11 power plants mostly sat idle last fiscal
PDB bought electricity from them at high rates
At least 15 percent of the country's 71 independent power producers were sitting idle for 80 percent of the time last fiscal year, raising questions about their need.
Bangladesh Power Development Board (PDB) purchased electricity from the mostly idle power plants at rates much higher than the average purchase price of Tk 14.62 per kilowatt-hour (kWh).
The power plants that are sitting idle 80 percent of the time are: Raj Lanka Power, Summit Barisal Power, Bangla Trac Power Unit-1, Bangla Trac Power Unit-2, Aggreko Energy Solution Aowrahati, Aggreko Brahmangoan, APR Energy, United Mymensingh Power, Paramount Btrac Energy, BR Powergen Ltd, and United Payra Power.
The purchase price from the 11 power plants was between Tk 26.08 per kWh to Tk 56.33 per kWh.
"The reason behind the excessive unit cost is that the power plants were sitting idle," said Mohammad Tamim, dean of the chemical and material engineering department at the Bangladesh University of Engineering and Technology.
Every power plant has a fixed cost including capacity charge, staff salaries and bank loans, while their variable cost is the fuel cost, which it gets from the government.
The unit price is calculated by dividing the total cost by the total electricity output.
"If a power plant produces electricity at 50 percent or 60 percent plant load factor (PLF), it produces more electricity over the year and that impacts the total cost," he said.
In other words, the 11 plants were operating at less than 20 percent PLF, which is the ratio between the actual energy generated by the plant and the maximum possible energy that can be generated with the plant working at its rated power and for a duration of an entire year.
Even if a plant produces no electricity, it still gets its fixed costs. After dividing the total cost by the total power output, the unit price is fixed, which is higher for low output plants, Tamim said.
Save for Raj Lanka Power and United Mymensingh Power, the power plants sat idle for 80 percent of the time in the previous five fiscal years.
If a power plant produces electricity at 50 percent or 60 percent plant load factor, it produces more electricity over the year and that impacts the total cost.
"If a power plant produces less than 20 percent of its capacity, there is no need for it in the area," Tamim added.
The PDB, which logged in record losses amounting to Tk 47,788 crore for fiscal 2022-23, did not disclose the capacity payments made in its annual report. It also did not give a breakdown of fixed costs and variable costs.
In fiscal 2022-23, the 11 plants were paid a total of Tk 220.5 crore by the PDB.
Summit Power referred the correspondent to the PDB spokesman for comment on Summit Barisal's low PLF. Bangla Trac and United Power could not be reached for comment.
The lower production by the 11 plants is due to the commissioning of the large power plants, said Shameem Hasan, spokesman for PDB.
Summit Barisal Power's low PLF is due to the commissioning of the Payra 1320MW thermal power plant in 2020, he said.
When asked about the capacity charges paid to the 11 plants, he said: "For now, we have to pay the capacity charges. The government must make a call on whether it wants to continue paying capacity charges in the future."
In principle, the PDB has cut back on purchasing electricity from high-cost power plants that burn furnace oil and diesel.
Overcapacity is one of the big concerns for the power sector, said Khondaker Golam Moazzem, research director for the Centre for Policy Dialogue.
The reserve power generation capacity will exceed 50 percent by next year.
"This should be reduced," he said, adding that the existing contracts with the power plants should be reviewed and old, inefficient plants should be retired.
"All contracts must have the no-electricity-no-pay clause added in."
The macroeconomic challenges the country is facing at the moment are a result of the faulty import-dependent nature of the power and energy sector, Moazzem said.
"Bangladesh's energy generation model, especially the one used to purchase power from IPPs, is not only weakening the PDB but is also hurting the overall economy."
In an extraordinary measure, the government is set to issue Tk 14,000 crore worth of special bonds to clear mounting arrears to the IPPs thanks to the narrow fiscal space.
Moazzem also called for scrapping the Quick Enhancement of Electricity and Energy Supply (Special Provision) Act 2010, also known as the indemnity law for the power sector.
"Because of the indemnity law, the power purchase agreements are not transparent and we are not able to get competitive pricing. Because of the indemnity law, PDB has to buy expensive power," he added.
Power Cell Director General Mohammad Hossain, however, denied that the power sector's overcapacity is high.
"Overcapacity is not much as there are some power plants under maintenance and some are needed for peak hours."
The government counts many abandoned or old power plants in calculating the overall capacity, which increases the number.
"But ultimately the overcapacity is more or less 20 percent, which is required."