Cover Story

An Inevitable Hike?

Akram Hosen
Photos: Amirul Rajiv
Additional Reporting: Anika Hossain

The cost of electricity has been increased for the sixth time in three years. Last month's 15 percent increase in retail power tariff was the fourth time in a single year that the government hiked the cost of electricity. The cost of electricity has more than doubled since the present government came to power. While the general public is opposing this decision for obvious reasons, the authorities insist that they had no choice but to hike the price: “The price of furnace oil that we use to produce electricity has risen from Tk 26 to Tk 60. The supply and generation cost has also increased significantly,” says Mizanur Rahman, director, systems and planning of Power Development Board (PDB).

It takes a considerably large amount of fuel or other forms of energies like, coal, air, water, gas, oil or solar power to produce electricity. Nuclear, air, solar and water are recyclable energies. Coal and gas-fired power plants are known to be cheaper and sustainable ways of producing electricity. But over the last three years, our power sector has gradually become more dependent on oil than ever. The use of imported oil, obviously costlier than gas or coal, has increased power generation costs significantly. Although it was the authorities who took the decisions that made the sector dependent on oil, it has been decided that “the people who are using the electricity should give proper costing,” adds Mizanur Rahman.

In its proposal for increasing the price of electricity, PDB included a table demonstrating the increased use of oil for power generation over the years. The use of fuel in fiscal year 2012-13 is speculated.

The numbers indicate the path our power sector is taking. It has been reported that new oil based power stations will start to operate next summer. The production cost for per unit power will also be raised then.

When the government came to power in 2009, there were severe power shortages in the country. In order to meet the demand for electricity immediately, it gave work orders for rental and quick rental power plants that run on oil and are more expensive than the state owned power stations. But the apparent reason why they were chosen was to relieve the imminent shortage of power while other, more sustainable power stations were being built.

The caretaker and the BNP led government before the present government also enthusiastically advocated rental power plants.

“As an emergency measure, I always support rental power plants. I support rental electricity because they can create a breathing space for us to establish permanent and cheaper power stations,” says Dr M Tamim, former special assistant on power, energy and mineral resources to the chief adviser of a caretaker government.

However, Tamim believes that the government focused too much on the emergency measures, rather than thinking about long term solutions. “Their expansion of rental and quick rental plants has been uncontrolled and has ended up being a liability for the economy.” Oil-run power stations are also used by other countries, but their usages are always temporal and the entire power sector does not depend on their power generation. However, we have more rental power plants than we can possibly use at present. Three years have passed, but no alternative to these plants have been made available.

Most of the experts allege that there were irregularities in the way the rental and quick rental power plants were brought. “The individuals who were endowed with the contracts bought old, obsolete power stations at cheap prices and brought them here,” says BD Rahmatullah, former power cell director general. He adds that the nationalised banks were instructed to give any amount of credit to anyone who planned to set up power plants. “I know of cases where old stations were bought but the credit taken from the banks was to buy new ones,” he adds.

He also informs that the people who were given the rental and quick rental contracts are all leaders of the Awami League or Jatiya Party. “The worst part is that by passing an indemnity bill they have closed the way for anybody to challenge the legal grounds of these contracts,” he adds.

It is also important to note that the profit margin of the parties who have rented the power station to the government have remained unaffected despite the increasing furnace oil price over the last three years. It is the government that is paying for the oil and subsidising the oil supply.

Asked about his opinion on subsidising electricity in order to lower the retail prices, noted economist MM Akash says that the government has signed a deal with IMF that states that our electricity prices should be directly linked to international oil prices. “There will be no question of subsidising as long as we are using oil as fuel,” he says. If, for example, the oil price doubles in the world market now, our electricity prices will also be adjusted accordingly. “It is dangerous, because the increased cost of electricity will increase the cost of production for many things and the economy will be more susceptible to inflation,” he adds.

Economists and energy experts have always been skeptical about the rental power stations and have been asking the government to overhaul the existing power to increase their efficiency. “We knew that the dependence on rental electricity would prove to be catastrophic for the sector. But nobody paid any heed,” concludes Professor Akash.

Earlier this year, it was reported that making the existing power stations energy efficient could be a much cheaper solution to the power shortage. The power stations relying on gas are only 60 percent energy efficient. It means that the amount of gas that we are burning to produce 60MW electricity could produce 100MW if the plants were overhauled and made energy efficient. (Prothom Alo, 16 January 2012)

Dr M Tamim says that replacing old machinery of the power stations could give us 1000MW more electricity with the same amount of gas. Had the government started working on making the plants efficient from the beginning, we could have had cheaper electricity by this time, he adds. “They are planning on establishing permanent power plants at present. But the chances that these power plants will materialise soon are slight,” he adds.

According to PDB, we are now producing 1200MW electricity from gas and 1700MW from oil. “We didn't have any choice but to move to oil, because we didn't get enough supply of gas. If we had cheaper and subsidised gas, why would we use oil?” asks Mizanur Rahman of PDB. He further informs that the machines capable of producing 1000-1500MW electricity could not function, because there was no gas. The plants were brought in order to stop public sufferings, according to him.

In a similar vein, Muhammad Enamul Huq, the state minister for energy, also says that we don't have gas and that oil was the only feasible solution. Having said that economic calculations vary from person to person, he asserts that the prices are not fixed. “If oil prices fall tomorrow, our electricity prices will fall as well. The government is running the sector on a 'no profit no loss' basis,” he says.

Before this government came to power it was promised that they would set up power plants that are less costly to run. They promised to make the old power stations efficient through overhauling and effective maintenance. Increased supply of gas through exploration was also promised. “None of their promises have materialised because nobody had even tried,” says BD Rahmatullah. He informs that in the onshore gas fields of the country, we still have 30-32 cft gas, but they are not being explored. Workover and proper maintenance of the existing gas fields could also enhance gas supply without much expense.

Rather than focusing on gas exploration and ensuring efficient use of fuel in the gas-fired power plants, the government has repeatedly been saying that the country doesn't have gas and that oil is the only available option.

If we were producing power from gas, per unit of electricity would have cost TK 1.80, while oil run power stations, at the current rate of oil, produce electricity that costs 12.5-13 per unit, informs MM Akash. While we are becoming dependent on oil-run power generation, very little is being done to enhance the exploration and supply of gas.

“It's proven that we can't rely on oil to generate power. We need coal and gas fired power plants. There is a lot of hope of exploring new gas fields,” says M. Tamim.

The gas-fired power plants promised by the AL led government remain a distant dream to this date. “If the Bibiana and Bhola gas-fired power plants had materialised, we would have 600MW of cheap electricity in the country,” says Tamim. The installation procedure of the Bibiana power plant had stopped when the World Bank withdrew its $ 120 million funds. “The government should have tried again to complete that plant even if with its own funds,” he says. If the government prioritised cheaper ways of generating electricity, the public would not have to suffer like this.

Another power plant in Bhola also had the prospects for a source of electricity, but prompt actions have not been taken by the government to install that plant.

As a result, our dependence on oil has increased in three years.

Experts have been suggesting that the government should empower Bangladesh Petroleum Exploration Company (BAPEX) and buy new rigs for gas exploration. “After we have yelled our lung out, they increased the capacity to a total five rigs,” says BD Rahmatullah. He adds that a rig costs Tk 200 crore and that 10 rigs could be set up easily.

The amount that has been spent for these rental stations would have been enough to start working other permanent solutions. Apart from the economic factors, burning so much oil is also ruining the environment. There is no way that the rental and quick rental power plants used by other countries for emergencies, will provide us affordable electricity in the future.

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