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Big hole in 'capacity payment'  

Shamsul Huq Zahid   | Published: October 17, 2019 22:27:58 | Updated: October 18, 2019 21:58:38


The amount---more than Taka half a trillion--- is huge. The money was, reportedly, paid to the owners of the private sector power plants during the last 12 years as ' capacity payments'.

The payments were in addition to a large amount that the state power agency---the Bangladesh Power Development Board (BPDB)--- paid to the private power plants, including a large number of rental power plants, every year against purchase of electricity.

But against the capacity payments, the BPDB did not get anything material. What it got was assurance of stable supply of power.

Capacity payments are, however, more like guarantee money. Power plants do get such money whether or not they produce electricity. The payments operate like an insurance policy for power plants that commit to generate sufficient power to meet electricity at all times.

The BPDB people or the power sector honchos, deliberately or otherwise, have been doing their arithmetic with regards to demand and supply of power wrong and this has been taking a huge financial toll on the national exchequer.

There is no denying that the power supply is now stable than any time before. Even during the hot summer days, load-shedding in Dhaka, if not other places of the country, was a rare incident. Power supply disruption is caused not by short-supply but due to problems in distribution network, in most cases.

While ensuring stable power supply, the government has created over-capacity, largely depending on very expensive sources of power generation---rental power plants in the private sector.

According to a media report, the country's total generation capacity now stands at about 19,000 megawatt (MW). The highest amount of power generated until now was 12,324 MW on September 15 last. The demand during the winter season hovers between 6,000MW and 7,000MW.

Naturally, because of reduced demand, the government does not have to buy power from the private power plants during winter. Yet it has to make capacity payments to private power plants in accordance with the deals signed with individual power companies.

It is evident from available statistics that the power sector has excess capacity of more than 6,000 MW, even after meeting the demand for power during peak summer season. The government has been making payments unnecessarily against the unused or more capacity during the summer days.

Moreover, there are allegations that many inefficient private power plants do very often fail to supply power as per agreements, yet they receive capacity payments.

'Capacity payment' is a common practice in the global power market. It is seen as an incentive used to lure investments in power sector. But a section of people in the power sector of Bangladesh, apparently, have been using it unduly to make their fortune.

The rental power plants came into being as a stop-gap arrangement in 2010 to overcome a dismal power situation. The idea was that the government and also the private sector would build large to medium conventional power plants within the shortest possible time. But things have faltered there. The government initiated a good number of large power plants, but even after two decades, not a single big power plant could be completed as yet. However, a few are expected to start generating power soon.

It seems, taking advantage of a piece of indemnity legislation, some people have been playing foul while granting licences to rental power plants and making so-called capacity payments.   

 

zahidmar10@gmail.com

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