Driven by a strong commitment to renewable energy, the government of Bangladesh enacted the Renewable Energy Policy of Bangladesh (REPB) in 2008, setting ambitious targets to achieve a 5% share of renewable energy in total generation capacity by 2015 and a 10% share by 2020. The government of Bangladesh further envisioned expanding this 10% target significantly by 2041. However, these goals remain unfulfilled.

In June 2023, the power generation capacity of Bangladesh amounted to 24,911 MW. Combined cycle plants contribute the most at 8,363 MW (33.57%), followed by reciprocating engines at 8,023 MW (32.21%). Steam turbines contribute 3,742 MW (15.02%), gas turbines add 1,438 MW (5.77%), and hydropower plants provide 230 MW (0.92%). Solar photovoltaic (PV) systems contribute 459 MW (1.84%), whereas power imports add 2,656 MW (10.66%).

In terms of fuel sources, gas dominates at 11,372 MW (45.65%), followed by furnace oil at 6,492 MW (26.06%). Coal provides 2,692 MW (10.81%) and power imports contribute 2,656 MW (10.66%). Diesel adds 1,010 MW (4.05%), hydropower contributes 230 MW (0.92%), and solar PV systems contribute 459 MW (1.84%).

The Integrated Energy and Power Master Plan (IEPMP) 2023 forecasts a maximum power demand between 27.4 GW and 29.3 GW in 2030, 50.4 GW and 58.6 GW in 2040, and 70.5 GW and 96.8 GW in 2050 – with corresponding renewable power generation targets of 10% in 2030, 22% in 2040, and 35% in 2050. The target has been further extended to 20% by 2030 and 30% by 2040 under the new Renewable Energy Policy of Bangladesh 2025 (the “REPB 2025”).

The REPB encompasses various independent power plants (IPPs) based on renewable sources, including solar PV, solar thermal power/concentrating solar power, wind energy, biomass, biogas, hydropower, and other sources such as biofuels, gasohol, geothermal energy, river current energy, wave energy, and tidal energy.

However, with the exception of the state-sponsored 230 MW Kaptai Hydropower Station, no additional hydropower projects have been planned. Consequently, local renewable power development is primarily concentrated on solar PV parks, with some emphasis on wind energy and waste-to-energy plants. Other renewable technologies, such as biogas, green gas, bio-LNG, hydrogen, and geothermal heat, remain largely untapped. The REPB 2025 further focuses on distributed renewable energy projects and microgrids and net-metering arrangements. 

The renewable energy market in 2025 is currently experiencing heightened competition compared to 2024. The prevailing tariff rate has decreased to USD0.0998/kWh ‒ a significant reduction from the 2016 starting point of USD0.17/kWh. Although land acquisition challenges have delayed numerous renewable power plant projects, several have recently secured necessary land rights and commenced construction. The unsolicited proposal procedure for the development of power projects was abolished under the Quick Enhancement of Electricity and Energy Supply (Special Provisions) Act 2010 (the “QEEES Act”), save for those projects that had already been processed in good faith. Accordingly, the only way to develop/implement renewable projects by way of unsolicited proposal is through the Guidelines for Unsolicited Proposals 2018 applicable in PPP procurements where the competency of the proposal is revaluated under public tenders.

Recent issues in connection with foreign currency availability in Bangladesh – primarily due to global conflicts – now seem to be alleviated by strong remittances and export earnings, along with the revamped enforcement of financial regulations and bank governance to curb money laundering. The government of Bangladesh is also reportedly considering the removal of capacity payments for fuel-intensive power plants (encompassing both those using conventional sources and those using renewable sources) in order to alleviate the financial pressure caused by foreign currency issues (see 2.1 Governing Law and Upcoming Changes).

Lately, wind power plants have garnered increasing interest, thanks to recent findings on their adequacy. The first wind power plant achieved commercial operation in 2024 and there are several more in the pipeline. The Bangladesh Sustainable and Renewable Energy Development Authority (SREDA) has also issued new guidelines on conducting feasibility analyses for proposed wind power plants.

The following legal framework governs the energy market in Bangladesh, including renewables.

