Clearing private producers' dues, more heavy fuel plant use to help prevent load shedding

Infograph: TBS

This summer Bangladesh could avoid severe load shedding it faced last year by regularising overdue bill payments to the private power producers. The move will enable them to import primary fuel to produce electricity as per demand in the country.

In addition, increasing the use of heavy fuel oil or HFO-based power plants in the daily power generation mix will also help the authorities to reduce power cuts, private power producers and stakeholders have said.

Imran Karim, vice chairman of Confidence Group and former president of the Bangladesh Independent Power Producers Association, said electricity supply this summer will be much better than last year if the government keeps its commitment to pay the bills to private producers.

"If the current trend of overdue payments and dollar supply from the central bank for opening LCs to import fuel continue, I think we will not face a 2,000MW load shedding that we faced last year," said Imran Karim.

"In such a scenario, we will face 400-500MW load shedding, which is very usual for an emerging country like ours," he added.

The current president of the private producers association Faisal Khan also agreed.

Due to the high fuel price in the global market, supplying power at a subsidised rate to consumers and a lack of budgetary support from the finance ministry, BPDB's bills payable to the private power producers amounted to around Tk20,000 crore at the end of December 2022.

The amount dropped to Tk14,000 crore this January as the Bangladesh Power Development Board, the state-owned entity that acquires electricity from different sources, began to clear the overdue payments, said a source.

In a recent letter to the central bank, Bippa said due to the shortage of dollars in the market, it is not possible for member companies to import the required HFO, lube oil and spare parts stock to meet the demand for electricity.

"Demand for electricity will sharply rise with the onset of the Boro harvest season, Ramadan and summer. All independent power producers are prepared to meet the demand of electricity but they are unable to import the required fuel and parts," reads the letter.

The Adviser to the Prime Minister for Power, Energy and Mineral Resources, Dr Tawfiq-e-Elahi Chowdhury, expressed a very optimistic outlook about a better power and energy supply situation this year compared to last year as the authorities have made all preparations in this regard.

"This year our projection is that maximum demand could be around 16,000 MW. As part of our preparations, we have started purchasing LNG to meet the gas demand for power generation and industrial sectors. We have preparations for generating power through other types of fuels too," he told The Business Standard.

Heavy fuel can remedy load shedding

Heavy Fuel Oil (HFO) could remedy the power crisis as its price remains reasonably low and stable. Besides, facilities needed to convert HFO into electricity are available in the country, said the private power producers.

At present, there are 64 HFO-based power plants with a combined capacity to generate 6,000 MW of electricity.

In FY22 the share of HFO-fired electricity was 23.51% of the total consumption at a 41% use case of these plants, according to BPDB data.

Increasing the use case of these plants to 50-60% will reduce load shedding significantly, said Imran Karim.

Energy cost alone accounts for more than 60% of the cost of power production, while other components account for the rest.

The former president of Bippa said, "If we exclude all taxes and consider only the dollar rate, coal and HFO power prices will be the same."

"HFO is one step ahead in competitiveness as coal-based power plants' conversion efficiency is maximum 40% while HFO-based plants' conversion efficiency is maximum 46%. So, even if the coal price is 15% less than the HFO price, the price of the power generated by HFO will be the same as that of coal," said Karim.

Will global energy prices remain volatile?

The post-Covid-19 supply chain disruption and the Russia-Ukraine war are the main reasons for the global energy price hike, and we would not be discussing the issue of power shortage if these crises had not arisen, said Imran Karim.

"The price of energy will decrease as many countries have started using different sources of energy, while the use of renewable energy is gradually becoming trendier," Karim predicts.

"Earlier, we had to spend around $12 billion for energy imports for a whole year. However, we spent around $14 billion last year for energy imports, but acquired less energy compared to previous years," he said. 

He estimated that energy import cost will reach $22 billion by 2030 when the country's power production cost will be Tk12 kWh. Besides, the price of gas will be around Tk50 per cubic metre if the dollar price does not increase further.

"It appears that we may have entered the era of market-driven energy and power prices. It is best to have such kinds of power rather than no power at all," he added.