Bangladesh has rolled out tax breaks and incentives to accelerate solar energy adoption as it grapples with a worsening power crisis linked to global fuel disruptions and domestic supply shortfalls.
The measures, introduced in the July 1 national budget, aim to help the country meet its target of generating 20% of electricity from renewable sources by 2030. They include removing customs duties on solar equipment and exempting solar producers and suppliers from income tax. Institutions adopting solar power will also receive a rebate equivalent to 5% of their electricity bills over the next five years.
The policy push comes as Bangladesh faces acute energy stress. The country relies heavily on imported natural gas, which accounts for about half of its electricity generation. Disruptions in the Strait of Hormuz following the US-Israel attack on Iran in February led QatarEnergy—Bangladesh’s largest supplier—to halve shipments this year.
The fallout has been severe. Rural areas have endured electricity outages lasting up to 10 hours, while industrial output has dropped by 25% to 30%, according to the Bangladesh Garment Manufacturers and Exporters Association. Rising global energy prices are also fuelling inflation and could cap economic growth at 4.5% this year, the Asian Development Bank said on July 9.
Against this backdrop, Dhaka is betting on solar power to reduce import dependence and stabilise supply. The incentives are expected to lower rooftop solar installation costs by 30% to 37%, according to environmental group CLEAN, and encourage large-scale projects, energy storage expansion and grid upgrades.
The focus is particularly on industry, including the garment sector, which contributes about 11% to GDP. But critics warn that the approach risks sidelining rural households, where nearly 70% of the population lives.
“The tax reforms have raised hopes, but the problem runs much deeper,” said Syeda Rizwana Hasan of the Bangladesh Environmental Lawyers Association. “Electricity outages are severe outside Dhaka, and rural consumers must benefit from any reforms.”
Bangladesh’s renewable energy drive has historically lagged. It missed its earlier goal of generating 10% of electricity from renewables by 2020, and current installed capacity stands at just 5%, according to official data. Solar capacity is about 1,515 megawatts.
Expanding rooftop solar could significantly ease pressure on imports. Adding 2,000 MW of capacity could save between $476mn and $1 billion annually, estimates the Institute for Energy Economics and Financial Analysis (IEEFA).
However, scaling up remains a challenge. Bangladesh needs to add roughly 760 MW of renewable capacity each year to meet its 2030 target—more than three times its recent annual average of about 228 MW.
Private developers are unlikely to prioritise small household systems, which generate limited returns. Analysts suggest aggregating demand across communities to make rural projects commercially viable.
“There is clear potential for rural solar,” said IEEFA analyst Shafiqul Alam. “But it requires new delivery models that bring multiple households together.”
Experts say financing is another major constraint. While the government has allocated 171.93bn taka ($1.40bn) to the power and energy sector, only about 2% is earmarked for renewables. Current annual investment of $238mn falls far short of the $933mn to $98 mn needed each year to meet 2030 goals.
Industry voices are calling for a dedicated renewable energy fund and expanded access to low-interest loans for households, farmers and small businesses.
“Tax incentives are a step forward, but not sufficient,” said Hasan Mehedi of CLEAN. “Without affordable financing and targeted support, smaller consumers will remain excluded from the transition.”
Bangladesh’s solar push reflects both necessity and opportunity. But without broader reforms that extend beyond industry and address financing gaps, the country risks deepening existing inequalities even as it seeks to secure its energy future.