• The Electricity Act 2018 – replacing the Electricity Act 1910, this is the principal legislation establishing the structure and implementation guidelines for the generation, transmission and distribution of electricity in Bangladesh, including land/easement acquisition for such purposes.
• The Bangladesh Power Development Board’s Order 1972 – this establishes the powers of the Bangladesh Power Development Board (BPDB), including its authority to award generation concessions and purchase electricity from both the private sector and the public sector.
• The Private Sector Power Generation Policy of Bangladesh 1996 (the “Policy”) and the Policy Guidelines for Enhancement of Private Participation in the Power Sector 2008 – the Policy was adopted by the Ministry of Power, Energy and Mineral Resources (MPEMR) in 1996 and was revised in 2004. The Policy regulates private investment in the power industry in Bangladesh and sets out, inter alia, the procedures for procurements, as well as corresponding financial arrangements and incentives. The Policy Guidelines for Enhancement of Private Participation in the Power Sector 2008 expand upon the Policy, allowing joint ventures between public and private entities and addressing other aspects of private sector power generation.
• The REPB 2025 – building upon the Policy, the REPB 2025 provides additional institutional arrangements, resource and technology development programmes, investment and fiscal incentives, and regulatory policies specifically for renewable power plants under private participation.
• The Public Procurement Act 2006 and the Public Procurement Rules (PPR) 2008 – the Public Procurement Act 2006 in principle outlines the major considerations in public procurement, including different procurement methods (local, international, etc) and the processes involved. The PPR provides detailed methodological guidelines for each process. These regulations apply to all forms of public procurement (using public funds), regardless of the procuring authority.
• The QEEES Act – enacted in 2010 and abolished in 2024, the QEEES Act aimed at overriding the Public Procurement Act 2006 for quick development of energy projects. Currently, only projects already contracted under the QEEES Act are being processed.
• The Bangladesh Energy Regulatory Commission Act (BERCA) 2003 – the BERCA empowers the Bangladesh Energy Regulatory Commission (BERC) to issue, renew, revise and revoke licences for all entities involved in power generation, transmission and distribution. The BERCA also grants the BERC the authority to implement important regulations such as:
1. the Bangladesh Energy Regulatory Commission (Electricity Grid Code) Regulations 2023 – establishing the procedures for facilities to operate using the Bangladesh National Grid and specifies criteria, guidelines, basic rules, procedures, responsibilities, standards and obligations for the operation, maintenance and development of the electricity transmission system;
2. the Bangladesh Energy Regulatory Commission (Licence) Regulations 2006 – establishing the procedures and relevant requirements for the licensing of various activities, including electricity generation and fuel storage;
3. the Bangladesh Energy Regulatory Commission (Power Generation Tariff) Regulations 2008 – establishing the procedures for the adjustment of tariffs that apply when power is sold to the government of Bangladesh;
4. the Bangladesh Energy Regulatory Commission (Power Transmission Tariff) Regulations 2016 – establishing the procedures for the adjustment of tariffs that apply to power transmitted into the transmission system; and
5. the Bangladesh Energy Regulatory Commission (Retail Distribution) Regulations 2016 – establishing the procedures for the adjustment of tariffs that apply to power distributed at retail level.
• The Policy Guidelines for Power Purchase From Captive Power Plants 2007 (renewed in 2019) and the Policy Guidelines for Small Power Plants (SPPs) in the Private Sector – these provide guidelines for captive, small and distributed power plants on how they can sell generated power to large government intermediaries (such as special economic zones), how to connect to the grid, and what the tariffs should be.
• The Net-Metering Guidelines 2025 (the “NMG 2025”) – the NMG 2025 outlines standards for grid connection, procedures for handling credits related to net import and export of electricity, adjustments, and reimbursement for net export.
• Environmental laws – the major environmental regulations include the Bangladesh Environment Conservation Act 1995 and the Bangladesh Environment Conservation Rules 2023. These provide the framework for environmental clearances at various stages, including mandatory impact assessment reports to be submitted during the environmental clearance process.
• Land-related laws – As land has been the major bottleneck in achieving renewable energy targets, the Guidelines for Development of Renewable Energy Projects using Land Owned by Government Agencies under PPP Modality, 2026 have been introduced to facilitate greater autonomy for the government authorities allocating land for PPP renewable projects against lease fee or minority equity stake or a combination of both, as per the feasibility study. In general, the Acquisition and Requisition of Immovable Property Act 2017 governs the acquisition of land for public purposes, including determining compensation for acquired property. The above-mentioned Electricity Act 2018 designates acquisition/right of way over land for power generation and transmission as public purposes.
• Construction-related laws – the following pertain to construction:
1. the Building Construction Act 1952;
2. the Town Improvement Act 1953;
3. the Building Construction Rules 1996;
4. the Natural Water Bodies Protection Act 2000;
5. the Dhaka Metropolitan Building (Construction, Development, Preservation and Demolition) Rules 2008;
6. the Bangladesh National Building Code 2020; and
7. local government acts.

The government of Bangladesh has recently enacted the Policy for Enhancement of Private Participation in Renewable Energy-based Power Generation, 2025 (PEPPRG2025):

• introducing a policy on merchant power plants (MPPs), whereby anyone can enter into power purchase contracts with any public sector power utility (PSPU), including distributors in any area subject to supervision by the Bangladesh Energy Regulatory Commission;
• allowing transmission and distribution networks to be used through open access or wheeling arrangements;
• abolishing the concept of capacity payment – only energy payments and wheeling charges will be considered;
• providing no guarantee for fuel supply by the government of Bangladesh or any sovereign guarantee for the payment obligations of the distributors;
• allowing PSPUs to enter into joint ventures with private entrepreneurs; and
• discontinuing the government of Bangladesh’s obligation to grant security in the form of sovereign guarantees for PSPUs’ purchase obligations.

The primary regulators for energy activities in Bangladesh are as follows:

• Office of the Electrical Adviser and Chief Electric Inspector – this body has the authority to enforce the Electricity Act 2018 through inspections, binding instructions, penalties, rights to information, and other measures.
• Power Division – a division within the MPEMR, the Power Division is responsible for all policies and matters concerning electricity generation, transmission and distribution from both conventional and renewable energy sources, including hydroelectricity. It also exercises administrative control over other state-owned entities in the power sector.
• Power Cell – set up under the MPEMR in 1995, the Power Cell has a mandate to lead private power development, recommend power sector reforms and restructuring, conduct studies on tariffs, formulate a regulatory framework for the power sector, and facilitate the promotion, development, implementation, commissioning and operations of private power generation projects.
• SREDA – enacted by the SREDA Act 2012, SREDA is an agency under the Power Division. SREDA operates as the focal point for the promotion of sustainable energy development and energy efficiency. It is monitoring the implementation of the Energy Efficiency and Conservation Master Plan up to 2030. It provides co-ordination of sustainable energy planning (including action plans linking together the activities of several agencies), promotes awareness of renewable energy and other clean energy technologies, and integrates their development within overall national energy policy and development.
• The BPDB – incorporated under the Bangladesh Power Development Boards Order 1972, the BPDB is a board under the administration of the MPEMR and is responsible for a major portion of the generation and distribution of electricity in Bangladesh. It also acts as the statutory offtaker of power generated by the private sector. The BPDB also distributes electricity directly to all areas except the areas where distribution is carried out by the Rural Electrification Board (REB) (mostly in rural areas), Dhaka Power Distribution Company and Dhaka Electric Supply Authority (DESA) (in Dhaka), West Zone Power Distribution Company (West Districts) and Northern Electricity Supply Company Ltd (North Districts).
• The Power Grid Company of Bangladesh (PGCB) – the PGCB is responsible for owning, operating, and efficiently expanding the national power grid. It acts as the interconnection stakeholder for all IPPs.
• The BERC – this regulates and issues licences to power and energy sector stakeholders and acts as the independent regulator for the sector to ensure fair competition and conduct. It possesses the authority to access information, conduct inspections, issue binding instructions, and impose penalties on all stakeholders active in the power and energy sector.

