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The Financial Express

Challenges for power supply at affordable cost

| Updated: September 28, 2021 20:50:13


Challenges for power supply at affordable cost

Prime Minster Sheikh Hasina inaugurated five power generation plant operations (Combined Cycle 400 MW Bibiana -3 at Habiganj, 100 MW Unit-2 at Chattogtarm, Meghnaghat 104 MW at Narayanganj, 100 MW Madhumati at Bagerhat and upgradation of 150 MW to 225 MW Combined Cycle power plant at Sylhet) with a total 779 MW capacity on  September 12, 2021.

With these power plants a total installed generation capacity in the country has been increased to 25,235 MW (including from grid connected 146 power plants, 2800 MW captive and solar power). As per Bangladesh Power Development Board (BPDB) information, per capita installed power generation capacity now stands at 560 kWh. 99.5 per cent of the country's population is now within electric energy coverage. The present actual generation capacity from the grid-connected power plants is nearly 22,000 MW. On the contrary, a good number of old power plants have been waiting for retirement and their actual generation capacity has been decreased (de-rated approximately 1,000 MW). Due to systematic shortages of primary fuel supply, scheduled maintenance and technical problems, power generation capacity has been reduced nearly 3,000 MW (in fact approximately 3,600 MW could not be generated due to fuel shortages and forced shut down in early September 2021). The peak electricity demand increased now nearly at 14,000 MW. The gradual increase of business and industrial activities in the country should create new demands for electricity.

There are a number of large baseload power generation plants under construction or ready to supply generated power once the adequate grid connectivity will be in place. Earlier, during the extreme crisis period for power a decade ago, the government decided to allow 20 Rental and Quick Rental power plants (under contracts for three, five and 16 years) for supplying power not wasting too much time for their installations. They were short lived contracts with significantly high power generation costs.

 State Minister for Power, Energy and Mineral Resources of the government Mr. Nasrul Hamid informed the national Parliament that the government decided to keep the Rental and Quick Rental power plants operational but on 'standby mode'. As per published information, there are 16 rental power plants in operation with a total capacity to generate approximately 1,109 MW power. They are planned to retire gradually within 2024. So far, 6 rental and 6 quick rental power plant's contracts have been waiting for renewal and the government has been considering to renew at least five contracts for a further period. The State Minister for energy justified the decision that these plants would be useful in the crisis period. He further informed that the existing contracts for the rental power plants would be renewed with the conditions of 'no electricity to grid, no payments for the plants.' Details of the renewal terms for the rental power plants are to be worked out.

The above facts indicate that the significant growth of power generation capacity in the country during last one decade could not secure the stability of the power systems, so far. Unfortunately, the power generation capacity development could not progress with the power transmission and distribution system development in a synchronised manner. As a result, a number of major power plants, despite their generation capacity enhancement, new generation capacity remain idle incurring huge losses for the government. Also, primary fuel supply arrangements for power generation have been significantly lagging behind and substantial power generation capacity remains unutilised. Policy makers have failed to balance their focus on judicious development of local primary energy sources and fuel import infrastructure development.

As a result, rapid decline of domestic gas resources (and no significant addition of domestic primary energy) for last 20 years led the energy and power sector heavily (and increasingly) dependent on import of primary energy. Price of primary fuels (gas, LNG, coal) has been steadily increasing in the world market and the existing infrastructure limitations impede Bangladesh to get supply of reasonably cheap primary fuels from the international market (so far 38 per cent of the power generation capacity relies on imported furnace oil and diesel). Crude petroleum price per barrel climbed to US$ 75 in July. Spot market price for LNG remains volatile and the government has decided not to import LNG from spot market. The government has been negotiating with Qatar and Oman for LNG supply under long term contracts. Various offers from private companies for supplying natural gas from imported LNG along with infrastructure development are under review of the government now. There are concerns that such offers would not secure primary energy at affordable costs.  Also there are concerns that the 8 coal field power plants (with a nearly 9,200 MW capacity) under construction in the coastal areas will not be able to supply electricity at costs which may help sustain the present level of electricity costs for the consumers.

 Power tariff has increased by 90 per cent over the last 11 years as per the information of the Consumers' Association of Bangladesh. The government has been increasingly providing subsidies for covering the losses between generation costs and the costs paid by the consumers. The current year's budgetary allocation for power sector subsidy is Taka 9,000 crore (90 billion). Government subsidy required both for power and for balancing primary energy imports.

 Further increase of LNG imports (which is inevitable at this stage) will push up power generation costs. The Power System Master Plan 2016 projected that average cost of electricity supply per unit (kWh) would increase from Taka 7.38/kWh in 2016 to Taka 17.72/kWh in 2041.

Prime Minister Sheikh Hasina in her call to the people requested for maintaining austerity while using electricity, as the electricity generation costs remain significantly subsidised. She further informed that the billing price for consumer was much lower than the generation costs. Growing dependence on imported primary energy for power generation invites serious pressure on the country's economy.

Power generation and distribution cost increment is inevitable. Therefore, rational use of the government resources is a must and there is no alternative to be efficient in electricity use and its management.

 

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

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