Bangladesh is entering a decisive phase in its energy transition. To meet some of the ambitious targets - including generating 40% of electricity from renewable sources by 2041 - the government has recently announced sweeping reforms aimed at accelerating solar energy deployment.
These initiatives include a target of 10,000 MW of solar power generation by 2030, mandatory rooftop solar installation on public buildings, tax exemptions for renewable energy producers, and expanded access to solar systems for urban households.
To support this transformation, Bangladesh may increasingly rely on two key policy mechanisms: feed-in tariff (FiT) and net metering (NEM). Both are designed to encourage private-sector participation and decentralize electricity generation, although they differ significantly in structure and economic impact.
A feed-in tariff (FiT) is a policy mechanism designed to accelerate investment in renewable energy technologies by guaranteeing renewable energy producers a fixed, long-term payment for every kilowatt-hour (kWh) of electricity supplied to the national grid.
Although FiTs are sometimes viewed as an older policy instrument, they have historically played a critical role in scaling renewable energy globally, particularly in countries such as the United Kingdom and Germany.
By contrast, net metering allows electricity consumers who generate their own solar power to offset their electricity bills by exporting excess electricity to the grid.
Bangladesh currently operates a net-metering framework where consumers can install solar systems up to 100% of their sanctioned load capacity. While NEM promotes self-consumption and reduces electricity costs, it generally does not provide the additional financial incentives associated with FiTs.
Given Bangladesh’s urgent renewable energy goals, a hybrid approach combining net metering with targeted feed-in tariffs may offer the most effective pathway toward rapid solar expansion.
Understanding the mechanisms
A feed-in tariff guarantees renewable energy producers a fixed, above-market price for electricity exported to the grid over a long contractual period, typically 15–20 years.
This mechanism reduces investment risk and provides predictable returns, making renewable energy projects financially attractive.
Status in Bangladesh
Bangladesh has historically applied FiTs mainly to selected utility-scale renewable energy projects. However, in recent years, the government has gradually shifted toward competitive reverse auctions for large-scale solar procurement to reduce electricity generation costs and improve market efficiency.
Despite this transition, FiT may still remain relevant for small and medium-sized rooftop solar projects, particularly during the early expansion phase of the renewable energy sector.
Net metering enables consumers who generate solar electricity to use the national grid as a virtual storage system. Surplus electricity exported to the grid offsets future electricity consumption.
The 2025 breakthrough
Under the net metering guidelines -- 2025, Bangladesh introduced several transformative reforms:
These reforms significantly broaden public participation in renewable energy generation and create new financial incentives for households and industries.
Advantages in the Bangladeshi context
Key challenges
Despite significant policy improvements, several critical challenges remain.
1. Land constraints: As the world’s most densely populated large country, Bangladesh faces severe limitations in acquiring land for utility-scale solar projects. Greater emphasis should therefore be placed on:
2. High import duties and upfront costs: Although import duties on inverters have recently been reduced, taxes on specialized solar components -- including DC cables and mounting structures -- continue to increase project costs and discourage investment.
3. Grid stability and infrastructure limitations
The national electricity grid requires substantial modernization to accommodate intermittent renewable energy sources such as solar and wind. Investment in smart-grid technologies, energy storage systems, and grid flexibility will be essential.
4. Financing bottlenecks
Conventional banking institutions in Bangladesh often consider renewable energy investments high-risk. Transitioning from slow refinance schemes toward more agile pre-financing and blended-finance mechanisms could improve project implementation.
Recommendations
To unlock Bangladesh’s estimated 10,000 MW solar potential over the next five years, several strategic actions are essential.
FiT or net metering?
The global renewable energy market has gradually shifted toward competitive auction systems and net-metering frameworks. Reverse auctions have successfully reduced solar tariffs in many countries by encouraging competition among developers.
However, Bangladesh’s renewable energy market remains in a transitional stage. Under current conditions, relying exclusively on market-based mechanisms may slow investment momentum.
A temporary, targeted FiT - particularly for rooftop and small-scale solar projects - could accelerate deployment during this critical growth period.
A hybrid strategy combining aggressive net metering expansion, targeted short-term FiT, fiscal incentives, and accessible green financing may therefore represent the most practical and effective pathway for Bangladesh.
Introducing a limited-duration FiT program - for example, for projects commissioned within the next 12-24 months - could stimulate urgent investment and prevent market stagnation.
Final thoughts
The transition from a fossil-fuel-dependent electricity system to a renewable-energy-based economy is no longer optional - it is an economic, environmental, and strategic necessity.
By combining competitive utility-scale procurement with aggressive rooftop solar expansion, and strengthened financing mechanisms, Bangladesh can achieve greater energy security, reduce carbon emissions, lower long-term electricity costs, and move closer to its renewable energy targets for 2030 and 2041.
Solar energy remains Bangladesh’s most viable pathway toward sustainable development. With decisive policy implementation, institutional reform, and investment support, the country has the potential to emerge as a regional leader in distributed renewable energy development.
Dihider Shahriar Kabir is an Environmentalist and Non-Resident Bangladeshi Living in the United Kingdom.
