3.1 Major Challenges in Renewable Energy Investment: Findings from Three Forums-
A. Market Entry and Institutional Barriers (Ist Forum, October 2023)
Land acquisition is among the most binding constraints on project development. Prolonged negotiations with landowners, site classification disputes, and lack of clear government responsibility for land provision impose substantial time and capital costs before a project reaches financial close.
Administrative hurdles in the pre-establishment phase, including multiple sequential approvals for Environmental Impact Assessments, business registration, and licensing, create significant delays, particularly for foreign investors without a local presence.
Absence of a dedicated investment promotion mechanism for the renewable energy sector. Bangladesh Investment Development Authority (BIDA) has not historically had a dedicated RE investment desk, leaving Chinese and other overseas investors without a single point of facilitation.
Limited technology transfer and knowledge-sharing frameworks: while overseas investment is sought for capital, the mechanisms for structured knowledge transfer from experienced markets like China remain underdeveloped.
B. Financial and Fiscal Barriers (2nd Forum, October 2024)
Currency risk: payments are made in local currency with USD equivalence, but the PPA framework does not adequately compensate for exchange rate depreciation between invoice and payment dates, a growing concern as the Taka has weakened over project timelines.
High cost of local finance: local bank lending rates of 12-13% make domestic financing uncompetitive compared to international sources: yet foreign loans come with extensive due diligence requirements that raise transaction costs.
Inadequate green finance instruments: despite the existence of Bangladesh Bank’s Green Transformation Fund (GTF) and Technology Development Fund (TDF), these are limited in scope, complex to access, and not tailored to the needs of Chinese overseas investors who typically rely on China Development Bank, Exim Bank of China, or AllB financing.
Tax incentive implementation gaps: tax holidays exist on paper but are time-bound. progressively decreasing, and carry reinvestment conditions (30% reinvestment in industry; 10% annual purchase of listed company shares) that add complexity and deter foreign applicants. In practice, some investors have not received declared tax holidays because rules changed mid-project.
C. Institutional and Governance Challenges (3rd Forum, June 2025)
Cancellation of 31 solar project Lols (totalling -5.68 GW, USD 6 billion) under the interim government: investors had already committed approximately USD 300 million through banking channels, with 15 companies having purchased land. No compensation mechanism was announced, and the review committee’s authority remained unclear.
Fragmented multi-agency approval processes: coordination failures across BPDB, PGCH, REB, SREDA, and local authorities generate sequential delays that no contractual provision addresses, because most approving agencies are not parties to the PPA.
Paper-based and partially digital processes: the investment and licensing ecosystem remains largely paper-dependent, requiring physical document submission; no centralized online portal exists for tracking application status, creating particular difficulties for foreign investors.
Power purchase tariff renegotiations: Chinese investors at the 3rd Forum specifically flagged renegotiation of agreed tariffs as a major deterrent, characterised by the Chinese Enterprises Association in Bangladesh as directly damaging the country’s investment reputation.
Delayed payments: investors consistently reported payment delays well beyond contractual timelines, with some. cases extending to 7-8 months or longer, compounding currency risk and eroding project returns
Cancellation of Lols without grievance redress: the almence of a fast, fair dispute resolution mechanism following Lol cancellations left investors, some of whom had bought land and transferred funds, without legal recourse or restitution.
Source : CPD PPA Study
