10th September 2019
Mollah Amzad Hossain

The possibility of increasing power tariff is in the air since the recent hike in gas prices. Bangladesh Energy Regulatory Commission (BERC) while determining the gas price hike by 32.8% at the end users’ level claimed about the impact of importing 850 million cubic feet (MMCFD) of LNG and its introduction to the national gas grid. The BERC also stated that the actual requirement of the hike should have been 75% for offsetting the actual impact of LNG injection. But considering the interests of consumers, the increase had been confined to 32.8%. The rest would be provided as subsidy to be met from the proceeds of the energy security fund created by the BERC and the government. But actually around 600 MMCFD of LNG is being supplied now to the gas grid due to capacity constraint of the grid.

Two Floating Storage and Regasification Units (FSRUs) in Bangladesh coastal area have the capacity for delivering 1,000 MMCFD. But the works of two gas transmission pipelines (Maheshkhali-Anowara and Faujdarahat-Feni-Bakhrabad) are in progress by the Petrobngla company, Gas Transmission Company Ltd (GTCL). It will be possible evacuating 1,000 MMCFD of LNG into the gas grid, when the pipelines are commissioned by the end of 2019.

In a recent press meet, State Minister for Power, Energy and Mineral Resources Nasrul Hamid MP replied in the negative as he was asked about the possibility of power tariff increase, following the gas price adjustment. He said that the LNG introduction to the national gas grid facilitated increasing gas supply for power generation. Consequently, dependence on expensive diesel and furnace oil is being progressively reduced. Hence, the power tariff increase is not essential now. Of course, even if full capacity of liquid fuel based generation capacity is not used, the government has to account for payment of capacity charge. On the other hand, power demand being well below the generation capacity, a significant generation capacity remains idle. This also adds to generation cost.

Available information shows 94% population of Bangladesh have access to power till June 2019. The installed capacity, including captive generation, now is 22,059 MW. Total generation till June 2019 was 70,533 Gwh (Gigawatt hour). Highest generation during peak hour was 12,893 MW. Capacity of grid connected power is 18,961 MW. The government has a vision of achieving 24,000 MW of capacity by 2021, 40,000 MW by 2030 and 60,000 MW by 2041. The transmission and distribution system loss now is 11.96%. There is a plan to bring it down to single digit also. Bangladesh Power Development Board (BPDB) Chairman Engr. Khaled Mahmood while talking to EP mentioned that by 2030 power generation will completely come out of reciprocating type of engine generation.

The government’s vision is achieving mid-income country status by 2021 and developed economy by 2041. The per capita power consumption now is 510 Kwh. This will be enhanced to 580 Kwh by 2021, 1,200 Kwh by 2030 and 2,100 Kwh by 2041.

BPDB information states that in 2009, the installed capacity was 4,942 MW – 83% of which was own fuel natural gas based. Diesel and furnace oil used to contribute only 8%. In 2019, the capacity of grid connected power is 18,961 MW.

The average generation cost in 2008 was Tk 2.30/Kwh. The contribution of natural gas was 57.5%. Contribution of liquid fuel – diesel and furnace oil – was 32.1%. The contribution of liquid fuel leap frogged over the past 10 years as gas supply progressively got reduced. The global average of liquid fuel contribution is 1% and coal is 38%. The Power System Master Plan (PSMP) under consideration now suggested 35% contribution of coal by 2041. Its contribution now is merely 2.8%. The contribution of own gas and imported LNG is also planned to be 35%. PSMP also prescribed for 1% contribution of liquid fuel in 2041. Increased use of LNG to cover deficit of own gas supply would obviously increase cost of fuel.

Analyzing the BPDB information, it appears that average generation cost which was Tk 2.30/Kwh in 2008 increased to Tk 6.27 by 2015. It reduced a little to Tk 5.99 in 2017. The cost again increased to Tk 6.00/Kwh by June 2019. According to PSMP 2016, the generation cost following prescribed fuel mix would become 12 cent/Kwh. Bangladesh is eventually becoming net primary fuel importing country. PSMP 2010 prescribed for 50% reliance on coal for achieving 40,000 MW generation capacity by 2030. About 30% was planned to come from local coal. But the government’s decision for moving out of local coal exploitation now is leading Bangladesh to almost exclusive reliance on imported coal for making 35% contribution to achieving 60,000 MW generation capacity by 2041. The cost would be at least 30% higher than using local coal. On the other hand, imported LNG would have to cover the deficit arising out from the depletion of own gas reserve. Cost of generation using RLNG is 50% more than using own gas. Price of gas for power now is US$1.6/MMBTU. With the increase of RLNG import and supply to power, the price of gas for power would also increase.

Engr. Mizanur Rahman, Member, BERC claimed that price of coal and LNG in the global market may not change much over the next few years. Hence it would create a major price shock even if Bangladesh becomes more and more dependent on imported fuel. Gas based power plants would achieve almost double efficiency from present stage. According to him, Bangladesh may not be in significant problem for power tariff increase. But he categorically mentioned that liquid fuel dependency must be brought down to 1%. Unless this is done, price shock would become inevitable. On the other hand, we must give priority to power import if the price for that is lower than our own generation.

Till 2006, natural gas was the dominating fuel for power generation. But from 2007, gas crisis started emerging. Power load shedding started growing for gas supply deficit for power generation. For facilitating increased gas supply to power, new gas connections to domestic, commercial and industrial consumers were stopped. Still then the situation cannot be managed. In such situation initiative was taken for contingency power generation in 2018. Liquid fuel became the fuel of choice.

