Renewable energy no longer optional

A garment factory owner in Dhaka recently said electricity and fuel now account for 22 percent of his manufacturing costs, up sharply from three years ago. In Chattogram, a large rice farmer said rising diesel prices and shrinking margins mean rice cultivation is barely profitable. These examples show a wider reality across Bangladesh: energy costs are becoming a defining factor in production across industries, including agriculture.

Bangladesh’s energy sector now faces an uncomfortable truth. A business model heavily dependent on imported fossil fuels is no longer sustainable. Global oil-price volatility, instability in the Middle East and pressure on foreign-exchange reserves are directly affecting the domestic economy. The gap between energy production and demand continues to widen. Domestic gas production is below 2,000 MMCFD, while demand exceeds 3,800 MMCFD. Bangladesh is increasingly relying on imported liquefied natural gas, leaving the country exposed to global market volatility and supply chain risks.

Recent increases in industrial energy costs are already threatening export-driven sectors such as garments. Small and medium-sized businesses are likely to face even greater difficulties

In FY2024-25, Bangladesh spent around $3.9 billion on LNG imports. Total annual energy-import costs are estimated at $12-$15 billion and are expected to rise further amid current geopolitical tensions. Energy has therefore become not just a sectoral challenge, but a macroeconomic one. The impact extends far beyond power shortages. Higher fuel prices raise manufacturing costs, transport expenses and agricultural input costs. These pressures contribute to inflation and weaken competitiveness across the economy.

Recent increases in industrial energy costs are already threatening export-driven sectors such as garments. Small and medium-sized businesses are likely to face even greater difficulties adapting to rising costs. Meanwhile, the rest of the world is accelerating its shift towards renewable energy. Renewables now account for more than 30 percent of global electricity production. China leads global investment in solar technology, India aims to install 500GW of renewable capacity by 2030, and Vietnam has rapidly expanded solar generation through supportive policies.

Bangladesh, by contrast, generates only about 5 percent of its electricity from renewable sources despite having strong natural potential. The barriers are not resource-related, but institutional and policy-driven. The country has some of the highest levels of solar irradiance in the region. Rooftops, water bodies and hybrid land-use systems offer major opportunities for solar expansion. Rooftop solar alone could generate 3,000MW-4,000MW across industrial, commercial and residential buildings with limited public investment. Most projects could be led by the private sector.

However, high financing costs, lengthy approval processes and unclear regulations continue to discourage investors. In countries such as India and Vietnam, approvals for solar projects are often granted within weeks. In Bangladesh, similar approvals can take months or even years. Solar-powered irrigation also offers a major opportunity. Bangladesh currently uses around 1.5 million diesel-powered irrigation pumps, consuming roughly 1 billion litres of diesel annually. Replacing them with solar-powered pumps could cut fuel imports, lower farming costs and reduce emissions.

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Renewable expansion will also require improved storage systems and stronger grid readiness. As battery technologies become cheaper worldwide, Bangladesh must begin pilot projects and create incentives to support large-scale deployment. The main obstacle, however, remains institutional rather than technological. Bangladesh needs lower import tariffs on renewable technologies, access to concessionary financing, faster approval timelines, expanded net-metering systems and stronger coordination among institutions. Many approved projects also remain stalled, damaging investor confidence and slowing progress.

Bangladesh now faces a clear choice: continue relying on imported energy vulnerable to global shocks, or build a diversified renewable-energy system that offers greater price stability, lower long-term costs and stronger energy security. This is no longer simply an energy crisis. The decisions taken now will shape Bangladesh’s economic future for years to come. Transitioning from short-term fixes to long-term energy resilience is no longer optional.

Mashid Rahaman is managing director of Rancon Solar and Rangs Properties Limited. Subail Bin Alam is chief operating officer at Rancon Solar and Rancon Infrastructure and Engineering Limited, and director at BSREA.