Bangladesh’s transition to renewable energy faces significant financing challenges that require urgent attention to unlock the country’s substantial green energy potential. The nation needs innovative financial solutions to overcome current barriers and achieve its ambitious renewable energy targets by 2030. The scale of investment required is substantial yet achievable. Bangladesh needs $1b yearly to generate 20% electricity from renewables by 2030, according to recent analysis by energy experts. This investment target reflects the magnitude of the transition challenge facing the country. Multiple barriers currently hinder green energy financing in Bangladesh. There are several barriers to green energy financing in the country, including rapid policy changes, offtaker risk, a complex loan disbursement process, and land acquisition challenges. These structural issues require coordinated policy responses to create more favorable investment conditions. Currency volatility has significantly impacted financing costs and project economics. The devaluation of the Bangladeshi Taka by a massive 27% against the US dollar between May 2022 and January 2025 has made foreign currency loans more expensive and created additional uncertainty for investors planning long-term projects. Credit rating challenges compound the financing difficulties. Moody’s downgraded Bangladesh’s credit rating to B2 in November 2024 from B1 earlier, based on the country’s lower-than-expected economic growth in the near term, political challenges, and banking sector risks. This downgrade increases borrowing costs for both government and private sector renewable energy initiatives. International support is emerging to address financing gaps. The Renewable Energy Facility is expected to mobilize up to $763 million in investments and to contribute to the installation of an estimated 750 MWp of new renewable energy capacity in Bangladesh. This facility demonstrates growing international confidence in Bangladesh’s renewable energy potential. The economic case for renewable energy remains compelling despite financing challenges. Dependence on imported fossil fuels has proven costly for Bangladesh. Apart from the high price volatility of fossil fuels in the international market during 2022-23, the recent devaluation of the Bangladeshi Taka has made fossil fuel imports more costly. This cost pressure strengthens the economic argument for domestic renewable energy development. Grid modernization requires parallel investment to support renewable energy expansion. As Bangladesh’s variable renewable energy capacity is likely to surge in the next five years, the old electricity grid might experience stability issues. The new budget should allocate sufficient funds for grid modernisation and expansion. Success depends on coordinated efforts between government policy reform, international financing partnerships, and private sector engagement to create sustainable financing mechanisms for Bangladesh’s green energy transformation.
