February 1, 2024
DHAKA – Capacity payments, the scourge of the rapid rise in Bangladesh’s power generation capacity, are set to get higher this year.
At least five more gas-fired plants with a combined capacity of 2,482 megawatts (MW) will get the green light to start commercial operation this year — when about two-thirds of the capacity of existing gas-fired power plants are sitting idle for the ongoing gas crisis.
Once the commercial operation date (COD) is approved, the power plants will get a minimum payment whether they produce any electricity or not, which is known as capacity payment.
Of the five plants, two will be awarded the COD this month, raising concerns about whether those plants would largely be sitting idle and racking up capacity charges.
At least three Padma bridges could be built with the capacity payments that were made to the 114 power plants since 2009.
In its last three terms, the Awami League government has paid at least Tk 1.04 lakh crore to 82 independent power producers (IPPs) and 32 rental power plants as capacity charge and rental payments, Nasrul Hamid, the state minister for power, energy and mineral resources, told the parliament on September 5 last year.
Any day now, the 584MW Unique Meghnaghat power plant and the 583MW Summit Meghnaghat II power plant will get their CODs, according to officials of the Bangladesh Power Development Board (PDB), the state agency that purchases the electricity produced by the power stations.
Nearby the two plants is another 718MW gas-fired power plant that is being set up by India’s Reliance Power and Japan’s JERA. That plant will also get its COD soon.
All three plants in Narayanganj’s Meghnaghat — which was once a rural backwater of fishing hamlets and paddy fields but is now a hub of power stations — were approved in 2019 for generation by 2022. The three plants’ combined capacity is 1,885MW.
Apart from these three independent power producers, PDB itself has two gas-fired plants under construction — Ghorashal Repowering Stations Unit 3 and 4 — that are 97 percent and 95 percent complete, according to the progress report of PDB.
At present, gas-fired power plants account for 10,712MW of the total installed capacity of 25,481MW and their combined demand for gas is 1,969 million cubic feet per day (mmcfd).
In the best-case scenario, Petrobangla, the state agency that supplies gas, can provide 1,000 mmcfd of gas to the power plants from its total supply of 3,500 mmcfd. But at present, Petrobangla’s total supply is 2,500 mmcfd, of which gas-fired power stations are getting 700 mmcfd.
Though gas is the cheapest fuel, the country is now able to produce around 3,500-4,000MW from gas out of the total generation of 9,500MW to 10,500MW.
Only in 2026 will the gas supply increase adequately thanks to the drilling of new gas wells and long-term LNG import deals, according to Petrobangla’s plans.
Against this backdrop, it is not clear where the 322 mmcfd of gas to power Meghnaghat’s turbines is going to come from.
Petrobangla Chairman Zanendra Nath Sarker and Titas Gas Managing Director Haronur Rashid Mullah could not be reached for comment despite repeated attempts.
Asked how PDB would ensure adequate gas supply for the new plants, Khandaker Mokammel Hossain, member (generation) of PDB, said: “We still have no plan on how to increase the gas supply — we need more discussions with the other stakeholders.”
Anupam Hayat, the chief financial officer of Unique Meghnaghat Power, is confident that their plant will get an adequate gas supply due to its fuel economy.
“Our plant produces electricity with up to 65 percent efficiency whereas most of the other gas-fired power plants, both private and government-owned, operate at only 35 to 40 percent efficiency. That means we would be able to produce more electricity than the others with the same amount of gas and our unit cost would be lower too.”
Subsequently, it makes most sense for the authorities to ensure maximum gas supply to Unique Meghnaghat, which has signed a gas supply agreement with Titas Gas.
“NLDC [the National Load Dispatch Centre] goes for merit-based demand and we are confident that we will be on the top of that list,” Hayat added.
Unique Meghnaghat was producing electricity on a trial basis between January 4 and 20.
Its gas supply was stopped on January 20, when the country abruptly faced a severe gas shortage as the Moheshkahli Floating LNG terminal run by Excelerate Energy delayed resuming operations and the Summit LNG terminal, the other floating storage regasification unit (FSRU) in Bangladesh, ran out of cargo.
While Excelerate Energy’s FSRU is operating as normal, Unique Meghnaghat’s gas supply is yet to be resumed.
On the other hand, Summit Meghnaghat II is facing no such issue, as per Summit Power’s email response to The Daily Star.
“We are happy to announce gas has been provided now and the Summit Meghnaghat II is in ‘commissioning’ mode, generating electricity as per the NLDC and BPDB instructions. We expect this most efficient power plant to provide 583 MW of electricity during summer at least cost,” it added.
Summit Power, which is the largest IPP in the country with 12 power plants in operation and shares in at least two more, received the highest share of the capacity payments: Tk 12,130 crore.
Ranjan Lohar, the chief executive officer of Reliance Bangladesh LNG and Power, could not be reached for comment.
In the last couple of years, the government only increased the power generation capacity but did not allocate enough budget to ensure energy supply to those power plants, said M Shamsul Alam, dean of the faculty of engineering at Daffodil International University.
“Because of such a policy, the electricity production cost is increasing day by day as more power plants’ capacity remain unused and they are getting capacity charges for days.”
Subsequently, huge amounts of subsidies are required in the sector.
“Besides, in the name of subsidy reduction, the government is planning to put the additional burden on the consumers’ shoulders,” said Alam, also the senior vice-president of the Consumers Association of Bangladesh.
The decision to award CODs to gas-fired power plants amid the ongoing gas crisis is “adding salt to the wound” as it will increase the burden of both PDB and the consumers, said Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue.
“Already, PDB is struggling to pay the dues of existing power plants. The government has to issue special bonds and print money to pay the deferred payments.”
The fallacious policy will increase the overcapacity burden, too, he said.
“When the contracts were signed, there was overcapacity and the CPD had raised concerns then too. If the government had good intentions, they might retire the old, inefficient power plants first and then allow the new power plants. That has not happened and this indicates that the government always favours a group of beneficiaries in this sector,” Moazzem added.
The country saw its highest generation of 15,648 MW in a day in April last year. This upcoming summer, there is a target to generate 17,800 MW.