How Recent Policy Support Can Accelerate Solar Energy Adoption in Bangladesh’s Apparel Sector

Md. Sajib Hossain

For years, Bangladesh’s apparel sector has been facing energy challenges, including rising electricity costs, global energy supply uncertainties, and volatile energy prices. There is also increasing pressure on the sector to reduce energy-related greenhouse gas emissions (GHGs) to meet sustainability requirements.

In order to accelerate the expansion of renewable energy use, the Government of Bangladesh has introduced several policy and fiscal measures, including the Net Metering Guideline (2025), and fiscal incentives in the National Budget FY2026–27.

To accelerate the generation of renewable energy, the Government of Bangladesh has also introduced the Draft National Renewable Energy Development Strategy (2026–2030) in June 2026. The strategy places special emphasis on rooftop solar, and sets a target of installing 5,500 megawatts (MW) of rooftop solar capacity by 2030.

Rooftop solar photovoltaic (PV) system is the best available options for Bangladesh’s apparel sector.  As it is a cost-effective source of renewable energy, and also helps utilize the rooftop space available in factory buildings.

The large-scale installation of rooftop solar in Bangladesh’s apparel sector is crucial to diversify its energy mix, enhance energy security, and reduce GHG emissions.

National Electricity Generation Capacity and the State of Renewables

Bangladesh’s electricity generation is mainly based on fossil fuel-based energy sources. As shown in Table 1, Bangladesh’s installed electricity generation capacity stands at around 32,458 MW, as of July 2026, of which renewable energy accounts for only 1,807.83 MW (5.57 per cent). This shows the country’s heavy reliance on fossil fuel -based energy sources. However, natural gas holds the largest share (38.43 per cent) of installed electricity generation capacity mix, followed by coal (19.33 per cent) and heavy fuel oil (17.38 per cent).

Table 1. Bangladesh’s Installed Electricity Generation Capacity by Fuel Source (July2026)

Source: Author’s compilation based on the Sustainable and Renewable Energy Development Authority (SREDA), Renewable Energy Database (2026), (last updated: 8 July 2026).

As shown in Table 2, among the renewable energy, Solar dominates the renewable energy technology, with 1,514.66 MW, accounting for 83.80 per cent of total renewable capacity. Meanwhile, hydropower (230 MW; 12.70 per cent) and wind (62 MW; 3.40 per cent) have relatively smaller shares.

The tables also suggest that solar has become the dominant renewable energy source in Bangladesh, yet renewables still represent only a limited share of the installed national electricity generation mix. Given this situation, it is crucial to increase the share of solar energy to diversify the electricity generation mix.

Table 2. Installed Renewable Energy Capacity in Bangladesh (July 2026)

Source: Author’s compilation and calculations based on the SREDA Renewable Energy Database (2026), (last updated: 8 July 2026).                                                                      

Note: Individual percentage shares have been rounded to two decimal places; therefore, they may not sum to exactly 100%.                                                                                                              

Current Scenario of Installed Solar Capacity

Figure 1 shows the distribution of installed solar capacity by technology in Bangladesh. Solar parks account for the largest share (49.20 per cent). Meanwhile, net metering rooftop solar (around 21.3 per cent) and rooftop solar systems outside the net metering framework (around 6.2 per cent), together contribute more than one-quarter (27.43 per cent) of the country’s total installed solar capacity.  This indicates the increasing role of rooftop solar in expanding renewable energy generation in Bangladesh. However, other Solar Technologies account for 23.37 per cent share of the total installed solar capacity. 

Figure 1. Composition of Installed Solar Capacity by Technology in MW (July 2026)

Source: Author’s compilation and calculations based on the SREDA, Renewable Energy Database (2026), (last updated: 8 July 2026).

Note: Other Solar Technologies include solar home systems, solar irrigation, solar minigrids, solar street lighting, solar-powered telecom BTS, solar charging stations, solar nanogrids, and solar drinking water systems.

Fiscal Incentives in the National Budget FY 2026–27 to Promote Solar Energy Adoption

The National Budget FY 2026–27 introduces a range of fiscal Incentives to accelerate renewable energy generation, especially solar energy. These incentives are expected to improve the financial viability of solar investments in Bangladesh’s apparel industry by reducing equipment costs, while encouraging domestic manufacturing of key solar components. The major incentives in this regard are as follows:

• A zero percent income tax rate on the solar power sector until 2035 to encourage environmentally friendly, affordable, and sustainable solar power generation. At the same time, a 5 percent tax rebate is being offered to consumers on payments against their solar electricity bills.

• Reduction of import duty (CD), regulatory duty (RD), supplementary duty (SD), and advance tax (AT) to 0% on essential solar components, including solar inverter; battery pack housing; lithium cell, lithium-ion battery; solar photovoltaic (PV) module/panel; mounting structure (steel); mounting structure (aluminum); lithium cell, lithium-ion battery, lithium-ion battery pack, BESS; battery management system (BMS); SCADA/Plant Monitoring or Control System; UV-Protected Solar DC Cable; and battery thermal management system (See National Budget FY 2026–27, Budget Speech, Annex-B, “List of Proposed Concessionary Items for Solar Plant Installation,” p. 210).

• Duty exemptions on raw materials required for the production of lithium-ion batteries, sodium-ion batteries, and battery packs, until 30 June 2031, to support the development of local energy storage solutions.

• Continuation of duty concessions until 30 June 2028 for selected components, including mounting structures, lithium battery cells, and battery energy storage systems (BESS), after which the concessions will be withdrawn as part of encouraging the gradual development of domestic manufacturing capacity.

 Net Metering for Rooftop Solar Adoption

As part of promoting the renewable energy and expanding the share of renewables in the national electricity mix, the Government of Bangladesh first introduced the Net Metering Guideline in 2018. This guideline was revised in 2025.  This allows eligible grid-connected consumers, to install rooftop solar photovoltaic (PV) systems at their premises, to generate electricity to meet their own demand and export any excess or surplus electricity to the national grid through a bi-directional smart meter.

At the end of each billing cycle, eligible consumers pay only for their net electricity consumption after adjusting exported electricity, while unused energy credits are carried forward and settled periodically in accordance with the Revised Guideline 2025.

Thus, this mechanism helps reduce electricity costs, improves energy efficiency and makes able to factories to earn additional value from surplus electricity exported to the grid.

Apparel manufacturers can adopt rooftop solar through either the Capital Expenditure (CAPEX) or Operational Expenditure (OPEX) model. Under the CAPEX model, factories finance, own, operate, and maintain the solar system, and retain all benefits from electricity generation and net metering.

Under the OPEX model, a third-party investor finances, installs, owns, operates, and maintains the solar system, while the factory purchases electricity generated by the system under a long-term agreement.

 However, of the two models, the OPEX model is particularly attractive for small and medium-sized factories, which have limited capital. As it eliminates the need for upfront investment, while factories purchase solar electricity at an agreed tariff, which is typically lower than the retail electricity tariff charged by the distribution company.

Lastly, recent policies and strategies will play crucial role to accelerate rooftop solar adoption in Bangladesh’s export-oriented apparel sector. Optimistically, the large-scale adoption of rooftop solar in the apparel sector will contribute significantly to achieving the Government’s ambitious renewable energy targets of generating 20 percent of electricity from renewable sources by 2030 and 30 percent by 2040.

Author: Md. Sajib Hossain, Research Associate, Research and Development Cell, BKMEA. He can be reached at hsajib87@yahoo.com ; Disclaimer: The views expressed in this article are those of the author.