High cost of 'quick rentals' may be big burden for govt
Sunday, 28 November 2010
M Azizur Rahman
The high-cost rental power plants are set to emerge as the country's single largest power plant category for electricity generation by next year as the government has attached utmost priority to resolve power crisis on ad-hoc basis, said officials.
The expensive diesel and furnace-oil run rental power plants now account for over one-third of the country's total power plants with 14 such plants in operation out of 40, a senior Power Development Board (PDB) official said.
He said a number of gas-fired and oil-based power plants have been kept shut making room for operation of high-cost fuel-run power plants in private sector.
Some 15 more rental power plants will begin electricity generation by 2011, said the official.
Currently the country has a total of 50 power plants but 40 are operational.
Of the total plants 17 belong to PDB, 15 are rental power plants, nine owned by small independent power producers (SIPPs), six are independent power producers (IPPs) and one each by Electricity Generation Company of Bangladesh (EGCB) and Ashuganj Power Station Company Ltd (APSCL).
Electricity generation from the rental power plants is now hovering around 665 megawatts (mw), which is almost one-fifth of the country's overall electricity generation of about 3,500 mw.
Experts, however, said the government's stanch on allowing more rental power plants branding them as 'quick rentals' on the basis of negotiations with the sponsors bypassing competitive tendering process might impede the country's growing economy.
Although most of the rental power plants failed to generate electricity in time, the government's electricity generation augmentation drive depending on costly rental power plants might prove wrong in the long run, they feared.
Besides, the absence of any policy on rental power plants and their tenure ranging from three years to 15 years might create problems for the regulators in future, they added.
The multilateral donor agency World Bank has also expressed its concern over the government's higher expenditure to buy electricity from rental power plants and import necessary fuel.
The burden may restrict the country's economic growth at a rate between 6.1 percent and 6.3 percent, said the Washington-based donor agency in its latest economic outlook.
Additional cost for fiscal year 2011 would range between Tk 52 billion and Tk 56 billion, which is about 0.6 per cent or 0.7 per cent of the gross domestic product (GDP), the WB projected.
Average tariff rate for oil-fired rental power plants is around Tk 8.0 per unit (1 kilowatt hour), which is more than double than the tariff rate for gas-based power plants of Tk 3.0 per unit.
"The high cost rental power plants might be a big burden for the government in terms of funding, budgeting and overall economy," Professor M Tamim of Bangladesh University of Engineering and Technology (BUET) told the FE.
He said the government should not increase the number of rental power plants further as it could not be the means to long term power solution.
"The government should in no way extend the tenure of the rental power plants from their original contract obligations," said Tamim who was an adviser of the previous caretaker government.
Power ministry officials said the first rental power plant came into operation during the immediate past caretaker government to mitigate power crisis on ad-hoc basis.
The caretaker government had approved installation of seven rental power plants but none of the plants started operation in time.
Among the entrepreneurs who were awarded rental power plants during caretaker government the Energy Prima consortium consisting local Energy Prima and Hosaf Meter along with Russia's Geo-Spectrum group was awarded four gas-fired power plants at Shajibazar, Kumargaon, Fenchuganj and Bogra to generate a total of 170 mw of electricity.
Alstom Power Rental of the USA was awarded Bheramara 20 mw rental power plant.
Aggreko International Projects Ltd of Singapore was awarded Khulna 40 mw rental power plant and Indonesia-based Kaltimex Energy bagged the Bhola 20 mw rental power plant.
The Asian Entech was awarded Sikalbaha 55 mw furnace oil-fired power plant.
All the entrepreneurs who got work orders during the caretaker government were penalised by the PDB for their delay in electricity generation from their plants.
Energy Prima consortium, however, has challenged the PDB's penalty measure, said a senior PDB official.
After taking office the Awami League-led grand alliance government took initiative to install eight rental power plants but could award only three rental plants.
Among the sponsors RZ Power Limited, a sister concern of local firm Rahimafrooz, was awarded Thakurgaon 50 mw diesel-run plant.
Quantum Power System, a sister concern of local Otobi, was awarded Bheramara 110 mw plant and Noapara 105 mw power plant.
