The Power Sector of Bangladesh 2021: Excess Capacity and Capacity Charge is weighing down the Bangladesh Economy

As per latest Annual Report of Bangladesh Power Development Board (BPDB), installed capacity reached 22,031 MW in FY 2020-21 which was 8.1% higher than the previous year. Still 8,239 MW of capacity remains unused this year. The generation of electricity was also increased to 80,422.54 gWh in FY 2020-21 which was 12.6% higher than FY 2019-20. The maximum demand of power was 13,792 MW which was 8.3% higher than FY 2019-20. However due to the additional demand of power , the rate of idle power plants decreased only 0.1% from last year, virtually unchanged. Similarly, the plant load factor (PLF) of the power sector reached 41.88% in FY 2020-21 from 40.91% in FY 2019-20. The PLF increased marginally, only 0.97% from the earlier year. Bangladesh power plants ran for only 153 days while they sat idle and unutilized for 212 days in FY 2020-21. BPDB paid BDT 51,878.96 crore (USD 6.10 billion) to buy electricity in FY 2020-21 which was 25.92% higher than BDT 41,198.80 crore (USD 4.84 billion) spent in the earlier year. As a result, the generation cost increased 11.8% higher to BDT 6.61 per kWh from BDT 5.91 in FY 2019-20. BPDB paid BDT 13,155.21 crore (USD 1.55 billion) to 37 private companies as Capacity Charges in FY 2020-21. The amount was 21.2% higher than last year. As a result, BPDB’s annual loss reached BDT 11,509.12 crore (USD 1.35 billion) in FY 2020-21 — a single year rate increase of 54.5% from BDT 7,450.24 crore in FY 2019-20. Subsequently, the GOB had to provide BDT 11,777.91 crore (USD 1.39 billion) as repayable subsidy to BPDB which was whooping 58.3% higher than the earlier year. Two consecutive years with annual losses of around BDT 10 thousand crore (USD 1.2 billion) is an alarming trend that caused BPDB to become a heavy burden on the Bangladesh economy at a time when resources were needed to address the unexpected health care emergency caused by Covid 19 pandemic. The top 12 companies, with installed capacity of 6,551.66 MW, received BDT 8,730.14 crore (USD 1,027.08 million) as capacity charge which is 66.4% of total capacity charge paid in FY 2020-21. Summit Group topped the list followed by United Group, Bangla Trac, China National Machinery Import and Export Corporation (CMC) and Orion Group.

The top 12 power plants, with installed capacity of 4,763 MW, received BDT 65.02 billion (USD 764.95 million) as capacity charge in FY 2020-21 which is 49.4% of total capacity charge. Payra Coal Power Plant topped the list followed by Sirajganj 410 MW Dual Fuel Power Plant, Keraniganj 300 MW HSD Power Plant and Meghnaghat 337 MW Dual Fuel Power Plant. Six power plants did not generate any electricity and consumed 3.15 gWh of electricity from the national grid creating a negative drag on power production. Five power plants didn’t generate any electricity. The 10 most expensive power plants generated 184.52 gWh (1.76% of their capacity) of electricity at an average cost of BDT 106.94 per unit. The GOB approved 46 power plants with an installed capacity of 49,392 MW to be constructed by 2030. Many of these are gas plants even though Petrobangla can only supply only 55.3% of current demand of fossil gas for power generation. LNG costs reached record high levels in 2021 forcing BPDB to pay much higher fuel costs. The excessive dependency on costly LNG will not only emit increased GHGs but also create unbearable pressure on the national economy. The total installed capacity will reach 37,731 MW in 2025 and 49,392 MW in 2030 against demand of 19,900 MW and 27,400 MW respectively. As a result, 17,831 MW and 21,992 MW of power will become stranded assets by 2025 and 2030 creating more weight dragging down the Bangladesh economy. To compensate the improvident installation plan in the power sector, BPDB could face loss of BDT 26,533 crore (USD 3.12 billion) in FY 2021-22, BDT 50,000 crore (USD 5.81 billion) in FY 2024-25 and BDT 63,000 crore (USD 7.33 billion) in FY 2029-30 which will further increase the price of power at consumers’ end. Immediately halt the construction of new fossil fuel power plants (including ones based on coal and LNG) and cancel all approvals of new LNG based power plants which have not achieved financial closure. Shift those resources to investments in renewable energy to come online much more quickly and meet any new generation demand that might be needed in 2027. No more extension of the tenure of expensive fossil fuel based RPPs, QRPPs and IPPs. There is simply no economic justification for their continuation due to the overcapacity of power. No more extension of the tenure of expensive fossil fuel based RPPs, QRPPs and IPPs. There is simply no economic justification for their continuation due to the overcapacity of power (page ###). Shutting down the loss making power plants to avoid further record setting losses is also crucially important. Implement rapid installation of RE Projects at both distributed and utility scale on unused lands at the power hubs. To fulfil this target, significant allocation for RE should be made in the Annual Development Programme (ADP) of the national budget. Increase Energy Efficiency at internationally accepted levels to supply cheaper and more reliable electricity consistent with recommendations in the 8th Five Year Plan, Perspective Plan 2041 and in the NDC 2021.

Immediately implement massive T&D projects on an urgent basis to supply the generated electricity to the consumers so that the overcapacity could be reduced at a significant level. Endorse the Clean Air Act and impose Green Tax immediately to control emissions and penalize the power plants which emit excessive CO2, SOx and NOx than permitted under the act. Reduce the staff of public power plants and decentralize BPDB through decommissioning power plants and regional distribution systems to newly formed public sector power generating and distribution companies. More than one-third of Bangladesh power generation capacity is not being used creating stranded generation assets that are paid to sit idle. If Bangladesh continues spending millions constructing new fossil fuel power plants that are not needed, it will drive power costs up even more and weigh down the Bangladesh economy. A target plant load factor should be established at minimum 70% before any new power plants are allowed to begin or continue construction. Loans to build fossil fuel plants were based on 80% load factors. Unutilized power generation with current plant load factors of only 41.88% provides no benefit to Bangladesh consumers, only increased costs. It is much more sound fiscal management to retire unutilized plants, adopt a No Electricity No Payment (NENP) policy and stop the costly construction of new fossil fuel plants that are not needed. This will allow electricity usage to catch up to capacity and more efficiently utilise existing assets and stop an ever increasing weight on the Bangladesh economy caused by the power sector.