Page 8 - AsiaElec Week 03 2021

AsiaElec POLICY AsiaElec

Overcapacity threatens viability of

Bangladesh’s power sector

BANGLADESH OVERCAPACITY in Bangladesh’s power sys- Bangladesh have been cancelled due to concern
tem has worsened and threatens to deteriorate over high prices during 2020. This concern is
further, the Institute for Energy Economics and likely to intensify now that Asian LNG prices
Financial Analysis (IEEFA) said in a note. have soared to a new high in early 2021.
Data from the Bangladesh Power Devel- “Furthermore, there is still a significant
opment Board’s (BPDB) latest annual report amount of new, expensive oil-fired power gen-
shows that overall power capacity utilisation in eration set to come online which will add cost
fiscal year 2019-20 was just 40%, down from pressure onto the BPDB in addition to imported
43% in the prior year – a clear sign of worsening coal and LNG.”
overcapacity. More than 1,000MW of new oil-fired power
Planned capacity additions over the next five is scheduled to be operating by the end of 2021
years will likely see capacity utilisation decline according to the BPDB.
further, said IEEFA energy finance analyst By contrast, Bangladesh currently has 700.84
Simon Nicholas. MW of total clean energy generation capacity,
“With another 21,000MW due to come on of which 369.81 MW is grid connected. Solar
line by 2025 and only 5,500MW of old capac- accounts for 466.91 MW of the total clean power
ity due to be retired, utilisation will drop below figure.
40% unless a very high rate of power generation A new Power System Master Plan (PSMP)
growth is maintained,” says Nicholas. is currently being prepared for release in 2021.
Power generation growth was just 1.26% in It has been reported that overcapacity and fuel
2019-20, barely keeping pace with population issues are amongst the priority issues to be
growth, as the economic impacts of COVID-19 addressed in the new plan.
were felt in Bangladesh. “The Sustainable and Renewable Energy
The IEEFA estimates that capacity utilisation Development Authority’s (SREDA) draft
will drop below 40% over the next five years National Solar Energy Roadmap recommends
unless power generation growth is maintained aiming for a high-deployment solar installation
at or above 10% per annum. program with a target of up to 30,000MW of
“Worsening overcapacity has significant solar to be installed by 2041,” said Nicholas
implications for the BPDB’s finances as well as At present 2% of the population still has no
power tariffs,” says Nicholas. access to power, reducing the country’s GDP
“Under power purchase agreements, ther- by up to 3% per year, according to government
mal power generators receive capacity payments estimates.
regardless of whether they are utilised or not. Rapid urbanisation is also a major factor in
Under new legislation recently passed in organising power supplies, with nearly half the
Bangladesh, power tariffs can now be raised population expected to live in urban areas by
multiple time each year. 2025.
“On top of the overcapacity problem, the Bangladesh’s installed power capacity is more
planned future reliance on expensive imported than 20,000 MW and the country aims to pro-
coal and LNG will raise the per unit fuel cost for vide electricity to all of its more than 160 million
thermal power,” says Nicholas. people by 2020.™
“Several tenders for LNG imports into

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