A new study report, prepared based on the latest annual reports of the Bangladesh Power Development Board (BPDB), said the rising cost of electricity sold by independent power producers (IPPs) and payments for keeping overcapacity in the system can result in increased power tariffs in Bangladesh. The US-based Institute for Energy Economics and Financial Analysis (IEEFA) in its report warned that the increasing power purchase cost and further dependence on imported fossil fuels like LNG are enhancing the need for hiking power tariffs. Currently, the electricity purchased from IPPs accounts for more than 50 per cent of the BPDB’s total operating expenses. The question now arises why the government is interested in increasing power production despite insufficient transmission infrastructure in the country.
The significant rise in the cost of electricity purchases from IPP’s has become a big reason for the government subsidies to bail out the BPDB after its losses reached a record Tk 11,780 crore in the 2020-21 fiscal year, up from Tk 7,440 crore in the previous year. According to BPDB data, the board spent a total of Tk 50,435 crore to generate and purchase electricity from independent power producers, rental and public plants, and in import from India. At the same time, overcapacity is eroding the BPDB’s financial status. Even though BPDB has recurring losses over the years, four more new power plants were allowed to come into operation last year. But for unknown reasons, payment to some individual power producers of old powerhouses has been reportedly kept stalled. Over the past decade, Bangladesh’s power generation capacity quintupled from 4,942MW in 2009 to over 25,000MW now. During the same period retail power tariff also saw almost a 100 per cent increase from Tk 3.60 per unit to Tk 7.13. The question now arises – how much electricity Bangladesh requires and at what cost?
The study also cited the case of the Payra coal-fired power plant, which is receiving capacity payments whilst half the plant stands idle because of insufficient transmission infrastructure. Only two out of seven towers of the Dhaka-Payra power transmission line have so far been installed in the Padma River. But the BPDB is paying Tk 130 crore a month in capacity charges to the Payra power station. The government’s subsidy bill to BPDB hits a record Tk 11,780 crore in fiscal 2020-21, up from Tk 7,440 crore the previous year.
If Bangladesh wishes to start enjoying the benefits of low-cost renewable energy as much as the rest of the world, the government should halt the construction of planned LNG and coal-fired plants and reset the planning more on renewable sources of power.
