Staff Reporter :
Bangladesh must restore regulatory certainty and reinforce investor assurances to regain investor confidence and unlock essential funding for its renewable energy ambitions, according to a new report from the Institute for Energy Economics and Financial Analysis (IEEFA).
Under its updated Renewable Energy Policy, the country aims to generate 20 per cent of its electricity from renewable sources by 2030, rising to 30 per cent by 2040.
To meet these targets, IEEFA estimates Bangladesh will require between $933 million and $980 million in annual investment until 2030. Thereafter, annual investment needs are projected to increase to between $1.37 billion and $1.46 billion through to 2040.
IEEFA has urged Bangladesh to proactively engage with multilateral development banks, international climate finance entities, and bilateral development finance institutions to mobilise capital.
“Public finance alone will be insufficient to meet the scale of investment required. Private sector participation will be critical,” said Shafiqul Alam, IEEFA’s lead energy analyst for Bangladesh.
To address currency volatility that could deter foreign investors, the report recommends the establishment of a currency hedging mechanism.
Investor confidence has been undermined by recent policy changes, most notably the suspension of 31 utility-scale renewable energy projects that were previously approved through non-competitive bidding. The cancellations have raised contractual uncertainties and highlighted the need for stable and transparent policy frameworks.
The IEEFA report recommends reinstating the “project implementation clause” to provide clarity around payment obligations and calls for a revenue assurance mechanism to mitigate counterparty risk for renewable energy producers.
Beyond regulatory issues, the report also identifies a range of structural barriers to private investment, including difficulties with land acquisition, off-taker risk, technology and performance concerns, weak project pipelines, and complex loan disbursement processes.
Bangladesh’s appeal to foreign investors is further constrained by its low sovereign credit rating. In November 2024, Moody’s downgraded the country’s rating from B1 to B2, citing weaker-than-expected economic growth, political uncertainty, and vulnerabilities within the banking sector. The downgrade has made international borrowing more costly for Bangladeshi entities.
Labanya Prakash Jena, IEEFA sustainable finance consultant, noted: “The downgrade has further weakened Bangladesh’s credit profile in international financial markets, compounding the challenges of securing cost-effective financing.”
Despite these obstacles, the government’s recent move to reduce customs duties on imported solar inverters has been welcomed as a step in the right direction. The report encourages similar duty reductions on components for small-scale solar installations, such as panels and associated hardware, to catalyse further investment.
To enhance access to finance, IEEFA suggests introducing a credit risk guarantee scheme and implementing a pre-financing modality for green funds administered by the Bangladesh Bank, aimed at simplifying and accelerating disbursements.
“The government, development partners, financial institutions, investors, and renewable energy companies must work collaboratively to create an enabling environment that supports innovation, investment, and sustainable growth,” said Alam.
