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The Adani Group’s Godda coal-fired power plant in India’s Jharkhand will supply very expensive electricity to Bangladesh that it simply cannot afford, says a new report by the Australia-based Institute of Energy and Economic Financial Analysis (IEEFA).
The plant is due to start generation on December 16 using coal shipped from the group’s Carmichael mine in north-eastern Australia.
It was known years ago that power from the Godda plant fuelled by Carmichael mine’s coal would be expensive, says the report’s author Simon Nicholas.
He said that coal is being imported from Carmichael and railed 700km from the port to the Godda power plant in Jharkhand. “The full cost of this is being passed into Bangladesh. Power from Godda will then be exported to Bangladesh, reportedly costing almost double the initial expectation at around US$150/megawatt-hour (MWh).”
“During the Carmichael mine’s protracted development phase, backers of the Queensland project often stated that the project was needed to help people out of poverty in South Asia. This was merely a coal industry spin. If anything, it is doing the exact opposite,” he said in the report.
Nicholas said the original plan for Godda was to use coals mined in Jharkhand. The plan was later changed to use Carmichael mine’s coal and lock the Bangladesh Power Development Board (BPDB) into a power purchase agreement that allows Adani to import coal into an Indian coal mining state from Australia and pass the full cost onto Bangladesh.
“It is even clearer now that the Godda power plant deal with Bangladesh was aimed primarily at propping up the development of the Carmichael coal mine,” he added.
Further impacts
The power plant will begin generating at the end of a year that has seen Bangladesh’s growing dependence on fossil fuel imports become a crisis amid record-high prices. Credit rating agency Moody’s has placed Bangladesh under review for a downgrade in early December 2022, citing its rapidly declining foreign exchange reserves driven by rising costs for energy imports.
The burden of fossil fuels has led to power blackouts and growing pressure to increase consumer power tariffs. School and office hours have also been cut in Bangladesh during the year to curb rising fuel costs.
The country will face further impacts as power from the Godda plant will be very expensive. This price is two and a half times higher than the price at which BPDB sells power to distributors, said Nicholas.
He said the huge gap in price at which the BPDB buys and sells power has to be covered by government subsidies that are becoming increasingly unaffordable and it will lead to the need to increase power tariffs significantly to transfer the burden onto consumers.
“This process has already started. In November 2022, the tariff at which the BPDB sells power to distributors was increased by 20 per cent and the power distribution companies are now submitting proposals to increase retail tariffs by the same amount.
“Increasing power tariffs to unaffordable levels will clearly hinder, not help, Bangladesh’s development,” said Nicholas, adding this was all very predictable.
He said, “The growing burden of fossil fuel imports has been putting Bangladesh’s power system under growing financial strain for years and IEEFA has been warning that this will lead to the need for higher power tariffs.”
Quality and cost
With full access to electricity announced by the Prime Minister of Bangladesh in March 2022, the key power issue for Bangladesh’s development is no longer accessible but the quality and cost of electricity generation and supply.
The Godda coal-fired plant will add to the growing cost of power purchases from Independent Power Producers (IPPs), the worsening financial pressure the BPDB finds itself under and the rising pressure to shift that burden onto consumers via power tariff hikes, the report said.
The BPDB has not been able to pay the IPPs since May 2022 and currently owes those five months of payments amounting to $2.5 billion.
Bangladesh approached the International Monetary Fund (IMF) for a $4.5 billion loan in July 2022 to help it cope with the mounting economic pressure. The reduction in power subsidies via tariff increases is likely to be an IMF condition on the loan.
“Bangladesh will need to focus more on renewable energy going forward if it wants to limit the burden of fossil fuel imports and increase energy security,” said Nicholas.
