Bangladesh’s power sector needs an investment of $35.2 billion to $42.6 billion to achieve its renewable electricity target share of 30% by 2040.

Achieving this target may be compromised by policy inconsistencies; governments' inflated electricity demand projections, which vary in approaches and targets from each other; a lack of a plan to phase out fossil fuels; and investment uncertainty, said the Center for Policy Dialogue (CPD) on Sunday.

The think tank also stated that the country's electricity demand will reach about 29,761 megawatts (MW) by 2040, up from 22,702 MW in 2030 and 26,277 MW in 2035. To meet the demand, new power plants with a capacity of about 35,753 megawatts will need to be installed to ensure at least 30% supply from renewable energy.

These findings were unveiled at a dialogue titled “NDC 3.0 for the Power Sector: Is Bangladesh Setting 'Ambitious' Targets?” organized by the CPD on Sunday.

“If Bangladesh continues to be policy-ambiguous and dependent on fossil fuels, the risk of financial crisis and failure to meet climate targets will increase,” said Khondaker Golam Moazzem, research director at CPD.

“On the other hand, if Bangladesh adopts a unified strategy, it can successfully transition to renewable energy. Now is the time to take decisive action,” he added.

Among the panelists, Imran Karim, former president and director of the Bangladesh Independent Power Producers’ Association (Bippa), said that currently the share of renewable energy in power generation is only 2%, but to increase it to 20% by 2030, an investment of $12-14 billion would be required.

“Restoring investor confidence is essential; the private sector can play a major role in this. The government has recently issued LoIs (Letters of Intent) for renewable energy, but quick tendering is essential to accelerate progress,” he suggested.

Earlier, Mehadi Hasan Shamim, program associate, CPD, delivered the keynote presentation.

He said: “Accurate demand projections are vital to avoid overcapacity, which risks stranded assets, or undercapacity, which risks shortages and economic losses. But policy documents—MCPP (2022–2041), IEPMP (2023), and Renewable Energy Policy (2025)—all provide guidance, but with varying approaches and targets.

“Mujib Climate Prosperity Plan (MCPP) sets a 30% renewable target by 2030 and 40% by 2041, emphasizing solar, wind, and decentralization. However, the plan does not provide detailed electricity demand projections, making implementation more challenging.

On the other hand, another government plan titled “Integrated Energy and Power Master Plan” (IEPMP 2023) projects 58,680 MW capacity by 2041 with a 25% reserve margin, targeting 40% clean energy.

However, only 9% (5,280 MW) of this is from traditional renewables; the rest comes from nuclear, CCS, hydrogen, and ammonia co-firing.

The think tank stated that demand projections are seen as inflated, and the definition of “clean energy” is too broad, diluting the role of renewables.

The Renewable Energy Policy (2025) sets updated targets of 20% renewables by 2030 and 30% by 2040.

After showing government plans, CPD showed their calculations.

Findings

According to CPD’s Demand Projections (Alternative Forecast), an econometric VECM model with GDP, population, energy prices, and CO₂ emissions is used to forecast demand. Key assumptions:

• 25% reserve margin for peak demand (higher than the global benchmark to account for variability).
• Capacity factor of 0.25 for renewables and 0.61 for fossil fuels.
• The exponential growth model sets an interim 2035 target of 24.5% renewables.
• Captive power (~2,800 MW) and off-grid renewables (~554 MW) are treated as constant.

As per CPD's calculation, by 2040, total projected electricity demand (on-grid + captive + off-grid) reaches 29,761 MW, up from 22,702 MW in 2030 and 26,277 MW in 2035.

They claimed these projections reflect a more realistic and technically grounded estimate compared to inflated official figures.

The research paper also shows that “to reach Bangladesh’s renewable energy targets, the installed generation capacity must be calculated using projected demand, reserve margins, and the plant factor of renewable technologies.”

CPD said, in 2030, projected demand is 22,702 MW, and meeting the 20% renewable target requires 4,540 MW of renewable generation, which translates into 18,162 MW of installed capacity due to the low plant factor of 0.25%.

By 2035, demand rises to 26,277 MW, and the 24.5% renewable target requires 6,438 MW of renewable supply, necessitating 25,751 MW of installed renewable capacity.

And in 2040, demand is projected at 29,761 MW, and achieving the 30% renewable target requires 8,928 MW of renewable generation, which calls for 35,713 MW of installed renewable capacity.

Shamim also said that, “These results highlight that the low-capacity factor of renewables means a much larger installed capacity is required compared to fossil fuels to deliver the same share of electricity.”

Recommendations

The CPD has made several recommendations for a successful transition from fossil fuels to renewables. These include:

• A baseline assessment regarding the coordination and collaboration of different government authorities is vital, as there is a visible dissimilarity among their perceptions.
• Rather than playing small with less ambitious targets, the NDC 2025 should set more ambitious targets for mitigation measures such as renewable energy targets, GHG emissions, and energy efficiency targets.
• The new NDC must improve its methodological rigor and framework for more accurate estimation of the key statistical indicators.
• The renewable energy target should be set at 30% (35,753 MW) from renewable energy by 2040, if not 40%.
• There should be an interim target for 2035 for all the indicators, such as renewable energy, energy efficiency, and GHG emission reduction.
• The Department of Environment needs to schedule consultation and data tracking activities more frequently to implement the NDC and track progress against the indicators.
• Along with the necessary finance and policy requirements for the affected vulnerable community in the case of both the new renewable energy plants and phased-out fossil fuel-based plants.
• The NDC must lay out a target for gender and youth inclusion in the energy transition's employment generation.