The dilemma over liquid fuel based power plants
Monday, 3 May 2010
Shamsul Huq Zahid
In Bangladesh, until now power is more or less is synonymous with crisis. But the government might soon be facing a real dilemma with the sector when a good number of new rental and peaking power plants would start supplying power to the national grid.
Sounds strange? Why should there be any dilemma when both the people and the government desperately want the maximum increase in power generation in the backdrop of a serious power shortage? Even a single megawatt (MW) of power means a lot to a government, which has come under severe criticism from all quarters, including businesses and domestic consumers, for failing to make available power as per their requirement.
The incumbent government often has tried to pass on the bucks to the BNP-led alliance government and the last caretakers for the power-related woes. But it is aware of the fact that the people are least interested in blame game and they want quick solution to their power and gas problems.
There is no denying that there could be no quick-fix solution to power problems that have accumulated over a period of two to three decades because of deliberate indifference on the part of the successive governments. But the incumbent government has not been aggressive to solve the power problems in line with its election manifesto. It did spend its first 15 months in power taking decisions and scrapping some of those on setting up rental power plants.
Of late, the government could, possibly, realize its follies and it has recently decided to allow setting up of large rental power plants through unsolicited bids. Side by side, it has signed, agreements with contractors, from both home and abroad, for setting up furnace oil-based five peaking power plants in the public sector. The government has also signed contracts with a few local power companies to set up rental power plants. The Power Development Board (PDB) has also invited bids for setting up three fuel oil-based power plants having a total generation capacity 550 MW under build, own and operate (BOO) basis. With these three, 11 fossil fuel power plants with total 2120 MW generation capacity are now put on offer for the private bidders from both home and abroad. Bids are likely to be invited soon for more liquid fuel-based power plants.
If the government sticks to its implementation plan, the power situation would improve, partially, within next 15 months and substantially by 2013 or 2014. Finding solution to power problem should be a matter of great satisfaction for the incumbent government since the achievement might help it retain power for yet another term.
But the success will be not without a cost. Since most of the proposed power plants will be liquid fuel oil-based, the government would have to count a substantial amount of subsidy every year. In the case of furnace oil-based power plants, the per unit cost of power would be between Tk.7.0 and 8.0 and the same will be nearly Tk. 14 in the case of diesel power plants. The average selling price of power is now between Tk 3.0 and 4.0 per unit. It is most likely that the government would hike the existing power tariff. But despite a hike the gap between the PDB’s procurement price and the selling price would continue to be very high. Can the government afford a large amount of subsidy on account of power?
The government is yet to work out the subsidy requirement on account of procurement of power from the proposed power plants. The finance minister while talking to the newspaper editors last week admitted that the issue of subsidy on account of power purchase deserved attention. He said there is no alternative to ensuring supply of adequate power for the greater interest of the economy. The finance secretary informed the editors that any estimate on additional subsidy would not be necessary for the next fiscal since proposed fuel-based power plants would start operating from the fiscal 2011-12. But a good number of private sector rental power plants would start selling power to the government in the first half of the next financial year and the government would be required to pay additional subsidy on that account. So, how can the government avoid recalculation of subsidy requirement in the coming fiscal?
It seems that subsidy payment on account of power operations by the PDB would be substantial and it would create serious strain on government resources. However, the government would have to make available sufficient power at any cost. But its target should be cutting of the cost as far as possible. Since the prospects of gas availability remains bleak, at least, in the near future, the only way of cutting the cost on account of power generation remains to the use of the country’s own coal for power generation. The government must not waste any more time on the method of coal extraction. It should do what it feels right and encourage setting up of coal-based power plants.
In Bangladesh, until now power is more or less is synonymous with crisis. But the government might soon be facing a real dilemma with the sector when a good number of new rental and peaking power plants would start supplying power to the national grid.
Sounds strange? Why should there be any dilemma when both the people and the government desperately want the maximum increase in power generation in the backdrop of a serious power shortage? Even a single megawatt (MW) of power means a lot to a government, which has come under severe criticism from all quarters, including businesses and domestic consumers, for failing to make available power as per their requirement.
The incumbent government often has tried to pass on the bucks to the BNP-led alliance government and the last caretakers for the power-related woes. But it is aware of the fact that the people are least interested in blame game and they want quick solution to their power and gas problems.
There is no denying that there could be no quick-fix solution to power problems that have accumulated over a period of two to three decades because of deliberate indifference on the part of the successive governments. But the incumbent government has not been aggressive to solve the power problems in line with its election manifesto. It did spend its first 15 months in power taking decisions and scrapping some of those on setting up rental power plants.
Of late, the government could, possibly, realize its follies and it has recently decided to allow setting up of large rental power plants through unsolicited bids. Side by side, it has signed, agreements with contractors, from both home and abroad, for setting up furnace oil-based five peaking power plants in the public sector. The government has also signed contracts with a few local power companies to set up rental power plants. The Power Development Board (PDB) has also invited bids for setting up three fuel oil-based power plants having a total generation capacity 550 MW under build, own and operate (BOO) basis. With these three, 11 fossil fuel power plants with total 2120 MW generation capacity are now put on offer for the private bidders from both home and abroad. Bids are likely to be invited soon for more liquid fuel-based power plants.
If the government sticks to its implementation plan, the power situation would improve, partially, within next 15 months and substantially by 2013 or 2014. Finding solution to power problem should be a matter of great satisfaction for the incumbent government since the achievement might help it retain power for yet another term.
But the success will be not without a cost. Since most of the proposed power plants will be liquid fuel oil-based, the government would have to count a substantial amount of subsidy every year. In the case of furnace oil-based power plants, the per unit cost of power would be between Tk.7.0 and 8.0 and the same will be nearly Tk. 14 in the case of diesel power plants. The average selling price of power is now between Tk 3.0 and 4.0 per unit. It is most likely that the government would hike the existing power tariff. But despite a hike the gap between the PDB’s procurement price and the selling price would continue to be very high. Can the government afford a large amount of subsidy on account of power?
The government is yet to work out the subsidy requirement on account of procurement of power from the proposed power plants. The finance minister while talking to the newspaper editors last week admitted that the issue of subsidy on account of power purchase deserved attention. He said there is no alternative to ensuring supply of adequate power for the greater interest of the economy. The finance secretary informed the editors that any estimate on additional subsidy would not be necessary for the next fiscal since proposed fuel-based power plants would start operating from the fiscal 2011-12. But a good number of private sector rental power plants would start selling power to the government in the first half of the next financial year and the government would be required to pay additional subsidy on that account. So, how can the government avoid recalculation of subsidy requirement in the coming fiscal?
It seems that subsidy payment on account of power operations by the PDB would be substantial and it would create serious strain on government resources. However, the government would have to make available sufficient power at any cost. But its target should be cutting of the cost as far as possible. Since the prospects of gas availability remains bleak, at least, in the near future, the only way of cutting the cost on account of power generation remains to the use of the country’s own coal for power generation. The government must not waste any more time on the method of coal extraction. It should do what it feels right and encourage setting up of coal-based power plants.