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The Financial Express

Expectations of reliable, affordable power supply

Mushfiqur Rahman | Published: February 26, 2020 21:41:30


Expectations of reliable, affordable power supply

The country's electricity generation capacity has been improving steadily and present installed capacity including import of electricity has reached at 19,630 megawatt MW (with captive and renewable units the total capacity stands at 22,787 MW).

However, a large part of the installed capacity has been idling as the potential industrial consumers'  demand remains much below the expected level. Maximum generation that has been attained so far is 14,165 MW in a single day. As of now. there are 137 power plants (both in public and private sectors) installed in the country. A good number of power plants have been undergoing operations and maintenance works. There are a few large power plants awaiting commissioning soon.

But industrial demand for electricity has been showing no sign of rapid growth. As a result, experts fear the unutilised capacity for electricity generation may reach 50 per cent or above in the near future. The Power System Master Plan recommends that the government should limit reserve generation capacity within 20-25 per cent. More idle power generation capacity has been causing not only the lost opportunity for the precious capital invested but also incurring huge regular expenses from the exchequer in the form of capacity charges. The capacity charges are paid by the government following its contractual obligations to private power plants based on calculated unutilised installed capacity.

Some experts, therefore, argue in favour of verifying the power plants capacity by internationally reputed third party auditors.

State Minister for Power, Energy and Mineral Resources Nasrul Hamid informed parliament on February 18, 2020 that the government provided subsidy of Tk 522.60 billion in past 10 years for power sector. He added that average cost of generating electricity for both public and private sectors is Tk 13-14 per unit at furnace oil-based plants, Tk 25-30 per unit at diesel based plants and Tk 2.5-3.0 per unit ay natural gas-based plants. However, the cost of per unit supply of electricity at the bulk level of Bangladesh Power Development Board (BPDB) is Tk 5.82 and its average selling price at the bulk level is Tk 4.80.

The government's subsidy for power includes not only for meeting the gap between cost of generation and distribution and revenue earned from consumers but also capacity charges paid as cost of producing electric energy. So, rationalising subsidy remains a priority for the government.

The government has successfully facilitated sufficient power generation capacity to make power available through the national electricity grid all over the country (95 per cent population is covered by the electricity grid). But industry owners broadly prefer depending on captive power generation and its use in their industries as the grid power so far cannot always reliably ensure quality power supply.

Share of domestic, commercial and industrial consumption of grid electricity in 2019 was 53.31 per cent, 12.11 per cent and 29.54 per cent respectively, BPDB data show. Approximately 42 per cent of industrial power demand in 2019 was met by captive power plants. Difference between costs of the grid and captive power generation also influences industrial users to prefer captive power as it is cheaper so far. Uninterrupted supply from the power grid so far remains a challenge partly because of primary fuel supply scarcity, reliance on costly imported fuel use and inadequate transmission and distribution networks.

Domestic natural gas, the largest primary energy source for electricity generation, has been falling short of supply for power generation. And the shortfall has been met by imported LNG, liquid petroleum and coal resulting in gas and electricity price escalation, as well as growing demand for subsidies. As per present projections, further reliance on imported LNG for the country's energy sector will start increasing in 2025 inviting further incremental rise in power and fuel gas prices in the near future.

Reports suggest that the government will need to spend around $4.2 billion in 2019-2020 on energy imports and LNG alone will take $3.49 billion from this spending. The balance will be required for importing approximately 2.0 million tonnes of coal for Payra coal-fired power plant and electricity from India through inter-country grid lines and for furnace oil to run the liquid fuel-based power plants. The growing gap between import and export trade of Bangladesh and the soaring import bills for energy will increase pressure on the country's economy specially on the foreign currency reserves and the balance of payments.

Power System Master Plan 2016 (PSMP) prognoses that coal will be the cheapest primary energy and in future coal-fired power plants will increase in the county. On the other hand, supply, quality and price of coal will become very unstable in the future, as demands for coal supply in South and South East Asia have been increasing. PSMP projects that coal demand in 2040 will be approximately 60 million tonnes, hence domestic coal resource development will become more important by then than it is at present.

Industries need power supply at an affordable price for retaining their competitiveness. Overdependence on imported fuel, especially liquid fuel for generating electric energy ignoring domestic fuel resources including coal and gas, may jeopardise the dream of attaining affordable energy supply and sustainable industrial growth.

The government plans for gradually reducing the country's dependence on natural gas to fuel power generation and encourage diversified fuel-based power generation and maintain a balance mix in primary energy. Special attention is put to rationalise the cost of grid power generation adopting a balanced fuel mix from domestic and import sources. The government's policy planners have been encouraging enhancement of efficiency at all segments of the primary energy and electric energy value chain for ensuring quality power supply at an affordable cost for industries and commercial consumers.

Mushfiqur Rahman, a mining engineer, writes on energy and environment issues.

mushfiq41@yahoo.com

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