Over the past three decades, Bangladesh’s power and energy sector has undergone a remarkable transformation, backed by massive investments and driven by a national ambition to modernize. The installed electricity generation capacity surged from just 3,301 megawatts in 1996 to an impressive 27,424 megawatts by June 2025. Yet, amid this progress, renewable energy, a vital pillar of sustainable growth, has not received the focused attention it deserves. Despite years of policy discussions and lofty ambitions, the failure to follow through with practical implementation has caused the share of renewables in total electricity generation to slip. Back in 1996, the country’s lone hydropower plant contributed 230 megawatts, about 7% of installed capacity. That share has now declined to 5.6%, despite the passage of time and technological advancement.
When it comes to actual energy generation, fossil fuels continue to dominate. Last year, they accounted for a staggering 98% of all electricity produced, while renewables contributed a mere 2%. The Sustainable and Renewable Energy Development Authority (SREDA) reports that Bangladesh’s current renewable electricity generation capacity stands at 1,572 megawatts, including the same 230 megawatts from hydropower that has remained unchanged since 1996. Solar accounts for the lion’s share at 81.3%, followed by hydropower at 14.6% and wind at 4%. Of this total, 380.24 megawatts comes from non-grid sources, mostly small-scale solar, and 1,196.86 megawatts from grid-connected projects. While this brings the installed renewable capacity to around 8%, the real story on the ground tells a more sobering tale. The once-celebrated spread of 6.0 million solar home systems has faded, with the majority now non-functional. As a result, the International Renewable Energy Agency (IRENA) estimates the true operational share to be only 5.6%.
Compared to regional and global peers, Bangladesh's progress in renewables looks modest at best. As of 2023, solar and wind together account for 30% of global electricity generation capacity. In South Asia, Sri Lanka has leapt ahead with 39.7% of its electricity from renewables, India has reached 24%, and Pakistan stands at 17.16%. In contrast, Bangladesh remains stuck at 5.6%, despite years of effort.
Recognizing the need to course-correct, the government introduced the Bangladesh Renewable Energy Policy 2025 on June 16. It builds on the country’s first such policy, launched in 2008, which had set out to achieve 5% of total electricity capacity from renewables by 2015 and 10% by 2020. Those targets, however, were missed. The new policy aims higher—20% of total electricity demand from renewables by 2030, and 30% by 2040. But energy experts raise a pressing concern: there’s still no clarity on whether these percentages refer to installed capacity in megawatts or actual electricity generation in units. “This needs to be clarified,” said Shahriar Ahmed Chowdhury, Director of the Center for Energy Research at United International University (UIU), echoing a sentiment shared by many watching the sector closely.
Bangladesh Renewable Energy Policy 2025
As mentioned, the Ministry of Power officially gazetted the Bangladesh Renewable Energy Policy 2025 on June 16. While the announcement has been welcomed, experts, researchers, and investors have raised concerns about whether the designated implementation agency—SREDA—is truly capable of carrying it out. For SREDA to effectively function as the nodal agency, it must be empowered with legal authority, skilled personnel, and technological capacity.
The policy identifies solar, wind, ocean waves, biogas, and biomass as renewable energy sources. It also highlights the need for regional cooperation, including setting up regional grids, electricity markets, and legal frameworks. However, the policy doesn’t specify whether regional cooperation will involve wind, solar, or hydropower. Notably, the latest Power System Master Plan and the Integrated Energy and Power Master Plan (adopted in 2023) emphasized building a four-nation power grid to import hydropower from Nepal and Bhutan.
Under the new policy, investors in renewable energy will receive a 10-year tax holiday, followed by a partial tax holiday for the next 5 years—though the extent of the partial exemption has not been specified.
Entrepreneurs can install rooftop solar systems on industrial and commercial buildings and sell electricity to the government or private entities under the Net Metering Guideline 2018. Power distribution companies can also establish rooftop solar, mini, micro, nano, and pico grids in their service areas to generate and distribute renewable energy. Private entities may similarly sell electricity to the government or individual buyers under this policy. The Bangladesh Energy Regulatory Commission will determine the tariffs for such sales.
