The race against time:: New Age Xtra

This article was originally published in New Age Xtra on October 15, 2010

The race against time

Syed Tashfin Chowdhury evaluates the various initiatives undertaken by the government to increase capacity for power generation and explains why excessive focus on rental power plants may not bode well for the country in the long run

After a week of intense power outages throughout Dhaka and all over the country on the first week of October, people took to the streets staging demonstrations and blocking highways to protest the crisis. The agitations were one of many that took place over the past few months this year for the same reasons.

Unknown to most of these people, the Speedy Supply of Power and Energy (Special Provision) Bill, 2010 was passed by the parliament recently. State Minister for energy Mohammad Enamul Haque had presented the bill at the house, which was passed through voice vote on October 3, 2010.

While the bill may sound like a perfect solution to the power crisis, a deeper look into its contents will help most to realise that the law is providing immunity to stakeholders currently working or will be working in the sector. Under the bill, which has been given priority over other acts including the Public Procurement Act 2006, such stakeholders and their activities cannot be questioned by anyone.

The law, to be effective for two years after which it can be extended or cancelled, is giving the government or any of its departments the advantage to take quick and effective initiatives to supply, distribute, transmit, transport and market and import power and energy. Under the law, a proposal processing committee can send its recommendations to the cabinet committee on purchase for final decision. If the cabinet body finds the recommendations appropriate, then the concerned ministry or department will need to take quick actions at implementing the initiative.

No petitions can be filed against officials who will act in good faith to implement the law, which will also empower the government to formulate rules through issuing gazette.  Besides helping the government to take immediate steps to solve the power crisis to some degrees, the law will let the government implement any energy related initiative including extraction of mineral resources.

Following the passage of the bill at the parliament, Transparency International Bangladesh (TIB) Executive Director Iftekharuzzaman said on October 4 that through the bill, although the speedy progress may be ensured to some extent, the government’s commitment to ensure transparency and accountability will be at stake. He mentioned that, by bypassing the public procurement act, questions would soon be raised about the discriminatory policy toward the power sector. He further added that due to such acts, the public procurement sector would be drilled with financial irregularities while also opening up scope for greater corruption.

After providing sound reasons, Iftekharuzzaman urged the government to follow the appropriate procurement process in the power sector after withdrawing the bill.

Besides curtailing the democratic processes in the country, such a law would also provide a greater advantage to the government authorities and the public and private companies involved with them at alleviating the power and energy related issues, at taking impromptu risks and measures, which if not planned out properly can become rather expensive for the nation. The motive behind the law, to facilitate the smooth implementation of power and energy related initiatives taken by the government, also raises questions about the current status of prior government initiatives taken over the past few years to solve the power crisis.

The ruling party in its election manifesto had mentioned, under clause 3, ‘in the next three years or by 2011, power production will be increased to 5,000 megawatt and by 2013, it will be increased to 7,000 megawatt’. However, the promises have not materialised over the years.

According to the daily report of Power Grid Company Bangladesh (PGCB) on October 9, the actual day peak generation stood at 3,482 MW while the evening peak generation was at 4,109 MW.  The maximum power generated till date was on August 20, 2010 at around 4,699 MW against a demand that varies from 5,500-6,000 MW during summer.

Further aggravating the crisis is the detail that most of the power plants are usually not operational. Although the total number of power plants is currently at 48, nine power units are not operational at the moment including a 110 MW power generating unit in Khulna. The plants were shut down mostly due to low gas pressure and the failure of the over stressed machineries.

The staggering effect of the gas crisis can be realised when we look at the case of the 633 crore takas-worth 150 MW peaking power plant inaugurated by the Prime Minister Sheikh Hasina herself at Shikalbaha in Chittagong on September 8 this year.

Within hours of inauguration, the gas pressure dropped and the plant was forced to shut down at around 4:00pm. UNB had reported that BPDB sources had informed that gas was supplied to the plant on special arrangement for the sake of PM’s inauguration on the day.

Despite the problems in the sector, the government bravely revised its objectives and targets for the power sector. The final draft of the Outline Perspective Plan of Bangladesh 2010-2021, titled ‘Making Vision 2021 a reality’,  developed by the General Economics Division (GED) of the Planning Commission, set electricity production targets at 8,500 MW by 2013, 11,500 MW by 2015 and 20,000 MW by 2021.

Besides etching out the strategies, constraints and possibilities of the sector, the plan mentioned the contribution of the private sector to power generation along with observations into system loss, the cost of electricity, the potential of energy mix, non-traditional energy and so on.

