Power price projections

Media reports say the government has been moving ahead with the Rampal coal-fired power plant on a priority basis and intends to complete it within the next five years. The land development work for the project has already been completed. In addition, the Bangladesh-India Friendship Power Company, the owner of the project, has completed necessary preparations for engaging 'owners' engineer'. The company will prepare the power plant design and supervise the implementation work of the engineering, procurement and construction (EPC) contractor to be engaged soon.
There are a number of challenges for the project implementation. Among them, the power plant owner could not secure the specific source of coal import so far. It has the intention to sign a contract for coal supply for the power plant from any of the possible sources in 2015.
Earlier a study carried out by the government indicated Indonesia, Australia and South Africa as the possible sources of coal supply for the Rampal power plant. The study also suggested that the coal from Indonesia would be comparatively cheaper including the carrying cost. But Indonesian coal is likely to have less heating value. One of the largest coal importers from Indonesia is India. As per the report published in the Mining Weekly (May 2013), Indian coal import from Indonesia was around 77 million tonne in 2012-2013. India imported approximately 17 million tonne coal during the same period from South Africa and 26.8 million tonne from Australia. The dominating share of Indian import has been tied with Indonesian coal mainly because of freight advantages.
But Indian importers plan to increase its coal import from South Africa as it can supply better quality coal. India is willing to replace Indonesian coal with those from South Africa considering the current soft international coal market.
The projected import cost of Indonesian coal, including transportation and handling costs as indicated by the above mentioned report to the power plant site, is US$175 per tonne. Assume one unit of electricity generation requires 0.35 kg of coal as fuel, the cost for fuel at today's exchange rate will be Taka 4.96 per kilowatt. If operation and maintenance cost per unit is taken as Taka 1.3, then the minimum cost per unit of electricity at the power plant end becomes Taka 6.26. The company should meet the debt service liability for the investment and should make some profit. The consumer will need to consider the additional cost involved for transmission and distribution of the power generated at the power plant end. Therefore, the coal-fired power, once generated at Rampal, will not reach the consumer at a price less than TK 8.0 per unit. We should not forget that the coal price is not a static parameter and there are several factors which may rapidly push the coal price up from the present depressed coal market worldwide.
The Jakarta Post (10 February 10, 2014) indicates that Indonesia will cap coal output at about 400 million tonne this year. It plans to impose sanctions against companies that mine more coal than approved by the country's Energy and Mineral Resources Ministry. Primarily this decision is linked to avoid over-supply in the market with coal and protect better revenue earnings for Indonesia.
In a separate development, another report says that the Bangladesh Power Development Board (BPDB) has floated a tender for implementing apparently its last gas-based large (400 MW) power plant project at Bibiana. The report suggests that the government will not go for any more such project unless a major gas field discovery is secured. At this stage, a number of gas-based power projects have been suffering from gas supply shortages due to shortfall.
The BPDB has signed agreements for several gas-based power plant contracts in the past without gas supply security from the Petrobangla, the governments' oil, gas and mineral corporation. The Petrobangla is not sure about the gas availability for new power plants in future.
In the backdrop of the rapidly depleting gas reserve, the government has announced its strategy to shift its absolute dependence on natural gas for power generation and gradually diversifying primary fuel sources. The Power System Master Plan 2010 of the government projects 50 per cent power generation from coal, both from domestic and import sources within 2030. The government made further correction to the coal-based power strategy and decided to depend fully on imported coal for meeting the primary fuel demands. The government has also decided to continue expensive power purchases from the much-talked-about rental power plants which are mainly run by imported expensive liquid fuel.
Average cost from the rental power plants is projected to be Tk 15 per unit of electricity. The government has now little option but to continue with the contracts with the rental power producers to avoid the gap between generation and demand for electricity. The base-load power plants, if implemented as per plan, could help the government reduce its dependence on the costlier rental power. But that never happened. Now, the government departments indicate likely power and gas tariff increase shortly.
The writer is a mining engineer                 and writes on energy and                      environment issues. mushfiq41@yahoo.com