Foreign Investment in Bangladesh: Powering Renewable Energy

The cancellation of 31 renewable energy projects by Bangladesh’s interim government has further undermined the already weakened investor confidence in the local market. However, the new government has recognised the importance of attracting foreign investment in Bangladesh to accelerate the clean energy transition and economic growth, strengthen energy security and is determined to rebuild the country’s image. While challenges remain, authorities have stepped up efforts to make the domestic clean energy market more attractive, ease foreign investors and de-risk project development. 

Bangladesh on a Quest To Attract Foreign Investors and Project Developers

Bangladesh generates 1,807 MW of renewable electricity and aims to increase solar power capacity to 10,000 MW by 2030, which would require approximately USD 9.36 billion in investment.

To scale up the needed financing, the government is looking to international partners. Bangladesh’s commerce minister has sought investments in the domestic solar power sector from Australia, with the latter reportedly recognising “a significant potential” in the country.

The EU has mobilised a EUR 395 million package for public-sector investment, including a EUR 350 million EIB-backed loan and EUR 45 million in grants, to de-risk renewable energy projects in Bangladesh. Germany is expected to provide an additional EUR 50 million in financing, plus EUR 1.5 million in grants.

Chinese officials have reaffirmed their readiness to scale up preferential financial support for key renewable energy projects in Bangladesh through diversified channels. 

Efforts to De-risk Clean Energy Projects Underway to attract Foreign Direct Investment

The government is working to remove barriers such as weak policy support, high setup costs and complex import structures for solar equipment. There are also plans to advance public-private partnerships and stimulate large-scale investment opportunities by easing market entry for investors and helping them ensure profitability. 

Citing Pakistan’s successful model, Bangladesh’s Minister of Power, Energy and Mineral Resources Iqbal Hassan Mahmud announced an opportunity for the government to either source solar equipment and provide it to investors or allow the private sector to import it at zero duty. Incentives for industrial-scale battery storage systems, tax exemptions and a five-year tax holiday are also under consideration.  

Authorities are also opening land access to interested investors and have declared their readiness to take an equity stake, while firms must bring capital and technology. Furthermore, the Bangladesh Power Development Board (BPDB) has recently issued tenders for three solar power plants in the districts of Chittagong, Rangamati and Dinajpur, with a combined capacity of 77.6 MW, inviting international developers to use its foreign-currency resources from the Power Sector Development Fund. 

Challenges Remain Despite the Positive Momentum

The biggest challenge facing clean energy developers and investors in Bangladesh is project bankability and securing sovereign guarantees, as evidenced by the interim government’s failure to attract investors for 55 grid-connected solar projects totalling 5.3 GW between December 2024 and March 2025.

India and Vietnam have improved the bankability of clean energy projects through layered payment security systems and alternative offtake models, but Bangladesh is yet to draw on these lessons. For example, while the BPDB has recently invited international bids to develop 10 grid-tied solar power plants, totalling 495 MW, as of the time of writing, no sovereign guarantees to make projects bankable for foreign investors have been announced.

Policy Reforms Crucial For De-risking Projects and Scaling Up Foreign Clean Energy Investments

Achieving the government’s 2030 clean energy target requires improving investor confidence by ensuring predictability and halting practices such as abrupt cancellations and sudden policy reversals, such as the removal of the Implementation Agreements, which have eroded payment security and undermined the bankability of projects.   

Improving renewable power purchase agreements, which over time have removed key protections such as sovereign guarantees, balanced risk-sharing and strong arbitration frameworks, is among the most important steps in de-risking projects. Restarting viable cancelled projects and accelerating net metering approvals to be completed in less than a month are other impactful short-term measures to improve investors’ confidence.

In the medium term, it is also necessary to make long-term financing terms more competitive. Khondaker Golam Moazzem, research director of the think tank Centre for Policy Dialogue, warns that financing costs for rooftop solar remain too high, with concessional financing inaccessible and interest rates reaching 12% or higher, rendering projects financially infeasible. 

Experts also note that the tax incentives need improvements, as they apply only to companies generating solar power for their own use, while others continue to face applicable tax burdens.

Bangladesh’s Next Move Critical

According to IEEFA, Bangladesh needs USD 933-980 million annually in renewable energy investment until 2030. Yet, today, its clean energy market lags behind regional peers in terms of investment attractiveness. In 2025, it ranked 69th among all emerging markets, down from 13th in 2022. Furthermore, the Asian Development Bank 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.

Bangladesh’s low starting point means it has much work to do to convince investors to choose its clean energy market over those of regional peers, such as Vietnam, Pakistan and India, for example. Those countries offer blueprints for turning targets into working solutions, and if Bangladesh doesn’t follow in their footsteps, it risks falling further behind in its quest to attract clean energy investors. Importantly, it would fail to break its fossil-fuel reliance and would continue to suffer from the associated environmental, energy-security, affordability and accessibility consequences.