With the power demand rising amid heatwaves, the energy mix included more oil to boost electricity generation, leading the interim government away from its plan to reduce energy spending.
The increased use of oil-based power plants keeping cheaper power plants, based on gas and coal, kept idle is caused by the government鈥檚 inability to arrange for a cheaper energy, mainly due to the dollar crisis.
Keeping idle any of Bangladesh鈥檚 power plants, especially baseload gas- and coal-based ones, proved to be a huge liability, inflating energy costs, thanks to the capacity charge entitlement.
鈥楾he production cost of per-unit electricity is set to exceed Tk 12 in the ongoing fiscal year,鈥� said Shafiqul Alam, lead energy analyst, Institute for Energy Economics and Financial Analysis.
鈥榃hile overcapacity has increased, Bangladesh fails to ensure an efficient聽聽 energy-mix use,鈥� he explained.
On April 6 at 7:30pm, Bangladesh generated 3,053MW from furnace oil to meet the electricity demand for 15,075MW, the highest power demand so far this year. At the peak demand hour, gas accounted for 5,560MW while coal for 4,105MW and the supply from Adani for 1,363MW.
In the past financial year, the per-unit electricity generation cost from gas was Tk 6.31, followed by Tk 12.74 in producing a unit of power from coal. Per-unit power produced by furnace oil, on the other hand, took Tk 25.70.
The average per-unit electricity production cost in the past financial year was Tk 11.55.
At the peak power demand hour on April 6, some 54 per cent of the gas-based power generation capacity and 28 per cent of the coal-based capacity remained idle. The furnace-oil-based capacity use, on the other hand, was 55 per cent.
鈥楾he government is unlikely to avoid increasing reliance on oil for it does neither have enough money nor alternative planning to arrange for cheaper fuels,鈥� said Shafiq.
Against the required demand for 4,000mmcfd, the gas supplies remained around 2,500mmcfd with the local gas supply depleting amid the absence of exploratory activities in potential gas reserves. The capacity to import liquefied natural gas, which accounts for a third of the current supply, also remained substantially unused.
The power generation capacity from gas and coal is set to increase by 5,500MW between the past and the ongoing financial year, adding to the capacity charge burden about Tk 14,000 crore more.
Yet, the government seemed to be left with no alternatives but to use oil capacity anyway for it allows the government to rely on private companies because payments to them can be delayed and made in installments.
The energy mix this summer is reminiscent of the energy administration by the past Awami League regime, which had brought these oil-based power plants into operation and often used them more than cheaper power plants.
During the AL regime, the use of oil-based power plants often accounted for a third of all power generated, often surpassing the use of coal.
Bangladesh鈥檚 capacity to use gas and coal is declining compared to past few years. Last year, the gas capacity use on some days exceeded 7,000MW and coal capacity use 5,000MW, which rarely happened so far this year.
Rather, since February, the use of oil-based power plants frequently exceeded 3,000MW with the highest generation of 3,629MW made in mid-March.
Oil accounted for 23 per cent of the power produced in 2022-23, consuming 50 per cent of the total spending for the purpose in the year. In the past fiscal year, the oil use was reduced to generate 11 per cent of all the power generated. Still, it accounted for 32 per cent of the overall expenditure.
The interim government has planned to reduce oil use to 9 per cent in the current fiscal to cut its energy expenditure, which energy experts say is unlikely to happen.
鈥楨nsuring energy efficiency such as curbing gas leakage and creating awareness could have increased energy supply,鈥� said Shafiq.
But such efforts are not present.
What right interventions could achieve is manifested in the steps that led to a substantial reduction in power tariff in Pakistan, about a year after its current prime minister initiated a reformation effort of the power and energy sector.
On April 3, Pakistan prime minister Shehbaz Sharif announced a Rs7.41 per-unit cut in power rates across the country, which made international headlines and was interpreted as a sign of economic revitalization. For commercial users, the rate was reduced by Rs 7.59 for a unit.
The PM told the media that they had to work hard to convince the International Monetary Fund, which is currently extending loans to the country under many conditions, to agree to power tariff reduction.
The key steps that led Pakistan to the success is ending contracts with six independent power producers and revision of agreements with 16 others, introducing a take-and-pay model and reducing capacity payments. Power plants鈥� financial dealings have also been shifted from US dollars to Pakistani rupees to shield electricity pricing against exchange rate volatility.
Money, estimated at Rs 168 bn, saved from the drop in international oil prices would also be used to reduce the pressure of energy expense on the people in Pakistan.聽聽
The committee that the interim government formed in Bangladesh nine months ago for power sector reform is yet to come up with solutions enabling energy cost reduction. Pakistan and Bangladesh present similar power sector situations. Pakistan鈥檚 condition was only worse than Bangladesh.聽
The rise in power production cost also implies additional subsidy requirements. Last year, Tk 40,000 crore was needed in subsidy as power was sold at less than Tk 9 a unit, more than Tk 2.5 less than the production cost.
The oil-based rental and quick rental power plants were paid over
Tk 1,500 crore in subsidy. Over Tk 29,700 crore was paid in subsidy to Independent Power Producers, followed by over Tk 7,000 crore paid to Adani and nearly Tk 2,000 crore paid for the import of electricity from India.
Bangladesh Power Development Board member Zahurul Islam said that they were compelled to increase oil use due to fuel shortage and other technical reasons such as power plant maintenance and transmission shortcomings.
鈥楾his is still within our plan. We are doing it to ensure uninterrupted power supply,鈥� he said.
