Bangladesh could significantly expand rooftop solar generation and reduce its reliance on imported fossil fuels by adopting stronger policy incentives for distributed energy resources (DERs), according to a new report by the Institute for Energy Economics and Financial Analysis (IEEFA).
The report argues that Bangladesh can draw lessons from Australia and India, where rapid deployment of rooftop solar and other decentralised energy technologies has helped curb demand for fossil fuel-generated electricity while lowering energy costs.
Distributed energy resources are small-scale power generation and storage systems located close to where electricity is consumed, including rooftop solar panels, solar-powered irrigation pumps, biogas plants and battery storage.
Although Bangladesh has been slower to adopt such technologies, the report says the market is beginning to gather pace, driven largely by industrial investment in rooftop solar.
Official data show Bangladesh had installed 418.1 megawatts (MW) of rooftop solar capacity by June 2026. However, IEEFA estimates that capacity across 239 industrial establishments and business groups has already reached about 667 MW and could be as high as 1 gigawatt when smaller installations are included.
The expansion appears to have contributed to a modest reduction in daytime electricity demand, the report says.
“Compared with the country’s 859 MW of grid-scale variable renewable energy capacity as of June 2026, the growth in rooftop solar sends an encouraging signal for Bangladesh’s power sector,” said Shafiqul Alam, Lead Analyst for Bangladesh Energy at IEEFA South Asia and co-author of the report.
He said engineering, procurement and construction (EPC) companies have a pipeline of more than 500 MW of rooftop solar projects, although the country’s industrial sector could ultimately support several thousand megawatts of capacity.
The report also identifies Bangladesh’s diesel-dependent irrigation sector as a major opportunity for renewable energy. Replacing one-third of diesel-powered irrigation pumps with solar systems could reduce the country’s annual diesel import bill by around US$244 million (BDT30 billion), it estimates.
While rising grid electricity tariffs and high diesel prices have encouraged investment in rooftop solar and solar irrigation, IEEFA says import duties continue to discourage wider adoption.
Although the government has lowered import duties for some rooftop solar equipment, the report says strict eligibility requirements mean many smaller rural projects do not benefit. It also notes that changes to the tariff structure have increased import duties for industrial rooftop solar projects to 17%, compared with 1% under the previous capital machinery regime.
The report points to Australia and India as examples of how capital subsidies and other financial incentives have accelerated deployment of distributed energy systems. It recommends Bangladesh introduce broader duty exemptions to reduce project costs.
Bangladesh’s renewable energy strategy targets 10,450 MW of new renewable capacity between 2026 and 2030, with rooftop solar expected to account for more than half of the planned additions.
“A full duty waiver for rooftop solar projects would significantly improve the prospects of achieving that target,” Alam said.
The report also highlights delays in approving net metering connections despite official processing timelines of 10 to 15 days. It recommends that the Sustainable and Renewable Energy Development Authority (SREDA) and the Ministry of Power, Energy and Mineral Resources strengthen oversight of the approval process to accelerate deployment.
Looking beyond solar generation, IEEFA says Bangladesh should encourage battery storage alongside distributed energy systems and gradually introduce smart meters to improve grid management as renewable capacity expands.