In next six months several private producers will be ready to supply 5,350 MW of electricity to the national grid under agreements with the government. You are wrong if you think it’s going to ease the ongoing power crisis in the country. 

Worse still, the state-owned Bangladesh Power Development Board will have little use of this new electricity even though it is likely to pay in crores of taka in capacity charges to the producers further bulging the government’s spending on available but unused power.

Capacity payment is considered a penalty for the BPDB as the government fails to purchase the power available with the power plants for supply to the national grid under agreements. The government has recently been under fire from energy experts for continuing with the capacity payment for idle electricity amid rising economic problems.

As per the government’s power purchase agreement (PPA) with the private producers, the entire payments will be made in foreign currency mounting a new pressure on declining foreign exchange reserves, official sources said speaking on condition of anonymity due to the subject’s sensitivity.

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According to the sources, despite an improvement in payment the government still owes $1.5 billion to the private power plant operators for purchase of electricity. This arrear bills may increase as a fall-out of the new arrivals. 
The sources said, of the 5,346 MW electricity, scheduled to be added to the national grid from November 2022-to February 2022, some 1,600 MW will come from Adani Group’s coal-fired power plant in the Indian state of Jharkhand, 620 MW from Rampal Power Plant, 1224 MW from S Alam Group’s power plant in Bashkhali of Chattagram, 718 MW electricity from Reliance Power LNG-based Plant in Meghnaghat and another 600 MW from LNG-based GE-Summit power plant in Meghnaghat, and 584 MW from LNG-based Unique Group’s power plant in Meghnaghat.  

The BPDB’s official data puts the country's total generation capacity at 25,235MW of which grid-connected generation is 22,348MW up to April this year. 

The remaining 2,887 is captive generation, mainly produced by industry owners, exclusively for running their own industries, it said.

Of the 22,348 MW on-grid power, some 50.3 per cent (11,240MW) is being generated by public sector entities while the remaining 49.7 per cent (11,108MW) is coming from the private sector.

Currently, due to fuel constraints—specially, gas and liquid fuel crises, the national grid is getting around 12,500 MW, which is about half of the generation capacity.

As per the conditions of the agreements with the private power producers, if the government fails to receive power supply from the IPPs despite their available generation capacity, it has to provide them with capacity payment.

So, experts in the energy sector said, a huge capacity payment obligation is waiting for the government that will be counted from November this year when the electricity demand will substantially decrease with the beginning of winter season.

In the winter that starts from November and continues up to March, the country sees a significant fall in electricity demands and the consumption comes down to below 8,000 in evening peak hours while it remains 6,000-7,000 MW during the day peak times.

The BPDB official data shows that the country’s evening peak demand at the sub-station end was recorded at 7,922 MW and minimum generation was recorded at 5,879 MW at the generation end on December 31 in 2021.

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The country's highest power generation was recorded at 14,782MW on April 16 – meaning that the surplus capacity is 10,453MW (about 41 per cent).

Officials said when the 5,350 MW of new electricity will be added to the national grid in November- February period, the country’s generation capacity will go up further to 30,581 MW, but the demand will remain below 8,000 MW leaving the 22,581 MW idle.

This will further push up the government’s burden of capacity payment, said a top official. But he could not give a clear idea as to how much of the amount the government would need to pay in capacity payment to the private sector power producers.

Meanwhile, the BPDB official documents reveal that the government needs to spend a total of Tk 71,878 crore in the FY2021-22 for total power production, of which Tk 44,434 crore will be spent on purchasing electricity from the private sector.

Of this amount, Tk 37,963 crore will be required to purchase electricity from the independent power producer (IPP) and small IPP plants in the private sector which produce 38 per cent (8,807MW) of the total generation.      

The Centre for Policy Dialogue (CPD) at a recent seminar on power and energy sector budget has said that the capacity payment to private sector power plants, including rental and quick rental plants, has gone up to Tk 26,505 crore in FY2022 from Tk 5,600 crore in FY2018.

The amount of capacity payment could reach Tk 31,600 crore in FY2023, said CPD research director Dr Khondaker Golam Moazzem, while making his keynote presentation titled: “Energy and Power Sector in the National Budget for 2022-23” at the seminar.

Moazzem also said that the country’s surplus electricity which was termed as the over generation capacity of electricity has increased to 10,764 MW in 2021-2022 from 8231 MW in 2020-21 with a jump to 42.12 per cent from 37.37 per cent.

The BPDB recently submitted a report to the parliamentary standing committee on power and energy where it showed that the government paid Tk 54,000 crore as capacity payment in the last three years of which the private producers received Tk 42,000 crore.

Power Cell director general Mohammad Hossain, however, disagreed with the idea of adding 5,350 MW electricity to the national grid by December 2022- February 2023 period.

He said around 3000 MW could be added to the national grid at that time while the demand may grow by another 700 MW considering a 7 per cent GDP growth. He declined to make any comment about the possible growing burden of capacity payment.