How will 3 new power plants run with gas in short supply?

Three new large gas-fired power plants located in Meghnaghat, on the outskirts of Dhaka, are getting ready to go online in a few months – at a time when the existing gas-based plants are operating at reduced capacity due to poor and insufficient gas supply.

Sector insiders have said the existing gas-based power plants in both public and private ownership currently require around 1,500 million cubic feet (mmcf) of gas daily, but the actual supply stands at 950-1,000mmcf. Due to the poor gas supply, many gas-fired plants are sitting idle or operating partially, and the Bangladesh Power Development Board (BPDB) is forced to rely on costly liquid fuel-based power plants.

If the gas supply situation does not improve in the national grid, the new power plants will stay idle, they added. The government will have to pay a "capacity charge" of Tk2,600 crore annually to the idle plants.

Capacity charge is what the government must pay whether or not electricity is produced upon commissioning of a plant. According to the BPDB's own data, it spent Tk67,586 crore in the last decade for paying capacity charges to the private power plants that remained idle due to a lack of demand.

With a combined capacity of 1,917 megawatts (MW), the three under-construction gas-fired power plants, which have already missed their project completion deadlines twice, are expected to go into commercial operation by October this year.

Uncertainty over gas supply

The new plants with around $2 billion in local and foreign investment require around 322mmcf of gas per day to produce electricity at full capacity, but the authorities are unsure how they will be able to meet this demand. While the power plant implementing companies remain hopeful of getting the necessary gas supply upon project completion, the gas supply agency is uncertain about its ability to meet the plants' energy needs.

Meghnaghat-II 583MW Power Plant, the largest power generation unit of Summit Power International, was supposed to start electricity generation commercially in August 2022 but was later rescheduled to March 2023. However, the dual-fuel combined cycle gas turbine power plant costing $500 million is yet to start commercial operation.

Insiders from the Power Development Board reported that the Summit plant was on track to complete construction work at the beginning of this year, but due to the gas crisis and with little indication of any improvements soon, the project is now facing delays.

Summit project on track

When contacted, Summit Power International explained that the project's delay was due to a force majeure declared globally and by their equipment supplier and engineering, procurement, and construction (EPC) contractor General Electric (GE), the evacuation company Power Grid Company of Bangladesh, and the gas supplier Titas Gas Transmission and Distribution Company Limited.

However, the project is now on track according to a new schedule for September-October this year, the company claimed.

Previously, on 3 November last year, while visiting the plant construction site in Meghnaghat, Narayanganj, Summit Group Chairman Muhammed Aziz Khan announced that the power plant was expected to start commercial operation by June this year.

When asked about how the plant would get the necessary primary fuel to produce electricity amid the mounting gas shortage, he told The Business Standard that they had a contract with Titas Gas, which had confirmed the gas supply.

"We have seen the gas shortage because the government suspended importing LNG following its price volatility. But the price has started to decrease," he said.

In addition to Summit Group's plant, two other gas-based power plants sponsored by local conglomerate Unique Group and Indian multinational infrastructure company Reliance, with a combined capacity to generate 1,334MW of electricity, missed their commissioning deadlines due to energy supply uncertainty.

Titas Gas has signed two separate gas supply agreements with Unique Group and Reliance to supply gas to their power plants located near Summit's Meghnaghat-II Power Plant.

The $520 million Unique Group project was originally scheduled to start commercial operations in November 2022 but it was found to have 92% work progress as of 15 March. The project has missed its deadline twice without facing any penalties from the Bangladesh Power Development Board due to the uncertainty of gas supply.

Titas shortage 319mmcf

Titas Gas, the largest gas distribution company in the country, currently requires 750mmcf of gas per day to meet the demands of 20 gas-based power plants in Dhaka and Mymensingh divisions. But, the company is facing a shortage of 319mmcf per day as it cannot supply above 431mmcf per day due to lower delivery from the national grid.

When asked how Titas Gas plans to supply gas to the new power plants, its Managing Director Engr Md Haronur Rashid Mullah told TBS that they would supply gas to the power plants only if they receive enough gas from Petrobangla.

BPDB's burden to get heavier

Energy experts have expressed concern that the implementation of the new gas-based power plant projects will make the financial burden heavier for the BPDB, the sole state-owned agency responsible for purchasing electricity from producers, as it will have to pay capacity payments to the project-implementing companies.

Professor Dr M Tamim, an energy expert, stated that if the companies are given gas supply guarantees under power purchase agreements and the power plants are ready for production, the BPDB would have to pay penalties for keeping the capacity idle.

He questioned the implementation of such projects without ensuring gas supply.

Asked about this issue, SM Wazed Ali Sardar, member (Generation) of the BPDB, did not provide a direct response but stated that energy supply security is not the primary issue for the commercial operation of a plant and that it depends on various preparations from multiple stakeholders.