SREDA has been assigned multiple responsibilities under the policy. Within a specified timeframe, it must prepare a roadmap or implementation strategy. Based on this roadmap, SREDA will facilitate, support, and monitor renewable projects. It will encourage local manufacturing of renewable energy equipment and may establish a national laboratory to ensure quality standards. Additionally, product certification may be conducted through labs approved by an accreditation board or those listed by SREDA. The policy aims to expand the renewable energy sector, thereby reducing reliance on fossil fuels, which in turn will lower greenhouse gas emissions and decrease electricity generation costs, ultimately reducing the need for subsidies.
The policy also requires SREDA to develop a Renewable Purchase Obligation (RPO) for generation, transmission, and distribution companies. This would mandate that a certain portion of the electricity generated, transmitted, and distributed must come from renewable sources within a fixed timeframe. This kind of mandate is already in place in countries like India. However, the policy doesn’t specify what this portion will be or when the obligation will start. Shahriar Ahmed Chowdhury suggests the RPO should be set at 20% by 2030.
Buyers are increasingly pressuring export-oriented industries in Bangladesh to reduce their carbon footprint. In response, the introduction of a renewable energy certificate system has been proposed. Although the policy does not provide detailed guidance, fossil fuel–dependent industries could purchase such certificates to offset their carbon emissions and contribute toward increasing their renewable energy usage portfolio. The detailed strategy and implementation plan for this system will be finalized by the Sustainable and Renewable Energy Development Authority (SREDA).
The policy also encourages the adoption of agro-voltaics by integrating agriculture with solar power generation. Recognizing the country’s land scarcity, the government has kept open the option to allocate land for solar power plants. Additionally, several government agencies—including Bangladesh Railway, Roads and Highways Department, Bangladesh Bridge Authority, Bangladesh Water Development Board, Bangladesh Inland Water Transport Authority, EPZs, EZs, and BSCIC—can install rooftop solar systems on their unused lands or buildings. These entities will be able to lease their rooftops or land to private investors under government policy.
National Rooftop Solar Program
Following the announcement of the Renewable Energy Policy 2025, the government has begun initiatives to expand solar power. In a meeting chaired by Professor Dr. Muhammad Yunus, the chief advisor of the interim government, the National Rooftop Solar Program was launched. Under this initiative, all government buildings have been instructed to install rooftop solar systems. Hospitals, schools, and colleges are also included in this directive.
However, it remains unclear whether the government will invest directly or adopt a cluster-based model, leasing rooftops and setting tariffs for private sector investment. Sources indicate that there is a plan to install 1,000 MW of solar capacity on government building rooftops within six months. This will be financed by government funds and operated by the private sector. For educational institutions, a cluster model may be implemented, with leasing rates fixed and private investment allowed under net metering guidelines. Each participating institution would benefit from the savings generated.
S.M. Monirul Islam, DCEO & CFO of IDCOL, commented that if the government invests directly in rooftop solar for its own buildings, the benefits would be realized quickly. He emphasized that with a clear policy, single-point tendering, and EPC contracts, 1,000 MW could be added within six months. However, Shafiqul Alam, Chief Energy Analyst, Bangladesh at IEEFA Bangladesh, expressed skepticism about meeting this target within the timeframe. Shahriar Ahmed Chowdhury noted that since the Chief Advisor is personally interested in the issue, the target is likely achievable.
Mustafa Al Mahmud, President of the Bangladesh Sustainable and Renewable Energy Association, stated that their members are eager to participate in this initiative. He recommended that investments be solicited based on area-specific clusters to encourage a better response.
Revival of the Solar Home System (SHS)
Globally, Bangladesh’s Solar Home System (SHS) program is considered a success story. However, due to rapid grid expansion, around 95% of the 6 million installed SHSs are now inactive. Recently, some initiatives have been launched to connect these systems collectively to the national grid. As a result of SHS, IDCOL, the implementing agency, has received USD 18 million through carbon trading. This capital is being used to launch a new rooftop solar program with SHSs of 3–5 kWp capacity.
Nevertheless, there are technical challenges, particularly with inverters. This program will be implemented in peri-urban and rural areas with both grants and loans. Monirul Islam mentioned that discussions are ongoing to secure funding, and there is a possibility of adding 1,000 MW peak capacity from SHS by 2030.
Shafiqul Alam responded optimistically, stating that IDCOL is the most experienced organization in this sector. He suggested that the new SHS program should be integrated with the net metering policy. IDCOL is finalizing the program, having already consulted its partner organizations. However, details on costs, grants, and loans are yet to be disclosed.
