Low quality surplus power makes industries rely on captive power

At a time when there is a large surplus of electricity in the country, industrial consumers are still largely using their own captive power plants as they cannot rely on the blackout-prone power distribution system.

As a result, the government has been left with large amounts of unsold power, the cost of which is being imposed on the public through repeated power tariff hikes.

Different power plants connected to the national grid can now generate 19,000 megawatts (MW) of electricity against a maximum demand of 12,000MW.

Meanwhile, 2,907 large industries and enterprises, today, can generate 3,700MW using natural gas and diesel.

A synchronised effort to merge industrial users with the national grid could have raised the maximum power consumption to around 16,000MW and thus reduced the financial burden of unsold power.

The Bangladesh Power Development Board paid Tk8,929 crore to different private power plants in "capacity payments" to keep their plants idle.

This situation has resulted from the government's heavy investments in power generation during the last decade – and a lack of focus on upgrading the power distribution system.

Thus, different parts of the country experience power failures, even in winter – when demand is lower.

Industrial suffering

Envoy Textiles Limited, a leading denim producer in the country, has repeatedly faced load shedding and a low voltage problem to operate its machinery.

The factory is located in Bhaluka of Mymensingh and it uses power from the national grid.

The company's energy consumption report revealed that between January 2017 and July 2019, the factory remained shut an average of 59 hours every month – due to power outages.

The worst the factory experienced was in April 2017 when it remained shut for 171 hours.

Fed up with such power interruptions, the company is now using a captive power plant on its premises.

"Every day, we experience more than two hours of power cuts and we have to use diesel-run captive generators – which costs Tk60 lakh per month and Tk7 crore per year. This is nothing but an unnecessary expenditure," said Kutubuddin Ahmed, chairman and founder of Envoy Group.

But the fuel cost is not the only expense.

"We have to hire additional manpower to operate the captive power generator and buy a standby battery system to ensure an uninterrupted production line during load shedding. This imposes an additional cost of Tk2-3 crore," said Kutubuddin.

Power and load disruptions also punish costly industrial machinery by reducing their operability.

Like Envoy Textiles, most industries in different industrial cities – including Gazipur, Savar, Narayanganj, and Chattogram – that are connected to the national grid experience low voltage and load shedding problems.

Bangladesh Textiles Mills Association Secretary Monsoor Ahmed told The Business Standard that industries use captive power because it is cheaper and more reliable than the national grid's power supply.

"The gas supply situation has improved after meetings with government officials, including the power, energy and mineral resources minister, but a reliable electricity supply has not been established.

"If a textile industry wants to use the national grid connection, it must invest Tk10 crore more for a backup electricity system," Monsoor added.

A recent survey conducted by the Bangladesh Garment Manufacturers and Exporters Association found that industries located in Gazipur experience 438 hours of load shedding annually, while the amount is 338 hours in Chattogram, 330 hours in Savar and 292 hours in Narayanganj.

The survey also found that poor power supply inflicted a loss of Tk55.37 lakh on a factory in Narayanganj a year. Losses included technical faults in machines, production problems and time.

Therefore, industries are opting for their own power-generating facilities while the country's huge generation capacity remains unused.

On the other hand, the Bangladesh Energy Regulatory Commission's data says that it has approved licences for 2,907 captive power plants which have a combined capacity of generating 3,707MW electricity.

However, sources said the real number of captive power plants and the energy generation capacity is higher.

Capacity charges

The Bangladesh Power Development Board spent Tk8,929 crore in capacity charges for the privately-owned power plants in fiscal year 2018-19 – up 43 percent from the previous financial year.

"The amount may further rise as seven more oil-based power plants have started generating electricity recently and more plants are expected to come into operation in the coming days," a senior official of the Power Division told The Business Standard.

During the last decade, the Power Development Board spent Tk51,157 crore on private power producers in capacity charges.

Poor power distribution system

The Power Development Board is frustrated with incurring losses when it should be counting profits. It blames poor infrastructure within the transmission and distribution systems for not being able to sell a maximum amount of power.

While proposing power tariff increases in an effort to offset losses, the power board mentioned this at the public hearing of the Bangladesh Energy Regulatory Commission last month.

The Power Grid Corporation of Bangladesh, however, argued that there was no problem with the transmission system.

Its Managing Director Golam Kibria said the company's existing infrastructure could supply more than 23,000MW of electricity across the country.

He blamed the poor power distribution system on companies like the Dhaka Electric Supply Company Limited and the Bangladesh Rural Electrification Board.

The Bangladesh Rural Electrification Board – the country's largest power distribution company – however argues that while its infrastructure has some limitations, the industries are also to blame.

Its Chairman Major General (retd) Moin Uddin said, "We admit that we have some limitations because we distribute power through some old infrastructure. Industries are also responsible for this problem because most of the industries in Savar, Mymensingh and Gazipur are being developed in disregard to industrial planning."

Initiatives to reduce power outages

The Power Division has taken initiatives to resolve the problem through discussions with industrialists of the Bangladesh Garment Manufacturers and Exporters Association, the Bangladesh Knitwear Manufacturers and Exporters Association, the Federation of Bangladesh Chambers of Commerce and Industry, and the Dhaka Chamber of Commerce and Industry in several closed-door meetings.

The latest one was held on September 14 last year at Bidyut Bhaban with top representatives of the business associations.

The business leaders discussed the state of electricity supply and the losses incurred because of interruptions and low voltage.

Electricity supply and distribution entities, however, told the Power Division that most of the factories have been set up in violation of industrial planning – the main cause of power interruptions.

The associations decided to form a high-level committee to solve the power and energy sector's problem.