The government of Bangladesh has restored the provision of payment guarantees for renewable energy projects to attract new investment amid a severe energy crisis. The provision was reinstated following repeated requests from industry stakeholders, two years after it was scrapped by the previous government.
The absence of a government payment guarantee had deterred local and foreign investors from making new investments, amid uncertainty over payments for electricity supplied to the grid.
The Power Division signs payment guarantees with independent power producers (IPPs) on behalf of the government, while the Bangladesh Power Development Board (BPDB) signs power purchase agreements with them. A payment guarantee from the Power Division helps IPPs secure financing from local and international banks to develop power plants.
The Power Division recently instructed the BPDB to include payment guarantees in future tender documents. The directive was issued in a letter signed by Muhammad Abul Lyse, deputy secretary of the Power Division.
“With the objective of increasing electricity generation from renewable energy sources, instructions are hereby issued to invite tenders by including the provision of Payment Guarantee under the power purchase agreement and implementation agreement,” the directive states.
Industry stakeholders have welcomed the move, saying the restoration of payment guarantees will provide greater security for investors and help renewable energy developers secure financing from local and international lenders.
Ezaz Al Qudrat A Mazid, managing director of Solar EPC Development Ltd, said the initiative would improve project bankability, strengthen lender confidence and make it easier to attract both local and international investment to the sector.
“It is a positive signal for developers, financiers, and technology partners committed to Bangladesh’s clean energy transition,” he said, adding that the initiative would help unlock new renewable energy projects and support the country’s long-term sustainable energy goals.
Mostafa Al Mahmud, president of the Bangladesh Sustainable and Renewable Energy Association (BSREA), said that if the previous government had not canceled the payment guarantee provision, several solar power plants could have come online over the past two years.
“That could have helped lessen the ongoing power crisis, which led to factory shutdowns, job losses, increased power cuts, and immense suffering among people,” he told pv magazine.
Mahmud also called for the immediate removal of duties on all solar power equipment, including battery energy storage systems, as well as incentives to encourage the use of solar power.
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