Bangladesh’s ongoing energy crisis may ease temporarily, but it cannot be fully resolved without a decisive shift towards renewable energy, the Centre for Policy Dialogue (CPD) warned on Monday. The think tank said continued dependence on fossil fuels will leave the country exposed to long-term economic vulnerability and external shocks.
“We must think beyond fossil fuels,” said CPD Research Director Dr Khondaker Moazzem at the 4th Bangladesh–China Renewable Energy Forum, organized under the theme “Transforming Crisis into Opportunities: Renewable Energy Development under the New Government.” The event was held at a hotel in Dhaka.
He said the global fossil fuel crisis would not be resolved quickly. “Bangladesh needs to seriously consider alternatives in its energy sector,” he added.
Power, Energy and Mineral Resources Minister Iqbal Hassan Mahmood attended the event as chief guest, alongside the Chinese Ambassador, investors, development finance institutions, and energy sector stakeholders.
China’s role in energy transition
CPD highlighted China’s central role in the global renewable energy transformation, noting that its technological advancement and investment capacity could significantly support Bangladesh’s transition.
“China is at the forefront of renewable energy through innovation. Its investment in Bangladesh’s renewable sector is already substantial, and this engagement needs to be further strengthened,” said Dr Moazzem.
The think tank introduced a framework titled “3F–3R: Fallen Fossil Fuel, Rising Resilient Renewables,” describing it as a structural pathway for Bangladesh’s energy shift.
CPD also cautioned that even if geopolitical tensions in the Middle East ease, Bangladesh would continue to feel the economic impact of past supply disruptions for years.
Economic risks from oil shocks
Using econometric modelling, CPD warned that geopolitical oil shocks could have long-lasting macroeconomic effects. It projected GDP losses of 0.21% to 0.53%, inflation increases of 0.6% to 13.6%, and taka depreciation of 0.56% to 4.5% over the medium to long term.
The think tank said these projections highlight Bangladesh’s vulnerability due to its fossil fuel dependency.
$9.36 billion needed for renewable target
The government aims to generate 10,000 megawatts of electricity from renewable sources by 2030. CPD estimated that achieving this target would require around $9.36 billion in investment across solar, wind, biomass and biogas projects.
However, it warned that existing policy and contractual frameworks may discourage investors if reforms are not introduced urgently.
Concerns over power purchase agreements
The forum focused heavily on Power Purchase Agreements (PPAs), identifying them as the key determinant of investment flows in the renewable sector.
CPD said Bangladesh’s PPAs have gradually weakened in terms of investor protection. Early agreements included sovereign guarantees, arbitration mechanisms and balanced risk sharing. However, later revisions have shifted the balance towards the government, it said.
The think tank also noted that the discontinuation of Implementation Agreements has removed a critical layer of payment security for investors.
“No credible substitute mechanism has been introduced,” CPD observed.
Payment delays and currency risks
CPD highlighted persistent payment delays as a major concern. Although official cycles are two to three months, payments often take five to eight months.
It also pointed out that investors are exposed to exchange rate losses due to delayed payments, as tariffs are denominated in local currency with dollar equivalence but without compensation for depreciation risks.
In some cases, investors who completed projects reportedly faced attempts to revise agreed tariffs without contractual safeguards, CPD said.
Institutional bottlenecks
The think tank identified significant institutional inefficiencies in project approvals. Multiple agencies—including BPDB, PGCB, REB, SREDA and local authorities—process approvals sequentially rather than in parallel, leading to delays and lack of accountability.
It also noted cases where centrally approved land later faced local disputes, reflecting weak coordination between agencies.
Cancellation of solar projects raises concern
CPD criticized the cancellation of 31 solar project Letters of Intent, representing around 5.68 gigawatts of capacity and nearly $6 billion in potential investment.
It said the cancellations, along with already committed funds and land purchases, had damaged investor confidence and slowed renewable expansion.
Bangladesh lags behind global standards
Benchmarking Bangladesh against countries such as India, Vietnam, Kenya and Saudi Arabia, CPD said the country’s PPA framework lacks key features such as payment security instruments, implementation agreements and lender step-in rights.
It said enforcement remains the weakest element of the system, followed by imbalanced risk allocation.
“In a fair ecosystem, both cannot remain weak simultaneously,” CPD said.
Reform recommendations
CPD proposed introducing a revolving Letter of Credit covering three to six months of payments, backed by sovereign or central bank guarantees, as an immediate priority.
It also recommended synchronizing contractual deadlines to prevent developers from being penalized for delays beyond their control.
For medium-term reforms, CPD suggested establishing an inter-agency task force with binding timelines, developing a renewable energy procurement guideline, introducing dispute adjudication boards, and restoring sovereign commitment mechanisms similar to Implementation Agreements.
It further called for tax and duty exemptions on renewable energy equipment, noting that import duties currently stand at around 61.8%.
Financing and industrial support
CPD recommended that Bangladesh Bank introduce a low-cost financing window for rooftop solar projects and suggested repurposing land from cancelled fossil fuel projects for renewable energy development.
It also emphasized the potential of Chinese technology in solar panels, inverters and lithium iron phosphate batteries, proposing local assembly partnerships to reduce costs and import dependence.
Climate-linked trade pressure
The think tank warned that the European Union’s Carbon Border Adjustment Mechanism (CBAM), coming into force in 2027, will require Bangladesh’s export industries to adopt cleaner energy sources to avoid carbon-related tariffs.
Failure to accelerate renewable energy adoption could impact the competitiveness of the garment and textile sectors, it cautioned.
New investment channels expected
The think tank noted that the Bangladesh Investment Development Authority (BIDA) is expected to open its first overseas office in China within approximately six months, a move expected to facilitate direct engagement with Chinese investors interested in Bangladesh’s renewable energy sector.
CPD concluded that while renewable energy presents significant economic and strategic opportunities, the success of the transition will depend heavily on restoring investor confidence through institutional reform, policy stability and financial safeguards.
