Private Capital Vital for Bangladesh’s RE Energy Goals: IEEFA

Bangladesh must attract significant private sector investment to meet its renewable energy targets, with financing needs expected to rise to nearly US$1 billion annually by 2030 and up to US$1.46 billion per year by 2040, a new report from the Institute for Energy Economics and Financial Analysis (IEEFA) has found.

The government aims to generate 20% of electricity from renewables by 2030, increasing to 30% by 2040, under its new Renewable Energy Policy. However, analysts warn that public funding alone will fall short, and an improved investment climate is urgently needed to unlock private capital.

What Is Ailing The Sector? 

“Policy uncertainty, off-taker risk, land acquisition hurdles, and a weakened sovereign credit rating are all constraining investment in the sector,” said Shafiqul Alam, IEEFA’s lead energy analyst for Bangladesh and co-author of the report.

According to the report, abrupt shifts in policy — including the suspension of 31 utility-scale renewable projects awarded under the previous government — have created contractual uncertainties, undermining investor confidence. The move to a competitive bidding process, while intended to increase transparency, has raised concerns over regulatory stability.

The report calls for regulatory consistency, restoration of investor guarantees, structured land allocation, and enhanced capacity across the banking and service sectors to revive capital flows.

IEEFA recommendations 

For small-scale renewable energy projects, IEEFA recommends a series of measures to ease financing barriers, including:

• A credit risk guarantee scheme,

• A dedicated green finance facility with pre-finance options,

• Import duty waivers on key solar components such as inverters, mounting structures, and cables.

“The government’s reduction in customs duties on solar inverters is a positive move,” said Labanya Prakash Jena, Sustainable Finance Consultant at IEEFA. “But further waivers are needed to accelerate deployment at scale.”

PPP Model For Land Acquisition 

The report also suggests a Public-Private Partnership (PPP) model for land acquisition, particularly through special economic zones, to support utility-scale projects. Meanwhile, currency hedging funds, supported by multilateral or climate finance institutions, could help reduce foreign exchange risks that deter global investors.

Bangladesh’s credit downgrade by Moody’s to B2 in late 2024, due to macroeconomic and political risks, has worsened its standing in global markets, making borrowing more expensive and further limiting access to capital, the report notes.

“Accelerating renewable energy deployment will require strong collaboration among the government, private investors, financial institutions, and international organisations,” said Alam. “A predictable, investor-friendly ecosystem is essential for building momentum.”