Trade
5 years ago

Oil-fired power plants to retire on expiry

Govt aims to cut generation costs

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The government has no plan to renew contracts of 'costly' oil-fired plants on expiry to cut down power generation costs and ensure sustainable future energy security.

"A good number of oil-fired power plants might shut operations within the next two to three years as their contracts won't be renewed," said Nasrul Hamid.

The closure of these expensive plants would be carried out in phases, the state minister for power, energy and mineral resources told the FE.

He, however, said those on long-term contracts would continue operations until the country did not have sufficient base-load power plants to meet the growing demand for power during peak hours.

Fifty-seven out of 127 oil-fired power plants are now in operation in Bangladesh, according to the data of the Bangladesh Power Development Board (BPDB).

Of the total oil-run plants, 48 are furnace oil-fired and nine diesel-fired.

The remaining power plants are gas-fired, excepting two running on coal and one hydropower plant.

A few oil-fired plants, which were awarded during the present government's last term, would, however, initiate operations soon, said a senior BPDB official.

A decade ago in 2009, sources said, the government launched a drive to install multiple oil-fired rental- and quick-rental plants as a 'short-term' solution to the power crisis at that time.

It also allowed private sector-sponsored several gas-fired power plants to be set up on a rental basis.

Most of the plants' contracts were awarded on the basis of unsolicited offers under the Speedy Supply of Power and Energy (Special Provision) Act 2010.

The law has a provision of immunity to those involved with the quick-fix remedies.

The private entrepreneurs were allowed duty-free import of furnace oil with a 9.0 per cent service charge along with import costs as an incentive, said a senior power division official.

Alongside rental plants, the government also had a plan to install a number of big coal-fired peaking power plants as 'mid-term' and 'long-term' measures.

The power division also planned to stop rental- and quick-rental plants on expiry of their initial tenure and bring down electricity tariffs as well.

But big coal-fired plants 'failed' to come up in time, prompting the government to extend the tenure of rental- and quick-rental ones.

As a consequence, power tariffs for retail-level consumers were hiked by the energy regulator several times in the past one decade to cope with the rising electricity generation costs.

Meanwhile, Consumers Association of Bangladesh energy adviser Prof M Shamsul Alam welcomed the government plan and said, "It could have been taken much earlier."

If the tenure of oil-fired power plants is not extended, the BPDB's loss won't mount, he told the FE.

Currently, the BPDB counts losses to the tune of Tk 80 billion, which could be around Tk 35 billion if their tenure is not extended.

Mr Alam recommended shutting gas-fired rental power plants that, he said, were increasing the BPDB's loss significantly.

The CAB leader sought a comprehensive plan to ensure the country's future energy security, which should include termination of contracts of all the expensive diesel-fired plants.

According to the BPDB, countrywide power generation during evening peak hours on January 01 was 8540 megawatts (MW) and during off-peak hours 6,578MW against the total 17,685MW installed power generation capacity.

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