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Power & Energy - January 25, 2024

Power sector capacity charge increasing

Unregulated power sourcing

Zarif Mahmud : The cost of power generation has been rising for several years. In the fiscal year 2020-21, the average expenditure was Tk 6.61. It has increased by 67 percent in 2022-23 financial year in a span of two years. In this last financial year, the average cost of electricity production stood at Tk11.04. The Power Development Board (PDB) has estimated that it will decrease slightly in the current financial year. However, the average cost of power generation will increase again in the next financial year.
Compared to the last financial year, the average energy cost in power generation in 2023-24 and 2024-25 will decrease, but the burden of capacity charges will increase. The capacity charge is increasing a lot in these two years due to the coming up of new big power plants. Besides, the burden of capacity charges is increasing due to increase in dollar exchange rate. Because the capacity charge has to be paid directly in dollars or in rupees based on the exchange rate of dollars. As a result, as the exchange rate increases, the cost of power generation will also increase.
Analyzing the data of PDB, it can be seen that the average fuel cost for power generation last financial year was Tk7.11. In the current fiscal year, it will be reduced to Tk5.72 and in the next fiscal year it will be Tk5.45. But the opposite happens in case of capacity charge. In FY 2022-23, capacity charges and other expenses were on an average of Tk3.93. In the current financial year, it will increase to Tk4.90 and in the next financial year it will be Tk5.45.
According to this, compared to the fiscal year 2022-23, the average fuel cost in 2023-24 and 2024-25 will decrease, but the average capacity charge and other expenses will increase. The capacity charge will increase by 55.47 percent in two years. However, fuel costs will decrease by 23.35 percent. In this overall, the average cost of power generation in the current financial year will be slightly reduced to Tk10.62. Although next financial year it will increase again to Tk11.56.
Although the average cost of power generation in earlier years was much lower. The average cost of power generation in the financial year 2021-22 was Tk 8.84. Out of this, the average fuel cost was Tk5.37 and the average capacity charge and other expenses was Tk3.47. And in the financial year 2020-21, the average cost of power generation was Tk 6.61. Out of this, the average fuel cost was Tk3.16 and the average capacity charge and other expenses was Tk3.45.
Incidentally, in the fiscal year 2022-23, the growth in power generation in the country was only 3.68 percent. This brings the net generation (including imports) to 87,40 GWh. However, in the current fiscal year, the growth of electricity production has been estimated at 10.09 percent and next fiscal year at 8.99 percent. In this, the amount of net electricity production in the financial years 2023-24 and 2024-25 will be 95,805 gigawatt hours and 104,423 gigawatt hours respectively.
Last fiscal year, coal-based power generation was 11.58 percent. It will increase to 23.16 percent in the current fiscal year and 27.95 percent in the next fiscal year. Increase in coal-based power generation will reduce the average cost. Besides, international coal prices have come down a lot. Due to this, the current financial year expenditure will decrease. However, the price of coal is expected to increase in the international market next financial year. It will increase the fuel cost slightly. Also, the average capacity charge will increase as the dollar exchange rate increases.
According to PDB data, the average cost of coal power generation last financial year was Tk15.20. Out of this, the average fuel cost was Tk10.72 and the average capacity charge was Tk4.47. In the current financial year, the average cost of coal power generation may decrease to Tk13.5. Out of this, the fuel cost will be Tk6 and the average capacity charge will be Tk 7.5. And in the next financial year, the average cost of production in coal-based power plants will increase slightly to Tk15.60. Out of this, the potential fuel cost will be Tk8.76 and the average capacity charge will be Tk6.30.
Meanwhile, furnace oil plants will sit as coal production increases. This will greatly increase the average capacity charge. Last fiscal year, 21.05 percent of electricity came from furnace oil-fired plants. In the current fiscal year, it will be reduced to 7.97 percent and in the next fiscal year, it will be 2.47 percent. A decrease in production will increase average cost. The average cost of production in furnace oil centers last financial year was Tk 20.90. In the current fiscal year, it will increase to Tk28.59 and next fiscal year to Tk53.75.
The cost analysis shows that the average fuel cost in Furnace Oil centers last financial year was Tk16.10 and the average capacity charge was Tk4.80. In the current financial year, the average fuel cost will be Tk17.46 and the average capacity charge will be Tk11.13. And next financial year the potential fuel cost will be Tk17.28. But at that time the average capacity charge will increase to Tk36.47. Mainly due to the capacity charge, the cost of electricity generation in furnace oil will exceed two and a half times in the next financial year as compared to the last financial year.
Among other energy-based centers, the average cost of production in gas last fiscal was Tk5. In the current financial year, it will increase by Tk6.11 and next financial year to Tk6.71. The average production cost of diesel last financial year was Tk40.40. In the current financial year, it will be slightly reduced to Tk37.30. However, the diesel centers will no longer operate from the next financial year. Although at this time Rooppur nuclear power plant will start supplying electricity to the national grid. In this case, only the fixed expenses ie capacity charges and other expenses have been estimated at Tk 6.44. However, PDB has not considered the fuel cost in this case.
On the other hand, the average cost of electricity import from India last financial year was Tk7.83. In the current financial year it will increase by Tk8.17 paisa and next financial year to Tk8.47. Although the amount of electricity imported from India is close, the price has to be paid in dollars. And due to the increase in dollar exchange rate, the related parties think that the expenditure in this sector will increase.
Apart from this, the average cost of electricity import from India’s Adani’s Godda plant in the last financial year was Tk14.2 paise. Due to reduction in coal prices in the international market, Adani’s electricity prices will also be reduced by Tk13.58 paisa this financial year. However, if the price of coal increases again in the next financial year, the import cost will increase by an average of Tk14.5. However, PDB has estimated that the average capacity charge will decrease slightly in the future as Adani increases the amount of electricity coming in.

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