Power capacity charge becomes thorn in neck!

Zarif Mahmud: Power Development Board (PDB) has to pay capacity charges regularly for private sector power plants. Although licenses are given on the condition that 80 to 85 percent capacity will be used, these centers are running at an average of 35 to 40 percent. The capacity charge has to be paid by sitting on it. But Bangladesh is not getting rid of it easily. Even if the private sector is not allowed to set up new power plants, the burden of capacity charges will have to drag on for another 27 to 28 years.

The IMF delegation wants to know about the capacity charge in the meeting with the power department. The IMF team wants to know the status of capacity charge in the meeting. At that time, PDB said, gas and liquid fuel based power plants have to pay capacity charge of $10 to $12 for every kilowatt of capacity. This charge is $20 to $25 in coal-based power plants.
According to this, for each thousand megawatts of additional capacity of gas or oil-based power plants, $12 to $14.5 million have to be paid annually as capacity charges. At the current exchange rate, it amounts to Tk 1,400 to Tk 1,700 crores. And for each thousand megawatts of additional capacity of coal-based power plants, they have to pay between $24.30 million a year in terms of capacity charges. At the current exchange rate, its amount is Tk 2,800 to Tk 3,500 crores.
Several power plants are sitting in excess of capacity. This increases PDB’s fixed expenses and losses and government subsidies.
Earlier, the IMF delegation held a meeting with the Power Department and PDB in November 2022 before approving the loan. At that time, their question was that the capacity charge that is being given to the power plants will end in 2030 or not? Then PDB said, ‘That is not possible, because several new IPPs (Independent Power Producers) are coming into production. They also have to pay capacity charges. Now it is being reviewed, by when the capacity charge can be completed.
Analyzing data on existing and pipeline power plants in response to IMF queries,it can be seen that the term of coal based power plants is 25 years. The list includes India’s Adani, domestic SS Power, Sino-Bangladesh joint venture Payra, India-Bangladesh joint venture Rampal including several plants. The tenure of gas or LNG based plants is 22 years. The list includes eight centers including India’s Reliance, Domestic Summit, United. Two of these centers are dual fuel based i.e. LNG/Diesel powered. And furnace oil operated centers have 15 years. Besides, several solar and wind power plants are in the pipeline. However, no capacity charges are required for these.
According to the information, the capacity charge for 15 years from 2008-09 to 2022-23 has to be paid for Tk 1 lakh six thousand 786 crore 50 lakh. Out of this, the amount of capacity charge payment in 10 years from 2008-09 to 2017-18 financial year was Tk 43,333.83 crore. Whereas the capacity charge has been paid in five years from 2018-19 financial year to 2022-23 financial year Tk 63,452.67 crore.
The amount of capacity charge is increasing every year. Last fiscal year, about Tk 17,156 crores were paid in this sector. In the current fiscal year, the expenditure in this sector is expected to exceed Tk 20,000 crore. The main reason for this is the power plants of Adani, Summit and SS Power. Spending in this sector will increase in the next few years. Because several new large-scale power plants are scheduled to start production within the next two years.
According to information, India’s Adani, Bangladesh’s SS Power and Rampal power plants came into production last year. The three coal-fired power plants will expire in 2048 and 2049. Payra power plant capacity charge to be paid till 2046.
Two more coal-fired power plants are being constructed at Patuakhali. These two centers are being constructed in a joint venture between Bangladesh and China. Of these, the Patuakhali coal-fired power plant is scheduled to come into production by the end of 2024, with capacity charges to be paid by 2049. Patuakhali’s Payra-2 power plant is scheduled to start production in April 2026. The capacity charge of this center has to be paid till the year 2051.
India’s Reliance, Bangladesh’s Summit and Unit Group are building three LNG-based power plants. The core of the summit is dual-fuel based. Production of these three centers is scheduled to start in 2024 and 2025, the capacity charge of which has to be counted for 22 years, i.e. from 2046 to 2047. And United Power’s LNG-based power plant is scheduled to start production in 2026. Its capacity charge will be calculated till 2048.
Anlima Group’s LNG-based power plant is scheduled to start production in 2026. At the same time, another LNG-based power plant is slated to start production at Gazaria. And Confidence Group’s LNG-based power plant is scheduled to be completed in 2027. The capacity charges of these three power plants have to be calculated till the year 2048 and 2049 respectively.