Renewable Energy Policy 2025: Powering Bangladesh’s clean energy transition

Electricity demand in Bangladesh is projected to exceed 30,000 MW by 2030, while current renewable energy capacity remains limited at around 1,600 MW—far below the government's target of achieving 20% (approximately 5,600–6,145 MW). 

According to the Power System Master Plan (PSMP), peak electricity demand could reach nearly 60,000 MW by 2041, driven by an annual growth rate of 7–10%. To meet this rising demand, the government has adopted an ambitious strategy focused on expanding generation capacity, strengthening grid reliability, and diversifying the energy mix.

In recent years, Bangladesh's energy strategy has gradually shifted away from coal-heavy plans toward a more diversified portfolio that includes LNG, nuclear, and renewable energy. The Rooppur Nuclear Power Plant is expected to provide baseload power, while efforts are underway to scale up solar deployment, particularly on public land. 

However, renewable energy must move from the margins to the mainstream of Bangladesh's energy future. Without significant policy reforms, fossil fuel import bills could increase sharply, exacerbating fiscal pressures—especially amid global uncertainties such as geopolitical tensions and oil market volatility.

Against this backdrop, the Renewable Energy Policy 2025 represents a critical step forward. Its key objectives include reducing electricity tariffs and government subsidies, promoting the dissemination of renewable technologies, encouraging local manufacturing, reducing dependence on fossil fuels, attracting investment through improved institutional frameworks, ensuring product standardisation and cost competitiveness, increasing the share of green energy, and promoting battery energy storage systems.

The new policy marks a clear departure from the Renewable Energy Policy of 2008. While the earlier policy focused primarily on solar home systems, biomass, and small-scale projects, the 2025 policy emphasises utility-scale solar and wind power, hybrid renewable systems, and energy storage technologies. It also expands the role of the private sector through greater public-private partnerships and a more market-oriented approach.

The policy sets ambitious targets: achieving 20% renewable energy by 2030 and 30% by 2041. It prioritises large-scale solar and wind expansion, promotes rooftop solar and distributed generation, supports hybrid systems, and encourages both foreign and private investment.

Despite these strengths, several critical challenges remain. Implementation mechanisms are not sufficiently detailed, particularly regarding financing, land allocation, and institutional readiness. Bangladesh faces structural constraints, including limited availability of land for utility-scale solar projects and high upfront investment costs. The financial sector is not yet adequately prepared to support renewable projects, often lacking both technical understanding and appropriate financing instruments.

Institutionally, the Power Division under the Ministry of Power, Energy and Mineral Resources (MPEMR) holds overall responsibility, with the Sustainable and Renewable Energy Development Authority (SREDA) serving as the nodal agency. The policy assigns SREDA a wide range of responsibilities, including establishing a sustainable energy development fund, preparing implementation roadmaps, developing technical guidelines, facilitating investment, and coordinating across agencies.

SREDA is under-resourced and poorly synchronised with Bangladesh Investment Development Authority (BIDA), National Board of Revenue (NBR), Bangladesh Power Development Board (BPDB), and development partners. On top of it, the organisation has inadequate manpower to fulfil all the requirements  stated in the policy. 

It is seen that SREDA will extend services of equipment tests through accredited labs, prepare guideline for implementation of floating solar projects, guideline for biomass projects, guideline for energy storage system in the RE captive/third party sale projects, settle customs duties and exemptions, guideline for introducing Renewable Energy Obligation (RPO) and Renewable Energy Certificate (REC), develop regulations to maintain the nationwide RE project designer, installer, maintenance engineers, supplier, importers, manufacturers, OPEX investors, EPC companies. While the government will promote peer-to-peer (P2P) trading of rooftop solar PV energy between two or more grid-connected parties, the guidelines will be developed by SREDA.

SREDA will also follow up implementation of Net Metering Guidelines 2018,  formulate specific guidelines for the management of bio-slurry, in consultation with other concerned ministries. SREDA also tasked as per the new RE policy to prepare a guideline for the maintenance of solar panels, inverters and associated equipment of solar energy plants. It is seen that implementation of the policy is dependent on preparing a number of guidelines, road maps, facilitation, data base development and coordination with a number of other organisations supporting energy infrastructure, providing services and looking after regulatory obligations. SREDA with about forty plus manpower is capable enough to handle these issues is a big question.

