Renewable energy incentives: For all or just a few?

Bangladesh stands at a pivotal moment in its energy transition.

Rising fuel import costs, volatile global energy markets, and mounting pressure on foreign exchange reserves have exposed the vulnerabilities of an energy system that relies heavily on imported fossil fuels.

In this context, renewable energy, particularly solar power, offers not only an environmental solution but also an economic and strategic one.

That is why the recent national budget initially generated considerable optimism. The finance minister announced tax and duty incentives for renewable energy, which many interpreted as a major step toward accelerating the country's clean energy transition.

Headlines suggested that the government had finally removed barriers to solar expansion.

But a closer look at the post-budget Statutory Regulatory Orders (SROs) issued by the National Board of Revenue tells a different story.

Under the current framework, most of the tax and duty benefits are tied to solar projects operating under the Renewable Energy Service Company (RESCO) model and Power Purchase Agreement (PPA)-based arrangements.

In practice, this means that the incentives primarily favor companies that generate solar electricity and sell it to customers.

The problem is that Bangladesh's solar market has not been built solely by such companies. It has been driven by homeowners installing rooftop panels, farmers powering irrigation pumps, small businesses seeking relief from high electricity bills, commercial building owners, and a network of importers, distributors, and engineering firms that support these installations.

For these users, a PPA is often irrelevant. A farmer who wants to run a solar-powered irrigation system does not need a power purchase agreement. A family installing solar panels on its roof does not need to sell electricity to a third party. Yet the current incentive structure effectively excludes many of these users from receiving meaningful benefits.

Why distributed solar matters

International experience shows that renewable energy expansion is most successful when ordinary citizens can participate directly. Countries such as India, Vietnam, Indonesia, the Philippines and Pakistan have rapidly increased solar capacity through residential and medium-scale rooftop systems.

Distributed solar offers multiple advantages. It reduces demand on the national grid, lowers fuel imports, creates local jobs, and helps consumers manage rising electricity costs. Most importantly, it democratises energy production by allowing households, farmers, and small businesses to become active participants in the energy system.

If Bangladesh limits incentives to a narrow group of RESCO operators or project developers, it risks slowing the very transition it seeks to accelerate.

An overlooked industry ecosystem

The renewable energy sector is much larger than a handful of power generation companies. It includes hundreds of importers, distributors, dealers, technology providers, engineers, and technical service firms. Thousands of small entrepreneurs depend on this ecosystem for their livelihoods.

These businesses have played a central role in building Bangladesh's solar market over the past decade. Yet the current policy framework appears to overlook their contribution.

The result is widespread confusion. Many consumers now believe that duties on solar equipment have been fully removed and that prices should immediately fall. In reality, most solar products remain subject to the existing duty and tax structure. Businesses are therefore facing pressure to reduce prices even when their import costs have not changed significantly.

The missed opportunity

Perhaps the biggest concern is that the current policy misses the sectors with the greatest potential impact.

Roughly 63% of Bangladesh's electricity consumers are in the residential, agricultural, and small commercial sectors. The country still operates about 1.7 million diesel-powered irrigation pumps. Converting even a portion of these pumps to solar power could significantly reduce diesel imports and lower operating costs for farmers.

Similarly, the rooftops of homes, markets, factories, and office buildings represent an enormous untapped resource. With the right incentives, Bangladesh could add thousands of megawatts of solar capacity without acquiring new land.

Yet the budget provides little in the way of targeted incentives for solar irrigation, solar home systems, solar street lighting, or community-based renewable energy projects. These are precisely the areas where broad-based participation could deliver the greatest economic and social benefits.

Tax incentives alone will not solve Bangladesh's renewable energy challenge. Access to finance remains one of the sector's biggest obstacles. High interest rates, limited availability of long-term loans, and investment risks continue to discourage both consumers and businesses. The budget does little to address these structural issues.

Moreover, the government has yet to reform the outdated weight-based customs assessment system that often inflates the declared value of renewable energy imports. Moving to an internationally recognised transaction value-based system would make projects more affordable and transparent.

A more inclusive path forward

Bangladesh needs a renewable energy policy that is inclusive, competitive, and market-driven.

1. Review the current SROs to ensure that incentives are accessible to all stakeholders, including households, farmers, small businesses, importers, and EPC companies.
2. Provide consistent duty and tax exemptions for key renewable energy equipment such as solar modules, inverters, batteries, mounting structures, and related components.
3. Introduce targeted support for residential, agricultural, and small commercial users.
4. Expand access to affordable financing and simplify customs valuation procedures.

Most importantly, policymakers must recognise that renewable energy is not a special privilege for a select group of companies. It is a national asset that can strengthen energy security, reduce import dependence, create jobs, and support Bangladesh's climate commitments.

The country's energy future should not be shaped by policies that benefit only a few. The guiding principle must be clear: renewable energy for all, not for a select few.

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