Factory owners nevertheless want captive power plants

The government has brought the entire country under electricity coverage. In addition, our power generation capacity is almost twice the demand now. Nevertheless, the industrialists are interested in captive power plants in the factories

The number of approval for captive power plants in the country has multiplied by two and a half times in the 2021-22 fiscal alone. The number stands at 115 in the current fiscal. Some 44 captive power plants got approval in the previous fiscal. The number of applications for captive power spiked after the increase in power outages in the country as an impact of the ongoing Russia-Ukraine war. Some 20 applications for such power plants were submitted at the board meeting of Bangladesh Energy Regulatory Commission (BERC) on 22 August.

Besides, there are applications for increasing the power generation capacity of the power plants. Some 79 applications got approval even in 2021-22 fiscal.

In all, the number of captive power plants stands now at 3,460. The total power generation capacity of these plants is 4,723MW, of which 1,780MW is produced in diesel-run plants.

However, of this 1.780MW electricity, 1,092MW is produced by small diesel-run plants, commonly known as generators, under waiver certificates.

The BERC officials and the industrialists refer to three reasons for captive power plants.

First, the cost for producing power from gas in the factory is less than the price of electricity from the national grid. The cost of electricity from the grid averages around Tk 8.5 per unit in the industry. If power is produced in captive plants, the cost will be less than Tk 4. However, in the case of diesel, the cost is much higher.

Second, there is a lot of hassle in getting the electric connection and later on too. Instead, generating electricity from captive power plants, taking a gas connection for once, is much easier.

Third, factories have to install high-capacity generators due to the lack of uninterrupted power supply. This high-capacity generator is a kind of captive. Now the factory owners are running diesel-fired plants at an increased cost due to power outages.

Asked about the reason for running captive power plants despite the country’s high power generation capacity, Mostafa Azad Chowdhury, senior vice-president of Federation of Bangladesh Chambers of Commerce & Industries (FBCCI), told Prothom Alo, “Businessmen may turn to captive power plants due to the uncertainty of the future about uninterrupted power supply. Also, the uncertainty over getting uninterrupted electricity in the fear of a major recession ahead may play a part behind such a tendency.”

An approval from the BERC is required for installing its own power plant, and if the capacity of the captive plant is more than 1MW, a license is required. A waiver certificate is required for less than 1MW power generation.

According to the traders, once it was very hard to get electricity connection in the country. Even if there was availability, it was hard to get the connection in industries. Therefore, the industrialists started running their own power plants at factories.

After coming in power in 2009, the Awami League government stressed on installing power plants. Later, the power generation capacity increased exponentially. As a result, power-outage reduced drastically and electricity connection in industries became easier. But in recent times, it has been observed that the tendency of industries to run their own power plant in the factory has not decreased, rather it increased.

An investment of Tk 80 to 100 million is needed for a power plant of 1MW capacity. Traders say the factory owners make their own arrangements as uninterrupted power city is not available. A factory cannot be closed because of a power outage.

Of the applications which came up in the board meeting of BERC on 22 August, one was submitted by Bando Eco Apparels Limited. Speaking to Prothom Alo, Giyash Uddin Ezaz, managing director of Bando Eco Apparels Limited, says an approval is required if the capacity of the generator exceeds a certain level and they have applied for that.

He said, “The cost of producing electricity with diesel is three to four times that of the cost of the power provided under government arrangement. Due to the increase in power outages, generators have to run for more times than usual. Therefore, the production cost of factories is rising."

The BERC introduced a new consumer class named the ‘Q’, which had been in effect since 1 June 2012. It was said at that time that factory owners under this category would get uninterrupted electricity supply at an extended price.

The price of electricity in industry was around Tk 6 per kilowatt at that time. The price for per kilowatt electricity under the uninterrupted electricity supply facility was fixed at Tk 14. Due to the high price, there was no interest among the industrial owners in getting the service. Such a high pricing drew massive criticism at the time. Mohammad Hossain, director general of Power Cell, the policy regulatory agency of the Power Division, told Prothom Alo they use the unavailability of uninterrupted electricity supply as an excuse.

Captive power plant in a gas-powered factory reduces the production cost to a great extent. This is the main reason behind the interest of the factory owner. He said they have no problem running diesel-powered plants. However, they have some objections with few issues regarding gas-powered captive plants.

According to the figures of the Power Development Board, the generation capacity of the power plants connected to the national grid is 21,712MW now. On 16 April, a total of 14,712MW electricity was produced during the peak of demand. It was the highest power generation in a day in the history of the country. Due to the lack of demand, our additional generation capacity cannot be used. Besides, the government has to bear the capacity charge of the plant without using it.

Now, due to the ongoing global energy crisis, it has become impossible to produce power as per the demand. A planned power outage is being carried out across the country following the exponential rise in the price of fuel oil and gas in the international market since 19 July.

The PDB officials say the generation capacity of gas-fired plants in the country is 11,1625MW. The average cost for producing power using gas was around Tk 3.5 in the last fiscal. However, the gas-fired power plants are producing some 6,000MW.

On the contrary, PDB’s average cost for producing power using diesel was Tk 36 and Tk 17 for producing from furnace oil. Even the average cost for producing power from coal-fired plants was more than Tk 13 on average. The reason for not being able to increase the production of Power from gas despite a low cost is the unavailability of gas.

The scarcity of gas is nothing new. It started in 2010. After that, the government stopped giving new connections in residential areas. A special committee was formed to control new gas connections in residential areas. Later, however, the government started showing some leniency in providing gas connection in the industry as gas production increased.

The import of liquefied natural gas (LNG) started in 2018. After that, some captive power plants got gas connections. There are also allegations of irregularities and manipulations in providing new gas connections.

According to the sources in PDB, now the power plants connected to the national grid produce 6,500MW Power using 40 per cent of the total gas reserve in the country. And some 2,943MW electricity is produced from gas-run captive power plants using 20 per cent of the total gas in the country.

Discussions have been going on for a long time about not approving new gas-fired captives by keeping the power plant closed. Amid this discussion, such sorts are getting approval regularly. Titas Gas Transmission and Distribution Company Limited has the highest number of gas-run captive plants.

Speaking to Prothom, managing director of Titas, Harunur Rashid Mollah said approval for gas connection in captive power plants fell within the jurisdiction of the directorial body of Titas. However, the number of approvals declined due to the gas crisis. No one got approval at the board meetings in the last two months.

People concerned say that the government even started talks on exporting power as generation capacity increased. The PDB was instructed to discourage installation of captive power plants. There was a recommendation to increase the price of gas used in captive plants manifold. Now the price of gas is Tk 16 per cubic feet in the captive power plants.

However, these initiatives taken for discouraging companies in installing captive plants went in vain. Added to that is the fact the power outage has increased now. Therefore, the factory owners are looking for the approval for their own power plants at the moment.

According to relevant sources, power plants, adequate supply of energy and a developed power transmission system is required for uninterrupted power supply. Although the government stressed on installing power plants, there was not much emphasis on securing energy sources and improving transmission lines.

Senior vice-president of Consumers Association of Bangladesh (CAB), M Shamsul Alam told Prothom Alo that the government’s management in the power sector has become completely useless. As a result, to save the industrial sector and to secure their investments, the businessmen are moving towards uninterrupted power supply. However, there is still uncertainty over adequate power supply despite having their own power plants. Also, there is uncertainty over the import of LNG and diesel due to the dollar crisis.

*This report appeared on the print and online versions of Prothom Alo and has been rewritten in English by Ashish Basu