Dollar crunch raises spectre of load-shedding

Private power plants that use furnace oil risk facing severe shortage of fuel and this may result in power cuts during the hottest months of this year.

These plants will need $ 1.05 billion between March and June to import enough fuel, according to a letter sent by the power producers' association to Bangladesh Bank.

The amount is more than a quarter of the total fuel cost Bangladesh Power Development Board (PDB) estimates that it will need in that period to ensure adequate power supply.

Since the power generated by these plants is expensive and the foreign exchange reserve has been in decline, the government may prioritise plants that require cheaper fuel like gas.

But the private plants make up as much as 27 percent of the total capacity of the country's grid. The likelihood of them remaining underutilised raises concerns of major power cuts in summer.

The country's energy security is at peril without Bangladesh Bank's support for import of furnace oil or HFO, lube and spare parts for the plants, said the letter Bangladesh Independent Power Producers' Association sent to the BB on February 20.

"Due to the shortage of US dollars in the market, it is not possible for the member companies to import the required HFO... to meet the demand of electricity… The power producers are unable to import the required fuel and parts," said the letter signed by the association President Faisal Khan.

These power plants need 21.2 lakh tonnes of HFO between March and June to produce electricity at 80 percent of their rated power, said the letter, urging Bangladesh Bank to provide US dollars to local commercial banks so that letters of credit (LCs) can be opened for imports critical for power generation.

Contacted, BB Executive Director Mezbaul Haque said that the central bank will provide support according to whatever decision the government makes. The private power plants have already received over a billion dollars from the BB this year, he told The Daily Star.

However, according to the PDB 2022 report, the government last year spent only about half the budget it allocated for buying HFO and diesel because of shrinking dollar reserves.

Even after the government curtailed purchase of liquid fuel amid a shortage of dollar reserves, the total expenditure on liquid fuel needed for power generation doubled in 2021-2022 fiscal year, compared to the year before.

Since a majority of the private or independent power producers (IPPs) rely on liquid fuel, the price of electricity sold by them rose by 77.43 percent.

Even after spending so much money, the plants sat idle in summer last year due to shortage of fuel, leading to the worst power outages the country had seen in years.

Besides, even if the government cannot supply enough dollars to the banks to meet the demands of the IPPs, it is legally obligated to continue paying capacity charges.

Between 2019 and 2021 capacity payments made to IPPs accounted for as much as 45 percent of the total cost of the electricity purchased from them, according to an analysis by this newspaper.

The government currently owes more than Tk 14,000 crore, or about $ 1.4 billion, in unsettled bills to IPPs, according to PDB sources.

This year, Orion Power with its four HFO-run power plants would require over $ 197 million for fuel.

Last year, a plant of Orion Power's Dutch Bangla Power and Associates Ltd in Siddhirganj had a plant load factor (PLF) of just 19 percent.

PLF is the ratio between the actual energy generated by the plant to the maximum possible energy that can be generated with the plant working at its rated power and for an entire year.

Summit Power, which has the second largest demand this year, is looking for HFO worth $ 160 million for its four power plants. Last year, Summit Barisal Power Ltd had a PLF of 6.5 percent and Summit Narayanganj Power Unit 1 Ltd had 19 percent.

Powerpac Jamalpur Power Plant Ltd which is seeking $ 37 million had had only a 2 percent PLF last year.

Khulna Power Company Ltd is requesting $ 40 million, and its PLF was 11 percent last year.

"We fear that without this kind support from Bangladesh Bank the country will inevitably face widespread load-shedding during this critical irrigation season, Ramadan and summer," said the letter.