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Small power, big costs

  • Published at 12:46 am July 29th, 2017
  • Last updated at 01:14 am July 29th, 2017
Small power, big costs
The government is planning to approve the construction of at least 20 oil-based small-scale power plants within a short time, directly contradicting its own proclaimed policy of exiting oil-based power production. The new plants will have a total capacity of 3,000MW, but all of them are small, ranging from 50MW to 300MW. Experts say these small plants will increase the cost of power production sharply. Power plants under the capacity of 300MW are considered small. The government’s own master plan for power advocates for larger power plants because of their cost-effectiveness and fuel efficiency and says oil-based production should stop. A Power Development Board (PDB) official, seeking anonymity, said some of these plants will be established through deals under the Speedy Supply of Power and Energy (Special Provision) Act 2010, which allows ‘quick disposal’ of power sector contracts, bypassing provisions of the normal tender process. Meanwhile, the government’s plans to establish large-scale power plants are making little or no progress. Experts say there is a lack of proper planning and supervision from the concerned ministry, leading to a situation where the power supply is now largely dependent on small-scale plants.
The Power System Master Plan 2016, which is likely to come into effect soon, calls for ‘an exit strategy from the reliance on expensive oil-based rental power’
The Power Division, a unit of the Ministry of Power, Energy and Mineral Resources, has already received proposals from around 35 different private companies for setting up diesel and furnace oil-based power plants to generate over 6,600MW. Each of these companies have offered to establish plants with capacity of 50MW to 300MW electricity. The Summit Group has proposed a 310MW plant in Kodda, Gazipur and another 300MW plant in Mirsarai, Chittagong. Bangla Trac has proposed a 300MW and a 100MW plant in any suitable location. Doreen Power has proposed a 215MW plant in Manikganj. United Enterprise has proposed a 200MW plant in Mymensingh, Precceson a 150MW plant in Chittagong, Orion a 100MW plant in Santahar, Bogra, Energy Pac a 100MW in Thakurgoan and Midland Power a 50MW plant in Ashuganj. Bigger is always better BD Rahmatullah, former head of the Power Cell, said the smaller plants pose risks for the grid, while large plants provide stability and improve its durability. “Also, because smaller plants are less fuel-efficient than large power plants, the cost of power production will go up. That burden will ultimately fall on the consumer,” he said. “The construction cost of these plants is also high, and you need more land for them.” The government agrees, on paper. The Power System Master Plan 2016, which is likely to come into effect soon, calls for “an exit strategy from the reliance on expensive oil-based rental power.” The master plan, prepared with support from Japan International Cooperation Agency (Jica), is aimed at guiding the government’s power and energy policy up to the year 2041. The plan says the government should review the “exponential increasing of oil based rental power plants and development constraints of domestic primary energy.” Bangladesh’s current oil annual demand is around 5 million tons, and the self-sufficiency rate is only 5%. The reliance on imported oil leaves the country’s economy vulnerable to sudden shifts in oil prices in the international market. The government heavily subsidises the price of oil. The Power System Master Plan says the government should move away from oil product subsidy. “Energy subsidy is a tough challenge, because there’s always a concern that drastic increase of fuel and electricity prices may trigger another negative effect on the national economy,” the PSMP 2016 says. Why the small-mindedness? Power-sector analysts said the government wants to generate around 3,000MW of additional power by March 2018, with the upcoming general elections in mind. PDB officials said oil-based plants are an attractive option right now as the price of fuel oil is currently low in the international market. But despite the low prices of oil, the economy is already burdened with the high costs of oil-based power. The cost of electricity per unit from a gas-run plant is less than Tk2 while the cost of electricity per unit from a diesel or furnace oil-run plant is Tk14-18. There are now 45 oil-based power plants in the country, of which 36 are furnace oil-based and have a total generation capacity of 2,800MW; the remaining nine are diesel-based plants with a total capacity of 1,032MW. Although the government has made major efforts to boost the power generation sector in its two terms, all of the power plants that have been established are fuel oil-based and privately owned. Not a single large-scale power plant, which might help control costing, has been established so far. Experts think it is unlikely that the government will be able to make any of the large under-construction coal-based power plants operational within this tenure. As all the proposed power plants are also oil-based, consumers will ultimately be victims of periodic retail power price hikes. The government is nevertheless pushing for the smaller plants, even going so far as to push financiers to come to the aid of the companies bidding to construct the plants. Earlier this year the Power Ministry asked the Finance Ministry to amend the bank company law to speed up loan facilities for these companies. On June 21, State Minister for Power Nasrul Hamid attended a meeting with top bankers, urging them to give Tk20,000 crore in loans for the power sector. “We have decided to build some new power projects to generate 3,000MW electricity within a short period of time,” Nasrul Hamid had previously told this reporter. ‘Load-shedding as excuse’ After there were bouts of load-shedding this summer, the Power Ministry told government policymakers that it needed to build more small-scale power plants to meet the deficit. PDB officials say the key reasons behind the load-shedding were electricity towers damaged in storms, maintenance work of 10 power plants and gas crisis. The maintenance reduced the generation by 1,900MW, while the gas crisis has cut it down by another 800MW. But interestingly, when these problems are solved, the gap between the shortage and the capacity of the new power plants would stand at only around 300MW. On June 11, State Minister for Power Nasrul Hamid told Parliament that the government is implementing various programmes for increasing power generation capacity up to 24,000MW by 2021. ‘New plants could become a burden’ Energy Adviser to Consumers Association of Bangladesh Prof M Shamsul Alam thinks that the government has allowed the power sector to turn into a money-making opportunity for vested interests. “Costly power plants are being established so power generation is becoming costlier. It goes beyond the affordability of people. The government is creating a business group which has no connection with the people, rather personal financial gain is given priority,” he said. Dr Ijaz Hossain, a professor of chemical engineering at Bangladesh University of Engineering and Technology, asked: “Are these small power plants a quick fix to the failures in building the big ones?” When asked about the issues, PDB Chairman Khaled Mahmood would only say: “We have taken up the initiative because of the deficit of electricity. We follow the decisions taken by the government.” Nasrul Hamid could not be reached despite several attempts to get comment for this story.