Sep 24
Rental power: a no-go PDF Print E-mail

The Centre for Policy Dialogue (CPD) yesterday discouraged the country from going for the costlier option of quick rental power plants as a mid-term solution to electricity shortage. “On the one hand, consumers are paying higher power tariffs. On the other, the government is paying higher subsidies to the power sector,” said Mustafizur Rahman, executive director of CPD.

“The government should try to phase out the rental power plants as early as possible.” The economist came up with the analysis during a press briefing at his office in Dhaka while presenting the analytical review of the country’s macroeconomic performance in the outgoing fiscal year. Faced with a serious power crisis from years of non-investment in the sector, the government opted for rental power plants after coming to power in 2009.

At present, the share of rental power plants is about a third of total generation capacity. But these costly oil-based plants put the country’s fiscal and financial health under serious strains as the Power Development Board (PDB) has to bear a huge burden of subsidy because of very high purchasing price of electricity, Rahman said.

The research firm said the purchase price of electricity from rental power plants should be renegotiated by taking into consideration the changing cost structure.

Taking into account such financial burden, the government had planned to reduce the share of electricity generation from rental plants through their retirement, mostly by 2012-13.

“But the government could not sustain its plan and therefore, its fiscal burden in the coming years would not be lessened so easily,” CPD said.

Although the subsidy burden has partly reduced because of a fall in the import price of oil and the revision of power tariff, a part of it would remain due to the extension given to rental plants.

“The inefficiency of using rental plants will increase further if the government gives extension to most rental power plants without taking into consideration their level of efficiency,” CPD said.

“Overall, the power sector is burdened with huge inefficiency, which created a significant financial burden and led to a loss of supply of low-cost electricity and higher power tariff on consumers.”

Subsidy on the rental power plants in 2011-12 accounted for about 44 percent of the total subsidy to the power and energy sector, according to a study.

Despite several tariff adjustments since 2009, the subsidy burden per unit of generation of electricity did not decline, according to CPD.

Rather, it has increased significantly until 2011-12, from Tk 18.9 lakh per megawatt in 2009 to Tk 44.5 lakh by January 2013.

CPD said the gap between installed capacity and generation has been widening over the years, from 1,004MW in 2009 to 3,118MW in April 2013.

“This has happened mainly because of low-level of capacity utilisation of quick rental power plants. Such huge unrealised capacity raised questions about their quality.”

CPD also called for more fiscal and financial support for renewable power generation projects given the huge potential of the sector.

“Renewable energy could play an important and supplementary role in the power sector. The government should consider feed-in tariff for renewable power generation projects to woo private investors to the sector.”

About six million households from the off-grid area could be brought under the renewable energy network, CPD said. (Courtesy : The Daily Star)