Power sector mess threatens economy

Wrong policy decisions, inefficiency and corruption have landed the power sector in its present predicament, said power and energy experts.

This Opinion was first published in New Age on July 30, 2022.

Emran Hossain

The incumbent government set the stage for unabated corruption and making predatory profits in the power sector just a year after coming to power by passing the speedy power and energy supply act in 2010, said experts.

While the act offered impunity, experts said, the government in unsolicited bids granted contracts to private investors to build as many as 94 power plants on conditions that appear to have put the entire economy in peril.

Thirty-two other power plants have been set up as well by the government — on its own or in joint ventures — since 2009, with the country’s overall installed generation capacity increasing by more than fivefold to 25,000MW.

The rapid development of installed generation capacity — often without bringing required improvement in the distribution and transmission networks — has caught the government in a baffling situation.

The government struggled to even use half the installed capacity because of fuel shortage and high primary energy prices while idle capacity meant draining billions of dollars from the national coffers in capacity charges.

‘The crisis has been there all along. The fact is that the government is compelled to recognise it now as it cannot hide it any longer,’ energy expert Ijaz Hossain told New Age on July 26.

Just four months after announcing the 100 per cent electrification, the government introduced area-wise power cuts, lasting 13 hours a day at places, severely disrupting life and economic activities.

The government sought to blame the Russia-Ukraine war for the present crisis but energy experts choose to disagree, describing how the government have missed opportunities to avoid the crisis.

No prudent manager would keep building scores of power plants over more than a decade without having a sustainable source of primary energy, said Ijaz.

‘Everybody knew this as experts warned time and again about an economy like Bangladesh never being able to keep all those power plants running by importing fossil fuel,’ he said.

Globally, energy experts reminded, electricity generation requires primary energy supply guarantee from the power plant operators.

 

In a striking contrast, the incumbent government in Bangladesh took on itself the responsibility of supplying primary energy to power plant operators while also guaranteeing the operators rapacious profits in the form of capacity charge in the event their plants remain idle due to fuel shortage.

‘The present crisis is not the result of a single mistake but the culmination of a series of mistakes,’ said Ijaz.

On July 26, according to the Power Development Board, 42 power plants worth 4,127MW could not be operated because of primary energy shortage.

Bangladesh could never use its full installed generation capacity, particularly its gas-fired power plants, which generate the cheapest electricity, because of primary energy shortage.

Before the latest global energy crisis was triggered by the Russia-Ukraine, together with the Covid pandemic, about 40 per cent of the gas-fired power plants remained unused on average, PDB data showed.

Gas shortage returned to make people and business suffer even when the LNG price was at its historic low in 2020.

Bangladesh’s coal capacity is also left underused because of coal shortage while the government suspended operation at power plants worth 1,225MW because of excessive price of diesel, the most expensive primary energy.

‘Technically speaking, the decision to ensure 100 per cent electrification was wrong,’ said Ijaz, adding that the thoughtless expansion of power generation capacity was driven by the goal of 100 per cent electrification.

The highest electricity generation Bangladesh could achieve so far was 14,792MW — against the 25,000MW installed capacity — in April as distribution and transmission infrastructures were never paired with the rapidly increased generation capacity.

Unused power capacity exceeded the 50 per cent mark at times and the government paid a staggering Tk 72,567 crore to private power generators in capacity charge over the decade until 2021, according to the Bangladesh Working Group on External Debt.

The capacity charge paid in the past decade corresponds to the piling losses of the state-owned PDB, the lone buyer of electricity in the country, with a cumulative loss of over Tk 76,115 crore incurred over the same time period, the BWGED said.

‘The capacity charge could be defined in other words as a means of transferring public money to private pockets, sometimes to foreign companies,’ said Hasan Mehedi, member-secretary, BWGED on July 26.

A large portion of the capacity charge paid has gone to expensive rental power plants that rolled into operation with a deadline of maximum five years in 2010 for tackling the immediate electricity crisis while baseload power plants were being constructed.

The baseload power plants were undertaken to replace the expensive rental power plants.

But the rental plants, mostly fuelled by furnace oil and diesel, existed three times their stipulated lifetime with the construction of baseload plants, mainly coal-based, taking forever to complete.

For example, the construction of the 1,320MW Rampal power plant could not be completed in nine years. The 41-month construction schedule for the plant expired about 55 months ago.

Besides, the transmission infrastructure needed for evacuating electricity from the Rampal plant is yet to be ready. Half of the 1,320MW Payra power plant generation capacity also remains unused for over a year because of the lack of the power transmission lines.

The use of furnace oil, according to the BWGED, in rental power plants pushed up the cost of electricity by 67 per cent. At least 14 rental power plants are still in operation, some of them for more than 17 years.

A rental power plant is actually a combination of smaller power generators typically used at apartment buildings for coping with load-shedding.

Using such rental plants, which accounted for about 2,000MW installed capacity at its peak use, for generating electricity for a nation can never be viable for any economy in the world, experts said.

‘The present crisis is the government’s own making. It is the result of corruption, wrong policy decisions and inefficiency,’ said Ruhin Hossain Prince, an organiser of the National Committee to Protect Oil, Gas, Mineral Resources, Power and Ports, on July 27.

Experts had also warned against the risks of developing the capacity of highly-subsidised power sector in view of a highly volatile international energy market.

The worst of experts’ nightmares came true as the LNG spot market price rocketed almost eightfold on average between May 2020 and July 2022. Similarly, crude oil price increased nearly four times over the same period. The price of coal is also soaring.

Despite staggering power sector spending, the government hardly invested in the exploration of potential gas reserves or developing renewable energy as a source of primary energy.

The government was well aware of the country’s depleting gas reserve ever since coming to power but did not step up gas exploration despite geologists’ belief that the country was sitting on substantial gas reserves.

The renewable energy policy formulated in 2008 with the target of basing 10 per cent of the installed generation capacity on renewable sources by 2020 gathered dust.

Had the renewable energy policy been implemented, the government would have avoided current daytime power cuts with 2,500MW produced from renewables.

Instead of leaning towards renewable energy, which experts say is now compatible with fossil fuel, the government increased its dependence on coal in the power sector master plan formulated in 2010 and then on LNG in the 2016 PSMP.

Only 2 per cent of the current installed generation capacity is based on renewable sources.

‘Renewable energy could offer a unit of electricity at Tk 16 at night,’ said Ijaz Hossain.

During the day, he said, each unit of electricity produced from renewable energy now costs Tk 8.

On the contrary, the cost of producing power from furnace oil and diesel ranges between Tk 15 and Tk 40.

Consumers Association of Bangladesh energy adviser M Shamsul Alam said on July 27 that the speedy energy and power supply act encouraged corruption in the power sector, eventually leading to its collapse.

‘Bureaucrats got themselves engaged in corruption without any fear because of the indemnity offered in the law and it led to a complete regulatory failure,’ said Shamsul Alam.

‘As a result, power sector spending became rapacious while people found their living cost going through the roof,’ he said.

Power secretary Habibur Rahman refused to comment on experts’ analyses of the power sector failures.

‘The main reason for the current crisis is the energy crisis triggered by the Russia-Ukraine war,’ he only said, adding that associating any other causes with the present crisis would be misleading.

He was hopeful about a significant improvement in the situation after September.

 

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