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The interim government has come up with a plan to reduce power sector expenses by Tk 10,000 crore while energy experts term the plan impractical, saying that a right intervention could save Tk 30,000 crore overnight.

The interim government has made the plan as part of the ongoing efforts to revitalise the economy destroyed substantially during the ousted Awami League regime by predatory power and energy expenses.

Energy experts said that the plan ignored key areas of corruption and some proposals would bear serious consequences for industries, environment and public health. 

‘The plan reflects our inefficiencies,’ said Hasan Mehedi, member secretary of the Bangladesh Working Group on Ecology and Development, a platform of green activists.

Prepared by Bangladesh Power Development Board, the plan aims at reducing cost by 10 per cent or Tk 10,548 crore in 2025 by reducing generation cost, avoiding surcharge, not renewing retired power plants and adopting austerity measures.

The power generation cost is planned to be reduced by Tk 6,830 by increasing gas use, replacing the use of furnace oil and coal substantially. 

The plan proposes increasing gas supply by 150mmcfd which would cause an additional expense of Tk 2,405 crore. The gas supply now stands at 913mmcfd, BPDB document showed.

Increasing gas use implies an increase in liquefied natural gas import since output from local gas fields continues to decline. The BPDB used the subsidised rate of Tk 14.75 per  cubic metre in calculating the expense needed to raise the gas supply, rather than using the current LNG import rate of nearly Tk 66 per unit. Petrobangla recently said that the gas import price would soon hit Tk 75.72. 

The planned increase in gas supply through import will involve an additional spending of Tk 9,000 crore, more than what will be saved by reducing furnace oil and coal use –– Tk 6,299 crore and Tk 2,563 crore respectively, the experts said.  

‘More imports will keep draining the forex reserve, affecting industrial production even more,’ said Hasan Mehedi.

Meeting the demand of additional gas supply from the existing supply, without increasing LNG import, implies diverting gas from industries, where gas is used both as raw material and fuel. 

The problem with reducing the use of power plants based on furnace oil and coal is their capacity charge entitlement. More idle plants mean increased payment of capacity charge, the money the government is legally obligated to pay.

The BPDB plans to reduce the plant factor, the ratio of a power plant’s energy output to its capacity, in furnace oil-based power plants to 9 per cent from the existing 16 per cent. The plant factor was 21 per cent in the financial year 2023-24. 

Similarly, the plant factor in the coal power plants is planned to be reduced to 58 per cent from the existing 64 per cent. 

According to the plan, the increased gas use would reduce the power generation cost by 7.68 per cent to Tk 10.58 from Tk 11.46 per kWh. 

Shafiqul Alam, lead analyst at the Institute for Energy Economics and Financial Analysis, Bangladesh found the plan too simple to address power sector challenges. 

Power generation costs went up in FY24 despite substantial drop in fuel prices following new capacity addition, he said. 

In FY24, the installed power generation capacity was increased by 3,187MW with 9,543MW of new capacity under construction and Tk 26,000 crore was paid in capacity charge.

‘For reducing cost power consumption will have to be increased besides rationalising fuel use,’ said Shafiq. 

Bangladesh’s current installed power generation capacity is about 28,000MW. The peak demand during next high summer is estimated to be 17,500MW. The average maximum generation remains around 13,000MW.

Installment of 3,000MW of renewable energy could have saved about Tk 6,000 crore, Shafiq estimated. 

The government, however, planned to reduce power production from renewable energy and to reduce the renewable energy plant factor to 18 per cent, which was 21 per cent in FY24. 

‘Renewable energy revitalises the economy by saving dollars cutting the need to import fuel,’ said Hasan Mehedi. 

The BPDB also planned to cut non-fuel costs by Tk 2,280 crore. 

By halving the payment owed to Indian power plants, the BPDB planned to save Tk 543 crore in surcharge. Indian companies are entitled to get up to 1.5 per cent interest for delayed payment every month.

The BPDB planned to reduce its departmental cost by Tk 370 crore in six areas, including travel, power consumption, telephone and postal and machinery purchase. About 80 per cent of the savings is planned to be made in equipment procurement. 

The BPDB planned to save Tk 525 crore by not extending contracts of 10 power plants. The power plants, worth 1,010MW, including seven based on furnace oil, retired by August 2024.

The implementation of the plan is subject to completion of the capacity building projects of Meghnaghat and Aminbazar grid substations and the transmission works in Cumilla, Mymensingh, Kodda, Kaliakair, Rangpur and Thakurgaon, the BPDB said. 

Energy experts said that the plan ignored essential steps such as renegotiating predatory tariffs awarded to power producers through power purchase agreements necessary for saving the BPDB. 

The energy transition policy, proposed by Consumers Association of Bangladesh in March 2022, estimated the power sector’s unjustified cost at Tk 8,000 crore. 

In Bangladesh, transmission line construction costs Tk 10 crore per kilometre in Bangladesh against Tk 98 lakh in India, the association said. 

In 2019-20, Barapukuria thermal power plant purchased coal at $150 a tonne, far higher than the then imported coal cost of $100, the CAB said. 

‘The BPDB plan will rather increase cost. This is absurd. They are failing to make right interventions,’ said CAB energy adviser Shamsul Alam.

The right intervention, according to Shamsul Alam, included shutting down furnace oil-based power plants, refusing to pay local power plants in dollars and rationalising coal price. 

‘The steps could save about Tk 30,000 crore overnight,’ he said. 

Power secretary and BPDB chairman could not be reached over their phones for comments despite repeated attempts.