CPD Dialogue

Power overcapacity now economic burden

Emran Hossain | Published: 16:30, Jun 24,2020 | Updated: 16:06, Jun 25,2020


The government must review its power sector master plan in order to stop or delay any further expansion of power capacity for wrong economic growth forecast has already resulted in huge overcapacity, experts told a virtual dialogue on Wednesday.

Predicting a drastic fall in economic growth because of COVID-19 impacts in the coming days, the experts suggested that the power division should cut costs in every possible way, including cancellation or deferral of power plant projects under implementation or in the pipeline.

They warned that lack of industrialisation may lock power demand to lower than expected for some time and urged the government to consider cancelling or delaying all power projects, especially coal-based ones.

‘The government must review its demand forecast. Future demand must be looked into realistically,’ M Tamim, professor at the Department of Petroleum and Mineral Resources Engineering, BUET.

He said that the demand forecast must be compatible with industrial and GDP growths, which is likely to drastically fall because of COVID-19 impacts this year and a recovery from it might take a while depending on how the crisis ends.

‘Keeping huge power capacity unused will bear disastrous consequences for the country’s economy,’ said Tamim at the dialogue hosted by Centre for Policy Dialogue.

The keynote paper, presented by CPD research  director Khondaker Golam Moazzem said that the revenue generation is likely to fall because of COVID-19 impacts, making the power sector subsidy a financial burden for the government, which was almost Tk 9,000 crore last year.

The paper said that the subsidy is equal to capacity charge paid to idle power plants, which was Tk 8,929 crore in 2019, a 398 per cent increase since 2010, when Tk 1,790 was paid as capacity payment.

The paper said that overcapacity was so large that only about 10,000 MW of 20,514 MW capacity could be used during peak demand.

Up to 63.3 per cent power remains unused during January and at least 40 per cent during summer, said the paper.

Data shows that the government tend to use private power plants more as only 45 of 147 IPPs remained out of operation even during the time when power demand is sluggish.

CPD chairman Rehman Sobhan said that rental power plants should immediately be retired for they are the costliest energy source.

‘Why rental power plants are still there when we have overcapacity?’ asked Rehman Sobhan. He also questioned the deal with rental plants that makes it mandatory for the government to pay them even when they are not supplying electricity. ‘How good is such deal?’ he asked.

The governmental proposed to set aside Tk 26,758 crore in its budget for 2020-21 fiscal year for the power and energy division.

CPD suggested that the power division followed a ‘go-slow’ policy.

It said that there are at least five power plants allocated significant amount of money this fiscal but it could be deferred given the pandemic situation requiring the government to spend more on health and food.

Muhammad Fouzul Kabir Khan urged the government to move away from IPPs following the global trend as countries seek to reduce their liabilities in the power sector.

He said that it was time the government reviewed its power policy formulated in 2009 against the context of a severe power crisis.

Power and energy state minister Nasrul Hamid said that he did not think the country had an overcapacity and called it a miscalculation.

He said that renewable energy such as solar power was still not an option for Bangladesh for many reason including its high cost.

‘We however think there is the scope of reviewing coal power policy,’ said Nasrul.

He said that LNG price was declining and gas-based power plants performed better than coal-based ones.

He said that the government planned to produce 5000 MW of 41,000 MW from coal but many critics talked in a way it looked like whole Bangladesh would be filled with coal power plants.

Power Cell director general Mohammad Hossain, Sustainable and Renewable Energy Development Authority member Siddique Zobair, Bangladesh Independent Power Producers Association Imran Karim and CPD executive director Fahmida Khatun also participated in the dialogue.

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