Bangladesh’s energy crisis may ease in the short term, but it cannot be fully resolved without a strong transition to renewable energy, the Centre for Policy Dialogue said on Monday.
Speaking at the 4th Bangladesh-China Renewable Energy Forum in Dhaka, CPD Research Director Khondaker Moazzem stressed the need to reduce reliance on fossil fuels. “We must think beyond fossil fuels. The current crisis is not something that will disappear overnight,” he said.
The forum, held under the theme “Transforming Crisis into Opportunities,” also highlighted the importance of stronger energy cooperation between Bangladesh and China. Moazzem noted that China is leading globally in renewable energy and that deeper collaboration could help Bangladesh expand clean energy investment.
CPD introduced a framework titled “3F-3R”—‘Fallen Fossil Fuel, Rising Resilient Renewables’—to describe the structural shift needed in Bangladesh’s energy sector.
The think tank warned that even if global energy supply disruptions ease, Bangladesh will continue to face economic pressure from past shocks. Its analysis suggests that oil price volatility could reduce GDP growth slightly, increase inflation, and weaken the local currency over time.
According to CPD, Bangladesh plans to generate 10,000 megawatts of electricity from renewable sources by 2030, which will require about $9.36 billion in investment across solar, wind, and biomass projects.
However, the report identified major barriers to attracting investment, particularly in power purchase agreements (PPAs). CPD said the quality of these contracts has declined over time, offering less protection to investors. Earlier agreements included stronger guarantees and dispute resolution mechanisms, but recent versions have shifted more risk onto investors.
The situation worsened after the government discontinued implementation agreements that previously ensured payment security. CPD noted that no effective alternative has yet been introduced.
Investment challenges are further compounded by delays in payments, currency risks, and complex approval processes involving multiple agencies. In some cases, investors have also faced unexpected changes to agreed tariffs after completing projects.
The think tank warned that such issues are discouraging foreign investors, including those from China, who account for more than half of foreign direct investment in Bangladesh’s renewable energy sector.
CPD also cited the cancellation of 31 solar project proposals—worth about $6 billion—as a negative signal for investors.
To address these challenges, CPD recommended immediate and medium-term reforms. These include introducing payment guarantees through letters of credit, improving coordination among government agencies, and restoring a reliable framework to protect investor commitments.
The organisation also called for policy support such as tax exemptions on renewable energy equipment and easier access to financing, including a dedicated fund by Bangladesh Bank.
Looking ahead, CPD said Bangladesh could benefit from Chinese technology and investment, including the possibility of setting up local battery manufacturing facilities.
The report also highlighted external pressure to accelerate the green transition. Under the Carbon Border Adjustment Mechanism, set to take effect in 2027, Bangladesh’s export industries will need to use cleaner energy to avoid additional costs in European markets.
The event was attended by Energy Adviser Iqbal Hassan Mahmood, along with Chinese investors, government officials, and stakeholders from the energy sector.