The State of Bangladesh Solar Energy

Executive Summary

Bangladesh has installed approximately 1,200 MW of solar capacity, representing an estimated 1.55% of the country's total electricity generation of 101.7 billion kWh. Despite a compound annual growth rate of 24.4% over the past decade, solar energy remains marginal within a power system that derives 98.1% of its electricity from fossil fuels (natural gas 65.8%, oil 21.7%, coal 10.6%). The government's target of 6,000 MW by 2030 requires a 5-fold increase, demanding 800 MW of annual additions, an order of magnitude beyond recent deployment averaging 100-150 MW per year.

Bangladesh's Solar Home System program, with 6,000,000 units installed through IDCOL, stands as one of the world's largest off-grid electrification achievements. However, SHS installations have plateaued as grid coverage reached 99.5%, shifting the strategic imperative from off-grid access to utility-scale generation. The country's broader ambition of 40% renewable energy by 2041 confronts three specific barriers: extreme population density (1,265 people per km2) limiting land for ground-mounted arrays, weak grid infrastructure in high-irradiance northern regions, and a regulatory framework historically configured for fossil fuel IPPs.

Bangladesh's Power Landscape

Bangladesh generates approximately 101.7 billion kWh of electricity annually from a total installed capacity of 22,493 MW. The generation mix is dominated by fossil fuels: natural gas accounts for 65.8% of generation, followed by coal at 10.6% and oil/HFO at 21.7%. The country has achieved near-universal electrification at 99.5%, a remarkable accomplishment from a base of just 47% in 2009, but the quality and reliability of supply remain uneven, with load-shedding persisting in rural areas and during peak summer demand.

The power system faces a trilemma. First, domestic natural gas reserves are depleting; production has peaked and is now declining, forcing increased reliance on expensive imported LNG. Gas's share of generation has fallen from 64% in 2016 to 65.8% in 2024, but the displacement has come primarily from coal (rising from 2% to 10.6%) and electricity imports from India, not from renewables. Second, the HFO/diesel fleet (6,200 MW) represents some of the most expensive generation in the world, with fuel costs of $0.12-0.18/kWh creating a massive fiscal burden through power sector subsidies. Third, CO2 emissions per capita at 0.00 metric tons, while low globally, are rising rapidly with industrialization, and Bangladesh's international climate commitments require a credible decarbonization pathway.

Solar energy, at 1,200 MW (1.55% of generation), is the obvious candidate for addressing all three dimensions simultaneously. It is now the cheapest source of new-build generation globally ($0.038-0.049/kWh for utility-scale), it eliminates fuel import dependence entirely, and it produces zero operational emissions. The question is not whether Bangladesh should scale solar, but whether it can overcome the structural barriers to doing so at the pace its targets demand.

Solar Capacity Growth Trajectory

From 135 MW in 2014, Bangladesh's solar capacity has grown to 1,200 MW in 2024, a CAGR of 24.4%. This growth, while impressive in percentage terms, has been modest in absolute megawatt additions. The average annual addition over the decade was approximately 107 MW, compared to India's average of over 10 GW per year during the same period and Vietnam's addition of 9 GW in the single year of 2020 through its feed-in tariff program.

Estimated annual solar generation of 1576.8 GWh, based on a 15% capacity factor reflecting Bangladesh's solar irradiation of 4.0-5.0 kWh/m2/day adjusted for monsoon variability and grid curtailment, represents less than 1.6% of total electricity output. The capacity factor is constrained by several factors unique to Bangladesh: heavy cloud cover during the June to September monsoon season reduces output by 40-50% compared to dry months; panel soiling from dust and air pollution in the Dhaka industrial corridor reduces efficiency; and grid integration limitations force curtailment when local demand is insufficient to absorb solar output.