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Although the government was confident about its private sector contributions through new Rental Power Plants (RPP) and Independent Power Producers (IPP) initiatives, major success from these are yet to be achieved.

According to Power division sources of the Ministry of Power, Energy and Mineral Resources (MPEMR), the present generation capacity as of September 2010 is at 5,776 MW from which the public sector is responsible for 3,481 MW generation capacity while 2,295 generation capacity is that of the private sector comprising of IPPs, Small independent power producers (SIPPs), quick, three-year and 15-year RPPs.

According to a report in an English daily on October 9, quoting the Bangladesh Power Development Board (BPDB), power generation in the country has increased by around 900 MW since January 2009.  The report also mentioned Power secretary AK Azad as stating that the increase in power has been due to the successful launching of two diesel-fuelled rental power plants by Aggreko PLC, a British company, with whom quick rental power deals for generation of 200 MW power were signed in May this year.

Also, according to MPEMR, the 50 MW RPP by RZ Power Limited has also been completed and the power being generated from this plant has already been added to the national grid.

In the report, Chairman of BPDB, Alamgir Kabir was quoted as mentioning that the PDB anticipates that with if at least five petroleum-run rental power plants, with contract terms of three to five years, are launched by December this year, 450 MW more power will be added to national grid. The figure can be higher if two additional rental power projects, which missed deadlines a number of times, are able to begin operation around this period.

According to MPEMR, the total addition of power to the national grid has been around 356 MW from Small Independent power producers (SIPP) and RPPs from January till December 2009. The addition of power to national grid has been around 510 MW from January till September 2010, from three three-year RPPs, two quick RPPs and one public peaking power plant at Shikalbaha in Chittagong.

However, the gas-powered peaking plant at Shikalbaha has not been able to generate any power since its inauguration in September due to shortage of gas. The actual addition to the grid has, therefore, not been more than 716 MW from January 2009 till date.

At the moment, nine three-year RPPs are producing around 531 MW power while four 15-year RPPs are producing around 168 MW power. From these, eight are gas-based, three are diesel-based while the remaining two are run with furnace oil. The expenditure on the government’s part on per unit of power is around two to three takas, the expenditure on per unit of power from furnace oil fuelled-RPPs is around Tk 7.8 per unit. Government expenditure on per unit power from diesel-based RPPs varies from Tk 14 to 14.50.

Although, the RPP initiative is proving to be rather expensive, around 15 other quick RPP projects, planned to generate around 1,433 MW, are already in the pipeline. From these, two will be gas-based, two diesel-based, one being a combination of furnace oil and gas and the remaining ten will be run through furnace oil.

 Also, a recent BPDB monthly evaluation report on the progress of RPPs cited that, nine out of 12 quick RPPs are falling behind schedule. From these, a 100 MW plant project at Siddirganj, 100 MW plant project at Meghnaghat and the 100 MW plant at Keraniganj are lagging behind the most.  The 198 MW quick RPP at Shikalbaha and 78 MW plant at Ghorasal have been approved by the purchase committee. The 150 MW quick RPP project at Ashuganj and Brahmanbaria has also been initiated on October 6, this year.

From three ongoing RPP projects, the 105 MW plant at Noapara under Quantum power systems Ltd and the 50 MW plant at Barisal by Barisal power company Limited are behind schedule.

  As the work of most of these companies is not progressing on schedule, it is a cinch that most of these would not be able to generate power by the end of this year.

Although BPDB government officials and the State Minister for energy Mohammad Enamul Haque try to assure the media and concerned departments that the companies, not able to meet deadline, will be fined, most experts have mentioned time and again that given the huge investment behind the rental power projects, the nation would be losing out on a lot while the power crisis will still continue to linger.

As such, even if the power target of 5,000 MW is met by 2011, load shedding will still persist if the current demand is considered, which increases by 10 per cent annually.

Based on wishful thinking, even if all these temporary plants are initiated by the end of this year, we still may not have the promised power generation of 5,000 MW by 2011 due to a number of persistent problems including gas crisis, use of outdated machineries and power plants, corruption, system loss and others.

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The success of IPPs in the global power sector has been almost as good as the success of the initiative in Bangladesh. Currently, around seven IPPs are more or less successfully generating around 1,271 MW of power while nine SIPPs are generating around 325 MW power for the national grid. Earlier, the cost of power per unit for the government from the IPPs and SIPPs varied from Tk 1.80 to 2.

The MPEMR has mentioned, during a workshop on development of power sector and role of media, that new generation projects are being planned from which eight new furnace oil-based IPPs are expected to generate around 600 MW of power by September 2012. The presentation at the workshop also mentioned the plan of adding another 900-1,900 MW generating four coal-based IPPs to be commissioned by September 2014 to 2015.