The industrial policy of Bangladesh – most recently outlined in the National Industry Policy 2016 – classifies the generation, supply and distribution of power as a controlled sector, requiring licences for operation. The construction and operation of transmission lines remain exclusive to the public sector, with the government of Bangladesh maintaining a monopoly on transmission and distribution. All these activities are subject to the rules and regulations outlined in 2.1 Governing Law and Upcoming Changes.

• Generation: the BPDB is responsible for generating the majority of the country’s electricity. It owns and operates most major public sector power projects and acts as the primary offtaker of power generated by private power producers, who were first mandated to generate power privately under the Policy. The BPDB functions as a single buyer, purchasing electricity from IPPs through long-term power purchase agreements (PPAs) established via public tendering or unsolicited proposals.
• Transmission: the PGCB owns the entire national grid system and manages electricity transmission to the whole of Bangladesh. The PGCB acts as the interconnection stakeholder to all IPPs. Under the Policy, the developer of the IPP must construct interconnection facilities up to a PGCB-specified point in the relevant substation at its own cost. After the commercial operation date (COD), it must transfer such facilities to the PGCB.
• Distribution: after purchasing electricity, the BPDB sells bulk electricity to all the distributing entities, which are mostly autonomous state-owned enterprises. The BPDB is responsible for the distribution of electricity in most areas, except Dhaka and the western and northern zones, where distribution is handled by several state-owned enterprises in which the BPDB holds shares.
• Storage: energy storage is a nascent concept in Bangladesh. Although storage is integral to renewable IPPs, standalone storage plants have yet to be commercially implemented. The government of Bangladesh, under its IEPMP, has proposed demonstrative renewable energy storage schemes but has yet to finalise the implementation framework.

Currently, there are no restrictions on the ownership and transfer of renewable energy assets in Bangladesh, except for the following outlined here.

Restrictions in General and the Control Regime

There are no restrictions regarding the sale of power industry assets or businesses, or other transactions, including amalgamations and mergers in general. The Bangladesh Competition Commission (BCC) was formed under the Bangladesh Competition Act 2012 to ensure competition in all industries. The BERC also retains some power to maintain competition as a first-tier regulator for power generation industries. The BCC still operates reactively, as it has yet to formulate and enact specific competition rules for merger control.

However, any combination (including acquisitions, amalgamations or mergers) that has a detrimental impact on competition in the goods and services market or poses a risk of doing so is prohibited. The BCC has wide powers to investigate – either on its own initiative or in response to complaints from a third party – any combination that adversely affects competition. There are currently no minimum requirements (such as market influence, financial metrics or industry expertise) that must be satisfied by a purchaser of assets or an acquirer of a business.

Contractual Lock-In

Under a standard implementation agreement (concession agreement) used for power projects in Bangladesh, the designated main sponsor (lead member) must retain at least 51% equity until the COD and 40% thereafter until the sixth anniversary of the COD. The operating sponsor (operating member) that is identified by the competent authorities is required to maintain at least 20% of equity until the COD and 11% thereafter until the sixth anniversary of the COD.

A transfer that circumvents these lock-ins needs explicit approval from the offtaker. This approval is difficult to obtain and necessitates demonstrating the purchaser’s qualifications and the overall positive impact of the transfer on the industry.

Currently, there are no foreign investment restrictions that apply to the power industry, and investment can be made by any investor from any country recognised by Bangladesh. There is no investment limit threshold as long as the relevant criteria (in terms of debt financing, operation, prior experience in a similar size of investment, etc) are met. There is also no restriction on the holding of land rights through a special purpose vehicle (SPV), with even 100% foreign-owned SPVs able to hold land rights.

Investment Protection

The Foreign Private Investment (Promotion and Protection Act) 1980 grants protections to foreign investments in Bangladesh, as follows.

• Foreign investments are assured fair and equitable treatment, including full protection and security within Bangladesh.
• The terms of any sanction, permission or licence granted to an industrial undertaking with foreign private investment cannot be unilaterally changed in a way that negatively impacts the conditions under which the establishment was approved.
• Foreign private investment must be treated no less favourably than similar private investment made by Bangladeshi citizens.
• In the event of losses to foreign investment due to insurrection, riots, or civil unrest, foreign private investment will receive the same treatment regarding indemnification, compensation, restitution, or other settlement as investments made by Bangladeshi citizens.
• Foreign private investment cannot be expropriated or nationalised, nor subjected to any measures having a similar effect, unless for a public purpose and with adequate compensation. Such compensation must be paid promptly and be freely repatriable.
• The repatriation of capital and returns from foreign investment is guaranteed. In the event of liquidation of an industrial undertaking with foreign investment, the proceeds from such liquidation are also guaranteed to be repatriated.

Protection is also available under various bilateral investment treaties (BITs) entered into by and between Bangladesh and other foreign countries. The countries with whom Bangladesh has concluded BITs include Austria, North Korea, Thailand, Belgium, South Korea, Canada, Malaysia, Pakistan, Uzbekistan, France, Poland, Vietnam, Germany, Romania, Singapore, Indonesia, Switzerland, Denmark, Iran, India, Italy, Japan, Turkey, the UAE, the USA, the UK, the Philippines, and the Netherlands.

Access to Courts and Foreign Arbitration

Foreign investors and their SPVs have general access to local courts in Bangladesh. Moreover, Bangladeshi courts recognise the choice of foreign law and party autonomy as agreed upon in contracts. This principle is supported by the case PLD 1964 Dacca 637, which established that the expressed intention of the parties regarding the governing law of the contract overrides any presumptions.

However, the enforcement of foreign judgments is limited to countries that have reciprocal agreements with Bangladesh. Currently, only Indian judgments are enforceable in Bangladesh.