The gap to the 2030 target of 6,000 MW is 4,800 MW, requiring 800 MW of new capacity per year. At the current pace, Bangladesh would reach approximately 1,900 MW by 2030 under a business-as-usual scenario, missing the target by over 4,000 MW. Achieving the policy-aligned pathway requires not just scaling up the deployment rate by 5-8 times, but fundamentally reforming the institutional framework: streamlined land acquisition, pre-approved grid connection points, standardized PPAs, and a dedicated solar procurement agency or reformed SREDA with execution authority.

The contrast with regional peers is stark. India, at 51.0 watts of solar per capita, has leveraged its solar park model, competitive reverse auctions, and viability gap funding to attract over $20 billion in solar investment. Vietnam, at 174.0 watts per capita, demonstrated that a clear, time-limited feed-in tariff can catalyze explosive private investment. Bangladesh, at 7.1 watts per capita, ranks among the lowest in Asia despite receiving comparable solar irradiance. Pakistan, at 7.8 watts per capita, is the closest regional comparator, and both countries face similar constraints of grid weakness and policy uncertainty.

Solar Home Systems: Success and Plateau

Bangladesh's SHS program, with 6,000,000 units installed through IDCOL and its partner organizations (principally Grameen Shakti), is one of the largest off-grid electrification programs ever implemented. The program deployed approximately 350 MW of distributed solar capacity, bringing basic electricity to millions of rural households before grid extension reached them.

At its peak in 2017-2018, the program installed over 60,000 systems per month, financed through IDCOL's blended model of 20% grant (IDA/GCF), 50% soft loan, and 30% equity from partner organizations. Each SHS, typically 20-130 watt-peak, provided power for LED lights, mobile charging, and a small fan or television. The impact on quality of life, health (reduced kerosene smoke exposure), and economic productivity was transformative.

However, the SHS program has reached its natural ceiling. As grid coverage climbed to 99.5%, standalone SHS units became redundant for most rural households. New installations have dropped sharply since 2019. The program also faces a mounting e-waste challenge: the first generation of batteries is reaching end-of-life with no scalable recycling infrastructure for lead-acid batteries. Battery replacement costs, often 40-50% of the original system price, deter households from maintaining their SHS once grid power is available.

The strategic lesson is that SHS electrification, which brought solar power to 6 million off-grid households, is fundamentally different from the utility-scale solar buildout Bangladesh now requires. The 350 MW of distributed SHS capacity cannot substitute for thousands of megawatts of grid-connected solar needed to decarbonize the generation mix.

Grid-Connected Solar: Parks, Rooftop, and Distributed Systems

The transition to grid-connected solar encompasses four segments, each with distinct dynamics.

Utility-Scale Solar Parks. Of the 6,000 MWp of solar parks announced by BPDB and SREDA, only 500 MW are operational. Major projects include Teesta (100 MW), Payra (200 MW), and Feni (200 MW). The gap between announcement and commissioning reflects the core obstacles: land acquisition in the world's most densely populated country (1,265/km2), where every acre of ground-mounted solar competes with agriculture; grid connection bottlenecks in northern and western regions where irradiance is highest but transmission infrastructure weakest; and financing shortfalls where projects cannot reach financial close without grid guarantees, and grid investments await confirmed generation.

Rooftop Solar and Net Metering. With 112 MW installed and only 1,250 net metering connections since the 2018 guideline, rooftop solar remains at 112 MW against an estimated 6 GW rooftop potential. The low uptake reflects multiple barriers: tariff credit rates too low to provide attractive payback periods, a bureaucratic multi-step approval process, absence of building code mandates for solar readiness, and limited awareness among building owners. Rooftop solar avoids the land constraint entirely and reduces transmission losses, making it potentially the most scalable pathway for Bangladesh, but only with significant regulatory reform.

Solar Irrigation Pumps. IDCOL has financed 3,524 solar pumps replacing diesel for agricultural irrigation, with a combined capacity of approximately 35 MW. The target of 50,000 pumps by 2025 remains distant. Solar irrigation is attractive because it displaces expensive diesel, reduces groundwater overdraft by enabling metered usage, and directly supports agricultural productivity. However, installation costs ($5,000-15,000 per system), seasonal usage patterns, and farmer financing constraints limit adoption.

