Five quick rental power plants await two-year extension

Originally posted in The Financial Express on 09 March 2022

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The government finally is set to award a two-year extension to five furnace oil-fired quick-rental power plants (QRPPs) having a total generation capacity of around 457 megawatts (MW) under the ‘no-electricity, no-payment’ model.

A proposal in this regard will be placed to the cabinet committee on public purchase soon for its approval, a senior Power Division official of the Ministry of Power, Energy and Mineral Resources (MPEMR) told the FE on Tuesday.

Sources said the government has moved to extend the tenure of these plants to enhance electricity generation from oil-fired plants to cope with the mounting electricity demand.

The country’s dwindling natural gas reserve and high cost of LNG (liquefied natural gas) also prompted the state-run Bangladesh Power Development Board (BPDB) to increase dependency on oil-fired power plants, they said.

The high price of oil in the international market will, however, be a major challenge.

The BPDB and power plant owners were earlier involved in a negotiation when the power plants’ owners sought new tariffs along with the cost of employees’ salaries and maintenance of their plants, and the BPDB was interested in paying only tariffs on ‘no-electricity, no-payment’ basis.,

Following appeals from the plant owners, sources said, the government initiated the move for a fresh extension for these plants by two years under ‘no-electricity, no-payment’ mechanism.

The Power Division initially had endorsed the proposal and instructed the BPDB to complete negotiations over new tariffs.

All these much-touted QRPPs came into operation around 10 years back in mid-2011 and got an initial extension by five years in 2016 under the original contract terms.

The power plants under extension considerations are: Summit Power’s Madanganj 102-megawatt (MW) QRPP, Orion’s Meghnaghat 100MW QRPP, Dutch-Bangla Power’s Siddirganj 100MW QRPP and, Khulna Power’s Khulna 115MW QRPP and Noapara 40MW plant.

Some of these plants are the listed companies or subsidiaries of listed companies of Dhaka and Chattogram stock exchanges.

Owners of these power plants along with many tenure-expired and to be expired companies have long been lobbying with the government to get extension.

Under the ‘no-electricity, no-payment’ model, the BPDB is to purchase electricity from such plants only when necessary to meet the domestic demand, which had been mounting while the quick-power remedy was conceived to feed the power-hungry households and economy.

The BPDB will not have to pay capacity payments to the plant owners if it fails to buy electricity readily available with them.

Currently, only renewable energy-based power plants, especially solar-fired ones, are operational under the ‘no- electricity, no-payment’ arrangement.

All these five power plants were awarded based on unsolicited offers under the Speedy Supply of Power and Energy (Special Provision) Act 2010 when the country was reeling from an acute electricity crisis.

The law has a provision of immunity to those involved with a quick fix.

The government also allowed entrepreneurs of these power plants duty-free import of furnace oil to run plants with a 9.0 per cent service charge along with import costs as an incentive, said a senior Power Division official.

Currently, there are a total of 58 furnace oil-fired plants operational in the country with a cumulative electricity-generation capacity of 5,712MW. The country’s overall electricity generation capacity is 21,395MW.

Total operational power plants are, however, 143 as of February 9, 2021, according to the BPDB statistics.