Rooftop solar nears 1,000MW despite policy hurdles

Bangladesh’s rooftop solar industry is nearing a milestone of 1,000 megawatts (MW) in installed capacity, but regulatory and policy barriers could undermine its growth momentum, according to the Institute for Energy Economics and Financial Analysis (IEEFA).

A briefing note published by the think tank yesterday said the new tax structure has raised the tax on industrial rooftop solar equipment to about 17 percent from the previous 1 percent, making such projects significantly more expensive.

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Delays in approving net-metering connections, which allow rooftop solar systems to feed surplus electricity into the national grid, continue to hamper adoption, it added.

Official data show Bangladesh had 418.1MW of rooftop solar capacity as of June 2026. However, IEEFA found that 239 large establishments and business groups alone account for 667MW.

The institute estimates the country’s actual rooftop solar capacity could be around 1,000MW after including smaller installations below 0.15MW that are not fully reflected in official statistics.

The estimate is notable because Bangladesh’s grid-scale variable renewable energy capacity stood at 859MW as of June 2026, according to the briefing note, Role of Distributed Resources in Energy Transition: A Multi-Country Perspective, which examines the growth of distributed energy resources (DERs) in Bangladesh, Australia and India.

“Compared to the grid-scale variable renewable energy capacity of 859MW as of June 2026, the country’s growing rooftop solar capacity provides an encouraging signal for Bangladesh’s power sector,” said Shafiqul Alam, co-author of the report and lead analyst for Bangladesh Energy at IEEFA.

“The rooftop solar sector is expected to grow further, with engineering, procurement, and construction (EPC) companies holding a project pipeline of more than 500MW,” he told The Daily Star.

The growing use of rooftop solar also appears to be easing pressure on the national grid. IEEFA’s analysis of half-hourly daytime electricity demand between April 16 and June 11 in 2024 and 2026 found demand fell by as much as 6 percent.

While weather conditions and weaker industrial activity also contributed to the decline, the institute said rooftop solar appeared to have played a catalytic role.

However, IEEFA identified the current tax and duty structure as one of the main obstacles to expanding rooftop solar and solar irrigation.GROWTH FACES POLICY OBSTACLES

The new tax structure has raised the effective tax burden on industrial rooftop solar projects to 17 percent from 1 percent under the previous capital-machinery provision, IEEFA said.

According to industry stakeholders, the 17 percent comprises 15 percent value-added tax (VAT) and 2 percent advance income tax, while customs duty and supplementary duty remain zero.

The impact is particularly severe for smaller rural projects, as many are unlikely to qualify for duty benefits because project implementation contracts are often beyond the reach of small suppliers and traders undertaking remote installations.

The institute recommended a full duty waiver for rooftop solar projects.

“With the government stipulating a target to install a renewable energy capacity of 10,450MW between 2026 and 2030 in its strategy document, relying on rooftop solar for more than 50 percent new capacity, a full duty waiver to all rooftop solar projects will likely help achieve the goal,” said Shafiqul Alam.

The report said rising electricity tariffs are encouraging industries to adopt rooftop solar, while higher diesel prices are driving investment in solar-powered irrigation.

Delays in net-metering approvals remain another major obstacle. Although government guidelines require applications to be approved within 10 to 15 days, rooftop solar and solar irrigation projects continue to face delays.

IEEFA estimated that more than 93 percent of Bangladesh’s solar irrigation capacity remains off-grid. As irrigation pumps are used for only 110 to 150 days a year, the absence of net metering leaves them idle for much of the year, weakening project economics.

Bangladesh has more than 10 lakh diesel-powered irrigation pumps but only 3,556 solar-powered ones, the briefing note said. Converting one-third of the diesel-powered pumps to solar could reduce the annual diesel import bill by about $244 million, or Tk 3,000 crore.

The institute urged the Sustainable and Renewable Energy Development Authority (SREDA) and the Ministry of Power, Energy and Mineral Resources to monitor online net-metering applications and prevent approval delays.

Access to finance is another challenge. Despite the availability of low-cost green financing, lenders remain reluctant to finance distributed energy projects because of perceived risks and high collateral requirements. IEEFA recommended credit-risk guarantees to encourage lending to smaller businesses and farmers.

The institute also recommended promoting battery storage alongside distributed energy resources and gradually adopting smart meters. It said supportive tax policies, faster net-metering approvals and better access to finance are essential to achieving Bangladesh’s renewable energy targets.