Renewable Energy Dev
Originally posted in Daily Observer on 15 September 2025
Investment remains low despite fat incentive
Despite having huge incentive – banks committed effort to direct financing in country’s renewable energy (RE) development, the sector’s investment was still not considered profitable by companies.
Study revealed that Bangladesh currently required a staggering Tk 87,000 crore in investment in the next six years to achieve its renewable energy goal, however, is not promising as a little more than Tk 2,000 crore had been invested in the last six years.
According to the Power Division, in the last decade Tk 2.87 lakh crore was invested in fossil fuel against only Tk 4,500 crore spent in renewable energy sector.
“Banks always want to escape the risk of losing their capital by lending to investors of fossil fuel-based projects which went on the verge of defaulting on loan payment as the government struggled to pay their dues,” City Bank country business manager Ahsanur Rahman said recently.
Last fiscal, the power development board cleared 49.7 per cent of its total dues. It paid more than Tk 43,882 crore to 115 power producers, revealed the official data, with 78 per cent of the payment-Tk 34,410 crore-going to 24 IPPs.
Bangladesh’s current subsidy requirement in the power and energy sector is over Tk 50,000 crore, including Tk 34,000 crore subsidy, required for power sector alone.
Moreover, RE projects are more risky compared to the fossil fuel-based projects, so in true sense banks are not feeling comfort in investing in RE projects presently but the fact remains that banks could not profit from their investments in the power sector, especially from RE.
“If the government wants massive immediate expansion in renewable energy sector, it should urge authorities of the banks to extend loan payback period to 10-12 years from existing six years, which was too short a period for renewable energy investors,” Centre for Policy Dialogue research director Khondaker Golam Moazzem said.
He said for adopting financing instruments to facilitate transferring of foreign direct investments (FDI) and investment from multilateral development banks (MDBs) into the renewable energy sector.
It may be mentioned here that power demand is growing at 7 per cent annually, with peak demand projected to surpass 25,000 MW by 2030. In response, the government’s draft renewable energy policy sets ambitious goals, 20 per cent of total power from renewables by 2030 and 30 per cent by 2040. The roadmap includes incentives for local manufacturing, battery storage integration, competitive electricity trading, and targeted fiscal and financial support for investors.
‘The IPPs have destroyed the power sector,’ said power, energy and mineral resources adviser Muhammad Fouzul Kabir Khan.
‘Governments buying electricity is no longer in fashion,’ the adviser said recently adding that we enact a new policy being formulated would allow independent power producers to generate and sell electricity on their own.
The new policy builds on the Enhancement of Private Participation in the Power Sector 2008 and introduces the Corporate Power Purchase Agreement (CPPA), which allows industries and commercial establishments to purchase renewable energy directly.
Stakeholder consultations on the draft were held in July 2025 with representatives from SREDA, KfW Bank, Ditrolic Energy, Dentons Rodyk & Davidson LLP (Bangladesh), BSRM Ltd., Bangladesh Textile Mills Association (BTMA), H&M, and other stakeholders from the renewable energy and industrial sectors.
According to him, the policy aimed at boosting private sector participation in electricity generation for the export-oriented industries including textile and ready-made garments (RMG) industries in order to reduce their carbon footprint.