Bangladesh is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “New York Convention”). International arbitration is permitted under the Arbitration Act 2001. Parties have the freedom to choose the arbitral tribunal and the applicable rules. Foreign arbitral awards are enforceable in Bangladesh but they must be filed in the court of first instance for enforcement against the debtor or their assets. The court in which recognition or execution of the foreign arbitral award is sought may refuse to enforce such foreign arbitral award:

• if the party against whom it is invoked furnishes proof to the court that –
1. a party to the arbitration agreement was under some incapacity;
2. the arbitration agreement is not valid under the law to which the parties have subjected it;
3. the party against whom the award is invoked was not given proper notice of the arbitral proceedings or of the appointment of the arbitrator or was otherwise unable owing to some reasonable cause to present their case;
4. the foreign arbitral award contains decisions on matters beyond the scope of the submission to arbitration;
5. the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or with the law of the country where the arbitration took place; or
6. the award has not yet become binding on the parties or has been set aside or suspended; or
• the court finds that –
1. the subject matter of the dispute is not capable of settlement by arbitration under the law currently in force in Bangladesh; or
2. the recognition and execution of the foreign arbitral award conflict with the public policy of Bangladesh.

Foreign Exchange Regulations

Bangladesh has a very strict foreign exchange control regime under the Foreign Exchange Regulation Act 1947 (FERA). Generally speaking, the conversion and repatriation of foreign exchange require approvals from the central bank (Bangladesh Bank). For certain transactions, no prior approval from Bangladesh Bank is required and banks arrange summary approvals from Bangladesh Bank as outlined in the Guidelines for Foreign Exchange Transactions (GFET). These transactions include foreign investment, divestment, repatriation, technical fees, royalties, consultation fees, distribution fees, dividends, loan repayments (including interest payments), and import/export activities.

Bangladeshi companies have the authority to declare dividends to their shareholders through a general meeting. Banks can facilitate summary approvals from Bangladesh Bank for the repatriation of dividends to non-resident shareholders. When non-resident shareholders are involved in the sale of shares, a fair valuation is required, and post-closing notification to Bangladesh Bank is mandatory. However, prior approval from Bangladesh Bank is necessary for repatriating sales proceeds resulting from a non-resident’s sale of shares in a non-listed company. Liquidation proceeds can also be repatriated according to the procedures outlined in the GFET. Foreign borrowing requires approval from regulatory authorities designated by Bangladesh Bank. This process is relatively straightforward for industrial and infrastructure projects.

The primary regulatory framework for private sector involvement in power generation, including renewables, is outlined in the Policy. The Policy establishes the BPDB as the offtaker for such power generation, with the PGCB assuming the transmission provider role. Under the Policy, the following security package is granted to power projects.

• Model implementation agreements, power purchase agreements (PPAs) and fuel supply agreements (FSAs) will be prepared for private power projects to eliminate the need for protracted negotiations between the government of Bangladesh and sponsors.
• The PPA and the purchase and payment obligations of the offtaker will be guaranteed by the government of Bangladesh for performance obligations of the concerned utilities. As per the Policy Guidelines for Enhancement of Private Participation in the Power Sector 2008, any distribution licensees may purchase power from commercial power plants. However, so far only the BPDB is undertaking such role.
• If the fuel (eg, waste) is to be supplied by a public sector organisation, the performance of the fuel supplier will be guaranteed by the government of Bangladesh under the terms of the relevant fuel supply agreement. This does not apply to solar and wind power plants.
• For private power projects, the government of Bangladesh will provide:
1. standard protection against specific force majeure risks; and
2. protection against changes in certain taxes and duties.

In spite of the above still being at the disposal of the government, it has been pushing the procurement of power under PEPPRG2025 and REPB2025 under various merchant procurement models with a view to restructuring the typical risk allocation used in the above models, reducing its role (such as in guaranteeing the offtaker obligation) and pushing for the independent bankability of such projects. However, the bankability of the projects has yet to be successfully demonstrated.

Other relevant rules and regulations have been outlined in 2.1 Governing Law and Upcoming Changes, as have the relevant procurement processes in 6.1 Onshore Project Development and industry incentives in 6.4 Subsidies and Incentive Schemes.

The government of Bangladesh has not yet established a formal regulatory framework for producing gas from renewable sources. Although there are some small-scale, privately initiated biogas production projects in various regions, these initiatives are not yet at a utility scale.

The government of Bangladesh has not yet established a formal framework for heat production from renewable sources, as this is not considered a practical utility in a tropical climate such as Bangladesh’s.

The government has not yet established any formal framework for hydrogen, biofuels, or other renewable energy production. As per the IEPMP, the government does not have any plan to introduce hydrogen/ammonia-based power generation in Bangladesh before 2030, except for potential prototypes to assess their effectiveness.

The government anticipates introducing hydrogen/ammonia as co-fuels in existing thermal power plants between 2030 and 2040. Specific targets include gas-fired power plants with 20% hydrogen co-firing starting in 2037, increasing to 50% in 2045. Additionally, gas-fired power plants with 100% hydrogen firing are anticipated to begin operation in 2040, and coal-fired power plants with 20% ammonia co-firing are planned to start in 2035 (increasing to 50% in 2040).

Bangladesh is actively pursuing waste-to-energy generation through several pilot projects. Municipalities are entering into waste supply agreements with developers through a tendering process. Currently, only the Dhaka North City Corporation plant has progressed to the construction phase.

Although the procedures outlined in 3.1 Electricity are applicable to waste-to-energy plants, the Bangladeshi government’s primary focus for these projects is on the tendering method.

Captive Power Plants

Under the Captive Power Plant Policy (CPPP), captive power plants are defined as power projects that generate electricity for their own use or for the use of a specific group. Power generated by such plants may be sold at a predefined rate, which must not exceed the rate at which the BPDB sells electricity to distributors (excluding the wheeling charge). The producer is required to enter into a PPA in accordance with the template provided in the CPPP. Connection to the national grid is permitted at the producer’s own expense, with the PGCB entitled to charge a wheeling fee. Additionally, a power generation licence must be obtained from the BERC. To connect to the grid, the plant must have a capacity exceeding 20 MW.

