Oil-fired plant owners keen to continue electricity generation despite expiry of tenure

Owners of many tenure-expired privately-owned oil-fired power plants, including those of rental and quick rental ones, have shown interest to continue electricity generation on 'no electricity, no payment' basis instead of 'capacity payment' provision, industry insiders said.

Under 'no electricity, no payment' model, state-run Bangladesh Power Development Board (BPDB) will purchase electricity from such plants only when necessary to meet the domestic demand.

The BPDB will not have to make capacity payment to the power plant owners if it fails to buy electricity readily available with them.

Only renewable energy-based power plants especially solar-fired power plants are now operational on 'no electricity, no payment' basis.

Energy experts and consumers' rights group welcomed the move, saying that the government should continue its efforts to generate electricity from least-cost power plants in a bid to reduce overall electricity generation costs.

"I don't see any bad with the new model as the government will not have to expend additional costs other than electricity charge," said Imran Karim, president of Bangladesh Independent Power Producers' Association (BIPPA).

Rather the BPDB's expenditure will significantly reduce for buying electricity from these plants compared to other oil-fired power plants, he added.

The oil-fired power plants are supporting significantly during the ongoing winter season under the situation of a prevailing gas crisis and skyrocketed LNG (liquefied natural gas) price in the international spot market that went up as high as US$32 per million British thermal unit (mmBtu) last month, he said.

The country would have to face load-shedding even during the ongoing winter season if a good number of oil-fired power plants were not operational, the top brass of the privately-owned power plant owners said.

Currently, a total of 58 furnace oil-fired plants are operational in the country having the cumulative electricity generation capacity of 5,712 megawatt (MW) against the country's overall electricity generation capacity of 21,395 MW.

The number of total operational power plants is, however, 143 as on February 9, 2021, according to the BPDB statistics.

Around a dozen of privately-owned power plants retired over the past couple of years.

A total of 60 more power plants having the total electricity generation capacity of 5089 MW will be retiring over the next five years until 2026.

Of the power plants to be retired in next five years, 40 are gas-fired power plants having the total generation capacity of 3,094 MW, 15 are furnace oil-fired power plants having the generation capacity of 1,193 MW and five are diesel-fired power plants having the total generation capacity of 800 MW.

"The new model of no electricity, no payment is good," said Prof Ijaz Hossain of Bangladesh University of Engineering and Technology (BUET).

But the government should remain alert to check any manipulation by the vested group in the load dispatch centre, he said.

Low-cost electricity should always be given preference, he added.

The government will be able to save a significant amount of money if it does not have to make capacity payment o the plant owners, he said.

The BPDB had to pay around Tk 86.09 billion from the government as 'capacity payments' in the fiscal year (FY) 2019-20.

The board had to pay around Tk 89.29 billion as 'capacity payments' in FY '19.

The payments were around Tk 62.41 billion in FY '18, Tk 56 billion in FY '17, Tk 53.76 billion in FY '16, Tk 50.43 billion in FY '15 and Tk 47.14 billion in FY '14.

The BPDB had to pay Tk 54.90 billion in FY '13, Tk 50.01 billion in FY '12, Tk 29.73 billion in FY '11 and Tk 17.90 billion in FY'10, according to the BPDB.

Oil-fired power plants should not be in priority of the government to generate electricity, said Consumers' Association of Bangladesh (CAB) president Ghuam Rahman.

The government should rely more on less expensive and large base-load power plants, he said.

Oil-fired power plants can be operational only if other source of least-cost electricity is not available, said the CAB president.

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