Total excess capacity payments in the energy sector are projected to exceed Tk 36,000 crore over the past 15 years, thanks to the underutilisation of power plants (gas, coal), according to the White Paper on the State of the Bangladesh Economy.

The White Paper Committee, led by economist Dr Debapriya Bhattacharya, presented its findings at a press conference in the NEC conference room in the capital on Monday after submitting the report to Chief Adviser Prof Muhammad Yunus at his Tejgaon office on Sunday.

The report indicated that total capacity/rental payments to the private sector from 2010-11 to 2023-24 amounted to approximately Tk 115,000 crore.

The overall plant factor (the percentage of full capacity utilised) of the entire system has ranged between 42% and 46% over the last five years, indicating a highly inefficient system.

A 65% plant factor is achievable by minimising maintenance, reducing standby capacity, and ensuring the full supply of fuel, the report said.

Six HSD-based IPP plants, with a total capacity of 1000 MW, were awarded for a 5-year period in 2018, with reference capacity payments nearing $20/kW-month. ($1 = Tk 121 as of December 6)

But, none of these plants operated beyond 10% of their capacity on average throughout the contract period, resulting in 90% of the capacity payments being made for 1000 MW without any electricity production, the report highlighted.

These plants were primarily used in extreme situations that could have been managed by HFO plants.

The report further criticised the political considerations and underhand dealings involved in awarding these power plants, which led to crony capitalism.

From 2014-15, HSD and HFO power plants awarded under the Special Provision Act have received Tk 15,551 crore and Tk 9,100 crore, respectively, in capacity payments.

The average plant factors of HSD and HFO plants in the last five years were only 32% and 9.22%, respectively. If a minimum plant factor of 65% had been achieved, the oil-based power plants under the Special Provision Act would have received an additional Tk 10,000 crore in capacity payments.

The rental plants awarded in 2010-11 earned profits as high as 35% against a standard 15%, yielding a windfall of no less than Tk 10,000 crore.

Capacity and Energy Contracts

Capacity contracts are sometimes compared to monthly data packages, as opposed to the "pay-as-you-use" option in an energy contract. Irrespective of total usage, a guaranteed payment is assured through a Power Purchase Agreement (PPA) to ensure that full capacity is always available.

Taking advantage of such guaranteed payments, the capacity market has been flooded with oversupply due to unprecedented corruption.

The average annual plant factor or capacity utilisation for oil-based rental plants has been below 50%.

These plants, typically meant for peaking power supply, have been used extensively as underutilised baseload plants, leading to expensive operations and an increase in the cost of generation, making a burden for the exchequer.