The Awami League-led alliance government after assuming the state power in 2009 adopted short, medium and long-term power generation plan going outside the PSMP for managing the then power crisis. During this time, initiative was taken for short term diesel and furnace oil-based power plants. Implementation of small engine type power plants under the name of rental and quick rental plants started. During the initial stage, it was told that such plants would retire progressively in 3 to 5 years. The government planned to start importing LNG using FSRU from 2013 after taking the initiative in 2010. But in reality, LNG supply started from 2018.

According to the plan, imported coal-based power plants were due to start generation progressively from 2014, but till now in September 2019 none has been commissioned. It is now expected that the first 660 MW capacity unit of 1320 MW Payra Power Plant of Bangladesh China power company would come into commercial operation in December 2019. Due to delay of large base load power plant projects, the terms of 3-5 years contingency power plants were extended and 15 years term liquid fuel based IPP development was launched. On top of all these just before the last general election, contract was awarded for some power plants totaling 2,000 MW capacity. At the same time implementation works of public and private sector dual fuel (gas and liquid fuel) based power plants continued. Over the last two years in the name of contingency plants, contracts for new diesel-based power plants were also awarded.

After commencement of LNG supply from this year, 341 MW dual fuel Summit Meghnaghat Power Plant and 1,070 MW Power Plant of NWPGCL power plant at Sirajganj have started using gas. But they are not getting required gas supply as yet. If from early 2020, Petrobangla can supply 1,000 MMCFD of LNG from two FSRUs, gas supply to all dual fuel power plants excepting those in Khulna can be supplied. BPDB expects that the cost of power generation would be reduced when this happens.

Petrobangla manages gas supply to all users and on behalf of the government, Petrobangla company Rupantarita Prakitrik Gas Company Limited (RPGCL) buys LNG and supplies to national gas grid operated by another Petrobangla company GTCL. According to RPGCL, by 2021 total gas supply in national gas grid would be increased to 3,600 MMCFD. Petrobangla companies and IOCs would supply 2,400 MMCFD. RLNG supply would be 1,200 MMCFD. Around 200 MMCFD RLNG would come from India by a pipeline. In 2025, of the 4,200 MMCFD total gas supply in national gas grid, own gas would be 2,000 MMCFD. RLNG supply through pipeline from India would increase to 300 MMCFD, FSRUs would supply 1,000 MMCFD and land-based terminal would supply 1,000 MMCFD. In 2030, it will increase to 4,700 MMCFD when own gas supply would reduce to 1,800 MMCFD. Land based terminals would supply 1,500 MMCFD, FRSUs would supply 1,000 MMCFD and pipeline RLNG supply would be 400 MMCFD. In 2041, of the 5,900 MMCFD projected supply, own gas including 500 MMCFD expected supply from offshore would be 2,000 MMCFD. Pipeline RLNG and RLNG from FSRUs would remain restricted to 400 MMCFD and 1,000 MMCFD. Land based terminals would supply 2,500 MMCFD.

The actual gas demand for power generation now is 1,305 MMCFD. But it has not been possible till now to supply more than 1,105 MMCFD. Gas demand will grow to 1,764 MMCFD in 2021, 1,980 MMCFD in 2025, 2,400 MMCFD in 2030 and 3,150 MMCFD in 2041. Sources in BPDB claimed that it will not be an issue to get rid of liquid fuel dependency if gas demand is met in full as projected. By 2030, liquid fuel contribution can be reduced from 32% to 14%. Liquid fuel dependence can be further reduced if by this 6,400 MW coal-based power and 4,400 MW nuclear power are available and other gas based power plants come into operation as planned. In such situation restricting contribution of liquid fuel to 1% by 2041 would be possible. Experts observed that if by 2041, 7,200 MW nuclear power, 21,000 MW each coal and gas/LNG based power and 9,600 MW power from import are available, the price of power can be reasonably controlled.

The present spinning reserve margin of power in Bangladesh is way high in global consideration. The global spinning margin is below 15%. But in Bangladesh even till 2030 it is considered to be 25%. When the attention of Member BERC Engr. Mizanur Rahman was drawn, he said the reserve margin of 20-25% was taken into consideration as till 2014-15 many of the power plants in Bangladesh were using old, outdated inefficient technologies. Now most of the power plants are using modern efficient technologies. Hence there is no reason to maintain over 15% spinning reserve. For higher spinning reserve, BPDB is accounting for capacity charge leaving many plants idle. Till last fiscal year, about Tk 22,000 crore has been paid as capacity charge only. This is one of the major reasons for higher generation cost.

Sector experts observed that though the government often talks about coming out of expensive power generation, yet the terms of liquid fuel-based power plants still continue to be extended. New contracts are awarded for liquid fuel based IPPs. These are double standard. Cost of generation is increasing. Experts have lost faith in government promise that the terms of liquid fuel-based plants would be further extended. When asked about this, BPDB Chairman Engr. Khaled Mahmood categorically said that the terms of liquid fuel-based power plants would not be extended and no new contract for liquid fuel-based power plant would be awarded. But it will not be possible to get out of liquid fuel-based power completely before 2041.

In conclusion, it can be said that Bangladesh will become 87% dependent on imported primary fuel and power import if local coal cannot be brought into the fuel mix. Cost of fuel and cost of power will continue to increase and may grow beyond affordable limit if efficiency of energy utilization cannot be enhanced to international level. At the same time, investment in renewable energy must grow. Management of operations of all power plants must be of international standards for keeping the generation cost to an affordable limit. The inefficiency and pilferage must be completely eliminated. But even after all these, global and regional geopolitics will continue to impact on fuel price and make power generation cost unstable. Reducing or eliminating the use of liquid fuel for power generation may greatly help in managing the price risks.

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