Govt backtracks to diesel to increase power generation

The government stopped importing Liquefied Natural Gas (LNG) from the open market in July because of the dollar crunch. Diesel-run power plants were shut down as well to stop the fuel oil import.

As electricity generation reduced due to this, load shedding increased across the country. After raising fuel oil price, the government is now increasing production from the oil-run power plants again.

However, concerned people say that producing electricity using diesel is the most expensive option out of gas, coal, furnace and diesel powered power plants. And, gas is the least expensive one. But, gas supply has reduced for inclining towards import.

So, oil-run power plants are being operated more, finding no other ways. PDB’s cost will go up for this. And, a pressure will be created on the government’s subsidy which in turn might increase the electricity price.

As per the Power Development Board (PDB) sources, at present the average cost of producing per unit of electricity from diesel is about Tk 25 and from furnace oil about Tk 15. Meanwhile, the average production cost from gas is about Tk 4 per unit.

However, including all PDB’s average cost has surpassed Tk 9 already. PDB and Bangladesh Petroliam Corporation (BPC) sources say, due to drought the use of irrigation in Aman cultivation has increased while the temperature isn’t decreasing either.

So, all the diesel-run power plants have already been activated to meet the additional demand of electricity. These power plants are now being run for longer periods than usual. For this, BPC suddenly received a nine times higher demand of diesel supply from the PDB. At the same time, the demand of furnace oil in the electricity sector has doubled as well.

PDB sent a letter to BPC in October last year informing them of the fuel oil demand for each month of 2022. As per that record, the demand of diesel was 42,000 tonnes for three months starting from August to October. And, the demand for the whole year was 178,000 tonnes.

Now PDB’s diesel requirement in three months has soared to 391,000 tonnes. And the demand of furnace oil for three months has been changed to 291,000 tonnes from 146,000 tonnes.

That letter, PDB sent on 8 August, said newer demands have been informed for all furnace oil-run government power plants, Katakhali rental power plant and diesel-run government-private power plants. Earlier, the government increased the diesel price by Tk 34 per litre from 6 August while, the furnace oil price rose by Tk 13 per litre from 15 August.

Shutting down all the diesel-run power plants, strategic load shedding started from 19 July. Though, the load shedding was said to be one-hour long, it increased to several hours in most areas across the country. Later, two diesel powered plants were activated in Khulna and Sirajganj from 24 July.

As it did not help improve the load shedding situation, all diesel-run plants were re-activated in phases starting from 7 August. Power division and PDB officials said that production from the oil-run power plants has been increased to keep the load shedding within a bearable limit.

PDB sources say that the Power Development Board is under the pressure of incurring huge loss for the high fuel price and capacity charge (the charge for the extra production capability). They are not getting regular subsidies either. So, the PDB is unable to pay the power plants’ bills regularly.

This has also created pressure on the businessmen, who import fuel oil for the power plants. The power plants are suffering losses due to the difference in dollar exchange rate too. Even if the businesspersons opened LCs for oil importing after buying dollars at a higher price, PDB is paying the bills at the exchange rate fixed by the central bank. They are suffering losses for this too. So, some of them cannot import oil.

Nasrul Hamid, state minister for power, energy and natural resources said to Prothom Alo, some of the private power plants are unable to import fuel oil because of financial crisis. Oil is being supplied through BPC to retain the improvement in power supply condition.

As per the BPC sources, BPC used to supply furnace oil to all public and private plants. Later, BPC's supply in this sector started decreasing when private entrepreneurs began importing oil themselves with permission.

At present, the number of furnace oil-run power plants is 60. Among them, 40 private power plants import oil under their own management. The monthly demand of all furnace oil-run power plants in the country is 400,000 tonnes.

Imran Karim, president of Bangladesh Independent Power Producers Association (BIPPA), an organisation of private sector power producers, told Prothom Alo that such a difference in the dollar exchange rate is unprecedented. And PDB's delay in paying the bill has fuelled the problem even further. Some have become unable to import oil because of this.

Two concerned officials of BPC told Prothom Alo that BPC plans beforehand on buying fuel oil for every six months. And, suppliers send demand notes based on this. PDB notified them about the addition demand all on a sudden.

The two officials further said it was not being possible to meet the entire amount demanded for August. Currently they are supplying it from the stock. Each power plant is being supplied a bit less oil than their mentioned demand.

BPC chairman ABM Azad said to Prothom Alo a bit of pressure has been created for the additional demand, which wasn't a part of the plan. Still, maximum efforts are on to run the power plants by supplying the required amount of oil. Preparations have been taken to supply oil as per the demand in the next two months.

On some days of the last month, the amount of load shedding surpassed the threshold of 2,000 megawatt. It was more than 1,500 megawatt at the beginning of this month.

However, the amount of load shedding is reducing gradually now when production from oil-run power plants has gone up. The power demand might decrease in November. Till then efforts are on to control load shedding by increasing the production of oil-run power plants.

Out of the eight diesel-run power plants, six are private while only two are government. Including all, the total production capacity is about 1,500 megawatts.

And, the furnace oil-run power plants have the production capacity of 6,000 megawatts while, the power generation capacity from gas is about 11,500MW. But, they are able to produce only about 6,500MW due to the gas crisis.

Meanwhile, concerned people of the power plants say earlier it used to take maximum two months for the power plant arrears to be paid. But some bills have been overdue for about five months now. This may disrupt production and give rise to load shedding as well.

M Tamim, special assistant to the chief advisor of the former caretaker government on energy, said to Prothom Alo all the oil-run power plants in Pakistan closed down because of the overdue bills. Load shedding used to be extended up to 12 hours in the country.

This issue needs to be addressed quickly to avoid extreme load shedding in the country. The oil supply must be ensured somehow, he added.

* The report, originally published in the print and online edition of Prothom Alo, has been rewritten in English by Nourin Ahmed Monisha