Four rental power plants given new lease of life

Originally posted in The Business Standard on 29 December 2021

The government on Wednesday decided to buy power from four gas-based rental power plants that have remained idle since last year after serving contract terms for around a decade.

In this move, the government will be buying power from these plants on a “no electricity, no payment basis”, meaning that the government will not be liable for them remaining on standby unlike in all other power purchase contracts.

The power tariff will also be lower than in the original contracts, while the tenure of purchasing power from each plant will be different, ranging from one to five years, as decided by the cabinet committee on economic affairs in a meeting on Wednesday.

These four plants – built on an urgent basis to cover power generation shortfall between 2008 and 2012 – together have 660-megawatt capacity.

Since the expiry of their contracts, the owners of these plants had been asking the government to allow them to sell power to the national grid whenever necessary as their plants were all functional and available.

The contract renewal has come at a time when the Bangladesh Power Development Board (BPDB) is sinking into the red owing to purchasing electricity from rental power plants and keeping overcapacity in the system.

In FY21, the BPDB suffered a loss of about Tk11,000 crore. The amount of losses will go up in the current fiscal year, with costs of power generation increasing owing to continuous rise in gas and fuel prices in the world market, according to the state’s single buyer of electricity.

However, both the authorities and energy experts have opined in favour of the extension to the contracts terming it a win-win situation for both parties.

The government will pay only if it purchases power from the plants when necessary, Finance Minister AHM Mustafa Kamal told the media in the capital on Wednesday.

Besides, the tariff rates of these plants will decline in the new tenure, he added.

The government has already faced much criticism over paying an excessively higher amount of subsidy to purchase electricity from these rental power plants, causing it to suffer a financial loss in the power sector.

Under the new contracts, Sylhet’s Kumargaon 50MW power plant got a one-year extension, while the 50MW plant in Fenchuganj and the 20MW plant in Bogura received three years each. The three plants are owned by Energy Prima Ltd, a sister concern of Hosaf Group.

The government extended the tenure of Ashuganj’s 53MW power plant, owned by United Energy Ltd, by five years for the second time.

The new electricity tariff for the Kumargaon 50MW plant is Tk1.97 per kilowatt hour (KWh), which earlier was Tk2.61KWh, while per unit tariff of Fenchuganj 50MW power plant has dropped to Tk2.12KWh in the new contract from Tk2.78KWh.

At the same time, prices of power to be purchased from Bogura 20MW and Ashuganj 53MW power plants have fallen as well to Tk2.03KWh and Tk2.43KWh from Tk2.51KWh and Tk3.28KWh respectively.

Professor Dr Mohammad Tamim, Buet professor and an energy expert, said, “The extension to the tenure of the rental power plants with a provision of ‘no electricity, no payment’ is good for both the government and the plant owners.

“The government will now be able to get cheaper electricity from these plants instead of depending on oil-based plants.”

The complete phase-out of rental power will not be possible until large coal-fired projects kick in.

At present, there are 15 quick rental and rental power plants in the generation system that cost around Tk3,328 crore in FY21.

After assuming power in 2009, the Awami League government introduced rental power plants on a large scale with a view to easing the power crisis at that time.

The plants were scheduled to be shut down by 2024, according to a report from the Ministry of Power, Energy and Mineral Resources.

Gas-based 660MW new power plants gets approval

The cabinet committee on economic affairs on Wednesday also approved a proposal to build a gas-based 660MW new rental power plant, which will be established by a consortium of Confidence Power Holdings Ltd, GE Capital US Holding Inc, Confidence Power Ltd, and Electropac Industries Ltd.

Imran Karim, vice-chairman of Confidence Group said they are targeting to build the plant by 2026.

“We submitted the proposal in 2019, but it got delayed owing to the pandemic. We hope to sign all the required contracts by July next year,” said Imran.

At present, United Group has 10 power plants in operation with a combined capacity to generate 1,301MW.