Study report by a US based energy consultant firm said as reported by a Dhaka based national daily on Tuesday that the government plan to add more power generation capacity by installing big coal- and LNG-fired power plant will create substantial overcapacity in power sector soon much beyond what we would need. This mismatch would be too big in post corona business lull.
The warning that the report embodies is for severe financial implications with such overcapacity building leaving big part of the plants sitting idle. It will thus increase government subsidies manifold in the power sector in one hand and raising power tariff on consumers on the other to meet financial obligations to private producers.
The report said the country has already excess power generation capacity and only 43 per cent of it was utilized in fiscal 2018-19. This low usage even before coronavirus outbreak resulted in Tk 9,000 crore ($1.1 billion) idle capacity payments for power plants necessitating both subsidies and power price hikes and it may increase several times in few years.
Taking the economic impact of the Covid-19 into account, the study has mapped out that Bangladesh will have 58 per cent more power generation capacity over the need it will have by 2030. The Covid-19’s impact will also mean long-term power demand would be lower than forecast, making the overcapacity by 2030 worse if the current plan for coal- and LNG-based power capacity additions go ahead as usual.
Bangladesh is building big capacity coal-LNG plants which are however less appropriate to meet lower-than-expected demand growth in the country. The study has rightly referred to Indonesia’s example for Bangladesh saying such over commitment to coal power had led the country to pay $5 billion in 2018 as the cost of idle capacity. Idle capacity means the government is bound to pay for the unused power generation capacity to producers. Here in Bangladesh big international companies and local powerful people are building such plants while the nation will be bound to pay for their unused capacity.
In our view the situation in the country’s power sector controlled by private producers demands a through review to reduce dependence on big coal-LNG power plants and corroborate the production strategy with our mid-term demand. The nation must avoid falling into a power trap of the powerful. The study has made sensible suggestion that renewable energy is going to be much cheaper for future.
