Tk 4,232 crore have to pay as capacity charge

Despite plants will remain shut

Zarif Mahmud: Currently, the power generation capacity in the country is 25,951 MW. Four more power plants of 729 MW are scheduled to be connected to the national grid this month. Another 2,711 MW is expected to be added by June. In this, the power generation capacity will increase to 29,391 megawatts. However, the highest electricity production was 15,164 MW last July. Next April it can rise to 16,378 MW.
Next June, electricity production can be a maximum of 15,436 megawatts. That is, more than 13,955 megawatts or 47 percent of the power generation capacity will be sitting in June.
And in December, the maximum power generation of 10,733 megawatts can be the highest. In this month, 15,947 megawatts or about 60 percent will sit.
Meanwhile, the total capacity charge to be paid in the current financial year is (estimated) Tk 18,810 crores. Power Development Board (PDB) has to pay the charges for private sector plants even if they do not generate any electricity. Out of this, capacity charges of Tk 4,232 crore will have to be paid for centers sitting only in winter months.
These have emerged in the report entitled ‘Bitter Winter to Bite the Power Sector of Bangladesh’ published by the Foreign Debt Working Group BWGED.
The report was released yesterday. It said that currently the power sector is burdened with excess capacity. In July, excess capacity was sitting idle at 9,747 MW, which was 64 percent of peak hour generation. In November, idle capacity increased to 13,343 MW, 106 percent of peak hour generation.
According to the report, actual sitting capacity will rise to a record 149 percent in December, which will decline to 13,557 MW or 93 percent in March. Even during the summer season in June, 13,955 MW
or 90 percent of the capacity will be sitting. Among other months, capacity in January will also sit at par with December. It will sit at 128 percent of peak hour production in February. In April and May this rate will be 72 and 81 percent respectively.
PDB’s analysis of 2023 data shows that electricity demand in winter typically drops by 29 to 34 percent compared to summer months. However, the current economic crisis and the ongoing political uncertainty ahead of the national elections will further reduce electricity consumption. It is increasing the excess capacity.
On the other hand, power supply is not being increased during peak hours. A maximum of 15,164 megawatts of electricity was supplied during peak hours last July. In November it decreased to 12,608 MW. This month it will further decrease to 10,733 MW. In January it may increase by only 2.7 percent and in February by 11.2 percent.
According to the report based on the production capacity, in July, maximum power generation of 18,354 gigawatt hours was possible in the country. It increased to 18,685 GWh in November. This capacity may increase to 18,850 gigawatt hours this month. Every month this capacity is increasing at an average rate of 1.18 percent. It will increase by 14.18 percent annually.
Although the maximum production of 51.1 percent of the capacity of the power plants was last September. And in July 49.9 percent of the capacity and in August 49.5 percent electricity production. Power generation is 45.1 percent of capacity in October and 36.4 percent in November. Production is likely to be 32.3 percent of capacity in December and 32.4 percent of capacity in January.
In the following months, 33.9 percent of capacity will be used in February, 39.1 percent in March, 47.6 percent in April, 41.6 percent in May and 43.4 percent in June, according to the report. However, even if the power plant is sitting or the capacity is not fully utilized, the capacity charge has to be paid properly. At the end of the year, the capacity charge is to be paid at an average rate of one taka 80 paisa per unit (kilowatt hour) of electricity.
The current government has paid Tk 104,962 crore capacity charges from 2009-10 financial year to last financial year. Last financial year, PDB had to pay a maximum capacity charge of Tk 15,186.91 crore. The previous fiscal year (2021-22) amount was Tk 13,701 crore, 2020-21 fiscal year Tk 13,021 crore and 2019-20 fiscal year Tk 10,853 crore. In the previous financial years, the capacity charge was less than 10 thousand crore rupees. For the financial year 2007-08, PDB had to pay only Tk 1,281 crores.
The report also said that the cost of power generation is increasing due to the payment of capacity charges. In the last 15 years, the cost of power generation in the country has increased four and a half times. In the financial year 2007-08, the cost of power generation was Tk 2.33 per unit. Last financial year it increased to Tk 10.17. 2021-22 financial year which was Tk 8.84 and 2020-21 financial year Tk 6.61. In the previous few years, it fluctuated between Tk 5 to Tk 6.
Several recommendations have been highlighted in the report to get out of this cycle of wastage. Among them, the capacity charge of the electricity sector should be agreed to be paid in local currency i.e. taka instead of dollars, the provision of capacity charge should be amended by revising the electricity purchase agreement and the provision of ‘no electricity no payment’ i.e. contract based on ‘no electricity no payment’ i.e. contract based on coal, LNG and other fossil fuels in the pipeline. There are several recommendations including canceling power plant contracts and allowing renewable energy power plants.