Power Division suggested that coal based power plants, which made little progress or could not secure financing, be turned into LNG based plants
In a bid to move away from dirty energy, the Ministry of Power, Energy and Mineral Resources is seeking the prime minister's approval to convert 13 large coal power projects into clean liquefied natural gas (LNG) based plants.
In a letter sent to the Prime Minister's Office earlier this month, the Power Division said these 13 coal-based projects either made little progress or could not secure financing, a well-placed source said.
Besides, coal power has become costlier in recent years than clean power.
These ongoing projects have a total capacity of 13,000 megawatts – which is more than the country's current power consumption. As such, the ministry suggested keeping only the projects that are already under construction, and five ongoing coal power projects having 5,371MW of capacity fit the criteria.
The 13 other projects in question have acquired land, and they could be renegotiated into LNG based power projects, Power Division officials told The Business Standard.
State Minister for Energy and Power Nasrul Hamid, who announced the policy direction to shift from coal, recently revealed that financing issues and slow progress are the main reasons behind the re-thinking on the projects.
"As most of the sponsored companies failed to get financing, we have decided to rethink the projects. However, further discussion will be taken with the directive of the prime minister," he had said.
While coal power is difficult to finance, LNG attracts financiers easily now-a-days because of its declining price and clean reputation.
Currently, the government is importing 1000 mmcf (million cubic feet) LNG per day through two floating storage units. However, it plans to increase the import capacity to 2,000 mmcf gas per day by 2030.
Meanwhile, a total of five LNG-based projects with a capacity of 8,750 megawatts of electricity are in the pipeline.
Payra 3,600 megawatts and Moheskhali 3,600MW combined cycle power projects are the two of these plants which will be implemented by Siemens and General Electric (GE) respectively.
Summit Power also joined hands with GE to set up another big LNG based power plant in Meghnaghat.
In recent times, Indian conglomerate the Reliance Group has secured $644 million in loans from Japan Bank for International Cooperation and Asian Development Bank to build a 718 megawatts power plant in Narayanganj.
Summit Meghnaghat II Power Ltd (583MW) also secured a $350 million dual-tranche term loan facility from Standard Chartered Bank (SCB) and the International Finance Corporation (IFC).
Commenting on the issue, economist and environment activist Anu Muhammad said, "The power system master plan of the government has never been rightly planned. These projects were taken under the influence of vested interest groups.
"The latest move is also the result of the influence of the national and international companies which have interest in the LNG sector, like the Reliance group."
Claiming that the country does not even need LNG and nuclear based projects, he added, "We do not need these expensive primary energy based projects; instead, we need to accelerate the local gas exploration and shift the focus to renewable sources."
Bangladesh's handshake with coal power
At present, Bangladesh is one of the biggest hosts of coal power projects in the pipeline in the world. The world has largely been moving away from coal for the last couple of decades due to the advent of cheaper renewable energy.
If the 13 projects are cancelled, the country will realign itself with the global trend.
Some of these coal projects were taken up a decade ago in line with the power sector master plan (PSMP) 2010 and were approved in the recently revised PSMP-2016 under a mixed energy policy.
As this policy advocates for a 35% coal power in the total energy mix, the government awarded 18 coal-based power projects to different public, private and state-owned joint venture companies.
But over the years, it has become clear to the government that finding financing for coal power has become very difficult, as big financiers no longer back dirty energy. Instead they back environmentally friendly projects.
"International financiers such as the Asian Development Bank and Work Bank have changed their policies and do not want to finance coal projects. Even some Chinese banks have also walked away from financing coal," said a power division official.
The government awarded S Alam Group the Chattogram 1,224MW coal power project, which was scheduled to be completed by November 2019.
But as it could not make much progress due to a lack of financing, the company was fined Tk374 crore as per terms of the contract.
Coal power was supposed to be very cheap, as cheap as natural gas based power. A source pointed out that the coal power projects under implementation are not cheap, and way more expensive than gas based projects because of the import price of coal.
Besides, coal power projects require more land or space than gas-based power projects. Coal handling facilities and coal storages are the extra cost in generating such projects.
Around 0.06 acres of land is required for each megawatt of coal-based electricity, whereas a gas-based power plant requires only 0.004 acres of land to generate the equal amount of energy, says recent analysis made by the power division.
Economists and energy experts meanwhile said the government's plan for coal based projects were never feasible both technically and financially. There is even uncertainty over the projects that already have started construction work.
Coal projects to complete
As per the latest proposal, only five projects – which are currently being implemented – have completed construction work. These include two joint ventures, two private and a single estate owned projects.
The first joint venture project is Payra 1,320MW Thermal Power Plant Project. The first phase of the project contains two units, one has already started operation, and work on the second one is around 80 percent complete, said sources.
The second joint venture project – which is nearing completion – is the Maitree Super Thermal Power Project (1,320 megawatts). It is being implemented by the Bangladesh India Friendship Power Company Ltd.
Two private companies and also the sponsors, S Alam Group and Barishal Electric Power Company Ltd, will implement the Chattogram 1,224MW power plant and Barishal 307 megawatts coal power plant projects respectively.
However, these two companies have also faced a hard time in managing funds for their projects.
Additionally, the Matarbari 1,200MW power plant is the only public project which has been implemented by the Coal Power Generation Company Bangladesh Ltd, with funding from Japan International Cooperation Agency (Jica).