Although past governments and the present one did talk about the potential of IPP many times, most of the highly anticipated IPP projects like the 450 MW combined cycle power plant at Sirajganj and 450 MW plant at Bibiyana are yet to be initiated due to the gas crisis. Even with the present gas crisis, the cost per unit of power produced from the IPPs will not be more than Tk 3.

Despite the low expenditure behind IPPs, the government did not call for new proposals till October 7, 2010 when the BPDB requested proposals for 100 MW IPP and 50 MW at Dhaka, 100 MW and 50 MW plants in Chittagong, 100 MW and 50 MW plants in Rajshahi, 100 MW plant in Khulna and a 50 MW plant in Barisal. Interestingly, the eight requests for proposals were issued exactly four days after the Speedy Supply of Power and Energy (Special Provision) Bill, 2010 was passed in the parliament.

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There was extensive media coverage about the power import deal between Bangladesh and India. On February 20 and 21 of this year, the dailies and television channels reported on the two nation’s governments agreement to form a joint-venture company to set up a two-unit coal-driven power plant in Khulna with a power generation capacity of 1,320 MW. The establishment of a cross-border power grid was also reported at the time.

In March 2010, the Power Grid Company Bangladesh (PGCB) invited two international tenders for development of the cross border link while another global tender was invited by the PGCB in April of this year, turnkey supply, delivery, installation, testing and commissioning of the 165-km 230 kV Bibiyana-Comilla transmission line.

After the Asian Development Bank (ADB)’s approval to provide a loan of US $ 100 million for the link, around June 2010, the PGCB announced its plans to install a 40-km section of the line by June 2012.

However, the Bangladesh Planning Commission returned the PGCB proposal for the cross-border line citing ‘faulty project design’ and ‘lack of power supply guarantee by India’ for at least 33 years prior to the Planning Commission’s processing the project further. 

Around July of this year, the BPDB signed a 35-year power transmission agreement with Power Grid Corporation of India Limited (PGCIL) to import 250 MW of electricity from India. By this agreement, Bangladesh can begin importing the electricity by late 2012. However, the power and transmission tariff, to be paid by BPDB, will be on a monthly basis to be determined by India’s Central Electricity Regulatory Commission (CERC).

The import of power would still prove to be more expensive than the IPPs and SIPP in Bangladesh. Following the Memorandum of Understanding (MoU) signing between Dhaka and Delhi, HS Brahma, the power secretary of India, had said that power will be sold to Bangladesh at the rate paid by the state governments of India. ‘This may range between 2.5 and 4 rupees, depending on factors such as generation cost and the state where the power is being generated,’ he mentioned.

However, the Bangladesh power secretary had indicated at the time that the final cost of power per unit imported from India may hover around Tk 3.5 for Bangladesh.  There is also the uncertainty about the project’s completion on schedule.

Later on, around April of this year, there were talks of Bangladesh importing power from Bhutan following the revelation from studies that Bhutan has the capacity to generate around 30,000 MW of electricity from its rivers in the hilly region. However, the Bhutanese foreign secretary, Daw Penjo, had said to Bangladeshi media around the same time that any such plan for Bangladesh to import electricity from Bhutan would be conditional on agreement with India, as Bangladesh would need to construct around 34 km of distribution lines on Indian territories to channel in the power from Bhutan.

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While these were some of the highly anticipated power initiatives taken by the government to tackle the power crisis, other initiatives like peaking power plant projects, wind-based and solar-powered power plant projects, Rooppur nuclear power plant and so on are being focussed far less.

The government needs to focus more on solutions like approving more SIPPs and IPPs rather than focussing extensively on quick RPP and RPP projects.

Besides being costly, quick RPP, RPP, peaking power projects and power import from neighbouring nations will also tip the scales toward the private sector where currently the private sector contributes to 40 per cent of the power generation capacity. Moreover, dependency on RPPs and quick RPPs may prove to be fatal as these are, after all, temporary and extremely expensive solutions.

Furthermore, power plants set up under public sector ownership will, at least, assure affordability of electricity, an aspect that is very much essential to channel electricity to the remaining 51.5 per cent areas of the country which still has no access to electricity. Under the circumstances, the government can take initiatives through which distribution losses, at around 13.1 per cent at the moment, can be reduced and more offshore and onshore gas sources can be identified to increase the supply of gas to the power plants as opposed to being dependent on more expensive energy like diesel and furnace oil.