Bangladesh

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Govt unmoved by call for retiring rental power plants

Emran Hossain | Published: 00:21, Jul 04,2020

 
 

The government has remained indifferent to the call for immediately shutting down the rental power plants to lessen the expenditure from growing capacity charges, which was Tk 90 billion in 2019.

The call only grew stronger lately because of the economic fallouts due to the COVID-19 outbreak with experts and international think tanks predicting a fall in the existing power demand.

In May, the US-based Institute for Energy Economics and Financial Analysis reported that Bangladesh could use only 43 per cent of its power capacity, which was 19,630 MW in 2019.

On June 24, Centre for Policy Dialogue urged the government to have a plan to gradually phase out rental power plants which could instantly reduce the power overcapacity by 1,958 MW.

‘We do not have any plans of retiring rental power plants before their contract expire,’ Nasrul Hamid, the state minister of power, energy and mineral resources, told New Age.

He said that the country needed to have the capacity of 20,000 MW for the power demand during summer often reaches 12,000 MW.

‘People describing it as power overcapacity do not understand the complex power sector well,’ he said.

Bangladesh has a power capacity of 20,279 MW till date with the government allocating huge sums of money for continuing with the construction of mega power projects in 2020.

In the current fiscal, a third of power and energy budget, Tk 26,758 crore, has been put aside to pay capacity charges to idle power plants.

The average demand in the country during summer is 9,000 MW, which gets down to 6,000 MW during winter.  

The IEEFA report said that the ideal reserve power margin is 10 to 20 per cent while the power sector master plant of Bangladesh decided to keep it at 25 per cent.

The CPD said that Bangladesh paid Tk 511.57 billion as capacity charges in ten years as annual payment to idle power plants increased by 398 per cent since 2010.

Consumers Association of Bangladesh has long been demanding immediate cancellation of contracts with rental power producers saying that the contracts were designed to illegally benefit businessmen.

Shutting down rental power plants could help reduce the power sector deficit, which was about Tk 80 billion last year, the CAB frequently argued.

‘The government should cancel all rental power plants right away,’ said CAB energy adviser Shamsul Alam.

‘A contract cannot justify paying huge sums of money to unnecessary power plants every year,’ he said.

He termed the contracts with rental power plants illegal for the power plants were no longer required but still their contracts were renewed, sometimes twice or thrice.

‘The government seems only committed to increase profits made by the private power plants,’ he said.

After assuming power in 2009, the incumbent AL government started allowing rental power plants as an emergency measure to rapidly increase power production from only 4,942 MW.

The rental power plants were initially given three to five years to operate during which the government promised to develop its own power generation capacity.

But there are 17 rental power plants worth 1,090 MW still in operation, though they should have expired by now, showed a list of power plants in operation by Power Development Board.

The power plants were established in 2009, 2010, 2011 and 2012 with five-year deadline of operation.

Some of their deadline had to be extended three times to keep them operational until now.

Besides five years deadline, there were rentals that the government allowed to operate for 15 years and ten of them worth 1,282 MW would not expire before 2023, showed PDB documents.

Power secretary Sultan Ahmed said that the rentals would retire in due time as per their contracts unless the government needed them to improve the quality of power supplied to the people.

‘The necessity of the plants would be evaluated case-by-case,’ he said.

The CPD urged the government to immediately sit with private power plants to renegotiate contracts and stop paying them capacity charges.

Bangladesh increased its power generation capacity manifold over the last ten years but the quality of power has not improved much with frequent power cuts and grid failures.

Industries produce 2,800 MW on their own to avoid buying from the grid.

The IEEFA warned that Bangladesh surely headed for an impending financial crisis unless it reviewed its master plan and got rid of unnecessary power plants.

About 51 per cent power capacity is generated by private power plants, overwhelmingly dependent on fossil fuel such as gas, furnace oil and diesel.

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