Sunnyside Up: Scaling up

solar photovoltaics in

Bangladesh

Bangladesh is one of the world’s most vulnerable countries to the effects of climate change. Solar photovoltaics

(PV) can help manage climate vulnerabilities and also ensure energy access for all. Bangladesh is among the

largest users of off grid solar home systems globally. The markets for on-grid systems such as utility scale solar

parks and distributed generation on rooftops, other off-grid markets such as irrigation, public lighting, water

pumping, telecom towers etc. also hold substantial promise for adoption. Stronger policy and innovation is crucial

to overcome market barriers and accelerate further adoption.

2

unconditionally by 5% by 2030 and by 15% if international support is

provided.5 Therefore, there is a need to effectively tap the cost-

effective and abundant supplies of renewable energy.

Amongst various sources of renewable energy, solar energy is one of

the most viable options for Bangladesh as it has high daily average

solar radiation levels ranging from 4-6.5 kWh/m2.6 The Government of

Bangladesh has made some progress in tapping solar energy by

successfully disseminating solar home systems (SHS) throughout the

country, providing electricity to people in remote off-grid areas.

However, the contribution of SHS to the total amount of power

generated in the country is extremely low. Moreover, the on-grid solar

power generation capacity, currently at almost 47.5 MW, has been

growing at a very slow pace due to certain challenges like land

availability, high initial investment required, etc.7 This points toward the

need to scale up solar power capacity in the country.

Growing need to tap the cost-effective and abundantly available solar energy in Bangladesh

High reliance on costly

fuel oil imports due to

gas shortage

Increasing demand for

electricity underpinned

by growing population

and urbanization

61.5

82.8

2013 2017

Carbon dioxide emissions (million

tonnes)

Source: BP Statistical Review of World

Energy 2018

Need for solar energy in Bangladesh emanating from…

2009

5% 21%

Share of oil-based

electricity

2018

Falling gas

reserves (tcm*)

0.4 0.2

*trillion cubic metres

2007 2017

Source: BP Statistical Review of World Energy 2018, World Bank,

Bangladesh Power Development Board

Bangladesh’s energy sector has witnessed strong growth in the recent years underpinned by economic growth, burgeoning population and

large-scale urbanization. The country’s primary energy consumption has increased at a CAGR of 6.2% during 2010—2017 to 33 million

tonnes of oil equivalent (Mtoe) – compared with the global growth of 1.6%.1 Bangladesh heavily depends on fossil fuels and conventional

energy resources (mainly gas, accounting for 58% of total installed electricity generation capacity) to meet its energy demand.2 This is not

only depleting the country’s gas reserves but also causing environmental degradation in the form of higher carbon emissions. Moreover,

due to gas shortage, there is an increasing reliance on imported fuel oil which is attributing to rising fiscal burden. Therefore, it is crucial for

the country to diversify into alternative fuels to ensure energy security without any further delay.

The Government of Bangladesh has outlined a target to provide

electricity to all by 2021. Currently, 80% of the population has access

to electricity, however, the supply of electricity is not adequately

reliable (mainly in rural areas) due to infrastructural constraints.3

Increasing electricity demand and dwindling of gas reserves to almost

half of their size in 2007 has led to greater reliance on costly imports of

fuel oil for electricity generation. Consequently, the share of oil-fired

electricity increased from 5% in 2009 to 22% in 2017, and

simultaneously the fuel cost per kWh generated tripled from 1.1 to

over 3.4 BDT/kWh (US$0.014 to US$0.04) during the period.4 With a

strong pipeline of coal-powered plants, the country is also relying on

coal to meet its future electricity demand. Heavy reliance on fossil

fuels may result in higher carbon dioxide emissions in a country which

is already vulnerable to climate change impacts. Bangladesh has

pledged to the United Nations climate body to reduce its greenhouse

gas emissions

Bangladesh’s high

vulnerability to climate

change impacts

57.4 61.8 65.570.6 74.8

Net consumption of electricity (TWh)

Source: BMI

58%

21%

10%3%

8%

Natural gas Furnace oil

Diesel Coal

Others

Installed electricity

generation capacity by

fuel

3

The Government of Bangladesh has outlined a target to install 1.7 GW of solar capacity by 2021 through the solar home systems (SHS)

program and on-grid solar power plants.8 Bangladesh has been successful in developing off-grid rooftop solar power (solar home systems),

however, it needs to ramp up the development of on-grid large scale solar power plants in order to achieve the target. Presently, the country’s

solar power capacity is largely dominated by off-grid projects accounting for nearly 86% of the total installed solar capacity.9