Small Power Plants

SPPs are defined as power plants with a capacity of less than 10 MW. Such power produced may be sold to anyone at a predefined rate where the BPDB, DESA and the REB are present and, for other areas, the price may be mutually negotiated. Connection to the grid is possible at the plant’s own expense and the PGCB may charge a wheeling fee. Small power plants may sell electricity to BPDB distributors or to large consumers (such as export processing zones, special economic zones, private economic zones, hi-tech parks and large real estate) that meet the following voltage level and load characteristics:

• consumers connected to the national grid through transmission lines of 33 KV and above, with a connected load of not less than 5 MW;
• consumers connected to 33 KV or 11 KV distribution utility lines, with a connected load of not less than 1 MW; and
• consumers connected to 11 KV or 0.4 KV distribution utility lines, with a connected load of not less than 1 KW (in the case of renewable energy projects).

Net Metering

Under the NMG 2025, captive power plants, SPPs and private solar grids are permitted to connect to the national grid through the local distributor by executing a net-metering agreement. This allows any export of electricity to be offset against imports from the local distributor within a 12-month settlement period. If there is a net export at the end of the settlement period, the excess is settled through cash payments by the distributor or utility.

The construction and operation of transmission lines and associated facilities (including distribution) remain prohibited for the private sector. Such ownership, construction and operation are governed by the Electricity Act 2018, which grants the government a monopoly in these sectors, as outlined in 2.3 Regulated Activities.

Renewable energy projects, such as wind and solar power, are not subject to competitive bidding for dispatch processes for power generation. The electricity generated by IPPs is purchased at a specified voltage at the interconnection point, typically located at the outgoing terminal of the plant’s substation. The national grid interconnection line from this substation is provided by the relevant public agency. However, the private power producer bears the costs for interconnection facilities up to the outgoing terminal, including equipment such as step-up transformers, circuit breakers, and switchgear.

The concession agreement stipulates that the PGCB will provide the interconnection point, while the project company is responsible for developing the necessary infrastructure to supply power. This transmission line must be handed over to the PGCB or another authorised distributor or agency for maintenance, at no cost to the private developer.

Currently, Bangladesh lacks a formal framework for standalone energy storage plants. However, the IEPMP has proposed nine candidate sites for pumped storage power plants (PSPPs) – each with an installed capacity of 500 MW ‒ to provide peak supply in areas with low annual load factors. An implementation plan for these PSPPs is yet to be finalised.

The national grid is operated and maintained by the PGCB through the National Load Dispatch Centre (NLDC), which has the authority to restrict, curtail or suspend energy dispatch by generators in accordance with the Grid Code 2023. There are currently no general rules or guidelines in place for incentivising flexibility or demand-side management. The standard PPAs typically adopted a “take or pay” payment mechanism, except in cases where interconnection or dispatch restrictions are attributable to the offtaker or grid constraints. Under the PPA terms, in such instances, the offtaker is liable to make payments based on deemed generation, up to the dependable capacity agreed in the PPA.

While there are no utility-level off-grid solutions for the transportation and supply of renewable energy to end users, the government permits isolated grids for areas not connected to the national grid. These isolated grids are classified as mini, micro, pico, and nano systems, with capacities of up to 5 MW. Additionally, under the NMG 2025, power producers can supply energy to local utility distributors.

The government of Bangladesh has not yet established a formal framework for the transportation and storage of gas derived from renewable sources.

The government of Bangladesh has not established any formal framework for the transportation and storage of heat from renewable sources in Bangladesh, as this is not considered a viable utility in tropical climates such as Bangladesh’s.

The government of Bangladesh has not yet finalised a framework for the transportation and storage of hydrogen or other biofuels.

Currently, Bangladesh does not have an open market for electricity, whether in the form of a capacity market or an energy market. The BPDB used to act as the sole buyer, procuring electricity from IPPs, SPPs, corporatised generation companies, and other publicly owned power plants. The bulk power tariff rates were negotiated and determined based on factors such as fuel type, plant load factor, and other operational parameters. The BPDB usually exercised its statutory authority to purchase electricity at these negotiated prices, with approval from interministerial committees. Typically, the BPDB enters into PPAs lasting up to 20 years, in line with the Policy. Once the PPA term expires, the BPDB renegotiates the tariff with the developer.

The tariff under the Policy generally comprises two main components, as follows:

• Capacity payment ‒ this is linked to the level of availability of the plant and divided into escalating and non-escalating portions. The capacity payment covers debt service, return on equity, fixed operation and maintenance cost, insurance, and other fixed costs. It is paid in Bangladeshi currency (taka), but denominated in both US dollars (foreign loans and fixed costs payable in foreign currency) and local currency (local loans and investment and fixed costs payable in local currency). Such payment is generally adjusted for inflation.
• Energy payment – the energy payment covers the variable costs of operation and maintenance (including fuel), is paid in Bangladeshi taka, and is further divided into a pass-through fuel component and an escalating non-fuel component. The energy payment is denominated in both Bangladeshi taka and US dollars, depending on the nature of costs incurred. The portion denominated in US dollars is converted into Bangladeshi taka upon payment.

Notably, for renewable projects such as solar parks and wind farms, energy payments are made on a “take or pay” basis – unlike fuel-intensive projects such as waste-to-energy projects.

On the other hand, the BPDB sells electricity to the distribution utilities at wholesale tariff rates. These rates, along with transmission and distribution tariffs, are used to calculate the retail tariff – all of which are regulated by the BERC per the following regulations:

• the Bangladesh Energy Regulatory Commission (Power Generation Tariff) Regulations 2008 – establishing the procedures for the adjustment of the tariffs applied when power is fed into the transmission system;
• the Bangladesh Energy Regulatory Commission (Power Transmission Tariff) Regulations 2016 – establishing the procedures for the adjustment of the tariffs applied when power is transmitted through the transmission system; and
• the Bangladesh Energy Regulatory Commission (Retail Distribution) Regulations 2016 – establishing the procedures for the adjustment of the tariffs applied to power that is distributed at retail level.