Net Metering Guidelines and Rooftop Solar
Industry stakeholders believe that rooftop solar systems on industrial buildings can provide electricity at a much lower cost than grid electricity, which makes it attractive for investment. However, challenges remain due to the reluctance of utilities, especially REB cooperatives, a lack of investment guarantees under CAPEX and OPEX models, and minimal disbursement from Bangladesh Bank’s Green Fund. Currently, IDCOL is the only active investor in this sector.
So far, 130 MW of solar capacity has been installed under net metering. Experts believe there is significant untapped potential. Shahriar Ahmed Chowdhury asserts that, if the environment is favorable, 5,000 MW could be added through net metering in the next decade. He recommends revising the net metering guidelines, noting that the current policy permits solar to 70% of the total load. This could be raised to 100% or more, where feasible.
On the other hand, utility companies are concerned that rooftop solar is reducing their electricity sales. Due to this, it has been proposed that a portion of the savings generated under tripartite agreements be shared with the utilities to encourage cooperation.
When asked how to make better use of the Bangladesh Bank Green Fund, Shafiqul Alam noted that it is currently used for refinancing. He suggested allowing direct funding for solar projects and earmarking part of the fund for rooftop solar investments.
Commercial Model Needed & Solar Irrigation Roadmap
According to SREDA, 43% of agricultural expenses go toward irrigation. Converting diesel-powered irrigation pumps into solar ones could save a large amount of foreign exchange. There are currently 1.3 million diesel pumps in use, while only 2,300 solar irrigation pumps are operational.
A key challenge is that these installations remain idle about 50% of the time. Work is underway to develop a commercial model that would allow the excess electricity to be sold to the grid. However, it is still unclear at what price distribution companies will buy this power under net metering. Some pilot projects have already begun supplying power to the grid.
Currently, projects are implemented with 50% grant, 35% loan, and 15% equity. The Asian Development Bank has prepared a solar irrigation roadmap for the government, which has been adopted. The plan includes installing 32,000 solar irrigation pumps by 2032. However, the study notes that due to groundwater levels, solar irrigation may not be feasible in some sub-districts.
Despite this roadmap, the program is currently losing momentum. Stakeholders emphasize that without a viable commercial model, this initiative is unlikely to succeed.
Utility-Scale Solar: LOI Cancellation and Tendering
In Bangladesh, the total grid-connected renewable energy capacity—comprising hydro, solar, and wind power—stands at 1,192 megawatts. This includes 230 MW from hydropower, 60.9 MW from wind, and 901 MW from solar. An additional 300–400 MW of solar capacity is currently under construction.
Currently, the average tariff for grid-connected solar power is slightly over 13 cents per kilowatt-hour. Recent agreements have set this tariff at 10–11 cents per unit. Critics allege that for the first 13–14 years of its rule, the recently resigned Awami League government took no effective initiative to expand utility-scale solar. However, in its final two years, it received over 100 unsolicited proposals to set up solar projects, totaling more than 10,000 MW of potential capacity.
At the beginning of 2024, 50 local and foreign developers were selected under special legislation. Letters of Intent (LOIs) were issued for 37 projects. However, after the interim government assumed power, all LOIs issued under the special law were canceled. Despite appeals from the Bangladesh Sustainable and Renewable Energy Association to review and accept each proposal, the Power Division did not comply.
Dr. Khondaker Golam Moazzem, Research Director of the Centre for Policy Dialogue (CPD), has repeatedly called for a reassessment and signing of contracts based on the canceled LOIs. Shahriar Ahmed Chowdhury, Assistant Professor at UIU, has also advocated for a selective review and acceptance of the canceled projects. However, the government remains unmoved in its stance.
In parallel, tenders have been invited for 5,238 MW of grid-connected solar projects at various locations. Several changes have been introduced to the tender terms, the most significant being the removal of the implementation agreement—which investors viewed as a payment guarantee. A controversial clause was also added allowing either party to terminate the power purchase agreement (PPA) at any time after the project begins operation. Due to a lack of investor interest, this clause was revised to allow cancellation only after 10 years of operation.
According to the Power Development Board (PDB), a total of 41 bids have been submitted, while four projects received no bids. Nineteen projects received only a single bid. Sources indicate that no major foreign investor participated in the tender. Technical evaluations are in the final stages; the tariff rates will be revealed after opening the financial proposals.
