What Keeps Halting Bangladesh’s Solar Revolution

Bangladesh aims to generate at least 20% of electricity from renewables by 2030 and 30% by 2041. Yet, its share today is 2.3% of grid-based power generation, while nearly 70% of rooftop solar systems in Dhaka lie idle, and investments continue to favour fossil fuels. All this signals that a major gap remains between Bangladesh’s ambitious clean energy targets and on-the-ground realities.

The government targets generating 10,000 MW of electricity from renewables by 2030, estimated to require USD 9.36 billion in investment. Scaling up that financing can prove challenging, as Bangladesh continues to struggle to ensure project bankability, with major structural and institutional barriers eroding the appeal of the local market for foreign clean energy investors.

What’s Undermining Renewable Energy Investors’ Confidence in Bangladesh’s Market

In 2025, Bangladesh ranked 69th among emerging markets and 21st in APAC in terms of clean energy market investment attractiveness. For reference, in 2022, it ranked 13th among all emerging markets.

Several factors explain the fall. Over the years, Bangladesh’s power purchase agreements (PPAs) have progressively deteriorated in terms of investor protection. While the first renewable energy PPA included strong sovereign guarantees, well-structured arbitration and balanced risk coverage, successive revisions have shifted the balance away from investors.

For example, while the Bangladesh Power Development Board (BPDB) has recently invited international bids to develop 10 grid-tied solar power plants with a combined capacity of 495 MW across the countrt, as of the time of writing, no sovereign guarantees to make projects “bankable” for international lenders have been announced. 

According to the Centre for Policy Dialogue (CPD), a leading civil society think tank, many projects stall at the contract stage today due to weak PPAs. For example, they were lacking renewable-energy-specific provisions as they were adapted from fossil-fuel contracts. Some had inadequate payment security mechanisms and unclear contract terms. 

The CPD identifies contract enforcement as another systemic failure, since even well-drafted PPAs can’t be relied upon in practice. In at least one documented case, investors who had signed both a PPA and an Implementation Agreement and completed construction faced government attempts to revise the agreed tariff. 

Exchange rate fluctuation risk, payment delays and disputes also increase investor risk and raise the cost of capital. According to the CPD, normal payment cycles of 2–3 months have routinely extended to 5–8 months, with each delayed payment triggering subsequent delays.

There is the uncertainty factor, too. In September 2024, Bangladesh’s interim government cancelled the letters of intent for 31 renewable energy projects, totalling 5,680 MW of capacity and USD 6 billion in potential investment, with USD 300 million in banking financing already committed and 15 companies having purchased land. The move proved a significant blow to clean energy investors’ confidence in the local market, with potentially long-term consequences.

The CPD also notes that critical instruments, such as the Implementation Agreement, which provided a sovereign-backed guarantee covering permits, land and political risk to protect investors, are phased out without appropriate substitutes.

Some academics also warn about the lack of political will to complete particular projects, while others, described as “favoured” and usually backed by foreign lobbies, were approved without proper scrutiny or feasibility studies. 

Addressing the Existing Barriers Key To Unleashing Bangladesh’s Solar Revolution

Bangladesh’s PPA framework requires urgent reform to ensure payment security, clear enforcement and protective flexibility. The CPD argues that addressing enforcement and risk allocation first could ease the compensatory burden on all other areas, enabling the PPAs to function with less rigidity and fewer costly protective instruments. 

According to the CPD, among the critical fiscal measures are ensuring adequate allocation and funding for renewable energy in the national budget for FY2027, as well as a special subsidy to incentivise clean energy businesses. Tax and duty exemptions for all renewable technologies, and the establishment of a low-cost financing fund for rooftop solar with single-stage approval to minimise delays, are other areas for reform. 

Regarding power sector institutions, the CPD advises restructuring to establish dedicated renewable energy wings that prioritise transition goals and investments in modernisation, workforce capacity and gender-inclusive participation.

The High Stakes of the Stalled Solar Power Revolution

The CPD estimates that Bangladesh’s reliance on fossil fuels risks exposing it to persistent macroeconomic damage, including GDP losses of 0.21-0.53%, inflationary pressures of 0.6-13.6%, and currency depreciation of 0.56-4.5% in the medium-to-long term. 

According to Zero Carbon Analytics, Bangladesh’s annual fossil fuel import bill could rise by USD 4.8 billion, a 40% increase from 2025 levels and 1.1% of GDP, if oil, gas and coal prices remain high.

The CPD argues that Bangladesh’s energy future needs a structural shift, driven by the conceptual framework, “3F-3R: Fallen Fossil Fuel, Rising Resilient Renewables.” 

In the face of Chinese investors and affordable clean energy technologies, Bangladesh has access to practical and readily deployable solutions that can provide a way out. While Chinese officials have already made it clear that they are willing to provide support, it won’t be unwavering. Instead, it would depend on Bangladesh’s willingness to back its targets with the necessary policy and structural market reforms. And the first step is prioritising the health of PPA arrangements and their proper enforcement so that investors can rest assured they have protection.