Details of the latest feed-in and terminal tariff orders can be found on the BERC portal. During the past decade, consumer tariffs have risen at least ten times in an effort to reduce the gap between consumer income and the BPDB’s expenditure, especially concerning guaranteed capacity payments to power producers.

The BERC is currently working on enacting a “BERC (Tariff for Rooftop Solar PV Electricity) Regulation”, as prices for rooftop solar projects are currently negotiated between developers and users.

For captive power plants selling electricity to any utility, the tariff must not exceed the rate at which the BPDB sells power at 132 KV (Category G1), excluding wheeling charges. However, if fuel prices rise, the fuel component of the captive power plant tariff may be adjusted accordingly. Captive power plant tariffs must be pre-approved by the BERC.

The PEPPRG2025 introduced the concept of MPPs, whereby anyone can enter into power purchase contracts with any PSPUs, including distributors in any area subject to supervision by the BERC. Transmission and distribution networks may be used through open access or wheeling arrangements. However, implementation of the PEPPRG2025 is still pending, with a number of plants in the pipeline.

The government of Bangladesh has not yet finalised any framework for the trade and supply of gas from renewable sources.

The government of Bangladesh has not yet established any formal framework for the trade and supply of heat from renewable sources, as this does not seem to be a viable utility in tropical climates such as Bangladesh’s.

The government of Bangladesh has not yet finalised any framework for the trade and supply of hydrogen and other biofuels.

Long-term (corporate) PPAs are not yet a customary practice in Bangladesh – although they are becoming increasingly popular, particularly among industries with substantial unused roof space. These power plants are generally classified as captive power plants or SPPs, as discussed in 3.5 Local and Domestic Production.

In early 2021, Bangladesh was authorised as a country for issuing international renewable energy certificates (I-RECs). Both I-RECs and TIGRs (tradable instruments for global renewables) are traded privately between buyers and sellers and are registered on the I-REC and TIGR registries, respectively. Although there are currently no restrictions on the trading of renewable energy certificates (RECs) in Bangladesh, there is also no specific legislation in place to regulate or supervise the REC market.

In late 2024, a local designated national authority (DNA) was formed by the Department of Environment (DoE). Since then, a few standards specifically for solar homes have been developed and the local DNA will be responsible for recording, measuring and monitoring solar home systems. The current framework is yet to be extended for utility-scale projects.

The majority of renewable energy developments in Bangladesh have been in the onshore sector. Several utility-scale solar plants ‒ with capacities ranging from 50 MW to 250 MW – have reached commercial operation and numerous additional projects are in the pipeline. A 60 MW wind park was connected to the grid in 2024, with several more wind parks currently under development or in the award stage. Although there are a few waste-to-energy projects in development, only one 36MW plant has reached the construction stage. According to the BPDB’s Annual Report, as of 30 June 2023, the country’s total installed power generation capacity was 24,911 MW, with only 2.76% from renewable energy sources.

Award of Concessions

IPPs are generally projects awarded under the Policy for a term typically ranging from 15 to 20 years. These concessions are negotiated between the offtaker (BPDB) and the power producer. Concessions are granted in the form of a letter of intent (LoI) – and after meeting specific conditions, an agreement is executed, committing the government to the project. Alongside the implementation agreement, a PPA is also signed, outlining the terms of power offtake; in some cases, a fuel supply agreement and land lease agreement are included. The tariff structure for these agreements is discussed in 5.1 Electricity.

To accept the LoI, the awardee must provide an irrevocable and unconditional bank guarantee as security. The Bangladeshi government’s obligations – for example, the BPDB’s power purchase and payment obligations under the PPA, as well as the PGCB’s interconnection obligations – are secured through a guarantee agreement. Awards of PPAs to private power generators are mandated through the following processes:

• Per the Public Procurement Act 2006, read in conjunction with the Policy – under this Act, a public tender is floated to procure development proposals to supply power. Generally, a two-stage method (request for qualification (RFQ) followed by request for proposal (RFP)) is adopted; however, one-stage proposals are also accepted sometimes. A technical evaluation committee (TEC) is formed, which ranks the proposals based on a predefined matrix and awards the tender to the top bidder, subject to approval from the MPEMR and the Cabinet Committee of Government Procurement (CCGP).
• Unsolicited proposal process under the PPP Act, 2015 – once the MPEMR has received an unsolicited proposal directly or from any PSPU, it sends the proposal to the PPP Authority for PPP screening. If the project is eligible, it will be sent to the Cabinet Committee of Economic Affairs (CCEA) for preliminary approval. A feasibility analysis is then undertaken and a public tender is floated to evaluate the competitiveness of the unsolicited proposal as per  the Guidelines for Unsolicited Proposals 2018, whereby some bonus marks are accorded to the unsolicited bidder. A TEC is formed to check the proposal and, upon completion of its evaluation, the proposal is sent to the CCEA for final approval. Upon their approval, the project is awarded to the unsolicited bidder. SREDA has published specific guidelines for unsolicited proposals for renewables such as solar and wind IPPs.
• G2G method under the PPP Act, 2015 – this is adopted in the development of projects under government-to-government (G2G) agreements as per the Policy for G2G Partnership 2017. Under such method, the procurement process is overridden by the G2G framework agreement (thereby avoiding public tendering in most cases) and the private bidder is nominated by the collaborating government. However, even in such procurements, the PPP Authority must perform PPP screening and a feasibility analysis and the implementation is subject to preliminary and final CCEA approval.

As per the traditional Unsolicited Proposal Guidelines for Solar Projects, the applicant needs to meet the following criteria:

• Lead and operating member financial health – current assets divided by current liabilities must not be less than 1:1 in two of the preceding three fiscal years and profitability must be positive in two of the preceding three fiscal years.
• Net worth – the applicant’s net worth must be at least USD0.5 million per MW of the proposed capacity.
• Equity and debt financing – the lead member must have successfully raised equity financing of at least USD0.3 million per MWp and debt financing of at least USD1 million per MWp in aggregate over the past 15 years.
• Experience in solar projects – the lead member or operating member must provide references demonstrating their successful installation, operation and management of solar power projects, including at least one grid-connected solar project (with a capacity of at least 10% of the total offered capacity of the current project) that has been in operation for at least two years and is connected to the national power grid in the country in which such project is located.
• Development experience – the lead or operating member must provide references demonstrating the successful development of solar projects, including at least one grid-connected solar project with a capacity of 10% or more of the offered capacity and which is connected to the national power grid in the country in which such project is located.