Grid connected utility scale solar parks need to be ramped up to catch up with targeted capacity

What has been achieved?Future plans

Solar home

systems

5.5 million solar home systems installed

Provides electricity to ~13% of the country’s population

Bangladesh among the largest users of solar home systems globally

Other applications of solar technology in Bangladesh

With SHS replacing kerosene, the government is

saving US$225 million annually on kerosene

imports.10

1337 solar irrigation pumps

152 solar drinking water systems

102191 solar street lights

1933 solar telecom tower

Source: Sustainable and Renewable Energy Development Authority

Solar PV constitutes 1.8% (334 MW) of the total current

installed power generation capacity in Bangladesh. A

majority of installed solar PV capacity is off-grid solar home

systems (~233 MW). On-grid capacity is ~ 42 MW and

constitutes both rooftop (45%) and utility scale solar parks

(55%).

The government targets to achieve “Vision 2021” with

1.7 GW of solar capacity

Two solar power hubs being planned by Bangladesh

Economic Zone Authority (BEZA)

1,000 MW over 4,000

acres of land at

Chandpur

600 MW over 2,000 acres

of land at Chittagong

Bangladesh is among the largest users of solar home systems globally.

Through 5.5 million SHS installed in remote locations, it provides

electricity to nearly 13% of the population. Out of 5.5 million SHS,

nearly 4.5 million SHS were distributed through a national programme

undertaken by Infrastructure Development Company Limited (IDCOL),

a government-owned non-banking financial institution. By 2021, IDCOL

targets to finance 6 million SHS with an installed generation capacity of

~ 250 MW.

With the emergence of solar home systems, kerosene imports have

reduced bringing down the country’s fiscal burden. The Government

has also installed several solar irrigation pumps, solar drinking water

systems, solar street lights and solar telecom towers benefitting the

community people by ensuring food security and clean drinking water

contributing to better socio-economic conditions in the country.

So far, large scale (on-grid) solar power generation capacity in the

country has been growing at a relatively slow pace. Currently, an

independent power producer, Joules Power Ltd, operates the largest

solar power plant in the country (recently commissioned in October

2018) in Cox’s Bazar District with a capacity of 28 MW.11 The

momentum now seems to be building as the Bangladesh Economic

Zone Authority (BEZA) has drafted a plan to develop two solar power

hubs with a cumulative capacity of 1600 MW in the districts of

Chandpur and Chittagong.12 Moreover, the Government has already

approved the proposals for establishing 19 on-grid solar power parks

with a cumulative capacity of 1070 MW, although there is not enough

clarity on the progress of these solar power parks.13

Recent developments

December

2018

Proposal for setting up five solar

power plants with a total capacity of

227 MW approved by the Government

December

2018

MoU signd between Joules Power Ltd

(independent power producer) and

BEZA to install a 100 MW solar plant

in the Chandpur economic zone

April 2018

US$55 million financing approved by

World Bank for second rural

electrification and renewable energy

development project involving

installation of solar irrigation pumps,

solar mini-grids and cooking stoves.

Net metering policy and regulations notified by SREDA in

2018 to promote rooftop solar PV

Rooftop Solar PV

4

Land availability, financing and conducive policy remains the major constraints for accelerated adoption

Installed electricity generation capacity by fuel

type* (MW)

58.5%

20.7%

9.7%

6.7%

3.0%1.3% 0.1%

Natural gas

Furnace Oil

Diesel

Power import

Coal

Hydro

Solar PV

Source: Bangladesh Power Development Board

*as on October 2018

Bottlenecks to the

growth of on-grid solar

power capacity

► High cost of capital

► Lack of adequate resources and

framework to appraise solar energy

projects

► Need for diversified sources of

funding

Financing challenges

► Limited information available for

project developers

► Lack of technical studies and gaps

in project due diligence

Project development

challenges

► Non-agricultural unused land not

available

► Trade-off between land for

cultivable crop and renewable

energy projects

Land availability

► Immature solar industry requires

government incentives

► Absence of feed-in tariff structure

Lack of government

incentives

Challenges faced by on-grid solar power

developers

Solar PV accounts for only 0.1% of the total installed (on-grid) electricity

generation capacity of Bangladesh. The slow growth of large-scale

solar power generation capacity can be attributed to the following:

► Financing challenges: In Bangladesh, majority of financing

for solar power projects is provided by government bodies (for

eg, IDCOL) which have access to credit lines from multilateral

and development banks. Private players lack interest in

project financing due to less experience and high amount of

risk involved. Hence, there is a need for diversified sources of

funding. However, the project financing market in the country

is still immature to provide long term financing to projects.