Solar Mini-Grids. 30 solar mini-grids are operational, serving remote chars and islands where grid extension is uneconomic. With total capacity of approximately 5 MW, mini-grids are a niche application but play a critical role in providing reliable power to the most underserved communities. Sustainability depends on tariff adequacy and operator viability in low-density markets.

Policy Framework, Challenges, and Recommendations

Bangladesh's renewable energy policy architecture centers on the 40% renewable target by 2041, operationalized through SREDA as the nodal agency and BPDB as the single buyer. The 2030 interim target of 6,000 MW of solar requires approximately 800 MW of annual additions, a deployment rate 5-8 times the historical pace. The gap between ambition and implementation is the defining challenge.

Five structural barriers constrain solar deployment:

• Land scarcity. At 1,265 people per km2, Bangladesh has minimal available land for ground-mounted solar. Utility-scale solar requires approximately 5 acres per MW, meaning 6,000 MW would need 30,000 acres. Floating solar on the extensive network of haors, beels, rivers, and irrigation reservoirs offers a partial solution, as does agrivoltaics (dual-use solar-agriculture) and mandatory rooftop deployment.
• Grid integration. The transmission network was built for centralized thermal generation. Absorbing 20-30% variable renewable energy requires grid reinforcement, frequency regulation, forecasting systems, and 1,500-2,000 MWh of battery storage. Without proactive grid modernization, high solar curtailment will undermine project economics.
• Financing gap. Total lifecycle investment of $3.5-4.5 billion is needed for the 2030 target, while deployed investment through IDCOL and related channels totals approximately $333 million. The IDCOL microfinance model does not scale to utility projects costing $50-80 million each. Commercial banks are cautious; international investors face policy uncertainty.
• Regulatory inertia. The BPDB single-buyer model, long-term capacity payment contracts for fossil plants, and absence of renewable purchase obligations create structural disincentives. Merit-order dispatch, which would prioritize cheaper solar over expensive thermal, threatens the economic rents embedded in the existing fossil fleet.
• SREDA institutional capacity. SREDA was established as a promotional body, not a regulatory or procurement agency. It lacks the mandate, budget, and technical capacity to drive gigawatt-scale solar deployment. Institutional strengthening or creation of a dedicated solar procurement entity is essential.

Three policy recommendations address these barriers:

• Develop solar parks on marginal lands and water bodies. Identify and gazette low-productivity agricultural lands, abandoned shrimp polders, degraded chars, and water bodies for dedicated solar development. Floating solar on haors and irrigation reservoirs avoids the land-food tradeoff. A target of 3,000 MW of designated solar park capacity with pre-approved grid connection and standardized land lease frameworks would transform the pipeline.
• Mandate rooftop solar and reform net metering. Require solar readiness in building codes for all new commercial and industrial construction above a size threshold. Reform net metering tariffs to provide fair compensation for exported electricity. Create a streamlined digital permitting process. Rooftop solar is the pathway least constrained by land scarcity.
• Issue green bonds and establish bankable PPA frameworks. Bridge the financing gap through sovereign green bonds dedicated to solar and storage investment. Standardize PPAs with credible offtake guarantees, currency hedging for international investors, and dispute resolution mechanisms. India's solar auction model, which achieved tariffs below $0.03/kWh through scale and competition, provides a proven template.

The 18,000 MW target by 2041 and the broader 40% renewable ambition are achievable but only with fundamental policy reform, institutional strengthening, and a multi-fold increase in investment. The SHS program proved Bangladesh can deploy solar at scale; the challenge now is to replicate that success in the fundamentally different domain of grid-connected utility-scale generation.

Data sources: IRENA Renewable Capacity Statistics 2024, SREDA, IDCOL, BPDB Annual Report 2023-24, EIA International Energy Statistics, World Bank Development Indicators, Mujib Climate Prosperity Plan.