The Power Sector in the National Budget for FY2022: Perspectives on Allocative Priorities & Reform Agenda
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Draft CPD Webinar on The Power Sector in the National Budget for FY2022: Perspectives on Allocative Priorities & Reform Agenda Presentation by Dr Khondaker Golam Moazzem Centre for Policy Dialogue (CPD) 20 June, 2021 Study team Dr Khondaker Golam Moazzem Research Director Centre for Policy Dialogue (CPD) A S M Shamim Alam Shibly Research Associate Centre for Policy Dialogue (CPD) Helen Mashiyat Preoty Programme Associate Centre for Policy Dialogue (CPD) Discussion points 1. Introduction 2. State of the Power Sector during FY2021 3. The Power Sector in the National Budget for the FY2022 4. National Budget for FY2022 targeting the Clean Energy 5. Addressing Reform Issues in the Power Sector 6. Conclusion 3 1. Introduction 4 1. Introduction • CPD has been organising a series of events on the National Budget for FY2021-22 concerning different macro and sectoral issues • The power and energy sector is one of the priority sectors in the national budget • This study put focus on power sector related issues from allocative priorities and reform points of view • The ongoing year (FY2021) is an eventful year for the power sector of Bangladesh • Government has publicly announced abandoning coal-based power generation • In different international platforms, the Prime Minister announced Bangladesh’s commitment in shifting from fossil-fuel based power generation towards clean power generation • The 8th Five Year Plan (FY2021-25) has been officially made public in December, 2020 where the power and energy sector has got attention • Although the document does not properly reflect the stance on shifting from coal and promoting renewable energy led power generation • The National Budget for FY2022 would be one of the first official documents which is supposed to reflect government’s political stance and policy commitments • To be reflected in policy stances and fiscal & budgetary measures • The present budget analysis has been carried out from two dimensions • Efficiency-based analysis • Power sector reform analysis 5 2. State of the Power Sector during FY2021 6 2. State of the Power Sector during FY2021 2.1 Overall state of the power sector in FY21 Power sector in 2021& Its target for 2030 • The success of the power sector has been 2021 2030 described with basic facts on installed Installed capacity (MW) 25227 40000 capacity, per capita generation, access to Consumers (mil.) 40 electricity and system loss etc Trans. Lines (ckt km) 12744 28320 • Considerable progress has been made Dist. Lines (km) 612000 660000 in ensuring access to electricity • Installed capacity increased to Grid sub-station 26000 59000 25227mw, p/c generation 514kwh and (2024) access to electricity reached 99.5% Dis. loss 8.73% • Following that trend, 8th FYP put focus on Per capita generation 514 kwh further enhancement of generation capacity Access to electricity 99.5% mainly based on fossil-fuel Source: Power Cell, MoPEMR Power sector in the 8th FYP Baseline Target Target Target Target Target (FY2020) (2021) (2022) (2023) (2024) (2025) Installed Generation Capacity (MW) 23,548 24,000 26,000 28,000 29,000 30,000 RE-based power generation Solar 127 542 895 400 50 2,014 Wind 60 230 10 300 Waste to Energy 6 42 48 Total 127 608 1,167 400 60 2,3627 2. State of the Power Sector during FY2021 2.2 Power generation during FY2021: Efficiency analysis • The power sector needs to describe its success based on efficiency-led performance analysis • The power generation capacity has been continued to rise at a considerable rate during FY2021 despite having a huge surplus generation capacity (37%) • Per capita generation has increased by 20% in FY2021 • Coal, gas and HFO based power generation has increased although number of plants has reduced in case of coal and gas-based power generation • RE based power generation though increased in FY21, but it has yet to get attention Power generation in FY2020 and FY2021 Energy mix in power generation: FY20 & FY21 Actual (MW) %▲ Energy- 2020 2021 %▲ between mix No of MW No of MW between FY20 and 2021 FY19 FY21 plants genera plants generate (upto May, and (upto ted d Determinant 2019 2020 21) FY20 May) Coal 4 1146 3 1768 Generation 8.04 Gas 71 10979 67 11402 Capacity 18610 20383 22023 9.5 HFO 56 5540 61 6044 Maximum Demand 12,100 13,300 9.9 HSD 10 1290 10 1290 Maximum 8.2 Hydro 1 230 1 230 Generation 12,893 12,738 13,792 -1.2 Solar 4 38 7 129 Per capita 20.1 (0.35% (0.5%) generation ) (kWh) (grid) 