[🇧🇩] Energy Security of Bangladesh

[Saif]

BIPPA warns of potential power disruptions in summer amid unpaid dues

The Bangladesh Independent Power Producers’ Association, or BIPPA, has called on the government to pay outstanding dues to private power plants, warning of severe electricity shortages in the upcoming summer if immediate action is not taken. KM Rezaul Hasanat, the newly elected president of

thefinancialexpress.com.bd

BIPPA warns of potential power disruptions in summer amid unpaid dues
Published :
Jan 24, 2025 00:10
Updated :
Jan 24, 2025 00:10

The Bangladesh Independent Power Producers’ Association, or BIPPA, has called on the government to pay outstanding dues to private power plants, warning of severe electricity shortages in the upcoming summer if immediate action is not taken.

KM Rezaul Hasanat, the newly elected president of BIPPA, urged swift action during a discussion with journalists at the Sonargaon Hotel in Dhaka on Thursday, reports bdnes24.com.

In a brief presentation, former BIPPA president Imran Karim, disclosed that private power producers are owed Tk 160 billion in arrears over the past four months. He noted that a significant portion of the debt—more than Tk 100 billion of this amount is owed to liquid fuel-based plants.

The power plants have faced prolonged arrears with the government since the onset of the Covid-19 pandemic in 2020. Despite contracts stipulating a maximum payment delay of 30 days, the Power Development Board, or PDB, has reportedly been defaulting on payments for 120 to 180 days, with delays extending to as long as 200 days in some cases.

During this protracted period of arrears, the BIPPA claimed to have suffered substantial financial setbacks. The association reported a loss of Tk 55 billion due to the depreciation of the taka against the dollar, alongside an additional loss of Tk 32 billion in interest on working capital.

Imran emphasised the urgency of opening letters of credit, or LCs, immediately to ensure the operation of oil-based power plants in the upcoming summer.

He noted that any delay in this process could jeopardise the country's power supply during the peak demand season.

“If the LC is opened today, the oil will reach the plants after 45 days,” he explained, underscoring the tight timeline.

“It is not possible for the companies to open LCs if the dues are not received,” he added.

Currently, Bangladesh is generating between 9,000 and 10,000 megawatts (MW) of electricity, with only 400 to 600 MW coming from liquid fuel-based power plants. However, as the summer season approaches, the demand from this sector is expected to surge, requiring at least 4,000 MW of electricity to be supplied from these plants.

Speakers at the event warned that the summer season could begin as early as March, underscoring the need for immediate action. They stressed that initiatives must be taken now to ensure liquid fuel-based power plants are fully operational in time to meet the increased demand.

“We have met with the government three times since December to convey our concerns,” Hasanat said.

“Now, I am informing journalists so the public understands the challenges we face and no blame is misplaced later.”​

 

[Saif]

Renegotiating power tariffs

The government's decision to set up a six-member expert panel to renegotiate power tariffs signals a potential shift to redesign what has long been perceived as a lucrative domain for private power plant owners. The initiative aims to reduce power purchase costs and ease the state's debt burden. Th

thefinancialexpress.com.bd

Renegotiating power tariffs
Published :
Jan 24, 2025 00:01
Updated :
Jan 24, 2025 00:01

The government's decision to set up a six-member expert panel to renegotiate power tariffs signals a potential shift to redesign what has long been perceived as a lucrative domain for private power plant owners. The initiative aims to reduce power purchase costs and ease the state's debt burden. The panel will renegotiate tariffs with power plant owners who secured projects under the now-defunct Quick Enhancement of Electricity and Energy Supply Act 2010 that previously indemnified actions taken under its provisions. Initially enacted to address acute power shortages, the Act facilitated the approval of over 100 power projects during the Awami League government's tenure since 2009. This helped increase power generation capacity to 28GW. The capacity far exceeds the country's demand estimated at 17GW. However, the actual generation has rarely exceeded 13GW. The annulment of this indemnity law paves the way for more accountability in the sector. The Power and Energy Adviser of the interim government informed the FE that the formation of the expert panel aligns with the recommendations of the national body tasked with reviewing power and energy deals. After months of scrutiny, the national committee found that costs associated with most power plants --- whether established through tenders or unsolicited arrangements --- were exorbitantly high.

In addition to the high priced power tariff, a very contentious issue is the government's deal with the power plant owners on capacity charges that has been straining the state coffer for well over a decade. Under the agreements, private investors are guaranteed returns based on their investments rather than actual services rendered. Energy experts, citing Power Development Board analyses, argue that this mechanism has channelled public funds into private coffers. Some plants, approved without competitive bidding, continue to receive unreasonably high monthly capacity charges regardless of whether they produce electricity or not. These plants also benefit from subsidised fuel, while the government purchases electricity at inflated rates.

The new committee is expected to scrutinise these irregularities and recommend necessary reforms, including reassessment of the rationale behind capacity charges and potentially phasing them out. Such measures could significantly reduce the financial burden on the state. Additionally, the committee is expected to address challenges associated with high-sulfur fuel oil (HSFO)-based power plants and propose solutions to improve sector efficiency.

