Why load shedding despite so many power plants

The previous Awami League government constructed power plants one after another without ensuring a steady fuel supply and demand was also not taken into account either.

As a result, these power plants had to be kept idle for long periods every year. However, capacity charge has to be paid for these idle plants. To manage costs, electricity prices for consumers increased, and the government's liability also shot up.

Despite these measures, people have been suffering from load shedding whenever temperatures rise, which has been a recurring issue for the past three years.

The interim government, which took office on 8 August, is also facing the same challenge. There is insufficient fuel to operate the power plants, resulting in increased load shedding. On Monday alone, over 2,000 megawatts were cut due to load shedding.

Load shedding has intensified for the past three days. In some rural areas outside Dhaka, people are experiencing power outages lasting between 8 to 10 hours.

Although the country’s electricity production capacity is now approximately 27,791 megawatts, the current demand is less than 16,000 megawatts.

According to sources at the Power Development Board (PDB), a liquefied natural gas (LNG) terminal owned by Summit has been closed for three months. This has disrupted the gas supply, resulting in reducing electricity generation from gas-based power plants by 1,000 megawatts.

Moreover, electricity supply from Adani’s power plants has decreased by 500 megawatts due to overdue bills.

Oil-based power plants in the private sector are also unable to meet peak demand as they also owed a lot of money. Consequently, load shedding is being carried out to fill the gap.

The country requires 3.80 billion cubic feet of gas daily. Currently, 3 billion cubic feet are supplied to manage the situation. LNG deliveries from two floating terminals in Maheshkhali and Cox’s Bazar, provide 1.10 billion cubic feet. However, since Summit’s LNG terminal has been closed since 27 May, LNG supply has dropped to 600 million cubic feet per day.

Overall, daily gas supply has reduced to 2.60 billion cubic feet. Gas supply to the power sector has decreased to 820 million cubic feet. A month and a half ago, gas-based plants could produce up to 6,500 megawatts. Now, production is around 5,000 megawatts.

Adani's power plant in Jharkhand is supposed to supply 1,500 megawatts of electricity per day. However, their outstanding electricity bill has exceeded approximately Tk 95 billion. Of this, nearly Tk 59 billion is overdue. They are pressuring for payment, and coal imports for the plant are also affected, reducing production to 1,000 megawatts.

PDB member Khondkar Mokammel Hossain (Production) told Prothom Alo that reduced gas supply and overdue bills have led to decreased electricity production. The government has taken measures to address the arrears, and the situation is expected to improve soon.

When there is a shortfall in electricity production, load shedding tends to be more severe in rural areas. In cases of significant shortfalls, even the capital city, Dhaka, experiences load shedding. Dhaka Power Distribution Company (DPDC) and Dhaka Electric Supply Company (DESCO) are responsible for electricity supply in Dhaka.

Sources at these two organisations said DPDC initiated 100 megawatts of load shedding from 4:00pm on Monday, while DESCO carried out the same amount of load shedding in the evening. There were also reports of power disruptions at various times throughout the day.

In urban areas outside Dhaka, load shedding is occurring as well, but it is more pronounced in rural areas where rural electrification associations provide electricity. The Rural Electrification Board (REB) reports that on Monday, electricity supply was 20 to 25 per cent less than the demand.

On average, load shedding of about 2,000 megawatts was carried out. In some areas, there was no load shedding, while in other areas, the shortfall exceeded 50 per cent, resulting in load shedding for nearly half of the day. The worst affected areas are Mymensingh and Cumilla.

Electricity from the Mymensingh division also serves four districts, as well as Kishoreganj and Tangail. Masudur Rahman, an executive engineer at Power Grid PLC, said that last night at 8:30pm, the demand was 1,162 megawatts, but only 932 megawatts were available.

Anita Bardhan, deputy general manager of Mymensingh Rural Electrification Association-3, presented the situation.

He said in various areas, there is a cycle of one hour of electricity followed by one hour of load shedding.

Sources at the PDB’s Cumilla region say that the average demand for electricity in six districts—Comilla, Brahmanbaria, Chandpur, Lakshmipur, Noakhali, and Feni—is about 1,550 megawatts.

On Monday, 800 megawatts were supplied in the morning, and 1,200 megawatts in the evening.

Md Zakir Hossain, general manager of Cumilla Rural Electrification Association-2, stated, “The association's average demand is 65 megawatts, but we are only receiving 35 to 40 megawatts.”

