High import duties stifle Bangladesh's rooftop solar growth

There is an information asymmetry within the sector.

High import duties on solar panels and accessories emerge as a significant barrier to the rooftop solar sector's growth in Bangladesh, despite its potential to save the country US$1 billion annually. 

Shafiqul Alam, Institute for Energy Economics and Financial Analysis’ Lead Analyst for Bangladesh, pointed out the the critical issue of information asymmetry within the sector, which leaves potential adopters—building owners and EPC (Engineering, Procurement, and Construction) companies—unaware of the full benefits and changing regulations related to rooftop solar energy. 

He said that this gap in knowledge significantly slows the momentum needed for widespread adoption.

"Financial institutions see greater risks in financing rooftop solar projects in Bangladesh," Alam explained, highlighting the lack of attractive funding despite available financing vehicles. 

The financing dilemma is exacerbated by prohibitive import duties ranging from 11.2% to 58.6% on imported solar equipment, making the initial setup costs for rooftop solar prohibitively expensive.

Quality assurance issues also deter potential adopters. Alam noted that small-scale rooftop solar projects often suffer from poor-quality installations, undermining confidence in solar technology. 

Additionally, the capacity to deliver and maintain high-quality installations varies significantly between large and small EPC companies, with many smaller firms lacking the necessary expertise and resources.

Utilities, crucial for the integration of rooftop solar into the national grid, face their own set of challenges, including insufficient personnel to manage the growing number of net-metered installation proposals. This staffing issue limits the utilities' ability to effectively support the rooftop solar infrastructure's expansion.

To address these barriers, Alam proposed several solutions: enhancing sector-wide awareness, streamlining finance options through mechanisms like credit risk guarantee schemes, and advocating for the temporary waiver of high import duties to assess their impact on solar adoption.

Furthermore, establishing adequate testing labs for quality assurance and improving market monitoring are deemed essential steps towards ensuring high standards across the industry.

Alam also stresses the importance of capacity development among stakeholders and suggests that targeted programs could significantly bolster the sector's growth. 

Innovative business models for utilities, including utility-owned and third-party-owned models, could offer new revenue streams and motivate utilities to support rooftop solar expansion.

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