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Over-reliance on rental plants pushing up supply costs

M Azizur Rahman | June 21, 2015 00:00:00

The overall electricity supply costs are on the sharp rise in the country as the government is relying heavily on high-cost oil-fired rental and quick rental power plants keeping the low-cost base-load power plants idle, sources say.

Currently, almost all the oil-fired power plants, including the expensive rental and quick rental ones, are operational while several large low-cost gas-fired power plants are shut, they say.

State-run Bangladesh Power Development Board (BPDB), the lone buyer of electricity from power producers, is bound to purchase the high-cost electricity for the national power grid due to non-availability of low-cost electricity.

The government's subsidy allocation in the power sector is sure to shoot up if this trend continues for long.

Officials concerned say the country's several large gas-fired power plants located at Ghorashal, Haripur, Meghnaghat and Shiddhirganj have long been remaining shut or operated on a limited scale.

The state-owned Ghorashal power plant was supplying only around 182 megawatts (MW) of electricity against its installed capacity of 740 MW, according to the BPDB statistics as of June 18 last.

The Haripur 412MW combined cycle power plant (CCPP), Meghnaghat 300MW CCPP and Shiddhirganj 150MW steam turbine-generated power plants were totally shut on the day.

Several state-run oil-fired power plants also remained shut for long making room for operation of privately-owned power plants, it has been alleged.

The Summit Group-owned Meghnaghat 305MW diesel-fired power plant is the lone private sector oil-fired plant currently shut, BPDB statistics has revealed.

The BPDB purchases electricity from the large gas-fired power plants at the rates within the range of Tk 2.0-3.5 per unit (1 kilowatt-hour) while it buys power from the rental and quick rental oil-fired plants at prices ranging between Tk 13 and Tk 23 per kWh.

It seemed that the government was not serious about bringing the large gas-fired power plants into operation, sources alleged.

The newly-installed Meghnaghat 412MW CCPP power plant, which was shut in April last year following a fire incident, had not yet come online, a senior BPDB official said pointing to negligence.

He said the ever-increasing dependence on rental and quick rental power plants, most of which were built following unsolicited deals since mid-2010, was raising the electricity supply costs significantly.

The proposed allocation of Tk 80 billion as subsidy for power sector might exceed the limit if the government continues its over-reliance on expensive oil-fired power plants for electricity generation.

The government has already raised electricity tariff by almost threefold shifting the rising electricity generation costs to the consumers.

It has already pushed the country's average electricity tariff to a level higher than that in India, Nepal or Bhutan among the South Asian countries, according to a study by the World Bank.

The country's average electricity tariff is now 7.70 US cents (Tk 6.15) per unit (1 kilowatt-hour). The tariff is 7.03 US cents in India, 7.63 US cents in Nepal and 3.21 US cents in Bhutan, the WB report has revealed.

Installation of oil-fired rental and quick rental power plants over the past several years pushed up the country's average electricity generation cost to Tk 6.7 per unit during the fiscal year (FY) 2013 from Tk 2.62 per unit in the FY 2011, it stated.

The Washington-based multilateral donor agency called the short-term rental and quick rental power plants 'unsustainable short-term solutions' and suggested phasing them out instead of extending their tenure.

It recommended stopping payment to firms now out of production to ease the subsidy burden as the government has started renewing contracts with the firms.

Regarding future action plans, the WB said: "Bangladesh now needs to address the remaining demand-supply imbalance in power by pursuing a multi-pronged strategy to ensure sustainable availability of adequate and reliable power to support the country's development."

The policy priorities are to boost new base-load supply, promote efficiency across the value chain, diversify fuel mix to enhance energy security, and reduce the fiscal burden through better alignment of retail prices with unit costs, the WB report said.

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