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THURSDAY, MAY 29, 2025
Captive power is not cheap anymore. Then why won't industries let go?

Panorama

Ashraful Haque
08 January, 2024, 09:00 am
Last modified: 08 January, 2024, 04:24 pm

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Captive power is not cheap anymore. Then why won't industries let go?

Manufacturers want uninterrupted production, so they prefer captive power to ensure self-reliance and control

Ashraful Haque
08 January, 2024, 09:00 am
Last modified: 08 January, 2024, 04:24 pm
According to reports, in 2023, over 80% of factories still have their captive power plants.Photo: Collected
According to reports, in 2023, over 80% of factories still have their captive power plants.Photo: Collected

In the Integrated Energy and Power Master Plan (IEPMP) 2023, two scenarios about captive power generation and use have been speculated. In the 'net-zero scenario,' conventional captive power is thought to be zero in 2050. And under the 'advanced technology scenario,' conventional captive power will remain a little.

2050 is too far away to talk about the probability of the projection. However, currently, captive power usage in industries, especially in the apparel industry, is way too high to imagine a zero-captive power in the near future.

According to reports, in 2023, about 1,000 MW of captive power has been added to the country's power mix. The country's total power generation capacity stands at 27,481 MW, while captive power contributes 4,760 MW. Over 80% of factories have their own captive power plant. 

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Mostly powered by gas, captive power consumed 15% of 994.4 BCF gas supply in FY 2019-20, while the grid-integrated power system used 46%. In FY 2021-22, the percentages changed to 17% and 40% respectively, clearly indicating the increase of captive power production. 

In a recent roundtable discussion organised by The Business Standard, Professor M Tamim, a professor of the Petroleum and Mineral Resources Engineering department in Buet, mentioned that the growth curve of share of grid electricity in the industrial sector has been flat since 2017.

The former energy advisor to the caretaker government said that industrialists prefer captive power because they get gas at a cheaper price, enabling them to produce power at a lower cost than the grid electricity.

Industry owners however maintained that the scenario has changed, and with all the investment and costs factored in, a lower-cost captive power generation is no longer the case. 

Then why aren't the industries relieving themselves of the hassle of maintaining their own power plants and going for grid electricity in an all-out manner?

Industry insiders said that apart from the frequent power outages, the quality of supplied electricity is a major predicament. Emphasising that an import-based energy strategy cannot take the industrial sector far ahead, they also talked about how to fix the problem.

Mohammad Ali Khokon, the president of Bangladesh Textile Mills Association (BTMA) and chairman of the Maksons Group said that many machinery used in the apparel industry need stable voltage and frequency, which the national grid cannot guarantee right now.

"We need a guarantee of stable frequency, or our devices are at risk of damage. If I have to use a stabiliser, I'll have to spend $3 million to buy one. Such a device has a guarantee of only five years," said Mohammad Ali at the roundtable, pointing at the investment risk of such a purchase.

If the government wants to increase grid reliance, it has to do two things: increase the renewable in the mix, and ensure consistency and quality of grid power. An increase in renewable energy means a reduction of carbon emissions, which is sought by global brands. Therefore it will be a blessing, especially for the RMG industry.

Mohammad Monower Hossain, head of sustainability at Team Group

Then this cannot resolve the issue of frequent power cuts.

"I have experienced 48 instances of power-cuts in seven days, that too on 33 kv line," continued Mohammad Ali, who owns both garment and textile factories.

He also pointed out that there is a regulation that one has to take 5 MW power from the 33kv line. If someone needs 2 MW, why would he take a 5 MW line at a much higher price, he asked.

"Our grid doesn't have frequency automation, or voltage automation, as a result, fluctuation is high, and supply is also interrupted. On the one hand, you cannot supply gas, and on the other, the power supply is not reliable," the BTMA president vented his frustration.

Mohammad Monower Hossain, head of sustainability at Team Group also stated that the cost of captive power was cheaper than grid electricity in the past. With consecutive gas price hikes, the advantage is no longer significant.

Echoing BTMA president, Monower mentioned that in textiles, especially, machines require reliable and quality power supply.

"There are certain harmonics in electricity. The equipment used in the industry is expensive and sophisticated. The quality of the national grid's electricity does not match the harmonics required. As a result, the equipment often faces problems running," Monower said.

"Suppose you are operating a dyeing machine with grid electricity. If the machine stops suddenly, the work may get ruined," he continued, adding, "In case of a power cut, switching to an alternative power source and reloading the machine takes time. Production is halted during this time, which results in loss."

The manufacturers naturally want uninterrupted production, so they prefer captive power for the sake of self-reliance and control. Captive power is more preferable in heavy industries like dyeing and spinning, the RMG official pointed out.

A paradigm shift is necessary

The over-reliance on imported fuel and the resulting price hike are sending a sense of alarm throughout the industries. The government is gradually phasing out subsidies on the energy and power sector, due to increasing financial pressure and IMF's conditions for loans. 

This puts Bangladesh's industrial development in a precarious condition, many think.

"We are talking about $100 billion garment export and about a trillion dollar economy. Energy is the biggest obstacle towards that path," BTMA president Mohammad Ali Khokon said.

"Just a few years back, we had zero cost for gas import. Now we import $8-10 billion worth of LNG. We wouldn't face a dollar crisis if we didn't need to spend this huge money for energy imports," he opined.

"We've been saying for 10 years that Petrobangla needs to explore gas fields," the business leader mentioned. "Our gas reserves are dwindling; we've been asking the government to install compressors. It took five years to float the tender for the compressors!"

Five wellhead compressors are being installed in Titas and Narsingdi gas field wells to increase gas pressure and maintain regular supply. The installation of three compressors was completed last November, and the foundation was laid to house the remaining two compressors. In 2012, the country's first-ever gas compressor station was launched in Habiganj.

The business leader stated that energy is the main driving force for a country's industrialisation. "Today, industries are leaving Europe. Europe is held hostage by Russia due to the energy crisis," he said. The businessman believes if explored, Bangladesh has a good chance of finding enough gas to sustain the industry sector.

The textile entrepreneur said that there is a demand gap of 4 billion metres of fabric in the RMG industry. "We import $12 billion worth of fabric. RMG would be more competitive and profitable if we didn't have to import fabric. To strengthen the apparel backward industry, we need energy guarantee," he said. 

He also added that the garment industry needs comparatively a small amount of electricity, amounting to only 5% of total production cost. But backward industries such as thread and fabric manufacturing, dyeing, etc need a lot of energy.

"First resolve the energy issue. Then talk about industry. It is like tying you up and then asking to swim," said BTMA president.

In the wake of sustained price hikes of fuel and electricity, manufacturers are showing an increasing inclination towards renewable energy. Many of them are finding this option to be both financially feasible and good for the company's image among fashion retailers.

"Here in Team Group, we have all three provisions: we have grid connectivity, captive power and solar panels. We're now reliant on captive power generators, but from 2030 onwards, the reliance will shift on renewables," said Monower Hossain. 

The group is expecting to have 1.5 MW of installed solar power within months. It also has a target of installing a total of 7-10 MW of solar power in the long run. 

"If the government wants to increase grid reliance, it has to do two things: increase the renewable in the mix, and ensure consistency and quality of grid power. An increase in renewable energy means a reduction of carbon emissions, which is sought by global brands. Therefore it will be a blessing, especially for the RMG industry," the sustainability official elaborated.


Ashraful Haque. Sketch: TBS
Ashraful Haque. Sketch: TBS

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