Blue Photovoltaic Solar Panels installed on a building rooftop. Rooftop Solar Plant - stock photo (MD MARUF HASSAN via Getty Images)
What is limiting renewable energy adoption in Bangladesh’s garment sector?
Renewable energy adoption in Bangladesh's garment sector is growing, but remains concentrated among large, export-compliant factories. High upfront costs, a lack of technical capacity, and limited access to finance constrain smaller factories from using renewable energy in their production process – highlighting the need for targeted incentives and policy support to include such factories in the energy transition.
Bangladesh's ready-made garment industry stands at a crossroads in its energy journey. High and volatile grid electricity prices, vast unused rooftops atop factory buildings, and mounting sustainability demands from international clothing brands all create a strong rationale for adopting solar energy.
Yet adoption remains far from widespread, suggesting that while the sector’s green transition is underway, it is not yet assured. Despite supportive policies, such as the net metering guidelines introduced in 2018, the sector's potential is not being fully realised.
Studying renewable energy in Bangladesh’s garment sector
A new project explores why the gap between the promise of renewable energy and the reality in Bangladesh's garment sector persists, and what policymakers can do to accelerate the green transition.
This project, funded by the International Growth Centre, builds directly on the Mapped in Bangladesh (MiB) project, which conducted a comprehensive census of the country’s export-oriented garment factories. Drawing on this dataset, our study focuses on two of the most densely industrialised areas in Bangladesh: Gazipur and Savar, which are home to nearly 2,000 factories, or about two-thirds of the sector.
After accounting for factory closures and refusals to participate, we conducted a stratified random survey among 661 factories. The key takeaways from our study are outlined below.
Renewable energy adoption is growing, but remains geographically concentrated
Our findings reveal that the adoption of renewable energy technology (RET) in the ready-made garment sector remains at an early but notable stage. Among the full MiB dataset, 30.6% report having installed some form of renewable energy, mostly rooftop solar panels. In our Gazipur-Savar sample, the adoption rate is slightly higher at 32.8%.
However, these installations are typically modest in scale – the average installed capacity stands at around 160 kW, whereas the average total load was approximately five times that. Additionally, less than half of factories with solar power use it to run core production equipment, which suggests that a large-scale energy transition has not yet materialised.
We find that larger and export-oriented factories are more likely to have gone green than smaller firms. Factories that are part of international supply chains and under pressure to meet buyers’ compliance standards tend to lead in solar adoption.
We also observed a clustering effect: adoption appears to spread geographically. When one or two factories in an area invest in solar and demonstrate its feasibility, neighbouring firms become more inclined to try it.
Figure 1: Factory characteristics associated with renewable energy adoption
Notes: This graph reveals which factors most strongly predict whether a factory adopts renewable energy technology. Factories with easy access to solar energy, and those that belong to an accord or alliance, or where Worker Participation Committees (WPCs) exist, are more likely to use renewable energy. “Std.” refers to standard deviations – larger values indicate stronger effects. Figure generated by the author.
Environmental priorities outweigh buyer pressure
Environmental concerns are the strongest motivator for renewable energy adoption in the garment sector. Among the factories that adopted RET, 60% cited eco-friendly production as their primary driver, and 51% highlighted pollution reduction as an important motivation.
In contrast, only 12% pointed to buyer pressure as a key reason. This suggests that larger factories – which tend to lead adoption – are RET due to concern for the environment and their financial capacity, rather than facing compelling demands for clean energy usage from buyers.
Figure 2: Factors motivating solar adoption in the garment sector
Notes: This graph depicts the top reasons garment factories report for adopting solar energy, with each bar representing the percentage of firms citing a particular motivation. Eco-friendly production tops the list, suggesting that a large share of adoption is driven by environmental concerns. Figure generated by the author using survey data.
Solar adoption makes strong economic sense
Financial motivations are also an important determinant of RET adoption. Around 52% of adopters identified cost savings as a key driver of their investment decisions. Our technical case studies suggest that, under the right conditions, rooftop solar power can be a financially viable investment.
The per-unit electricity price of solar energy is around BDT 3.04 per kWh (approximately USD 0.04), which is well under half the cost of purchasing power from the grid. Internal rates of return reached as high as 36%, accounting for performance degradation and maintenance, with payback periods of five to eight years for moderate-sized systems. In terms of real savings, this means that a properly sized solar setup could reduce a factory’s electricity expenditure by 20-30%.
Financing gaps limit smaller firms
If solar energy is so financially attractive, why haven’t more factories jumped on board? The high upfront cost of installation was cited as a barrier by 65% of non-adopters. Tellingly, 94% of the factories that adopted solar energy financed the investment entirely with their own funds, highlighting the limited access to external finance.
Knowledge and capacity gaps compound the financial constraints. Almost half of non-adopting factories reported that they lacked the technical expertise needed to evaluate or manage installations, and roughly one-third admitted to having limited awareness of renewable options.
These findings suggest that the financing gap is particularly acute for small and medium-sized factories that do not have the internal capacity or capital to invest.
Space constraints limit expansion
Even among adopters, structural barriers persist – 75% of factories that have installed solar technology but do not plan to expand cited rooftop space limitations as their main constraint.
This challenge predominantly exists in dense industrial clusters, where physical space is often scarce and fragmented. Stakeholders have pointed to off-site solar generation or shared infrastructure models as potential solutions to overcome these spatial limitations.
Figure 3: Limits to solar expansion among adopters
Notes: This graph summarises the main constraints to solar expansion, and the share of adopters who face them. The majority cite limited rooftop space as the biggest barrier to further expansion. Figure generated by the author using survey data.
What do factories want from policymakers?
During our survey, factories were clear about the kinds of support they need to adopt renewable energy. Dedicated financial support, requested by 75% of respondents, stood out as the top priority. However, financial mechanisms alone are not considered sufficient.
Factories also want better information dissemination (64%), targeted incentives (59%), and technical training (56%). This pattern suggests that while cost remains the dominant constraint, firms are also seeking a supportive ecosystem.
Over 90% of factories identified government agencies as the primary actors responsible for facilitating this ecosystem, while international buyers and the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) were viewed as important, but secondary, facilitators.
While the evidence presented here is preliminary and specific to Gazipur and Savar, the implications are clear: current adoption patterns risk creating a two-tier system, where large, compliant exporters go green, while small and medium-sized enterprises are left behind.
This research was presented as part of a session on "Greening Bangladesh's garment industry: Are we doing enough?" at LSE Environment Week. Watch a recording of the session below:
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