People in rural areas are facing increasing difficulties. Helal Uddin, a resident of Monohargonj upazila in Comilla, said, “In Monohargonj's southern area, which faces the most load shedding within Cumilla Rural Electrification Association-4, we receive electricity for about 14 hours and experience load shedding for the rest of the time. The people in this area are enduring endless suffering due to power outages.”

The caretaker government in 2007 began constructing rental power plants to get rid of the severe load shedding,. After the Awami League came to power in 2009, large-scale power plant projects were undertaken. The Quick Enhancement of Electricity and Energy Supply (Special Provision) Act 2010, known as the Liability Immunity Act, was passed.

Under this law, power plants were constructed without bidding. Initially, various business people were involved in building these plants, but later Awami League leaders began acquiring ownership of these power plants. Power imports from India also started during the 2013-14 fiscal year.

In a decade and a half, electricity production capacity has increased more than five-fold, while actual production has risen 3.6 times. However, the cost of renting these plants has increased sixteen-fold.

Experts believe that during the Awami League's 15-year rule, unnecessary power plants were built primarily to benefit certain groups. During this period, electricity production capacity increased from 5,000 to nearly 28,000 megawatts, which is almost double the demand. Yet, half of this capacity remains idle, leading to rental costs known as capacity charges.

Mizanur Rahman, former member (Electricity) of the Bangladesh Energy Regulatory Commission (BERC), told Prothom Alo that the demand in 2021 was supposed to be 14,500 megawatts, which was largely accurate. With a 25 per cent additional, production capacity was was to be 18,000 megawatts. Instead, it was 22,000 megawatts (in 2021).

In response to the excess production capacity, the government has repeatedly raised electricity prices to cover rental costs. However, this has not alleviated production costs, leading to substantial subsidies that have strained the government’s financial capacity and the economy. In the 2008-09 fiscal year, the cost of renting power plants was Tk 26.62 billion. By the 2022-23 fiscal year, this had risen to nearly Tk 329.60 billion, and the final tally for the 2023-24 fiscal year could exceed Tk 400 billion, according to PDB sources.

Fifteen years ago, the average cost of electricity production per unit was Tk 2.53, which has now risen to Tk 11.33. Over this period, wholesale electricity prices have increased 12 times, and retail prices 14 times. The price per unit has risen from Tk 3.76 to Tk 8.95. Despite this, pressure on government subsidies continues to rise, with Tk 400 billion allocated for subsidies in the 2024-25 budget.

On 25 August, the Bangladesh Independent Power Producers Association presented an explanation to the Power Division regarding why production capacity and costs have increased. Speaking on condition of anonymity, two power sector businessmen told Prothom Alo that electricity production costs have been rising since the 2018-19 fiscal year due to increased fuel prices.

Fuel costs account for 65 per cent of electricity production expenses, and the price of fuel has risen by 163 per cent. Without this increase, there would have been no need for subsidies, and there would be fewer questions about power plant rental costs.

Experts believe that the contracts for power plants were designed to benefit business interests, leading to a crisis for the people. The new government has initiated a review of these contracts. On 5 September, a five-member national committee was formed, chaired by retired High Court Justice Moinul Islam Chowdhury, to review the electricity and fuel sector contracts made by the previous government without bidding.

Muhammad Fouzul Kabir Khan, advisor to the ministry of power, energy and mineral resources, told Prothom Alo that power plants were built without securing fuel supply. The committee will review all power plant contracts and provide recommendations for any irregularities found.

It will take some time, but contracts for power plants are not being renewed once their terms expire.

He stated that power plants which are idle most of the time will be shut down. Instructions have been given to proceed with this in mind, ensuring that electricity prices will not be increased.

People concerned said that each power plant has been contracted at different rates. The rental rates for these plants have not been standardized across the board; some have managed to negotiate higher rates.

Furthermore, the contracts for all power plants have set rental fees in US dollars. With the value of the dollar increasing from Tk 80 to 120 over two years, PDB’s costs have risen by 40 per cent. If the rental fees for plants without foreign loans had been calculated in Taka, these costs would not have increased. The contracts can now be revised, which could significantly reduce PDB’s expenses.

M Shamsul Alam, an energy advisor at the Consumers Association of Bangladesh (CAB), told Prothom Alo that the practice of entering into contracts without bidding has benefited unscrupulous businesses. A coordinated scheme was deliberately set up to jeopardize the country’s economy. The situation has reached a point where paying for these rental fees is leading to financial ruin. There is an urgent need to either revise or cancel these power plant contracts.

**This article, originally published in Prothom Alo print and online editions, has been rewritten in English by Rabiul Islam