Home ›› 29 Jul 2021 ›› Front
Captive power plants (CPPs) are causing a huge financial burden on the exchequer as the efficiency of the decade-old plants is dangerously low compared to other on-grid power establishments.
While their launching was intended to provide uninterrupted power supply to industrial units in the country, continuation of such plants for more than three decades raises question at a time when power generation capacity exceeds demand.
There are 1,771 CPPs in operation, generating 2,800-megawatt (MW) of electricity.
According to Bangladesh Power Development Board, the electricity generation capacity now stands at over 20,696MW against an average demand for around 12,000MW.
The government has to spend over Tk 3,500 crore in subsidy per annum to help run the CPPs. It has not permitted installation of any new CPP since 2019.
Energy expert Professor Ijaz Hossain pointed out that most CPPs are running at below 32 per cent capacity, way lower than the on-grid minimum standard plant capacity which is 60 per cent. He suggested plant owners to introduce new technology to make CPPs economically viable.
He said the government should strengthen transmission and distribution networks to connect CPP-dependent industries to grid-connected electricity.
“The government is providing gas to CPPs at a subsidised price which accounts for over Tk 3,500 crore a year,” Professor Ijaz told The Business Post.
Adopting new technology is a must to increase overall plant efficiency to at least to 60 per cent, or else subsidy on CPPs will rise exponentially which will add pressure to public exchequer, he explained.
The installation of CPP began in 1990 during severe power shortage that caused frequent blackouts, leaving industrial production in disarray.
According to the Bangladesh Energy Regulatory Commission, licences have been issued to install 2,907 CPPs with a cumulative generation capacity of 3,184MW. Around 82 per cent of all such plants use natural gas while the rest use diesel.
Stakeholders in power sector said that price is also a big factor in taking captive power as an alternative.
According to the power development board, it provides per unit electricity at Tk 8.36 to Tk 8.41 depending on the power line voltage while it costs Tk 3 to produce per unit electricity from a captive power plant.
CPP owners say the main reason for depending on the embedded generation is its quality and uninterrupted supply of power, which is a must for ensuring the quality of products as fluctuation of voltage hinders production and affects quality.
Industrialists on captive power plants
Israq Cotton Mills Limited set up such a power plant with a generation capacity of 8X1415 kilowatt of electricity only to ensure smooth power supply in the face of low grade loaded electricity disrupting production frequently.
Talking to The Business Post, its Managing Director Sajid Israq said: “We went for captive power only to ensure supply of machine grade electricity to our factory as grid-connected power is very unreliable.
“If we are provided with better loaded electricity, we will switch energy consumption from captive to grid-connected power as we have to count additional operation cost to run the power plant.”
Energy and Mineral Resources Division in a recent directive discouraged gas connections to captive power plants and diverted the fuel to industrial units in economic zones.
Contacted, Power Cell Managing Director Mohammad Hossen said: “We are trying to cover industrial consumption by grid-connected electricity having a generation capacity well above the national demand but weakness in transmission and distribution lines are making things complicated.
“There are some projects currently underway to overhaul the outdated transmission and distribution networks. Once implemented, the project will help supply reliable and efficient power.”
According to a report of Asian Development Bank released on March 21 this year, apart from efficiency and reliability of captive power, there are other factors involved like not switching to on-grid power as captive power is much cheaper than that from on-grid electricity.
The current price of on-grid electricity for industrial consumers is on average Tk 8.50 per unit (depending on various electricity supply line voltages), finds the report.
Captive power generation costs more
The efficiency of captive power is less than that of the grid-connected electricity while the government has to provide gas at a subsidised rate to the captive power plant operators.
Petrobangla is providing 157.52 billion cubic feet of gas to CPPs which is 15.12 per cent of the total supply of gas.
Under a government policy to cut gas supply to captive power plants, the share of power generation of CPPs declined consistently over the years.
Between 2010 and 2012, the share of CPPs in the country’s total power generation was 17.84 per cent. In the 2019-20 fiscal year, it fell to 11.60 per cent.