Land Acquisition

If land lease is not a part of the concession, then demonstration of land procurement is a prerequisite for the execution of concession agreements. Bangladesh recognises the concepts of freehold title of land, leasehold title of land, and general leases (as per the Transfer of Property Act 1882), as well as easements and licences (as per the Easements Act 1882). Freehold title of land, leasehold title, and general leases are necessary for plant operations, whereas easements and licences are frequently granted for the use of transmission lines and wind masts on a specific part of land without requiring substantial control or outright ownership of the land.

The right of way, as permitted under the Electricity Act 2018, is governed by the Acquisition and Requisition of Immovable Property Act 2017. When acquiring land, the acquirer is subject to resettlement obligations, which are imposed as part of the environmental clearance certificate (ECC). This resettlement must be conducted by an NGO through the formulation of a rehabilitation action plan.

The Guidelines for the Development of Renewable Energy Projects using Land Owned by Government Agencies under PPP Modality, 2026 have been introduced to facilitate greater autonomy for the government authorities in allocating land for PPP renewable projects against lease fee or minority equity stake or a combination of both, as per the feasibility study.

Interconnection

Under the relevant policy, electricity is purchased from the IPP at a specified voltage and delivered from the outgoing terminal (or interconnection point) of the power plant’s substation, as agreed with the BPDB. The transmission line for connecting to the national grid is either provided by the relevant government agency or must be constructed by the IPP. The IPP is responsible for the costs of all interconnecting facilities up to the outgoing terminal of the private power project, including step-up transformers, circuit breakers, and associated switchgear.

The concession agreement includes the PGCB as a party responsible for providing the interconnection point. The IPP must develop the necessary facilities to supply power up to that point. Before any construction begins on the interconnection or transmission line, the IPP must negotiate the entire interconnection plan with the PGCB and obtain its formal approval.

Environmental Clearance

The environmental laws of Bangladesh consist of the Environmental Policy 1992 and the Bangladesh Environment Conservation Act 1995 (ECA) read in conjunction with the Environment Conservation Rules 2023 (ECR).

The ECR categorises all projects as one of four divisions – green, yellow, orange, or red. Renewables fall into the yellow/orange category and waste-to-power and gas-fired IPPs fall into the orange category, whereas gas-fired IPPs above 100 MW and coal-fired IPPs are categorised as red. Any power project above 5 MW must obtain an ECC from the DoE before the COD as follows.

• First, a “no objection” certificate (NOC) must be obtained from the local government (Union Parishad). This generally takes around one week and is required before applying for the location clearance certificate (LCC).
• Second, the applicant must apply to the DoE for an LCC before initiating any site preparation work. The application must include the required documentation and an initial environmental examination (IEE) report. The LCC application should also include proposed terms of reference for conducting an environmental impact assessment (EIA), which is mandatory for red-category projects. After conducting inspections and reviewing the application, the DoE forwards its findings to an environmental clearance committee. The LCC is typically issued within 30 days of submission, provided any missing documentation is rectified within seven days.
• Third, once the EIA is completed, it must be submitted to the DoE for approval. The DoE may seek additional clarifications, call the applicant for discussions, or request input from other stakeholders. Once the EIA is approved, the chief controller of the DoE issues a conditional approval allowing development work to begin.
• Fourth, an ECC must be obtained from the DoE before operation commences. Upon completion of construction, an ECC application must be submitted to the DoE together with supporting documents and compliance reports, including those measures undertaken under the EIA (if any). After inspection and examination, the DoE will send its report to the relevant environmental clearance committee, which will consider the application and issue an ECC within 20 days of the application submission date.

The EIA approval and the ECC will typically be valid for a period of one year from the date of issue and must be renewed 30 days before expiry. The site preparation work (and development/construction for renewables) can be initiated after an LCC is obtained from the DoE. Development works may be initiated after the EIA approval. For red-category plants, development/construction can start after EIA approval.

Other Authorisations

Beyond the environmental clearance process, additional conditions apply to the site, construction and operation of a generation facility, as follows.

• Agricultural land is prohibited from being used for power projects. However, all other types of land are generally suitable for power project development. In cases where non-agricultural land is used, a change in land classification may be necessary to facilitate the development of an IPP.
• The substation proposed for interconnection must have sufficient capacity to handle the electricity output that will be supplied by the IPP.
• The output of the IPP needs to meet the requirements under the Bangladesh Electricity Grid Code 2023. This includes voltage and frequency requirements, primary and secondary frequency control mechanisms, and power factor maintenance.
• For wind power parks, approval must be obtained from SREDA by filing an assessment report showing that the assessment meets necessary standards.

Other approvals required – and the typical chronology thereof ‒ for a typical IPP include the following.

• After LoI issue until PPA execution – the applicant must obtain:
1. a certificate of incorporation;
2. a tax identification number (TIN) certificate;
3. a trade licence; and
4. business identification number registration.
• After PPA execution until financial close – the applicant must obtain:
1. an NOC from the local government;
2. industrial project registration;
3. an LCC;
4. approval for foreign borrowing;
5. approval for opening accounts denominated in foreign exchange;
6. approval for foreign insurance or reinsurance;
7. registration of the executed financing documents;
8. EIA approval;
9. approval from the Department of Forestry;
10. relevant approval for the construction of an electrical interconnection facility; and
11. easement/licence for the use of any land or the acquisition of any land.
• From financial close until construction start – the applicant must obtain:
1. import permit with approval for exemption of import duty and VAT;
2. exemption from registration duty on relevant instruments;
3. exemption from stamp duty on relevant instruments;
4. import registration certificate;
5. NOC for shoreline work, as well as jetty, intake and outfall structures, etc;
6. clearance from Civil Aviation Authority for any mast;
7. approval for the use of deep tube well/river water;
8. approval for connecting electric line to earth; and
9. relevant approval for the construction of an electrical interconnection facility.
• During construction period until commissioning – the applicant must obtain:
1. issue and renewal of the ECC;
2. establishment licence;
3. fire licence; and
4. electricity generation licence.

