Good Solar initiatives could still be stalled by old obstacles

The government wants Bangladesh to generate more electricity from rooftop solar. But are its own policies making that investment harder than it needs to be?

That is the uncomfortable question that needs to be asked as the government rolls out a series of initiatives to expand rooftop solar across the country.

There is much to welcome in the recent moves. The government is seeking to create new entrepreneurs for the rooftop solar sector and plans to develop district- and area-based service providers to bring local businesses, small and medium-sized enterprises, young people and women into the renewable energy market.

More importantly, under the net-metering system, the government has announced that surplus electricity generated from rooftop solar will be purchased at Tk10.50 per unit. Given the cost of rooftop systems, including battery storage, this price is clearly intended to encourage consumers and investors.

These are sensible steps. But good initiatives alone will not transform the rooftop solar market. The real test is whether the policies surrounding these initiatives allow them to work.

And that is where Bangladesh still has some serious contradictions to resolve.

The government has set an ambitious target: renewable energy is expected to account for 20% of total electricity generation by 2030, with 5,500MW coming from rooftop solar.

The question is not whether such a target is desirable. It is whether Bangladesh is creating the right conditions to achieve it. At present, there are reasons for concern.

The tax problem undermining the incentive

The most obvious contradiction lies in the taxation of solar equipment. In the budget speech on 11 June, the government announced that all taxes on imported solar equipment would be waived until 2030. The message was straightforward: reduce the cost of solar technology so that consumers and businesses have a greater incentive to invest. But implementation soon became complicated.

An NBR order issued the following day created questions about how the announced tax exemption would actually be applied. Even after a revised order, much of the intended benefit reportedly remained beyond the reach of ordinary consumers.

This is not merely a technical issue involving tax codes. It goes to the heart of whether the government's rooftop solar policy can work.

A consumer generally does not import an inverter, battery or other solar equipment directly. They buy these products from local suppliers. If importers face substantial taxes and duties, those costs eventually become part of the retail price.

So a tax exemption that does not translate into lower prices for consumers is hardly an effective incentive. The situation becomes even more problematic when the tax burden on certain equipment actually increases.

Take inverters. According to information provided by stakeholders, changes involving HS codes have raised the tax and duty burden on inverter imports from around 28% to 38%. Once weight-based taxation is taken into account, the effective burden can reportedly exceed 50% in some cases.

The situation with batteries is even more concerning, with the combined tax burden in some cases reportedly reaching roughly 64% of the product's value. This creates a fundamental policy contradiction.

On one hand, the government is offering Tk10.50 per unit for surplus rooftop electricity to encourage investment. On the other hand, high taxes can substantially increase the upfront cost of the very equipment required to generate and store that electricity.

One policy is pushing investment forward; another is pulling it back.

Rooftop solar is no longer just about panels

The tax issue deserves greater attention because rooftop solar is no longer simply about installing panels. Battery storage, hybrid systems, smart inverters and other technologies will increasingly determine how effectively rooftop generation can be integrated into the electricity system.

This matters particularly for Bangladesh. Solar generation is intermittent, while electricity demand does not always coincide with sunshine. Storage can allow consumers to use more of the electricity they generate and reduce pressure on the grid.

Making batteries and other storage technologies excessively expensive today could therefore create a much bigger problem tomorrow.

If Bangladesh wants 5,500MW of rooftop solar by 2030, it needs to think beyond panel installation. It needs an ecosystem in which solar generation, storage, smart metering and the grid can develop together.

That requires predictable and rational taxation—not a system in which investors have to navigate changing interpretations of tax rules.

Distribution utilities must change their mindset

There is another obstacle that may be even more difficult to overcome: institutional resistance.

Some officials within the country's electricity distribution system, particularly in the rural electricity network, continue to view customer-generated electricity through the lens of the traditional utility model.

Under that model, the utility produces or purchases electricity and consumers buy it.

Rooftop solar changes that relationship. A consumer can now become both a buyer and a producer. Through net metering, electricity can flow in both directions.

That should not be viewed as a threat. A consumer generating electricity on their own roof is not undermining the national electricity system. In fact, they are reducing demand for centrally generated electricity and helping reduce the country's dependence on imported fuel.

Distribution companies therefore need to change their approach.

Rooftop solar will require them to manage bidirectional electricity flows, smart meters, distributed generation and eventually large-scale battery storage. These are not problems to be resisted; they are the responsibilities of a modern electricity distribution system.

If distribution companies continue to see rooftop generation as lost business, Bangladesh will struggle to expand it at the required pace.

The real challenge is policy coordination

Perhaps the biggest lesson is that Bangladesh does not necessarily lack good policies. It often lacks coordination between them.

One ministry announces a tax exemption. An implementing agency interprets the rules differently.

The government offers an attractive price for surplus solar electricity. But the cost of the equipment required to generate that electricity remains high.

The government wants local entrepreneurs to enter the renewable energy market. But those entrepreneurs may still face complicated regulatory and approval procedures.

The government wants 5,500MW of rooftop solar by 2030. But distribution companies may not yet have the institutional mindset or infrastructure necessary to accommodate millions of small power producers.

These contradictions matter because energy policy is not a collection of isolated announcements. It is a chain. If one link is weak, the entire policy can fail.

The government should therefore ensure that the tax system actually lowers the cost of solar equipment, that batteries and storage technologies are not unnecessarily penalised, that net-metering procedures are simple and predictable, and that distribution companies facilitate rather than discourage rooftop generation.

The author, Ashraful Islam Raana, works at an international development organisation. Mandalcenter18@gmail.com

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.