Dhaka: Renewable energy accounts for a mere 5 percent of Bangladesh’s revised development budget allocation for the power and energy sector in the current fiscal year, while fossil fuel-based infrastructure continues to absorb nearly 80 percent of the allocation, as revealed by a new study from the Centre for Policy Dialogue (CPD).
According to United News of Bangladesh, the findings were presented at a CPD programme titled “Renewable Energy in the Upcoming Budget: Expectations and Reality,” held at a city hotel. Prime Minister’s Adviser on Finance and Planning Rashed Al Mahmud Titumir attended as the chief guest, with CPD Research Director Khondaker Golam Moazzem moderating the session and Programme Associate Md. Khalid Mahmud presenting the paper.
The study, named “Renewable Energy in the National Budget 2026-27: Overshadowed by Fossil Fuels?”, highlighted that renewable energy projects account for only 3 percent of the total power and energy project budget. These projects receive a mere 5 percent of the revised FY2026 allocation, amounting to BDT 795 crore, in stark contrast to fossil fuel-based projects, which command 87 percent of the total project budget and 79 percent of the actual allocation.
Bangladesh has expended over BDT 1,474 billion subsidising fossil fuel-based power generation between FY2020-21 and FY2024-25. The subsidy burden surged to BDT 620 billion in the revised FY2024-25 estimate, against an expected BDT 350-370 billion for the current year. The country provides the highest energy subsidy as a share of the sector budget, approximately 34 percent, among selected Asian countries.
The study also noted the omission of a BDT 100 crore renewable energy allocation in the FY2025-26 budget, which had been included in the previous fiscal year. It further indicated the absence of new incentives for solar or other clean energy technologies.
Currently, Bangladesh’s total installed renewable energy capacity stands at approximately 1,745 MW, with solar photovoltaic systems making up 83 percent of the total. Renewables account for just 5.39 percent of the country’s total installed capacity. The compound annual growth rate of renewable capacity from 2016 to May 2026 was recorded at 15.78 percent.
On the private sector front, while 168 MW of solar projects were completed in FY2024-25, around 321 MW are under construction, and over 5,254 MW remain in the tendering or planning phase, raising concerns about the pace of the procurement process. Bangladesh floated four tender packages for a combined 5,238 MW of renewable capacity between December 2024 and March 2025, but limited investor interest required repeated deadline extensions. The government has also cancelled 31 letters of intent covering 3,287 MW of capacity, triggering 11 High Court petitions.
The CPD study identified high import duties as a key barrier, with lithium-ion batteries facing a total tax incidence of 61.80 percent and solar inverters facing 28.73 percent. It called on the National Board of Revenue (NBR) to adopt a full-chain duty waiver across the entire solar value chain rather than selective relief on individual components.
Among its recommendations, the study urged the government to establish a standalone Renewable Energy Development Fund with ring-fenced allocations, create a dedicated Ministry of Renewable Energy, restructure SREDA into a statutory regulatory body with enforcement authority, and adopt a rolling three-year RE budget commitment to give investors long-term fiscal visibility. It also recommended a phased, legislated reduction in fossil fuel subsidies tied to verified renewable capacity additions and a direct RE promotion subsidy.
To meet the government’s target of generating 10,000 MW from solar by 2030, the study suggested that Bangladesh would need to install approximately 1,662 MW annually from January 2026 onward, requiring a substantially different budgetary posture than currently on offer.