Prescription for power
Tuesday, 15 June 2010
Manzur Ahmed
Power crisis? With large populations and high household demands and industrial development needs, Bangladesh is now in the midst of a serious power crisis. Power generation has failed to keep pace with demand, and, in the last two years, increasing shortages of natural gas, the primary fuel used in 84% power generation, have added to the sector's problems.
Bangladesh is under the spell of suppressed growth syndromes since decades (compared to the population growth and widening income disparity, 5-6% GDP growth is in effect lesser economic down turn and the per capita income growth is indicative of disproportionate affluence of the very few powerful and privileged) due mainly to policy constraints and governance deficiencies along with weak power and infrastructure facilities.
The power supply problems started to surface from early eighties and became acute during the nineties and continued to aggravate until it reached the current crisis point when lack of power, the life line of existence, has become the biggest threat not only for sustainable economic development but also to maintain minimum public necessities.
According to the government's statistics, our power demand is around 6000 MW and shortage is about 2000 MW and according to other stake holders, the current power demand is 8000 MW and shortage is 4000 MW including suppressed demand.
Studies show that poor quality power supply costs the country as much as 2.0 per cent in GDP growth each year. Manufacturers, surveyed in the World Bank's most recent Investment Climate Assessment, estimate that power shortages cost them around 12 percent in lost sales on an annual basis. According to a DCCI Study (April 2010) at least 65% industries are victims of acute load shedding. These are understatements.
Cost of electricity not available (CENA): Assuming that the daily demand-supply gap is around 2000 MW, then there is 2000 (1000)*1000*24 = 48 million kWh of electricity not being served every day. The Power Sector Master Plan for Bangladesh, prepared four years ago by Nexant (formerly Bechtel), has estimated the cost of electricity not available (an estimation of the effect to the economy i.e. factories not operating, unemployment created, lower sales etc. due to electricity shortage) to be $0.43 per kWh or Tk 30 per kWh. The result of these two figures is that the country is daily losing about $20 million or Tk140 crores per day or $ 7.2 billion per year. The cost of electricity generation may be between Taka 2.0 to 3.0 per kWh, but the cost of electricity not being served is much higher, at Tk 120 per kWh.
Factors that have hampered the power sector's ability to meet growing demand for electricity, among others, are;
1. Absence of earnest endeavour and policy support in pursuing energy and power sector development programmes to meet the ever growing demands,
2. Lack of appropriate power sector industry structure,
3. Sole dependence on gas based electricity ignoring 30-50% sealing prescribed in the 1994 Power policy.
4. Inefficiency of plants and its machinery and lack appropriate technology in power generation transmission and distribution.
5. Severely constrained access to capital.
6. High system losses in the sector, large amount of accounts receivable and existing tariff rates & structure are affecting the financial viability of the utilities and discouraging investment in the sector.
7. Un-economic power price turning the power sector unsustainable and commercially unviable.
Quick or Quack remedy 'Quick Rental Plants' (QRPs): In May 2010, the government took initiative to install 13 rental power plants - four diesel-fired plants within 120 days and nine furnace oil fired quick rental plants' within 270days -- without tender to meet the emergency needs. But the QRPs are not so quick after all, as always the first two rental power plants initiated by the government on February 4, 2010 as a fast track move have failed to start generation of any electricity within the stipulated deadline of June 3.
In addition the government took plans to add 9,426MW power to the national grid by 2015.
Besides setting up gas-based plants, power stations would be set up based on coal, diesel and furnace oil and dual fuel in view of crisis of gas in the country. The government has also undertaken plans to import electricity from India.
Out of these plans, the RPPs are the only beneficiary of the accumulated power crisis, opening up vistas of opportunity for some very fortunate few and the functionaries associated with the process at great cost and misery to the nation.
The PDB will have to buy 1,157MW of costly rental electricity for which either the government will have to provide Tk 50-700 billion in yearly subsidy or the consumers will have to bear the brunt of much higher electricity bills.