For years, media reports and energy experts have been criticising the government's practices, particularly the high tariffs paid to private power producers and the mandatory capacity payments to idle plants. The repeated calls for reform fell on deaf years. Now, with the committee tasked to revisit these deals, there is hope for tangible changes that will benefit citizens and alleviate the government's fiscal load. The renegotiation effort underscores the need for greater accountability and transparency in the power sector. By addressing inflated tariffs and capacity charges, the government has an opportunity to restore public trust and create a more equitable energy framework. If successful, this initiative could mark the beginning of long-overdue reforms, ensuring that public resources are used efficiently and sustainably.​

 

[Saif]

Don't push renewable energy transition into the distant future

Refrain from decisions that deter transition to renewable energy

www.thedailystar.net

Don't push renewable energy transition into the distant future
Refrain from decisions that deter transition to renewable energy

VISUAL: STAR

It is unfortunate that Bangladesh's power generation from renewable sources pales in comparison to its neighbours, despite our role as a climate change champion on the global stage. According to a recent report, only 0.8 percent of total power in Bangladesh comes from renewables—mainly wind and solar—whereas India, Pakistan, Sri Lanka, and Vietnam generate 11.5 percent, 3.7 percent, 10.8 percent, and 13.6 percent, respectively, from those two sustainable sources.

Bangladesh's transition to renewable energy has been slow, complicated, and hindered by contradictory policy decisions. Corruption and inefficiency plagued the country's entire energy sector during the last regime, and renewables were no exception. To partially fulfil her government's commitment to producing 6,000MW-16,000MW from renewable sources by 2030, former Prime Minister Sheikh Hasina approved 37 renewable plants, without following due process, under the controversial Quick Enhancement of Electricity and Energy Supply (Special Provision) Act, 2010. The law was repealed after the interim government took power in August, and the Bangladesh Power Development Board (PDB) floated tenders for 22 solar plants in various areas of the country with a total capacity of 853MW.

Unfortunately, the interim government, unlike previous administrations, has decided not to underwrite bills of power-generating companies if the PDB defaults. Ironically, PDB, which sells power at prices lower than its production or purchase cost, has a record of defaulting on payments. While the interim government's decision could be seen as an attempt to incentivise institutions to operate more efficiently and profitably by not bailing them out, it risks discouraging businesses from investing in renewables.

Given that Chief Adviser Prof Muhammad Yunus has long advocated for actions to mitigate climate change, we would expect his administration's policy decisions to reflect a commitment to transitioning to renewables. Decisions that contradict this aim should therefore be avoided. Also, a mechanism should be put in place to hold future political governments accountable if they fail to accelerate the transition to renewables. Moreover, reform of relevant public institutions is essential to ensure that Bangladesh does not fall behind in renewable power generation. Reducing our dependence on fossil fuel-generated power is not just necessary to cut costs and reduce reliance on foreign power supply sources, but because renewables may soon be the only viable options left for us to generate power.​

 

[Saif]

Bangladesh has entered into an agreement with America for the supply of 5 million metric tons of LNG.

 

[Saif]

Power subsidies may rise 83% this fiscal year

Subsidies for the power sector are likely to balloon 83 percent this fiscal year as the interim government is planning to clear all arrears owed to private power producers.

www.thedailystar.net

Power subsidies may rise 83% this fiscal year

Subsidies for the power sector are likely to balloon 83 percent this fiscal year as the interim government is planning to clear all arrears owed to private power producers.

An additional Tk 25,000- Tk 30,000 crore may be kept in the revised budget to pay off arrears, which will be added to the allocation for subsidies, according to the finance ministry's initial plans.

As a result, overall subsidies for the power sector are expected to rise to around Tk 66,000 crore at the end of FY25, up from an initial budgetary allocation of Tk 36,000 crore.

The allocation is likely to go up in the revised budget for FY25 and the amount will be finalised by March, finance ministry officials said.

As the government is a long way off from its revenue collection target, the funds may be diverted from the budgetary allocation for the Annual Development Plan (ADP).

The budget for FY25 had allocated Tk 265,000 crore for the ADP, but that figure may fall by around Tk 50,000 crore in the revised budget, a top official of the ministry said.

"If we can allocate the amount to the power sector, the arrears will be cleared by this fiscal year. As a result, the subsidy burden in the power sector will be reduced next fiscal," the official added.

The official also said that the government has taken initiatives to reduce power production costs in order to ensure that arrears do not pile up and that there is some room for flexibility in the future.

In December, a mission from the International Monetary Fund told the government to clear arrears to the power sector by June of 2025. They also proposed increasing electricity prices to help reduce subsidy expenditures.

However, the government refused to increase prices and formed several committees to investigate how they could reduce costs.

Muhammad Fouzul Kabir Khan, adviser to the Ministry of Power, Energy and Mineral Resources, said on Saturday that they are under tremendous pressure to increase electricity and gas prices.

Although the interim government has been in office for six months, electricity prices have not yet increased, he said, adding: "But I don't know how long it will last."

The pressure of piling arrears is akin to having a gun held to their head, according to Khan.

Currently, the Bangladesh Power Development Board (PDB) has arrears amounting to Tk 21,000 crore.

Of the amount, Tk 9,000 crore is owed to the Bangladesh Independent Power Producers' Association, whose members have said they will be unable to produce electricity in the summer -- which starts around March -- if the government fails to clear arrears immediately.

India's Adani power plant also started pressing hard for arrears amounting to around $850 million since the interim government took office.

Additionally, local coal-fired power plants are facing hassles in importing coal to operate smoothly due to a lack of funds.

The interim government has formed separate committees to identify loopholes in contracts signed during the ousted Awami League government's tenure, which increased the burden of subsidies, and to renegotiate power purchase prices.

Zahid Hussain, a former lead economist of the World Bank's Dhaka office, told The Daily Star that the government should focus on reducing power production costs.

"The immediate solution is to phase out inefficient power plants and renegotiate prices, which are excessive," he said.

According to Zahid, some power plants' contracts were unfair to Bangladesh, giving producers the leverage to overcharge.​