The Power Development Board has finalised the extension of its contract with yet another rental power plant, at Kumargaon in Sylhet, ignoring the call for reducing the country’s spending on growing capacity charge by shutting down all rental power plants.
A month ago the government renewed its contract for two years with a 35.5-MW rental power plant in Bhola as part of spending the largest-ever amount of over Tk 108 billion on capacity charge this year.
In the past nine years the government has paid rental power plants about Tk 500 billion in capacity charge, the payment the government is bound to make under contract to make to the rental power plants in case of no electricity purchase from them .
Even before the coronavirus broke out to significantly lower the power demand in Bangladesh, 43 per cent of the country’s installed capacity — 19,630 megawatts — remained unused due to ‘low demand in 2019, giving rise to the call for immediately closing the rental power plants.
‘We are renewing the contracts with the rental power plants for we need them for quality power,’ PDB chairman MD Belayet Hossain told New Age.
He said that the 50-MW rental power plant of Kumargaon, Sylhet is needed to supply electricity at correct voltages and frequencies.
Belayet, however, assured that the power plants with renewed deals would get minimum capacity charge, about a fifth of what it used to get, while the per unit electricity price would as well be significantly reduced.
‘The government has a policy of renewing the contracts with gas-based rental power plants based on the need while phasing out oil-based ones,’ said Belayet.
The rental power plants, based on gas, furnace oil and diesel, were introduced in 2009, after the incumbent AL government assumed power, as an emergency measure to rapidly increase power generation from 4,942 megawatts.
The government had initially promised to replace them by increasing its own generation capacity in three to five years, the initial operational deadline for rental power plants.
The government continued to allow setting up of rental power plants until last year while renewing the contracts with most of the old ones simultaneously.
There are 26 rental power plants generating over 2,000 megawatts still in operation, though they mostly should have expired by now.
The rental power plants have outlived their initial life span with repeated extensions of their contracts.
The Kumargaon power plant, owned by Hosaf Group, was established on July 23, 2008 with a five-year production period. Under the new deal, the plant would continue to operate at least through next year.
The 35.5-MW Bhola power plant was set up on May 16, 2009 for three years but remained operational until July 2019 with three extensions. The plant just had its fourth extension on October 8 for two more years.
The newly fixed unit price of power for the Kumargaon plant could not be known but the price for the Bhola power plant is available.
Since its inception, the plant sold power at Tk 3.65 per kilowatt hour until it was readjusted first time in 2019 at Tk 3.0735/ kWh. The plant will sell power at Tk 2.7999/ kWh from July this year.
Power experts said that the initial power price of rental plants was deigned to make them profitable for their life span and that the price after extension should have been much lower.
‘There is no point in the government renewing the deals with rental power plants,’ said Consumers Association of Bangladesh energy adviser Shamsul Alam.
‘Bangladesh has a huge surplus of power and the low power demand is unlikely to increase anytime soon,’ he said.
Power experts have long blamed the government for illegally benefiting businessmen through the continuation of rental power plants.
In June, the Centre for Policy Dialogue said that the phasing out of rental power plants could offer Bangladesh an overnight relief of an overcapacity of 1,958 megawatts.
Bangladesh’s installed capacity crossed the 20,000-MW mark this year with the government always maintaining that the rental power plants would be phased out in due time.
Almost half the rental power plants, 11, in operation are gas-based and being considered for extension. Five diesel-based plants would expire in 2023 and 2024. There is another diesel-based rental power plant rolled into operation in 2018 for 15 years.
‘Rental power plants have nothing to do with helping consumers. Rental power plants are the way of government helping businessmen illegally earn money,’ said Shamsul Alam.
The electricity price has increased 10 times in last 11 years and a huge capacity charge paid every year was one of the reasons the price of power has gone up, consumer rights activists said.
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