E-mail: mahmed019@hotmail.com
Power crisis? With large populations and high household demands and industrial development needs, Bangladesh is now in the midst of a serious power crisis. Power generation has failed to keep pace with demand, and, in the last two years, increasing shortages of natural gas, the primary fuel used in 84% power generation, have added to the sector's problems.
Bangladesh is under the spell of suppressed growth syndromes since decades (compared to the population growth and widening income disparity, 5-6% GDP growth is in effect lesser economic down turn and the per capita income growth is indicative of disproportionate affluence of the very few powerful and privileged) due mainly to policy constraints and governance deficiencies along with weak power and infrastructure facilities.
The power supply problems started to surface from early eighties and became acute during the nineties and continued to aggravate until it reached the current crisis point when lack of power, the life line of existence, has become the biggest threat not only for sustainable economic development but also to maintain minimum public necessities.
According to the government's statistics, our power demand is around 6000 MW and shortage is about 2000 MW and according to other stake holders, the current power demand is 8000 MW and shortage is 4000 MW including suppressed demand.
Studies show that poor quality power supply costs the country as much as 2.0 per cent in GDP growth each year. Manufacturers, surveyed in the World Bank's most recent Investment Climate Assessment, estimate that power shortages cost them around 12 percent in lost sales on an annual basis. According to a DCCI Study (April 2010) at least 65% industries are victims of acute load shedding. These are understatements.
Cost of electricity not available (CENA): Assuming that the daily demand-supply gap is around 2000 MW, then there is 2000 (1000)*1000*24 = 48 million kWh of electricity not being served every day. The Power Sector Master Plan for Bangladesh, prepared four years ago by Nexant (formerly Bechtel), has estimated the cost of electricity not available (an estimation of the effect to the economy i.e. factories not operating, unemployment created, lower sales etc. due to electricity shortage) to be $0.43 per kWh or Tk 30 per kWh. The result of these two figures is that the country is daily losing about $20 million or Tk140 crores per day or $ 7.2 billion per year. The cost of electricity generation may be between Taka 2.0 to 3.0 per kWh, but the cost of electricity not being served is much higher, at Tk 120 per kWh.
Factors that have hampered the power sector's ability to meet growing demand for electricity, among others, are;
1. Absence of earnest endeavour and policy support in pursuing energy and power sector development programmes to meet the ever growing demands,
2. Lack of appropriate power sector industry structure,
3. Sole dependence on gas based electricity ignoring 30-50% sealing prescribed in the 1994 Power policy.
4. Inefficiency of plants and its machinery and lack appropriate technology in power generation transmission and distribution.
5. Severely constrained access to capital.
6. High system losses in the sector, large amount of accounts receivable and existing tariff rates & structure are affecting the financial viability of the utilities and discouraging investment in the sector.
7. Un-economic power price turning the power sector unsustainable and commercially unviable.
Quick or Quack remedy 'Quick Rental Plants' (QRPs): In May 2010, the government took initiative to install 13 rental power plants - four diesel-fired plants within 120 days and nine furnace oil fired quick rental plants' within 270days -- without tender to meet the emergency needs. But the QRPs are not so quick after all, as always the first two rental power plants initiated by the government on February 4, 2010 as a fast track move have failed to start generation of any electricity within the stipulated deadline of June 3.
In addition the government took plans to add 9,426MW power to the national grid by 2015.
Besides setting up gas-based plants, power stations would be set up based on coal, diesel and furnace oil and dual fuel in view of crisis of gas in the country. The government has also undertaken plans to import electricity from India.
Out of these plans, the RPPs are the only beneficiary of the accumulated power crisis, opening up vistas of opportunity for some very fortunate few and the functionaries associated with the process at great cost and misery to the nation.
The PDB will have to buy 1,157MW of costly rental electricity for which either the government will have to provide Tk 50-700 billion in yearly subsidy or the consumers will have to bear the brunt of much higher electricity bills.
E-mail: mahmed019@hotmail.com