Green shift essential for energy security: CPD

Bangladesh’s ongoing energy crisis may experience temporary relief, but a sustainable solution will remain elusive without a decisive shift towards renewable energy, the Centre for Policy Dialogue (CPD) has said.

Speaking at the 4th Bangladesh–China Renewable Energy Forum in Dhaka on Monday, CPD Research Director Khondaker Golam Moazzem emphasised the urgent need to reduce reliance on fossil fuels.

The event was attended by Power, Energy and Mineral Resources Minister Iqbal Hassan Mahmood as chief guest, along with investors, development partners and stakeholders from the energy sector.

Held under the theme “Transforming Crisis into Opportunities: Renewable Energy Development under the New Government,” the forum brought together policymakers and experts to explore pathways for long-term energy security.

“We must think beyond fossil fuels,” Moazzem said, warning that the global energy crisis driven by fossil fuel dependence cannot be resolved quickly.

He stressed that Bangladesh must urgently pursue alternative energy sources to ensure long-term stability.

Highlighting China’s leadership in renewable energy innovation and investment, he noted that Chinese involvement in Bangladesh’s green energy sector is already substantial.

The forum, he added, aimed to identify opportunities to deepen bilateral cooperation and attract further investment.

In its presentation, CPD introduced a framework titled “3F-3R: Fallen Fossil Fuel, Rising Resilient Renewables,” outlining the structural transformation required in the country’s energy mix.

The organisation cautioned that even if geopolitical tensions in the Middle East ease and key supply routes reopen, Bangladesh is likely to face prolonged economic pressure from energy disruptions.

According to CPD’s econometric analysis, global oil shocks could have lasting macroeconomic effects, including GDP losses ranging from 0.21 per cent to 0.53 per cent, inflation increases between 0.6 per cent and 13.6 per cent, and depreciation of the taka by 0.56 per cent to 4.5 per cent over the medium to long term.

The government has set a target of generating 10,000 megawatts of electricity from renewable sources by 2030.

CPD estimates that achieving this goal will require approximately $9.36 billion in investment across solar, wind, biomass and biogas projects.

A key focus of the discussion was Power Purchase Agreements (PPAs), which are critical for attracting investment.

CPD observed that Bangladesh’s PPA framework has weakened over time in terms of investor protection.

While earlier agreements offered balanced risk-sharing and strong guarantees, more recent revisions have increasingly favoured the government.

The discontinuation of Implementation Agreements, which previously provided sovereign guarantees, has further complicated the situation.

CPD noted that no effective replacement mechanism has been introduced, undermining investor confidence.

The think tank also pointed out that Chinese investors account for more than half of foreign direct investment in Bangladesh’s renewable energy sector, making reliable PPAs essential for continued cooperation.

Several structural challenges continue to deter investment. Payment delays remain a significant concern, with standard cycles of two to three months often extending to five to eight months.

Although payments are linked to the US dollar, there is no compensation for exchange rate losses during delays, increasing financial risks for investors.

Institutional inefficiencies further hinder project implementation. Approval processes across multiple agencies lack clear timelines, while coordination gaps between ministries create additional obstacles.

In some instances, land approved at the central level has faced disputes at the local level.

CPD also flagged the cancellation of 31 solar project Letters of Intent—representing 5.68 gigawatts and ????? $6 billion in potential investment—as a negative signal to investors.

To address these issues, CPD recommended a series of short- and medium-term reforms.

In the immediate term, it proposed the introduction of a revolving letter of credit backed by sovereign guarantees to ensure timely payments.

Over the medium term, it called for improved institutional coordination, stronger contract structures and the restoration of credible investor protections.

The organisation also urged supportive policy measures, including tax exemptions on renewable energy equipment and the provision of low-cost financing for rooftop solar projects.

It highlighted the potential for local manufacturing partnerships with Chinese firms, particularly in battery technology.

With the European Union’s Carbon Border Adjustment Mechanism set to come into force in 2027, CPD warned that Bangladesh’s export industries must adopt cleaner energy sources to remain competitive in the global market.