Financiers do not possess enough experience and knowledge

of utility scale renewable energy projects and have low risk

appetite. Moreover, small institutional investor base and

undeveloped capital markets are not equipped enough to

support infrastructure financing.

► Land availability: A solar power plant requires 3 to 4 acres of

land to generate each megawatt of electricity. Bangladesh is a

densely populated agricultural country where non-

agricultural unused land is not easily available. According to

World Bank, agricultural land accounted for 70% of total land

area in Bangladesh in 2015.14 The Government of Bangladesh

does not allow the use of agricultural land for renewable

energy projects. Therefore, it is a major challenge to find land

for installing ground level solar projects.

► Lack of government incentive: Currently, solar industry in

Bangladesh is at a nascent stage. Hence, government

incentives are required to encourage investment in the

industry. Lack of incentive in solar power tariff makes it

economically infeasible to undertake investments in solar

industry, particularly for the private players.

► Project development: There is limited information available

for project developers due to lack of technical studies,

insufficient data on resource availability and gaps in project

due diligence, resulting in project development challenges.

Additional factors hindering the growth of solar power capacity in

the country include lack of skilled manpower, supply chain gaps,

limited grid connectivity and lack of awareness.

Stronger policy initiatives needed to drive the growth of

on-grid solar power projects in the country

Key incentives provided by the Government of Bangladesh to attract investment in solar energy projects

The Government has implemented several policies and measures to facilitate both public and private sector investment in solar energy

projects to scale up the contribution of renewable energy-based electricity production. The Government adopted the Renewable Energy Policy

in 2008 which aims to source 10% of electricity from renewable sources by 2020.15 However, the contribution of renewable sources to

electricity generation currently stands at merely 3%, much below the target outlined.16 This indicates that a stronger policy support from the

Government is needed to boost this sector.

In 2014, the Government of Bangladesh established Sustainable

and Renewable Energy Development Agency (SREDA) to provide

policy support for the growth of renewable energy. The

Government provides several fiscal incentives to solar project

developers in the form of tax exemptions (corporate income tax,

import duties and value added tax) under certain conditions. In an

effort to promote rooftop solar energy across the country, recently

the Government introduced net metering policy. It allows

consumers to sell their additional solar electricity to the

Government through net metering system. Despite such

incentives, many solar power projects continue to face delays as

project owners (mainly private players) have not made any

progress even after the expiry of deadline. This lack of action by

private players may be due to the absence of incentive tariffs -

10% higher tariff than the highest purchase price of electricity by

the utility from private generators – which have been under

debate for a long time. There is a need to provide more attractive

fiscal incentives and incentive tariffs to attract more investment

into the sector.

Fiscal incentives Other incentives

15-year corporate income tax

exemption

Payment guarantee to project

company through implementation

agreement

Assistance in getting clearances from

various government agencies

Net metering policy enables

consumers to sell their

additional solar electricity to

the government

Spare parts up to 10% of the total

plant cost are exempted from

import duty and value added tax

(VAT)

Avoidance of double

taxation on the basis of

bilateral agreements

Import of solar panels

exempted from 15% VAT

Established two flagship green funds

— Bangladesh Climate Change Trust

Fund and the Bangladesh Climate

Change Resilience Fund (BCCRF) —

the main sources of green finance

Allows foreign investors to transfer

investment, income and profit to other

countries

Tax waiver for foreign investors on

their earnings from technical know-

how, technical assistance and

royalty

5

6

Learnings drawn from developing countries show remarkable growth in solar PV installations driven by strong policy support

01

02

Public private partnerships

Stronger financial systems/financing options

International experience in the development of solar energy industry

Over the last couple of years, solar photovoltaic (PV) has been making

significant contribution to global renewable power capacity additions.

The growth in solar PV capacity is largely driven by Asia, particularly

China and India, where the solar sector has been expanding rapidly

driven by strong policy support creating investor interest in the market.

