Net metering rooftop systems: An opportunity for Bangladesh’s renewable energy goals

Around 200 MW of rooftop solar PV systems have been installed in Bangladesh. Photo: TBS

Bangladesh's energy future hinges on how effectively it integrates renewable sources into its grid. Since the issuance of the Net Metering (NEM) guidelines in 2018, the country has sought to foster renewable energy adoption by enabling prosumers—consumers who also generate electricity. 

The policy encourages self-consumption of generated electricity, with surplus power sold back to the utility at any voltage level, offering a win-win for both producers and the grid.

Bangladesh's Renewable Energy (RE) Policy 2008 set ambitious targets of meeting 5% of total power demand through renewables by 2015 and 10% by 2020. However, renewable energy today accounts for only 3.5% of the country's installed generation capacity—far short of these goals. 

Historically, the high cost of modern renewables like solar and wind hindered progress, as fossil fuel-based electricity was cheaper. However, advancements in technology and economies of scale have significantly reduced renewable energy costs, with grid parity now achieved globally. In many countries, renewables are even cheaper than fossil fuels. 

This trend in the declining cost of renewables will continue into the future. Getting long-term concessionary financing for renewables has also become easier worldwide due to various reasons.

The NEM policy in Bangladesh provides incentives for potential prosumers and is flexible and inclusive. For example, any type of renewable energy technology can be eligible for the policy. 

The policy covers residential, industrial, and commercial consumers, while agricultural consumers fall under the 'Guideline for Grid Integration of Solar Irrigation Pumps'. 

According to the Sustainable And Renewable Energy Development Authority (SREDA), to date, around 200 MW of rooftop solar PV systems have been installed in Bangladesh, but the rooftop solar market remains largely untapped.

When the NEM policy was first issued in Bangladesh, there were a few restrictions on prosumer eligibility and capacity limits for a smooth rollout of the policy. 

For example, only three-phase consumers were eligible, 70% of the sanctioned load was allowed, and there was a maximum capacity limit (initially 3 MW and then 10MW). The solar rooftop market has now matured in Bangladesh, and these limits should be reviewed. 

Some recommendations and related recommended incentives are given below for the revision of the NEM policy:

Aligning capacity with sanctioned load: The maximum capacity of the installed renewable energy system should be revised to be equal to the sanctioned load of the consumer. The capacity limit under the NEM system equal to the sanctioned load is justified, as the utilities' distribution network and also the internal electrical distribution system of the consumers are designed based on the sanctioned load. 

If an NEM system greater than the consumer's sanctioned load is allowed, then the internal wiring, system control, and protection devices need to be changed, which will increase the cost of the system. 

If space and other facilities permit, then permission to increase the installed capacity above the sanctioned load should be encouraged, but in that case, the prosumers should need to get additional approval from the utility to check the suitability of higher capacity RE system integration and the dispatch capacity. 

Enabling remote installations: The prosumers should be given the option to install renewable energy generation systems in any part of the country, by providing a wheeling charge to the grid operator or to the utility/utilities.

Prosumers should be able to use the energy produced by the remotely installed system by them. Many industries do not have enough rooftop area to install a solar PV system on their premises equal to their maximum allowable capacity under NEM guidelines, but they may have suitable spaces or building rooftops in other locations in the country that can be used for this purpose. 

Incentivising utilities with carbon credits: Prosumers should be given the option to sell excess energy to any other consumer or consumers within the utility area or any other part of the country by paying a wheeling charge to the utility/utilities or the grid operator. 

This will allow consumers who want to use specifically renewable electricity generated by another prosumer. 

The utility should be provided with a carbon credit facility in order to encourage them to accommodate NEM systems. 

At present, utilities do not have any incentive to promote net metering; rather, it reduces their revenue due to the self-generation of electricity by the prosumers. Utilities can have a fiscal incentive to support NEM through carbon credits.

As the cost is decreasing and thus the cost of generated electricity from the rooftop RE system is also decreasing, a wheeling charge for the utilities can also be considered in the case of larger NEM systems. 

Integrating economic and export processing zones: The EZ (Economic Zone) or EPZ (Export Processing Zone) authorities should support the NEM policy. At present, the EZs buy electricity from utilities and sell it to industries inside the EZs. 

