A long-overdue crackdown on ‘capacity payment’ finally comes as the government begins ditching diesel-guzzling power plants that idly fed on public money, sources say.
The bundling out of the ‘expensive’ power plants begins as demand grows louder for disposing of such plants most of which were almost idle in their lifetime but burdening the exchequer with ‘capacity payments’,’ according to the sources.
Over the past several months five privately owned and one state-run diesel plant were shut, a senior official at the state-run Bangladesh Power Development Board (BPDB) told the FE.
“Almost all the state-run ones are, however, still kept active although most of them have spent over 35 years of lifespan,” says the BPDB official.
Bangladesh’s total power-generation capacity was around 24,602 megawatts, according to official data of the BPDB as on August 20, including the installed capacity of the idle ones.
Around 51 per cent of the country’s power capacity is gas-fired while 27 per cent comes from furnace oil, 6.0 per cent from diesel and only 2.0 per cent from solar and hydropower, with another 5.0 per cent imported from India.
But the country’s overall electricity generation now hovers around 14,000MW, and the highest generation recorded so far was 15,648MW on April 19, 2023.
Cost of electricity generation from diesel-fired power plants was the highest at around Tk154.11 per unit followed by around Tk 22.10 per unit for furnace oil-based plants, around Tk 9.17 per unit for coal-fired plants and the lowest of all at Tk3.46, according to BPDB’s latest annual report published for fiscal year (FY) 2021-22.
The average operational plant factor of these diesel plants was only around 5.0 per cent although most were supposed to be operational at around 80-percent plant factor, said sources.
Of the shut privately owned diesel-run plants, Daudkandi 200MW power plant and Noapara 100MW plant owned by Bangla Trac went on retirement in April 2023, Aggreko’s Brahmangaon 100MW plant and Aorahati 100MW plant laid off in May and June 2023 respectively, while APR Energy’s Pangaon 300MW plant retired this August.
Siddirganj 100MW 3-year quick-rental power plant, owned by Desh Energy, was sent into retirement in April 2019 five years after its initial three-year tenure.
Without any output, however, private sector’s Keraniganj 300MW plant owned by APR Energy and Baghabari 200MW plant of Paramount Energy are still kept alive.
Sources said most of these diesel-fired power plants were awarded to private entrepreneurs during the previous general- election year 2018 under an indemnity law styled Quick Enhancement of Electricity and Energy Supply (Special Provision) Act 2010.
Effective until 2026, the law has a provision of immunity to those involved with the quick-fix remedies for energy shortages.
Besides, three state-owned diesel-fired power plants are still kept alive by the government despite a 2017 cessation order from the energy regulator – Bangladesh Energy Regulatory Commission (BERC).
All of these power plants are now in around 40 years of their lifeline, says a senior BERC official.
Bheramara 20MW plant is now in the 43rd year of its lifetime since initiation of its commercial operation in January 1980, Rangpur 20MW plant is now in the 35th year since its commercial operation commenced in August 1988 and Syedpur 20MW is now in the 36th year since commercial run begun in September 1987.
The BERC in its order had set June-2018 deadline to terminate operations of these state-owned oil-fired power plants.
State-owned Barisal 40MW diesel plant was, however, shut by the government two years after the expiry of the BERC deadline in June 2020.
The BPDB has to foot capacity-payment bills to the tune of Tk 2.25 per unit (1 kilowatt-hour) for keeping the idle diesel-fired power plants, said sources.
Capacity payment for the furnace oil-fired power plants is between Tk 1.85 and Tk 2.15 per unit.
Although the government is sending diesel-fired power plants on retirement, lately though, more than five dozen furnace oil-fired plants are still in generation, according to the BPDB.
According to Centre for Policy Dialogue (CPD) calculations, the BPDB made capacity payment of around Tk 170 billion in FY22, which is expected to soar 64.70 per cent to around Tk 280 billion in FY23.
The burgeoning capacity payments to power plants, including oil-fired ones, are waning financial condition of the BPDB as its operating loss reached around Tk 274.77 billion in FY’22 from around Tk 62 billion in FY’18–within five years-the CPD data showed
The amount of subsidy requirement also increased from Tk 40 billion in FY’17 to around Tk 230 billion in FY’23, which is feared to rise around 39.13 per cent to around Tk 320 billion in FY’24, it estimated.
Previously, the subsidy requirement for power sector witnessed a whopping rise of 152 per cent to around Tk 297 billion during ‘FY 22 from ‘FY 21, according to Institute of Energy Economies and Financial Analysis (IEEFA).
Chairman of the BPDB Md Mahbubur Rahman couldn’t be reached over the phone for his view of the power situation.
“There was no need of awarding the privately owned diesel-fired power plants during the previous election year as most of these plants were kept idle,” energy adviser of the Consumers Association of Bangladesh (CAB) Dr Shamsul Alam told Tuesday.
The decision was “tantamount to snatching public money”, he quipped.
“I don’t know whether performance tests of these diesel-fired power plants were carried out or not,” he lamented.
“These diesel-fired power plants were operational only around 15-20 days out of 365 days of a year,” says energy-expert Dr M Tamim in his comment on the intended quick fix.
“It was a wrong decision…I did not see any justification for building these power plants,” says the former energy adviser of interim government.
And former BERC member Md Mizanur Rahman opines that these diesel-fired power plants should have been shut down long before.
- The Financial Expreses