► China: China has made giant strides in solar PV installations

which is evident from nearly 60% CAGR growth in its solar PV

capacity during 2015-18. With a capacity of 175.2 GW at the

end of 2018, China has become a global leader accounting for

over one-third of the solar PV capacity in the world. Such

noteworthy growth in Chinese solar market has been driven by

government incentives including a nationwide feed-in-tariff

system, tax incentives and funding assistance.

► India: The country’s solar PV capacity has increased by more

than five times during 2015-18 to reach 26 GW by 2018 — 90%

of utility-scale and 10% of rooftop projects. India ranks fifth in

terms of installed solar capacity globally, accounting for 5% of

the global capacity. Various incentives provided by the Indian

Government including renewable purchase obligations for power

distribution companies, subsidies, viability gap funding and tax

incentives paved the way to bring investment into the sector.

► Philippines: The solar power market is rapidly emerging in the

country, which witnessed an addition of 881 MW of solar PV

capacity during 2014-16 to reach a total capacity of 903 MW

(900 MW on-grid) in 2016. This rapid adoption of solar power

was largely driven by the initial feed-in-tariff of

5.1 9.2 18.3 26.043.5

78.1

131.1

175.2

2015 2016 2017 2018

Solar PV capacity of India and China (GW)

India China

34%

5%

61%

Share in global solar PV capacity at 2018-end (%)

China India Rest of the world

Source: Renewable Energy Policy Network for the 21st century, National Energy Administration, PV Magazine, BloombergNEF, EY analysis

Rapid solar PV

capacity growth in

China and India

driven by strong

policy support

Rapid solar PV capacity growth in China

and India driven by strong policy support

Rapid solar PV capacity growth in China

and India driven by strong policy support

Key government initiatives to promote investment in solar PV installations

China India

► Power distribution companies and large industries are

required to source a fixed percentage of their power

requirements from renewables

► 10% of power production from coal and lignite capacity

additions to come from renewables

► Subsidy of 30% of project costs and access to low-

interest rate bearing loans

► Wheeling charges comparable with those offered to

fossil fuel based power

► Viability gap funding assistance for ultra large solar

power projects of 5,000 MW capacity

► Tax incentives including exemption from paying

corporate income tax; and excise duty and basic custom

duty exemption on import of solar PV-related

components

Note: Few of the government policy initiatives stated above for China and India have now been discontinued due to certain local factors, however,

they have still been captured here since they played a significant role in the growth of respective solar PV industry.

► Nationwide feed-in-tariff system guaranteeing

government’s purchase of power from solar

developers at high prices

► Provinces required to generate a certain percentage

of total energy from renewable sources

► Funding assistance for research and development

activities and for projects in rural or remote areas

► Access to low-cost capital

► Tax incentives including corporate income tax

exemption, partial refund of value added tax on the

sale of self-produced PV power

These examples clearly indicate that a strong policy support

system is essential for creating the necessary environment for

industry growth. Therefore, policymakers in Bangladesh must

restructure the incentives to ensure affordable technology and

adequate return to solar developers.

US$0.23 per kilowatt-hour in 2014.17 Additionally, the net

metering policy and interconnection standards which came into

effect in 2013 also contributed to a spike in industry activity.

The net-metering program opened up the whole market of

solar roof-top panels below 100 kW in areas that were

connected to the grid.

7

References

02

1 BP Statistical Review of World Energy 20182 “Key statistics”, Bangladesh Power Development Board,

http://www.bpdb.gov.bd/bpdb/index.php?option=com_content&view=article&id=5&Itemid=6, accessed on 25th January 20193 “Commentary: Population without access to electricity falls below 1 billion”, International Energy Agency,

https://www.iea.org/newsroom/news/2018/october/population-without-access-to-electricity-falls-below-1-billion.html, 30 October 20184 “Project information document / integrated safeguards data sheet”, World Bank,

http://documents.worldbank.org/curated/en/417631501592121920/pdf/PIDISDS117815-P161869-PUBLIC-Bangladesh-SREP-PDISDS-

