30% solar use can cut RMG factories’ energy costs by 15.7%: CPD

Bangladesh's readymade garment (RMG) factories could cut their average monthly energy costs by 15.7% if solar power meets 30% of their electricity demand, according to a new Centre for Policy Dialogue (CPD) study based on data from 350 factories.

The study calls for an accelerated transition to renewable energy as growing dependence on imported liquefied natural gas (LNG) exposes manufacturers to higher costs, supply risks and increasing pressure from global buyers, according to a press release.

The CPD said renewable energy should no longer be viewed merely as an environmental initiative.

For Bangladesh's export-oriented garment industry, renewable energy is increasingly a matter of energy security, cost stability and global competitiveness, it said.

Greater dependence on imported LNG leaves factories vulnerable to international fuel-price volatility, foreign-exchange pressure and potential supply disruptions.

By contrast, solar power offers a more predictable cost structure because it does not require continuous fuel purchases from international markets.

CPD Research Director Dr Khondaker Golam Moazzem said the ongoing gas crisis was likely to intensify, putting further pressure on the RMG sector and the wider economy.

"Relying solely on imported LNG will not be sustainable in the long run," he said.

Moazzem said the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) was already encouraging its members to explore renewable energy.

However, he added that manufacturers needed more comprehensive information on financing and technological options to manage the transition.

CPD modelling shows that meeting 30% of a factory's electricity demand through solar power could reduce its average monthly energy cost from Tk998,190 to Tk846,435, a saving of 15.7%.

The study found that even a 10% solar offset could reduce average monthly energy costs by 5.5%.

A Monte Carlo simulation involving 1,000 possible scenarios for each factory also found that renewable-energy adoption could reduce monthly energy-cost volatility.

Under the model, costs became less volatile at 96% of factories.

The CPD recommended combining renewable electrification with technological innovation and research into lower-energy production methods and alternatives for industrial thermal processes.

Industry leaders said Bangladesh had little time to complete the transition as major export markets introduced stricter environmental and decarbonisation requirements.

BGMEA Vice President and Desh Garments Ltd Deputy Managing Director Vidiya Amrit Khan said the shift from traditional energy sources to renewable energy had become a global requirement for the RMG industry.

"There are multiple EU and UK directives and regulations coming into force in the coming years that require an energy transition, so we have very little time," she said.

Khan said the BGMEA wanted renewable-energy investments to be exempt from tax and additional value-added tax (VAT).

"We want zero tax without an additional 15% VAT on renewable energy. If the government is going for zero tax, why is the National Board of Revenue not aligning with this?" she said.

Bangladesh Sustainable and Renewable Energy Association (BSREA) President Mostafa Al Mahmud said policy bottlenecks remained despite the government's target of generating 10,000MW of renewable energy.

He identified taxation of solar technology as a particular obstacle.

"The NBR's statutory regulatory order is still a bottleneck, with more than 50% VAT remaining on solar technologies," he said.

"Without out-of-the-box decisions from the government and the removal of these bottlenecks, we are heading towards a bigger energy disaster," he warned.

Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Executive President Fazlee Shamim Ehsan said Bangladesh was falling behind global competitors in adopting renewable energy.

"There are many EU regulations. We have many funds, but they are not accessible. We must explore pathways to access those funds," he said.

The CPD study found substantial differences in energy efficiency among factories of different sizes.

The smallest factories had an estimated energy-saving gap of 57.3% compared with the efficiency frontier, while the gap for the largest factories was only 8.9%.

The disparity was attributed partly to older machinery and tighter financing constraints among smaller factories.

Energy efficiency also varied significantly across machinery types.

A band-knife cutting machine was about 300 times more energy-intensive per unit of output than a laser-cutting machine.

A buttonhole machine was about 140 times more energy-intensive than the most efficient sewing machines.

Optimising or replacing machinery across the 350 factories could produce an average factory-level energy-saving rate of 10.17%, the study found.

Under the model, annual energy consumption could decline from around 1.54 million megawatt-hours under the existing machinery mix to approximately 1.28 million megawatt-hours under an optimal mix.

After accounting for actual factory capacity utilisation, however, the expected saving falls to around 25,330 megawatt-hours annually.

The investment required would be substantial: Tk6,604 crore for 50% adoption and Tk13,209 crore for full adoption.

The CPD said machinery replacement alone could not deliver deep decarbonisation because capital and energy functioned as complements, not substitutes, in the RMG sector.

Sewing equipment accounts for 85.2% of installed machinery, much of which is technically essential and difficult to replace.

DBL Group Chief Sustainability Officer Mohammed Zahidullah said solar energy would be central to Bangladesh's decarbonisation efforts.

"The key to decarbonisation for Bangladesh is solar renewable energy," he said.

Zahidullah warned that Bangladesh could lose export orders to competitors such as India, Pakistan and Vietnam as they were progressing faster in integrating renewable energy into production.

"The macro-level change will come when we, as a country, move forward with renewable energy. In our case, it is solar and public-private partnerships for setting up large-scale solar power plants," he said.

"For acquiring land for large-scale power plants, the government can provide the land, while the private sector can invest collectively in the technology," he added.

The CPD identified high upfront costs, limited information about alternative technologies, long payback periods and risk aversion as major barriers to renewable-energy and energy-efficiency investments, particularly for smaller factories.

It recommended expanding blended-finance arrangements that combine private investment, concessional lending, and government-backed credit.

The study also called on financial institutions to develop standardised appraisal frameworks for renewable-energy and energy-efficiency projects, making it easier for factories to secure financing.

With global brands increasingly imposing supply-chain decarbonisation requirements and carbon-sensitive trade measures emerging, the CPD warned that continued investment in fossil-fuel infrastructure could create stranded or underutilised assets.

It recommended expanding rooftop solar, promoting renewable electrification, incentivising energy-efficient machinery and developing alternatives for energy-intensive thermal processes.

The study also called for regular energy audits and streamlined approval procedures for renewable-energy projects.

Moazzem called for a coordinated initiative involving the BGMEA, BKMEA, BSREA, Petrobangla and other relevant stakeholders to address the current energy crisis and remove existing bottlenecks.

He proposed forming a joint committee comprising these organisations to identify solutions and take coordinated steps to remove barriers to Bangladesh's renewable-energy transition.