Fossil fuel bias may hinder energy transition: CPD

The proposed national budget for FY2026�"27 contains several positive measures for renewable energy, but continued fiscal support for fossil fuels could undermine Bangladesh’s energy transition goals, the Centre for Policy Dialogue (CPD) said on Wednesday.

Expressing concern over the government's plans to expand domestic coal production, including a target of producing 600,000 metric tonnes in FY2026�"27 and new projects at Barapukuria Phase II and the Dighipara Coal Field, CPD said such support for coal runs counter to efforts to promote cleaner energy.

The observations were presented by CPD Senior Research Associate Helen Mashiyat Preoty in a paper titled “Proposed National Budget for FY2026�"27: What is there on the Power and Energy Sector?” at a discussion chaired by CPD Research Director Khondaker Golam Moazzem at the organisation’s Dhanmondi office.

CPD acknowledged that the proposed budget has, for the first time, offered substantial fiscal incentives for solar-based electricity generation. These include a zero per cent tax rate for the solar power sector until 2035, a five per cent tax rebate on solar electricity bill payments, reduced import duties on solar equipment and lower taxes on related components.

The think tank described these measures as a positive signal for renewable energy development. However, it noted that only around two per cent of total development spending in power generation has been allocated to renewable energy projects, while the remaining 98 per cent continues to go to fossil fuel-based projects.

CPD warned that achieving the government's target of generating 20 per cent of electricity from renewable sources by 2030 would be extremely challenging under the current investment pattern. It said the target would require the installation of 1,662 MW of solar capacity annually between January 2026 and December 2030.

The organisation also questioned the feasibility of the government's target of producing 10 GW of solar power by 2030, pointing out that 11 renewable energy projects remained unapproved during the current fiscal year. These include seven solar projects with a combined capacity of about 640 MW, three grid modernisation projects and a battery energy storage pilot project.

According to CPD, renewable energy expansion cannot rely solely on private sector investment. It called for larger government-led solar projects and increased allocations for renewable energy in the development budget.

The think tank identified weaknesses in transmission and distribution infrastructure as another major challenge. Import duties ranging from 60 to 93 per cent on essential grid equipment, including transformers, conductors, towers and meters, continue to increase costs and slow modernisation efforts, it said.