Concept-Stage-revised-June-2017-Cleared.pdf, accessed on 25th January 20195 ”Bangladesh takes lead among Saarc nations to submit climate action plan to UN body”, The Economic Times,

https://economictimes.indiatimes.com/news/environment/global-warming/bangladesh-takes-lead-among-saarc-nations-to-submit-climate-action-

plan-to-un-body/articleshow/49107824.cms, 25 September 20156 “Key factors of solar energy progress in Bangladesh until 2017”, Kyushu University Institutional Repository, http://www.tj.kyushu-

u.ac.jp/evergreen/contents/EG2018-5_2_content/pdf/Pages%2078-85.pdf, accessed on 25th January 20197 “Sustainable and Renewable Energy Development Agency (SREDA)”, www.sreda.gov.bd, accessed on 14th February 20198 “Bangladesh: Solar power industry is yet to stand on its own feet”, Sun-connect, https://www.sun-connect-news.org/news/details/bangladesh-

solar-power-industry-is-yet-to-stand-on-its-own-feet/, 5 August 20189 “Sustainable and Renewable Energy Development Agency (SREDA)”, www.sreda.gov.bd, accessed on 14th February 201910 “Surge in Solar-Powered Homes”, World Bank,

http://documents.worldbank.org/curated/en/871301468201262369/pdf/913490PUB097810B00PUBLIC00100802014.pdf, accessed on 27th

January 201911 “With solar farms and roof panels, Bangladesh inches toward green power goal”, Reuters, https://www.reuters.com/article/us-bangladesh-

renewables-climatechange/with-solar-farms-and-roof-panels-bangladesh-inches-toward-green-power-goal-idUSKCN1MQ05I, 16 October 201812 “BEZA to set up 1000MW solar electricity zone in Chandpur”, Dhaka Tribune, https://www.dhakatribune.com/bangladesh/power-

energy/2017/06/23/1000-mw-solar-electricity-zone-setup-beza/, 23 June 201713 “Why is solar power development so slow in Bangladesh?”, The Daily Star, https://www.thedailystar.net/opinion/economics/why-solar-power-

development-so-slow-bangladesh-1560934, 11 April 201814 “Bangladesh - Agricultural land (% of land area)”, Trading Economics, https://tradingeconomics.com/bangladesh/agricultural-land-percent-of-

land-area-wb-data.html, accessed on 6th February 201915 “Renewable energy projects continue to face delays”, Dhaka Tribune, https://www.dhakatribune.com/bangladesh/power-

energy/2017/10/07/renewable-energy-projects-continue-face-delays, 10 October 201716 “Sustainable and Renewable Energy Development Agency (SREDA)”, www.sreda.gov.bd, accessed on 14th February 201917 “PH solar power plants among Southeast Asia’s top 25”, Business Inquirer, https://business.inquirer.net/252287/ph-solar-power-plants-among-

southeast-asias-top-25#ixzz5eqSrj9kq, 11 June 2018; “A 2017 Overview of Solar Energy Usage in the Philippines”, Solenergy Systems Inc,

http://solenergy.com.ph/a-2017-overview-of-solar-energy-usage-in-the-philippines/, 24 October 2017

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About IDCOL

Infrastructure Development Company Limited

(IDCOL) was established on 14 May 1997 by the

Government of Bangladesh. Since its inception,

IDCOL is playing a major role in developing and

financing infrastructure, renewable energy and

energy efficiency projects in Bangladesh. Today the

company stands as the market leader in private

sector energy and infrastructure financing in

Bangladesh.

What IDCOL offers:

• Long Term Local and Foreign Currency

Loan for Infrastructure Projects

• Agency services

• Debt and Equity Arrangements

• Corporate Advisory Services

• Training and Capacity Building Services

• Soft Loan and Grant for Renewable Energy

Projects

46 Electric mobility in India: Leveraging collaboration and nascency

Somesh Kumar

EY India Power and Utilities Leader

Tel: +91 11 6671 8270

E-mail: Somesh.Kumar@in.ey.com

Sanjoy K Gupta

EY Bangladesh Managing Partner

Tel: +88 028835513

E-mail: sanjoy.k.gupta@in.ey.com

Ashish Kulkarni

Executive Director – Power & Utilities, India

Tel: +91 124 464 4000

E-mail: Ashish1.Kulkarni@in.ey.com

Mohammad Saif

Director, Power and Utilities,

India Tel: +91 124 46 18134

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Kanv Garg

Director, Renewables & Electric Mobility,

India Tel: +91 124 671 4000

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Senior Manager, Power and Utilities

India Tel: +91 9867334415

Email: Rahul.Agnihotri@in.ey.com

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Manager, Power and Utilities

Bangladesh Tel: +88 1904667282

Email: Shuboday.Ganta@in.ey.com

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Assistant Director, Knowledge - Power & Utility

Tel: +91 124 470 1233

E-mail: Shikhar.Gupta@in.ey.com

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