Jun 13, 2025
| Musharraf Tansen | The Daily Observer
Bangladesh stands at a pivotal moment. The country faces mounting climate risks, rising fuel import costs, and growing energy demands. At the same time, it has the opportunity to redefine its energy future through a transition to renewable energy. The national budget for FY 2025-26, recently unveiled, offers a crucial opportunity to assess how seriously this transition is being prioritized. While there are positive institutional signals-such as the government's near-final revision of the outdated 2008 Renewable Energy Policy-the budgetary allocations tell a different story.
In FY 2024-25, the government introduced a Tk 100 crore (approximately USD 10 million) renewable energy fund. Modest as it was, the move was symbolically important, signaling recognition of the urgent need to diversify the country's energy mix. Yet in the FY 2025-26 budget, there is no mention of this fund-no continuation, no increase. This silence signals a concerning retreat just when momentum was starting to build.
Instead, the energy and mineral resources division received an allocation of Tk 2,178 crore-an increase from Tk 1,086 crore the previous year (revised to Tk 1,053 crore). On the surface, this appears encouraging. But crucially, the budget provides no dedicated allocation for renewable energy development within this increase. There is no indication of targeted investments aligned with Bangladesh's stated energy transition goals.
This is deeply troubling in light of the country's commitments under the Integrated Energy and Power Master Plan (IEPMP), which targets 40% of electricity generation from renewable sources by 2041. Meeting this goal would require an estimated cumulative investment of USD 37.4 billion and installation of 37.8 GW of renewable capacity by 2050. By comparison, last year's allocation of Tk 100 crore represented less than 0.03% of this investment need. Its absence in the current budget suggests a lack of long-term strategic vision and a failure to take early, necessary steps.
More broadly, the energy sector budget remains skewed toward fossil fuels. Substantial resources continue to be directed toward LNG subsidies, diesel-based generation, and capacity payments to idle fossil fuel plants. Over Tk 7,000 crore is proposed for LNG subsidies alone-dwarfing any support for renewables. At a time when global fuel prices are volatile and foreign currency reserves are under strain; this budgetary choice deepens economic vulnerabilities while undermining environmental goals.
Despite government rhetoric on energy diversification, there is no significant shift in budget allocations to support this transition. No provisions are made for retiring inefficient oil-based power plants or for building new grid infrastructure to integrate solar and wind at scale. Nor are there measures to encourage battery storage or smart grid technologies.
Bangladesh also faces long-standing structural and regulatory challenges. Land availability remains a major bottleneck for solar and wind projects. Grid infrastructure is underdeveloped in areas with high renewable potential. Though some incentives exist-like duty exemptions on solar components-these have failed to catalyze large-scale private investment. Policy inconsistency and weak institutional coordination further hinder progress. The 2008 Renewable Energy Policy is outdated and lacks legal enforcement. Tender processes are often delayed or cancelled, undermining investor confidence.
Reliance on imported fossil fuels is another structural constraint. In FY 2023-24, Bangladesh spent billions on energy imports, draining reserves and widening the trade deficit. Instead of using the FY 2025-26 budget to reverse this trend, the government has opted to double down-missing a key opportunity to pivot toward energy sovereignty through renewables.
Yet, despite these challenges, some promising developments signal a gradual shift. The operation of a 60 MW wind plant in Cox's Bazar marks the country's first major commercial wind project. A 500 MW solar tender is also underway. Institutions like the Sustainable and Renewable Energy Development Authority (SREDA) and Dhaka University's Renewable Energy Research Centre are contributing through energy audits, capacity-building, and policy research. In the private sector, rooftop solar systems are gaining traction among industries seeking to reduce costs and ensure reliability.
To turn these encouraging signs into a full-scale transition, Bangladesh needs to rethink its budgetary and policy approach. Here are five urgent steps the government must take:
Scale up investment:The government should commit at least Tk 1,000 crore annually to renewable energy. Priorities should include utility-scale solar and wind, battery storage, and off-grid mini-grid solutions for rural electrification. Targeted public investment can crowd in private capital and accelerate job creation in green sectors.
Mobilize green finance:The central bank can lead efforts to create green bonds, refinancing schemes, and blended finance mechanisms to de-risk renewable investments. Local banks and financial institutions must be equipped and incentivized to finance green energy ventures.
Enact a new renewable energy law:The outdated 2008 policy must be replaced with a Renewable Energy Act that includes enforceable targets, streamlined project approval processes, and strong regulatory backing. Inter-ministerial coordination should be institutionalized to improve execution.
Reallocate fossil subsidies: Bangladesh should begin phasing out subsidies for fossil fuels and redirect a portion-starting with LNG subsidies-to clean energy development. This would send the right market signals and support more sustainable fiscal management.
Invest in enabling infrastructure: Renewable energy cannot thrive without grid modernization. Investments in transmission and distribution, expansion of net metering, and development of technical standards for grid integration must accompany renewable project development.
The FY 2025-26 budget, while containing some positive signals, falls short of delivering a coherent and adequately funded renewable energy transition. The omission of continued support for the renewable energy fund and the ongoing dominance of fossil fuel subsidies reflect a disconnect between stated policy ambitions and fiscal decisions.
Yet the transition to clean energy is not a luxury-it is a necessity. It is about future-proofing the economy, reducing dependency on volatile global energy markets, and ensuring equitable access to affordable energy. Bangladesh has the human capital, institutional know-how, and regional leadership potential to be a clean energy frontrunner in South Asia.
What remains to be seen is whether it has the political will and fiscal resolve to seize this opportunity. The time for symbolic gestures is over. Bangladesh must act with urgency, invest at scale, and lead with clarity to build a just, inclusive, and sustainable energy future.