None of these three rental power plants could start operation on schedule, said the PDB official.
The high-cost rental power plants are set to emerge as the country's single largest power plant category for electricity generation by next year as the government has attached utmost priority to resolve power crisis on ad-hoc basis, said officials.
The expensive diesel and furnace-oil run rental power plants now account for over one-third of the country's total power plants with 14 such plants in operation out of 40, a senior Power Development Board (PDB) official said.
He said a number of gas-fired and oil-based power plants have been kept shut making room for operation of high-cost fuel-run power plants in private sector.
Some 15 more rental power plants will begin electricity generation by 2011, said the official.
Currently the country has a total of 50 power plants but 40 are operational.
Of the total plants 17 belong to PDB, 15 are rental power plants, nine owned by small independent power producers (SIPPs), six are independent power producers (IPPs) and one each by Electricity Generation Company of Bangladesh (EGCB) and Ashuganj Power Station Company Ltd (APSCL).
Electricity generation from the rental power plants is now hovering around 665 megawatts (mw), which is almost one-fifth of the country's overall electricity generation of about 3,500 mw.
Experts, however, said the government's stanch on allowing more rental power plants branding them as 'quick rentals' on the basis of negotiations with the sponsors bypassing competitive tendering process might impede the country's growing economy.
Although most of the rental power plants failed to generate electricity in time, the government's electricity generation augmentation drive depending on costly rental power plants might prove wrong in the long run, they feared.
Besides, the absence of any policy on rental power plants and their tenure ranging from three years to 15 years might create problems for the regulators in future, they added.
The multilateral donor agency World Bank has also expressed its concern over the government's higher expenditure to buy electricity from rental power plants and import necessary fuel.
The burden may restrict the country's economic growth at a rate between 6.1 percent and 6.3 percent, said the Washington-based donor agency in its latest economic outlook.
Additional cost for fiscal year 2011 would range between Tk 52 billion and Tk 56 billion, which is about 0.6 per cent or 0.7 per cent of the gross domestic product (GDP), the WB projected.
Average tariff rate for oil-fired rental power plants is around Tk 8.0 per unit (1 kilowatt hour), which is more than double than the tariff rate for gas-based power plants of Tk 3.0 per unit.
"The high cost rental power plants might be a big burden for the government in terms of funding, budgeting and overall economy," Professor M Tamim of Bangladesh University of Engineering and Technology (BUET) told the FE.
He said the government should not increase the number of rental power plants further as it could not be the means to long term power solution.
"The government should in no way extend the tenure of the rental power plants from their original contract obligations," said Tamim who was an adviser of the previous caretaker government.
Power ministry officials said the first rental power plant came into operation during the immediate past caretaker government to mitigate power crisis on ad-hoc basis.
The caretaker government had approved installation of seven rental power plants but none of the plants started operation in time.
Among the entrepreneurs who were awarded rental power plants during caretaker government the Energy Prima consortium consisting local Energy Prima and Hosaf Meter along with Russia's Geo-Spectrum group was awarded four gas-fired power plants at Shajibazar, Kumargaon, Fenchuganj and Bogra to generate a total of 170 mw of electricity.
Alstom Power Rental of the USA was awarded Bheramara 20 mw rental power plant.
Aggreko International Projects Ltd of Singapore was awarded Khulna 40 mw rental power plant and Indonesia-based Kaltimex Energy bagged the Bhola 20 mw rental power plant.
The Asian Entech was awarded Sikalbaha 55 mw furnace oil-fired power plant.
All the entrepreneurs who got work orders during the caretaker government were penalised by the PDB for their delay in electricity generation from their plants.
Energy Prima consortium, however, has challenged the PDB's penalty measure, said a senior PDB official.
After taking office the Awami League-led grand alliance government took initiative to install eight rental power plants but could award only three rental plants.
Among the sponsors RZ Power Limited, a sister concern of local firm Rahimafrooz, was awarded Thakurgaon 50 mw diesel-run plant.
Quantum Power System, a sister concern of local Otobi, was awarded Bheramara 110 mw plant and Noapara 105 mw power plant.
None of these three rental power plants could start operation on schedule, said the PDB official.