Currently, there are no operational offshore renewable energy projects in Bangladesh, except for one proposed wind power park in the planning stages. The same regulatory processes and requirements outlined in 6.1 Onshore Project Development apply to offshore developments.

Non-recourse project financing is the predominant funding mechanism for renewable energy projects in Bangladesh. Multilateral development banks, commercial banks, and climate funds are major financiers, often supported by export credit agency coverage. Project financing from shareholders is also permitted to a certain extent. For projects with state participation, the government can issue sovereign guarantees up to its equity stake.

Foreign borrowing is possible for IPPs, subject to approval from the relevant regulator designated by Bangladesh Bank (eg, the Bangladesh Investment Development Authority for private projects or the Non-Concessional Loan Sanction Committee for public projects with less than a 25% grant component). The key conditions are as follows.

• The borrowing must be for an industrial project (including power projects) with sound financials and sufficient cash flow projections to ensure loan repayment.
• The maximum debt-to-equity ratio allowed for foreign borrowing is 80:20.
• The recommended interest rate is the Secured Overnight Financing Rate (SOFR) + 4%, considering the all-in cost ceiling (including all annualised fees and expenses).

Financing from local banks or financial institutions, such as the Infrastructure Development Company or the Bangladesh Infrastructure Finance Fund Limited, is also available. These facilities are often used as bridge loans until full financial closing is achieved. For local borrowing, the maximum allowable debt-to-equity ratio is generally 50:50.

Lenders typically secure project financing facilities in Bangladesh through a combination of the following security mechanisms. Although the facility agreement itself can be governed by any law, the securities are usually governed by Bangladesh law to ensure enforceability in local courts, priority ranking in insolvency proceedings, fast-track enforcement, and other benefits. Securities may be subject to a 0.1% stamp duty (capped at BDT50 million) on the secured value and a 0.1% registration fee (for real assets). The available securities are:

• mortgage over real assets;
• hypothecation over movable assets (present and future, including bank accounts);
• assignment agreement with regard to contractual rights/receivables;
• pledge/lien over shares of the sponsors;
• guarantee from sponsors; and
• demand promissory note.

Debt service accounts and debt service reserve accounts are generally permitted for foreign borrowing facilities, subject to Bangladesh Bank approval. Offshore lenders often appoint local banks as security agents to facilitate enforcement. This arrangement typically does not require any further approvals beyond the original foreign borrowing approval.

The government has granted income tax exemption to institutions engaged in generating and supplying renewable solar power through the establishment of solar power plants, subject to certain conditions. The exemption applies to income derived from such activities up to 30 June 2035.

For IPPs (other than coal-fired IPPs) that commenced production before 30 June 2024, a tax exemption on income tax was available for 12 years, including:

• three-year tax exemption on income of expatriate employees;
• tax exemption on interest earned by foreign lenders;
• tax exemption on technical know-how, royalty and technical assistance fees; and
• tax exemption on capital gains earned from transfer of shares.

For IPPs commencing production after 30 June 2024, the tax holiday is 100% exemption during the first five years, 50% exemption during the next three years and 25% exemption during the next two years.

For rooftop projects, there is a special incentive for those installed before 28 February 2027. Considering the current market prices and the prices received through various tenders by the BPDB, the maximum generation cost of rooftop solar power, including batteries, has been set at BDT8.00 per unit. As part of the special incentive, a 20% profit and an 11.25% premium will be added to this generation cost, fixing the price of electricity at BDT10.50 per unit. If any customer is able to install such a solar power system at a cost lower than the prescribed cost, the savings will be considered as their dividend. According to the NMG 2025, customers who install rooftop solar power systems by 28 February 2027, and supply surplus electricity to the national grid after meeting their own consumption will receive BDT10.50 per unit for electricity supplied to the national grid for the next three years, until 28 February 2030.

For power projects, no VAT is levied on earnings generated from the supply of power.

Companies can import plant and equipment and spare parts up to a maximum of 10% of the original value of total plant and equipment within 12 years of commercial operation without paying customs duties, VAT, other surcharges, or import permit fees. This exemption excludes locally produced equipment meeting international standards.

Companies are not restricted to using the national insurance company (Sadharan Bima Corporation). They can choose insurance providers as required by lenders and utilities. However, foreign insurance is only allowed for policies unavailable in Bangladesh.

Instruments and deeds requiring registration under local regulations are exempt from stamp duty payments.

Currently, Bangladesh lacks specific guidelines or regulations for power plant decommissioning. However, IPP owners must adhere to the environmental clearance terms ‒ as outlined in the ECC – during the decommissioning process, which typically require restoring the site to its original condition. There is no obligation to establish a dedicated decommissioning fund throughout the facility’s operational life. Decommissioning costs can be covered at the end of the plant’s physical or economic life.

As mentioned in 1.1 Energy Transition, the government of Bangladesh enacted a new renewable energy policy in 2025. Key changes include introducing standalone storage plants as a distinct product category, with the tariff model still under development.

The REPB 2025 also aims to establish an institutional framework for RECs and enact the BERC regulation. Furthermore, it proposes:

• imposing renewable purchase obligations on specific industries to promote renewable energy consumption;
• mandating SREDA to develop a national carbon credits trading scheme and institutional framework; and
• including electric vehicle charging stations as eligible renewable energy projects. 

Under the newly floated National Rooftop Solar Program, the government aims to install solar systems on the rooftops of government offices, educational institutions and commercial buildings by 28 February 2027. The target is to add 3,000 MW of electricity to the National Grid. Depending on rooftop size, installations will range from 10 kW to several megawatts.