Banks have expressed concern that the current solar IPP policy is not investment-friendly. Earlier this year, Standard Chartered Bank Bangladesh organized a roundtable attended by Energy Advisor Dr. Mohammad Fouzul Kabir Khan, Power Secretary Farzana Momtaz, and Bangladesh Bank Governor Dr. Ahsan H. Mansur. Participants included Standard Chartered CEO Naser Ezaz Bijoy, City Bank Managing Director & CEO Mashrur Arefin, and BRAC Bank Additional Managing Director Tareq Refat Ullah Khan, among others.
They unanimously stated that without an implementation agreement, banks would not be able to finance solar IPPs. In response, Energy Advisor Dr. Khan firmly stated that there was no possibility of reinstating implementation agreements. He emphasized that since the private sector is engaging in business, it must assume the investment risk. The government no longer intends to invest in IPPs as it did in the past.
When asked, Shahriar Ahmed Chowdhury stated that under the current tender terms, investors will add a risk premium, resulting in higher tariffs. Therefore, to implement solar projects on time, the government should review and, if needed, renegotiate the canceled LOIs and move forward with contracts.
Conclusion
Bangladesh’s energy sector stands at a potential turning point under the country’s interim government. At the helm is Dr. Muhammad Yunus, founder of Grameen Shakti, who was instrumental in bringing solar rooftops to rural communities and helping millions access clean electricity for the first time. Alongside him, Energy Adviser Dr. Mohammad Fouzul Kabir Khan brings his experience as the founding CEO of IDCOL—an institution internationally recognized for supporting renewable energy projects. With this leadership team in place, many in the sector are hopeful that the government will inject fresh momentum into Bangladesh’s renewable energy journey.
The recent unveiling of the Bangladesh Renewable Energy Policy 2025 has been welcomed as a step in the right direction. Industry insiders have also embraced the announcement of a national rooftop solar program. Still, their optimism is tempered by experience. Bangladesh has had good policies before, but poor execution, lack of coordination, and limited follow-through have hampered real progress. Over the last three decades, the share of renewable energy in the national energy mix has actually fallen, not grown.
Experts note that countries making big leaps in renewables have used smart financial tools—like feed-in tariffs—to attract investment. Bangladesh, on the other hand, does offer incentives, but they’re often seen as insufficient to draw serious private sector interest. There are also practical hurdles: limited access to advanced technology, a shortage of skilled workers, and a persistent challenge in acquiring land for solar projects—especially for private developers.
A roadmap developed by SREDA with UNDP support once proposed building 11 solar parks. The plan gathered dust. Still, with World Bank backing, 20,000 acres of land were eventually earmarked in Jamalpur for a major solar park. Energy researcher Shahriar Ahmed Chowdhury warns that the government can no longer afford to delay. He believes building solar parks with ready transmission facilities could allow electricity to be delivered at just 6 cents per unit, making it both clean and affordable.
Looking ahead, many see rooftop solar and solar irrigation as low-hanging fruit—solutions that can yield quick gains if backed by smart investment and updated net metering rules. Wind energy, though more costly due to Bangladesh’s moderate wind potential, still holds promise—especially if lessons from ongoing projects are used to guide future onshore and offshore development.
Under the new policy, SREDA is supposed to be the key driver of renewable energy. But right now, it simply isn’t equipped for the job. It lacks the legal authority, technical know-how, and skilled workforce it needs. If Bangladesh wants to meet its clean energy targets, empowering SREDA must be a priority.
Winning investor confidence is another big challenge. The recent cancellation of 37 Letters of Intent (LOIs) for solar projects—some involving foreign partners—has rattled both local and international players. Unless the government reconsiders and reviews these cases, it risks losing out on much-needed investment.
When it comes to utility-scale solar, the way forward is clear: Bangladesh must stick to its Independent Power Producer (IPP) policy, ensure investor-friendly terms, and revive implementation agreements that act as financial safety nets for developers. The new policy’s promise to lower power generation costs and reduce subsidies depends on whether it can replace expensive furnace oil–based power with cheaper renewables.
Finally, experts caution that without specific initiatives to secure land, connect solar sites to the national grid, and improve investor protections, the country won’t be able to drive down the cost of solar electricity. The current government appears committed to a greener future with targets for 2030 and 2040 in place. If it follows through with action, not just promises, Bangladesh could very well usher in a new era of clean, affordable, and sustainable power for all.
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