Power sector’s overcapacity problems may deepen in post-pandemic period: CPD

The Bangladesh Power Development Board has confronted a rising financial burden due to overcapacity-related problems exacerbated by the Covid-19 pandemic. 

However, the problems will deepen in the post-Covid-19 period as the board must pay a capacity charge to plant owners while the plants remain unused due to low energy demand, reads analysis by the Centre for Policy Dialogue (CPD). 

The report titled "The Power Sector in the National Budget for FY2020-21: An Analysis of Allocative Priorities and Alternate Proposals" was presented by Dr Khondaker Golam Moazzem, research director of the think tank, at an online event on Wednesday. 

Dr Moazzem said that due to a miss-projection of energy demands, a large amount of power now remains unused. 

"In January and March of 2020, the highest overcapacity was reported at 63.3 percent and 62.5 percent, respectively. However, on June 16 of FY18, FY19 and FY20 the overcapacity was found to be 59 percent, 46 percent, and 49.8 percent respectively," he added.  

He further said this overcapacity is a result of the power sector's master plan where the reserve margin was set at 25 percent – which is significantly higher than the reserve capacity maintained by developing countries – 10 percent. 

"The Power Division [BPDB] has confronted the rising fiscal and financial burden due to overcapacity related problems which have been further aggravated during the Covid-19 period and would deepen in the post-Covid period," he added.

Regarding budget allocation for the power division Golam Moazzem said that the power division needs to follow a "go-slow" policy in power generation-related projects both under the public and private sector given the huge amount of overcapacity that currently exists. 

"By deferring some selected generation projects, about Tk3,421 crore would be released from the revenue budget and project support – which could be used for implementing other projects," he added. 

However, Nasrul Hamid, state minister for power energy and mineral resources, disagreed with Dr Moazzem. 

"The power sector is not at overcapacity. Rather we are still at risk because the daily peak demand is around 12,000 megawatts during the Covid-19 period against the country's total generation capacity of 16,000 megawatts," he said. 

Currently, the country's total power generation capacity is around 19,600 megawatts – excluding captive power. However, the state minister put the figure at 16,000 megawatts after a deduction of de-rated capacity. 

"If the Covid-19 situation was not there, the demand would cross 15,000 megawatts. Then I could be in trouble," he added.

He said the capacity has been increased on the demand forecast in the power sector master plan where activities in economic zones were considered.

"What would happen if some economic zones – including Mirersorai came into operation? How would we supply the electricity?" he asked.

Nasrul Hamid said, "We do not want rental power plants. For the rental power plants, we have a retirement plan that already started last year. However, it should be done with a balance as small plants also help us maintain the stability of the national grid."

Regarding solar power, he said, "It is variable energy. We cannot take a solar plant as a baseload plant because it cannot produce power in the evening when we face our peak demand."

CPD's Executive Director Dr Fahmida Khatun moderated the dialogue, chaired by eminent economist CPD Chairman Professor Rehman Sobhan. 

Rehman Sobhan asked the state minister about the reason for keeping rental power plants once actual power plants come on stream.  

Meanwhile, energy expert and Bangladesh University of Engineering and Technology (Buet) Professor Mohammad Tamim emphasised the need for efficient and reliable sources of power production to reduce overcapacity. 

"In the future, the national grid will be a critical part as we are going to get energy from multiple sources including coal, nuclear and regional power. Therefore, our National Load Dispatch Centre (NLDC) distribution system operation needs to modernise and become fully automated and independent," he said.

Speaking as a discussant, he also talked about the automation of the national grid to avoid supply disturbances. 

Regarding the BERC (amended) bill, he said, "The act will give unqualified power to the regulatory commission, and I think that would not protect consumer rights." 

The former member of Sustainable and Renewable Energy Development Authority, Siddique Zobair talked about the prospect of renewable power in Bangladesh. 

"We have enough prospects of renewable power in the country but for that the sector needs special support from the government. The investor should be given stimulus offers as it was given to independent power producers," he added. 

Among others, Mohammad Hossain, director general of Power Cell, a technical arm of the Power Division; Fouzul Kabir, former power division secretary; and Imran Karim, president of Bangladesh Independent Power Producers Bangladesh; also spoke at the discussion.