Bangladesh recently unveiled the Draft Renewable Energy Policy 2025 (DREP) which was open for public consultation until February 24, 2025. The country is trying to increase the share of renewable energy in the overall mix. According to data, only about 4% of the 28,000 MW of installed capacity is made of renewable energy sources. 

IEEFA, an independent energy finance think tank that examines issues related to energy markets, trends and policies, published its comment on the draft.

IEEFA said that the DREP manifests the country’s enhanced renewable energy ambition when compared with the 2008 policy. The DREP considers a potential import duty waiver for decentralised renewable energy systems, advocates a Sustainable Energy Development Fund for research and human resource development and potential review of the policy every three to five years. Among other things, it takes into account the critical nature of a time-based roadmap for renewable energy implementation, peer-to-peer trading, open access renewable energy transmission to establishments and undertaking a study to select adequate land for renewable energy projects. While the DREP incorporates important policy aspects that are essential for a planned renewable energy expansion, there is scope for improvement, IEEFA said.

IEEFA notes that the DREP aligns with the Integrated Energy and Power Master Plan (IEPMP) and other national plans. Given the government’s intention to revise the IEPMP, IEEFA suggests incorporating the finalised renewable energy policy within this updated framework. Additionally, the revised Nationally Determined Contributions should reflect the policy’s renewable energy targets to ensure coherence with Bangladesh’s broader climate commitments.

The DREP takes into account legal and institutional frameworks, holding Bangladesh Bank, IDCOL and other financial institutions responsible for filling the financing gap in developing infrastructure and renewable energy projects in the country. Since most utility-scale projects undertaken in the country have utilised foreign investment and low-cost funds from multilateral development banks, the Bangladesh government can broaden this financing framework to highlight the government’s vision of utilising different financing avenues to scale up renewable energy, IEEFA said. Additionally, the Securities and Exchange Commission is expected to play a vital role if a renewable energy project intends to utilise the bond market.

IEEFA raises another vital point, that of manufacturing and critical minerals. Since the Bangladesh government will promote the manufacturing of solar accessories and may also provide a production-linked incentive, it can consider resource mapping for critical minerals and assessment of the related supply chain to evaluate the extent of dependence on imports and its feasibility, IEEFA said.

Competition through reverse auctions, along with the falling cost of technology, has played a crucial role in the significant drop in renewable energy tariffs in different countries in the last 10- 15 years. IEEFA said that while land scarcity and the high cost of land mean that renewable energy tariffs in Bangladesh are unlikely to match those of other countries, properly designed revised auctions can bring down the cost in Bangladesh.

“Given that the DREP indicates that the government may allocate land for renewable energy projects, based on land study, reverse auctions may be effective in driving down tariffs. The final Renewable Energy Policy could consider incorporating guidelines for reverse auctions,” IEEFA said.

Smart-grid roadmap for a modernised power sector

Bangladesh is also working towards a more reliable and resilient power infrastructure. In collaboration with the US Trade and Development Agency (USTDA), the Boston Consulting Group (BCG) has developed a smart-grid roadmap and implementation plan aimed at modernising Bangladesh’s energy sector.

Despite progress in expanding electricity access, Bangladesh continues to face challenges related to power reliability and resilience. The Ministry of Power, Energy, and Mineral Resources (MPEMR) views smart-grid technologies as crucial for increasing capacity, meeting climate goals and strengthening energy security. However, limitations in grid automation, technological expertise, and stakeholder coordination have hindered progress.

To address these issues, BCG partnered with USTDA to connect Bangladesh’s smart-grid needs with US technology suppliers. This collaboration sought to facilitate knowledge exchange while equipping Bangladesh with advanced solutions for a greener and more efficient power system.

The project was executed in two phases. The first phase involved developing a smart-grid roadmap, assessing Bangladesh’s power sector, and evaluating utilities’ readiness for smart-grid technology. Key areas of analysis included operational challenges, technological gaps, environmental impact, and funding options. The roadmap featured nearly 30 initiatives designed to modernise the grid by 2030.

The second phase focused on piloting smart-grid initiatives. BCG supported two utilities in designing 10 pilot programmes spanning distribution, transmission, and sector-wide projects. This phase involved technical assessments, risk-mitigation strategies, capacity-building sessions, and stakeholder engagement.

Driving innovation and investment

In partnership with USTDA, BCG organised a “Smart Grid Experience Day” that brought together eight OEMs and technology partners from the US, who showcased their smart-grid solutions. Also, participants from four global finance and development-finance entities were introduced to look for funding opportunities. Furthermore, four US technology companies penned memorandums of interest to set up innovation demo labs under a newly unveiled Smart Grid Innovation Hub.

The smart-grid roadmap and pilot execution plan developed by BCG served as a framework for the government, boosting ongoing capacity-building plans and advancing Bangladesh's aim for a sustainable power future.

For Bangladesh’s power companies, the project has meant improved operational efficiency and reliability via the adoption of smart-grid technologies, which will cut transmission and distribution losses, BCG said. By modernising infrastructure and setting up technical capacity as well as human capability, utilities can meet rising energy demands while supporting Bangladesh’s energy goals by cutting environmental impact and providing affordable electricity, BCG said.

BCG said that the project has huge implications for the resilience of the power grid in a country that often faces extreme weather events due to climate change. Reliable power will benefit both the power sector and the wider economy leading to the creation of more jobs and new economic opportunities.