Over-capacity in power sector?

The Bangladesh Power Development Board (BPDB), it seems, is out to prove that plenty of anything---in its case, power plants--- at times, can be perilous.

This would sound bizarre to many, for even some years back the economy was bleeding due to power shortage. Industries remained shut, markets used to pull down shutters soon after dusk and residents across the country suffered due to frequent power outages.

Now, the abundance of power has emerged as a serious problem for the BPDB and the economy as well!

According to a report published in this paper late last week, the power plants under the control of the state-owned BPDB generated around 1,200 megawatt (MW) on April, 29 last, the highest ever volume of electricity produced in the country.

On that day, it, however, kept idle a number of power plants with an aggregate generation capacity of 6,000 MW since their services were not required.

But the BPDB has to count extra cost if it asks private power plants to remain idle. It has to compensate the power plants in the form of 'capacity payments'. Such payments have become more of a norm and also a serious financial burden on the BPDB.

The total installed capacity of the power plants at the disposal of the BPDB now stands at over 18,000 MW. So, more than one-third of the total installed capacity remained idle on the day that saw the highest ever power generation. In the winter season, the idle capacity goes up further.

All these statistics do point to a serious demand-supply mismatch in the country's power sector. However, some power plants, owned by the BPDB, are required to keep out of operation because of gas shortage. Such non-operation does not involve any form of compensation payment.

But the Board has to count a substantial cost if it asks the private power plants to remain idle since their services are not required for the time being.

If nearly one-third of the installed power generation capacity remains out of operation during peak summer season, it is hard to deny the fact that the sector is facing an over-capacity, at least, for now.

However, if seen in the context of the rising demand for power, the existing installed capacity should not be a problem. But, the real problem lies with capacity payments and the nature of power plants.

The power sector needs large and medium power plants having permanent structure, not mushrooming of temporary rental power plants.

Going by the current developments in the power sector, it is quite clear that some quarters were out to create an over-capacity using the expensive rental power plants. This has been done with an intention of benefitting themselves and the owners of rental power plants at the cost of public exchequer.

The special law that provides protection against legal actions against wrongdoing has emboldened an unscrupulous section of people to proceed whimsically.

The situation in the power sector can no way be described as orderly and disciplined. A total of 80 private plants are now dominating the sector and most of them have come into being through unsolicited offers. The special law has helped both the power ministry and sponsors of these power plants to make decisions without any opposition or scrutiny.

In 2010 when the power crisis was at its peak, such a piece of legislation might have been necessary for a limited period. But the continuation of the law for a decade through extension of its tenure time and again has given rise to many questions. 

Even there are anomalies in the fixation of tariff on power procured from privately-owned power plants. Tariff varies from plant to plant though all of them are using the same type of fuel---furnace oil or diesel. No convincing explanation is available with the relevant authorities in support of such variations in tariff. Besides, the owners of furnace oil-based power plants have been allowed to import their fuel duty-free and enjoy some other fiscal benefits. 

Allegations have it that taking advantage of the special protection law some people are making their fortune. Parliament has extended the tenure of the law a number of times since its adoption in 2010.

There is no denying that the government has taken up a number of mega power plant projects and most of them are coal-based. The size of the Rooppur nuclear power plant is quite big. But over the last one decade a good number of large conventional power plants should have been implemented. The overemphasis on rental power plants might have worked as a strong disincentive here.

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