Bangladesh’s Path to Reducing Fossil Fuel Dependence through Renewable Energy
Bangladesh stands at a critical juncture regarding its energy strategy. By embracing renewable energy, the nation could significantly reduce its dependency on costly fossil fuel imports, which currently account for 57% of its energy sector needs. Solar energy, particularly when paired with battery storage, presents a viable alternative for reducing oil-based peak power generation, both day and night. Furthermore, industries and large corporations in Bangladesh can align with sustainability goals by transitioning to renewable energy, thereby lessening their fossil fuel consumption.
The financial strain on the Bangladesh Power Development Board is evident with its substantial payment arrears of Bangladeshi Taka (Tk) 270 billion (USD2.21 billion) as of November 2025. This situation, coupled with a dip in the country’s credit rating to B2 in November 2024, highlights the pressing challenges associated with fossil fuel imports. The World Bank has intervened by offering a repayment guarantee to bolster Bangladesh’s liquefied natural gas imports. Additionally, a deal valued at USD2.75 billion (Tk336 billion) was signed with the International Islamic Trade Finance Corporation to facilitate fossil fuel imports.
The Urgency of Expanding Renewable Energy
Bangladesh’s renewable energy journey began with the approval of its first policy in December 2008, boasting a capacity of 244.4 megawatts (MW). By December 2025, this capacity had only grown to 1,690.7MW. For the nation to achieve its target of 20% renewable energy by 2030, it needs to add around 760MW annually from January 2026. Presently, projects under construction stand at 358MW, with a total capacity goal of approximately 5,851MW.
Addressing Land Scarcity for Solar Projects
Bangladesh faces challenges with land scarcity for utility-scale solar projects due to its dense population and agricultural reliance. However, opportunities exist within planned economic zones and through resource mapping. The National Special Economic Zone (NSEZ) offers potential with its 33,805 acres, including 5,980 acres designated as free space. A Transaction Advisory Services Agreement with the Asian Development Bank aims to develop a 100–200MW solar project in this zone. Allocating 1,000 acres for solar projects could yield about 350MW of solar capacity. Similar strategies could be applied in other economic zones, and land-resource mapping could identify suitable public land for further development.
Corporate Power Purchase Agreements (CPPAs)
As industries seek sustainable energy solutions, Corporate Power Purchase Agreements (CPPAs) emerge as a viable option. Pran-RFL, in collaboration with the International Finance Corporation, plans to establish a solar plant for H&M’s apparel suppliers. Similarly, the telecom company Robi is working on a 100MW solar project. The recent Merchant Power Policy provides a framework for CPPAs, promising multiple benefits, including increased on-grid renewable energy and enhanced sustainability for businesses.
Boosting Rooftop Solar Adoption
Rooftop solar solutions are crucial for Bangladesh, yet challenges like high import duties and limited financing options persist. Solar panels and inverters face a 28.73% import duty, although export-oriented industries can import them at just 1% duty. Accessing Bangladesh Bank’s low-cost green funds involves a complex process, deterring many industries. A temporary waiver of import duties on rooftop solar components could save around Tk22.4 million (USD0.18 million) per annum in fuel import costs for a 1MW rooftop solar plant. Establishing a dedicated fund at Bangladesh Bank with streamlined approval processes could further facilitate rooftop solar projects.
As Bangladesh navigates its energy crisis, strategic initiatives to overcome these barriers, coupled with active private sector involvement, can reshape the nation’s energy landscape.
Original Story at ieefa.org