The policy has given emphasis on promotion of floating solar projects, the guideline for which will also be prepared by SREDA. The promotion of wind energy will be and a wind mapping exercise will be published by SREDA by identifying potential locations, SREDA will arrange to conduct wind resource assessment as early as possible to fulfil the wind energy  target. Similarly for biomass projects a guideline will be developed by SREDA. Other guidelines for the use of energy storage systems in RE captive/third -party sale projects will be issued by SREDA with the approval of the power division. 

Bangladesh must adopt a comprehensive reform agenda. Fiscal policies, climate commitments, and regulatory frameworks need to be aligned to create a cohesive and investment-friendly ecosystem. Net metering should be modernised to support flexible rooftop integration and peer-to-peer trading, while binding renewable purchase obligations should be introduced for utilities.

The policy also envisions advanced mechanisms such as peer-to-peer (P2P) electricity trading, cross-border renewable energy cooperation, and expanded rooftop solar integration. However, many of these initiatives remain at the conceptual stage, pending detailed guidelines and regulatory frameworks to be prepared by SREDA, all of which need extensive R&D support by the concerned and required projects to engage experts from local and abroad. Industry-academia collaboration is a must in that direction.

Until SREDA is fully prepared with all these guidelines, framework and supporting staff to provide research, testing, advocacy and similar other services, it is beyond expectation that private sector investment in the diversified renewable energy sector is possible. 

In Bangladesh, project developers often face delays of 12–18 months, compared to 6–8 months in countries like India and Vietnam. Financing remains heavily debt-dependent, with interest rates ranging from 9–12% and limited availability of blended finance instruments. These barriers create a cycle of high costs, reduced investor interest, and slow adoption.

Regional cooperation also remains underdeveloped. While the policy mentions cross-border renewable energy trade with India, Nepal, and Bhutan, practical implementation is lacking. Bangladesh continues to rely heavily on fossil fuel imports, missing opportunities to access lower-cost hydropower and renewable energy from neighboring countries and to balance seasonal supply variability through regional grid integration.

In contrast, countries like Vietnam and India have adopted more proactive and integrated approaches. Vietnam's recent policy reforms, including direct power purchase agreements (DPPAs) and ambitious renewable energy targets, have attracted substantial private investment and enabled rapid expansion of solar capacity. Similarly, India's Production Linked Incentive (PLI) schemes have supported domestic manufacturing of solar components and green hydrogen, strengthening both energy security and industrial capacity.

Bangladesh's renewable energy framework, by comparison, remains fragmented and reactive. The absence of strong incentives for local manufacturing of solar panels, batteries, and inverters has increased dependence on imports, undermining competitiveness and resilience. Additionally, the current tariff structure places higher duties on renewable energy equipment compared to conventional alternatives such as diesel generators, creating a disincentive for clean energy adoption.

To address these challenges, Bangladesh must adopt a comprehensive reform agenda. Fiscal policies, climate commitments, and regulatory frameworks need to be aligned to create a cohesive and investment-friendly ecosystem. Net metering should be modernised to support flexible rooftop integration and peer-to-peer trading, while binding renewable purchase obligations should be introduced for utilities.

Equally important is strengthening regional energy cooperation through cross-border electricity trade, enabling Bangladesh to leverage hydropower and renewable resources from neighboring countries. The government should also create stronger incentives for private sector participation through transparent procurement processes, risk-sharing mechanisms, tax incentives, and concessional financing.

Finally, aligning renewable energy policy with industrial policy is essential. Supporting domestic manufacturing through targeted incentives can reduce import dependency, create jobs, and position renewable energy as a driver of economic transformation rather than a peripheral sector.

In conclusion, while the Renewable Energy Policy 2025 represents a significant step forward, its success will depend on effective implementation, institutional strengthening, and policy coherence. Without these, Bangladesh risks falling short of its renewable energy targets and remaining vulnerable to external energy shocks. With the right reforms, however, the country has the potential to build a resilient, sustainable, and inclusive energy future.

Sketch: TBS

Ferdaus Ara Begum is the Chief Executive Officer of BUILD, a public-private dialogue platform that works for private sector development.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.