The industries inside the EZs are not direct consumers of the utilities. The EZs or EPZs discourage their consumers from installing NEM systems. Industries inside the EZs or EPZs should be allowed to enjoy the benefits of the NEM policy.

Facilitating OPEX models: In the case of OPEX systems (where a third party installs the rooftop solar PV system instead of the property owner, and sells electricity to the owner) there should be a tri-party agreement signed among the consumer, the OPEX operator and the utility. 

The utility then can require the industry to pay the bill to the OPEX operator, thus reducing the payment risk of the OPEX operators. An incentive in the form of a wheeling charge can be provided to the utility to provide this risk mitigation service. 

Expanding access to single-phase consumers: Single-phase consumers should be eligible for connection under net metering. A minimum capacity of 1 kW should be considered, as a capacity of less than 1 kW is not financially viable. According to the Bangladesh Bureau of Statistics, the total number of households in Bangladesh is approximately 40 million (27 million are in rural areas and 13 million are in urban areas). 

If only one-fourth of the households are considered to be suitable for at least 1 kW of rooftop solar PV systems through NEM, we can get at least 10 GW of solar PV systems from the household rooftops alone. 

Scaling industrial and commercial rooftops: Bangladesh has implemented a very successful solar home system-based off-grid electrification program through IDCOL and installed over six million SHS all over the country. 

A similar program can be initiated by the government to encourage household rooftop solar systems under NEM guidelines. 

These systems will generate electric power at the point of consumption and thus reduce the system loss. Single-phase low-consumption consumers pay a tariff much lower than the generation cost. Reducing their demand would reduce the subsidy to the power sector.          

Different studies show that Bangladesh can achieve more than 10 GW of large-scale rooftop solar PV systems by 2041, by utilising current industrial and commercial roofs, as well as the roofs of industries in the planned economic zones.     

Reducing import duties on solar equipment: In the past, IPPs enjoyed 100 % import duty waivers for the import of their power plant equipment, but NEM-based prosumers did not get these facilities. Having an import duty waiver will reduce the cost of installation and it will encourage consumers. 

A rooftop solar system typically lasts for 20 years. It's time we calculated how much foreign currency we could save by replacing fossil fuel-based power generation with these systems.

For example, a 1 MW rooftop solar PV system can generate around 20 million units of electricity over its 20-year lifespan, saving about five million litres of diesel, which would otherwise cost Tk52 crore.

By offering an import duty waiver of roughly Tk50 lakh, we could save up to Tk52 crore in foreign currency over the next two decades by reducing the need to import fuel. At present, we have import duties of 11% on solar PV modules, 38% on solar inverters, 58% on solar PV mounting structures and cleaning walkways, and 58% on solar DC cables.     

Extending tax holidays to OPEX operators: In a recent circular, the government announced that RE-based Independent Power Producers (IPP) will enjoy a 100% tax holiday for the first 10 years of operation, then 50% for the next three years and 25% for the further next two years. 

This is a positive step forward, but it's important to note that power plants previously enjoyed a 100% tax waiver for 15 years. We should offer similar, if not more attractive, incentives for renewable energy (RE) projects. OPEX operators of rooftop solar PV systems should also benefit from the same incentives.

The cost of renewable energy technologies has dropped significantly, and world leaders are working towards a carbon-free world by 2050. For instance, Vietnam installed over 9,000 MW of rooftop solar PV systems in 2020 alone by offering fiscal incentives like Feed-in Tariffs. The country aims to power half of its homes and office buildings with rooftop solar by 2030.

For the sake of our energy security and a cleaner, emission-free future for ourselves and future generations, Bangladesh should set bold and ambitious targets for renewable energy.

We need to act swiftly to expand RE use by offering incentives such as waiving import duties and taxes and creating enabling policies. Additionally, we must plan to adapt our grid to handle higher levels of variable renewable energy by enhancing its flexibility and incorporating smart grid technologies. 

The future grid of Bangladesh should be built to accommodate upcoming innovations, including more renewable energy, the Internet of Things (IoT), and artificial intelligence.
 

Shahriar Ahmed Chowdhury is the director of Centre for Energy Research at United International University 

Dr Shakila Aziz is an assistant professor at the School of Business and Economics at the United International University. 

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