040. According to IEEFA analysis, to achieve these targets, and going by the growing power demand in the country, it will need to increase renewable energy capacity by 21.3% per year between July 2025 and December 2030 to reach 5.851 GW by 2030, and by 10.9%/year between 2031 and 2040 to reach 16.506 GW by 2040. 

Solar will likely play a big role in its total renewable energy capacity additions by the target years. Between 2015 and 2023, utility-scale solar tariffs fell by 48%. With a competitive procurement process in this space, prices are likely to fall further, making solar more attractive financially. For rooftop solar, the cost of energy hovers around TK 5 ($0.041)/kWh. 

Yet, the potential of this technology is marred by existing barriers, some of which include financing, and public finance alone will not meet the funding requirements.

IEEFA recommends that the government engage with Multilateral Development Banks, international climate finance institutions and bilateral development financial institutions to establish a currency hedging fund to mitigate currency risk.

While the government has made some positive moves, including reducing customs duty on imported solar inverters, it needs to do the same for components of small-scale solar projects such as solar panels, FRP walkway, mounting structures and DC cables. 

To attract investment, the report writers recommend that the government ensure regulatory stability, restore investor guarantees, map and allocate land for projects, and build capacity in both the banking and service provider ecosystems. 

“In the case of small-scale renewable energy projects, their accelerated deployment will depend on addressing the high import duty on critical components, performance issues and perceived risks. Easing lending norms for green funds can also help scale up such projects,” says Labanya Prakash Jena, Sustainable Finance Consultant, IEEFA.   

The complete report is available for free download on IEEFA’s website.