oil & gas

Govt looks to renew contracts with efficient power plants

time-to-renew- renew contractsThe government is looking to renew contracts with efficient oil-fired power plants based on their fuel consumption levels and tariff rates to ensure a sound fuel-mix for future energy security, Prime Minister’s energy adviser Dr Tawfiq-e-Elahi Chowdhury told the FE in an exclusive interview recently.

He said: “The oil-fired power plants must be efficient technically before getting their contracts renewed.”

A number of oil-fired rental and quick rental power plants are now seeking renewal of contracts as the expiry deadline of many such plants nears.

Some owners of the power plants are seeking renewal of contracts for up to 15 years at one go.

Some are also seeking to change the status of their power plants to independent power producers (IPP) instead of rental and quick rental plants.

“We shall examine how many oil-fired power plants we need to operate for a better fuel-mix,” Mr Chowdhury said.

A committee is now working on identifying the efficient oil-fired rental and quick rental power plants, he added.

Installation of the oil-fired rental and quick rental power plants under a short-term measure was necessary to ease the country’s acute electricity crisis, said the PM’s energy adviser.

“Apart from implementing short-term measures by installing oil-fired power plants, we also carried out medium-term and long-term planning to ensure the country’s future energy security,” he said.

Several medium to large base-load power plants already started supplying electricity to the national grid, he said.

More big gas-fired combined cycle power plants would come online soon, he expressed his hope.

With implementation of the already awarded coal-fired power plant projects, the country’s overall electricity generation costs would come down, said Mr Chowdhury,.

He said Prime Minister Sheikh Hasina’s forward-looking strategy worked as the catalyst towards doubling the country’s overall electricity generation only within the past four years.

“The government could not only be able to increase the electricity generation, but also diversified the country’s energy sources and thus shunned the overdependence on natural gas,” Mr Chowdhury claimed.

The country’s overall electricity generation on January 6, 2009, when the Awami League (AL)-led grand alliance government took office, was 3,267.50 megawatts (mw), data from the state-owned Bangladesh Power Development Board (BPDB) revealed.

Until January 2013, the government awarded 61 contracts for setting up 63 new power plants with an aggregate capacity of generating about 8,398 mw of power, according to the Power Division under the Ministry of Power, Energy and Mineral Resources.

Of those, 58 new power plants with a generation capacity of around 3,845 mw have already been commissioned and installation of 27 more plants with the power generation capacity of about 5,437 mw is going on.

With installation of the new power plants the country’s highest electricity generation was recorded at around 6,675 mw as of July 12, 2013.

The government already achieved the target of augmenting electricity generation as stated in its election manifesto prior to the December 2008 general election, due to the PM’s determination to achieve the goal, Mr Chowdhury said.

In its election manifesto the Awami League (AL) had set a target to increase electricity generation to 5,000 mw by 2011. With implementation of different power plant projects the country’s overall electricity generation reached 5,174 mw as on November 23, 2011, the BPDB statistics said.

“We shall also be able to exceed the electricity generation target, as was in the election manifesto, of 7,000 mw by 2013,” the PM’s adviser said confidently.

Drawing up an appropriate plan for building power plants to increase electricity generation and thus mitigate the acute electricity crisis and spur investments was initially a big challenge for the government, he said.

“We could adopt short, medium and long-term plans and earn confidence of the private sector in making investments,” Mr Chowdhury said.

The government had a track record of increasing electricity generation significantly during its previous term of 1996-2001, which also helped earn confidence of the investors, he said.

The initiation of sovereign credit ratings on Bangladesh several years ago by global credit rating agencies like the Standard & Poor’s and the Moody’s and their positive outlook on the country also helped build confidence among the investors, Mr Chowdhury said.

Under the short-term measure the government launched a drive to increase oil-based power generation in mid-2010 amid fast-depleting natural gas resources and planned to commission nearly three dozen new oil-based power plants, mostly rental and quick rental ones, by the end of 2013.

Currently 35 oil-fired power plants are operational across the country, according to the Power Division data.

Of them, 23 plants with a combined generation capacity of 1,787 mw run on furnace oil and 12 with a capacity of 393 mw run on diesel.

Although the overall electricity generation cost increased to around Tk 6.0 per unit (1 kWh) with installation of oil-fired power plants, it was much lower than the cost of not supplying electricity, which was around Tk 26-30 per unit, said the energy adviser citing a study report of the Bangladesh Institute of Development Studies (BIDS).

Over the last three years since the fiscal year 2010-11, the total contribution to the gross domestic product (GDP) on account of the quick rental power plants (QRPPs) ranged between Tk 233.12 billion and Tk 542.26 billion, the BIDS study paper prepared jointly by BIDS Director General Dr Mustafa K Mujeri and researcher Tahreen Tahrima Chowdhury revealed on June 29, 2013.

“In the absence of electricity from the QRPPs, the GDP growth rate could have been lower by at least 0.8 percentage points in the FY 2011-12,” the BIDS study added.

“We had no other option but to install the rental and quick rental power plants to overcome the acute electricity crisis the country was facing,” said the PM’s energy adviser.

The increase in electricity generation helped increase the country’s exports and boost agricultural output, Mr Chowdhury said.

According to the Export Promotion Bureau (EPB), the country’s export earnings in the last FY 2012-13 stood at US$ 27.01 billion, up by 11.18 per cent from that of the previous year.

The export earnings were $ 24.30 billion in FY 2011-12, $22.92 billion in 2010-11, $16.20 billion in 2009-10 and $ 15.56 billion in 2008-09, the EPB data showed.

The country’s foreign exchange reserve also increased resultantly to over $16 billion, equivalent to four months’ import bills, said the PM’s energy adviser.

Mr Chowdhury also said the country would get electricity from India within the next couple of months as all necessary formalities have almost been completed.

“Initially we’ll import around 250 mw of electricity, which will be increased to 500 mw soon,” he said.

The first-ever interconnectivity between the two countries in the power sector would also help ensure the country’s future energy security, said the energy adviser.

The government also took steps to build the country’s first-ever nuclear power plant at Rooppur in Pabna with Russian assistance to ensure the country’s future energy security and diversify the energy sources, Mr Chowdhury said.

The ground-breaking work on the first of the two units, each having the 1,000-mw power generation capacity, of the nuclear power plant would be done shortly, he expressed his hope

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