426.05 426.23 512 0.04 Per capita Power 0 1160 0 1160 Consumption Import (kWh) (grid) 375 378 0.8 Total 146 20383 149 8 22023 Source: BPDB 2. State of the Power Sector during FY2021 2.2 Power generation during FY2021: Over generation capacity Efficiency analysis Total installed Over capacity % of share of over • Over generation capacity remains a capacity (as per max. capacity of concerning issue Year (MW) generation) installed capacity • With the rise in generation capacity 2000-01 4005 972 24.27% 2010-11 7264 2374 32.68% and slow rise of T&D access, the over 2015-16 12365 3329 26.92% generation capacity is likely to 2018-19 18610 6068 32.60% 2019-20 20383 7645 37.51% increase further 2020-21 22023 8231 37.37% • Different types of power plants are being Source: Author’s calculation based on BPDB data used for power generation despite having excess capacity Power plants under different ownership • Rental PP operate with a capacity of Ownership 2020 2021 1300 MW No of Electricity No of Electricity • A number of dated and inefficient plants generation plants generation power plants operate in public PP Public PP 76 9568 57 10146 and private PP Joint venture 1 771 1 1244 • These plants have been targeted to IPP 49 7583 71 8172 Rental PP 21 1301 20 1301 be phased out Imported 1160 1160 • Without creating scope by phasing out Total 147 20383 149 22023 plants, private investment in the RE based power generation would be unviable 9 Source: BPDB 2. State of the Power Sector during FY2021 2.3 Progress of transmission and distribution of electricity • Transmission and distribution lines have increased during FY2021 • The length of transmission and distribution lines has increased at a slower pace compared to that of generation (3.7% and 5.9% respectively vis-à-vis 8%) during FY2021 • Dearth of transmission and distribution lines are mentioned as a major reasons for load shedding • Surprisingly, official data indicates no load-shedding in the country (between July, 2019 and June,2021) Transmission and distribution of electricity in FY2021 Load-shed of 01/07/2019 Load-shed of 16/06/2021 Load Load Changes Changes Area Area between between Shedding Shedding 2019 and FY2020 and Dhaka 0 Dhaka 0 FY2019 FY2020 FY2021 2020 FY2021 Chittagong 0 Chittagong 0 Transmis Khulna 0 Khulna 0 sion line Rajshahi 0 Rajshahi 0 (ckt km) 11,650 12,283 12,744 633 (5.4%) 461 (3.7%) Comilla 0 Comilla 0 Distributi Mymensingh 0 Mymensingh 0 on line 53,479 34,521 Sylhet 0 Sylhet 0 (km) 5,24,000 5,77,479 612000 (10.2%) (5.98%) Barisal 0 Barisal 0 Source: Author’s calculation from the data of BPDB annual reports Rangpur 0 Rangpur 0 Total 0 Total 0 10 2. State of the Power Sector during FY2021 2.4 Cost of Electricity during FY2020 • BPDB’s total cost of electricity was almost at the same level in FY2020 with that in 2019 • However, per unit cost of electricity (Tk/kwh) has declined but at a slow pace (from Tk.6.01 in FY19 to Tk.5.91 per kwh in FY20) • A significant rise in cost of electricity from IPPs and quick rental in recent years constrain slowing down the per unit cost • The per unit cost is the lowest in case of BPDB and purchase from public plants (Tk.3.8 and Tk.4.5 respectively) but it is higher in case of rental power plants (Tk..8.3) Total and Per Unit Cost of Electricity in FY2019 and FY2020 FY 2017-18 FY 2018-19 FY 2019-20 Increase Increase or or Amount Cost Amount Cost Amount Cost decrease decrease (Crore (Tk/kWh) (Crore Tk.) (Tk/kWh) (Crore Tk.) (Tk/kWh) in FY in FY Tk) 2019 2020 i. BPDB's Generation 9,431.39 6.44 7,648.06 4.58 7,464.76 4.47 (18.91)% (2.40)% ii. Purchase from IPP 10,410.59 5.72 15,748.50 7.42 17,518.98 7.00 51.27% 11.24% iii. Purchase from Rental 6,281.73 8.77 5,013.62 8.40 3,216.43 8.34 (20.19)% (35.85)% iv. Purchase from Public Plant 7,289.54 4.52 6,839.30 3.82 6,671.67 3.86 (6.18)% (2.45)% v. Purchase from India 2,812.58 5.87 3,702.63 5.46 4,017.13 6.01 31.65% 8.49% vi. Interest on budgetary support 1,188.31 0.20 1,294.80 0.19 1,294.80 0.19 8.96% 0.00% vii. Provision for Maintenance and 1,162.67 0.19 998.20 0.15 1,015.02 0.15 (14.15)% 1.68% development fund Total 38,576.81 6.33 41,245.12 6.01 41,198.80 5.91 6.92% (0.11)% 11 Source: BPDB annual report 2. State of the Power Sector during FY2021 • There is huge variation in per unit cost of electricity purchased from different IPPs • While the average cost is found to be Tk.7.42 in FY19 and Tk.7.0 in FY20, the unit costs for some plants were as high as Tk.394 in FY2019 and Tk.1579, Tk.944, Tk.606, Tk.394 and Tk.311 respectively for different plants • Unit cost variation (measured in st.