Govt to pay Tk 31,600cr to private power plants in FY23: CPD

The government will have to pay Tk 31,600 crore to the private power plants in capacity payment in FY23, the Centre for Policy Dialogue (CPD) has said.

Capacity payment had increased by 100 per cent in the last five fiscal years and was becoming increasingly dangerous for the power sector, it said in a report on Sunday.

The private power plants include independent power producers (IPPs), rental power plants (RPPs), and quick rental power plants (QRPPs).

The CPD organised a seminar on the power and energy sectors in the capital on Sunday, which was chaired by its Executive Director Fahmida Khatun.

Experts told the seminar the government’s debt in the power sector was increasing for various reasons, including unplanned development, corruption, and inefficiency of the Bangladesh Power Development Board (BPDB), while the citizens were paying the price.

They suggested stopping unplanned development and making the power sector dependent on affordable and domestically-produced energy.

CPD Research Director Khondaker Golam Moazzem presented a paper at the seminar. The paper said the government paid the private power plants Tk 5,600 crore in capacity payment in FY18, Tk 6,241 crore in FY19, Tk 8,929 crore in FY20, Tk 13,200 crore in FY21, and Tk 26,533 crore in FY22.

The BPDB is the only buyer of bulk electricity in the country. According to the agreement with IPPs, RPPs, and QRPPs, if it does not buy electricity, it will either have to make the capacity payment or rent the power plants.

The US-based Institute for Energy Economics and Financial Analysis (IEEFA) said in a 2021 report the government was paying the private power plants Tk 9,500 crore per year even though they were not generating electricity.

This was putting pressure on the cost of power generation and increasing the BPDB’s debt, it added.

Overcapacity

According to the BPDB, the country’s power generation capacity stands at 25,526MW.

The CPD said power generation capacity had increased by 88.5 per cent between FY18 and FY22 while consumption rose by only 37 per cent during this period.

Besides, power generation capacity increased by 16 per cent this year, but consumption went up by only 2 per cent. The country now has 10,764MW of electricity in excess capacity.

According to the CPD, this huge overcapacity is increasing the BPDB’s cost and also affecting electricity prices. At the same time, the BPDB’s additional cost has risen by 20 per cent.

The CPD report said power generation expenses rose by 11.6 per cent this year due to the rise in high-cost fuel consumption by IPPs, RPPs, and QRPPs. Of this, private power plants’ expenditure increased by 14.6 per cent and that of public plants by 11.1 per cent.

At present, 26 per cent of electricity is coming from fuel-based plants that are mainly private plants. A BPDB report said due to gas shortages and increased fuel consumption by power plants, the company’s production cost has increased by around Tk 12,500 crore.

Tk 34,200cr subsidy needed in FY23

The CPD said the BPDB as a state-owned entity should be neither profitable nor unprofitable, but it continued to suffer due to unplanned development in the power sector.

The BPDB’s operating loss was Tk 4,350 crore in 2020, which increased to Tk 8,666 crore the following year. Operating losses will increase by 26.2 per cent this year due to energy price volatilities in the world market.

The CPD said the cost of purchasing power from fuel-based private plants would increase by 58.33 per cent in FY22 while imports from India would rise by 17.3 per cent.

To bear this cost, a subsidy of Tk 17,000 crore has been set aside for the BPDB in the proposed budget for FY23. But the CPD estimated the BPDB would need Tk 34,200 crore in that fiscal year.

In other words, even if it gets Tk 17,000 crore, the BPDB will face a deficit of Tk 17,200 crore. However, the BPDB has already proposed increasing bulk electricity tariffs to meet the deficit.

M Shamsul Alam, dean of the Department of Electronics and Telecommunication Engineering at Daffodil International University, told Sunday’s seminar the government wants to run the power sector commercially.

“If that is the case, it is necessary to create a competitive market through international tenders. The government will then be able to purchase electricity at fixed prices in order to supply it at fair prices,” he said.

He added, “Why should the government be held hostage to the BPDB?”

Badrul Imam, an honorary professor of geology at the University of Dhaka, said Tk 26,066 crore was allocated for the power and energy sectors in FY23, including Tk 1,870 crore for the energy sector.

He said this money was not enough for energy exploration. He suggested gas exploration to generate electricity at affordable prices.

CPD’s Moazzem said the power and energy sectors were under pressure due to rising import costs of petroleum, liquefied natural gas (LNG), and coal. “While renewable energy has the potential to be a good alternative, it has been overlooked.” Among others, Power Cell Director General Mohammad Hossain and Bangladesh Independent Power Producers Association President Imran Karim were present at the programme.