The government plans to retire six diesel-fired power plants, with a combined capacity close to 1000 MW, before the end of 2023.
According to official sources, the six plants, belonging to four private companies, are Bangla Track's 300 MW (Jashore 100 MW and Daudkandi 200 MW), Aggreko's 200 MW (Awarahati 100 MW and Brahmangaon 100 MW), APR Energy's Pangaon 300 MW, and Paramount's Baghabari 200 MW.
"Of these, 800 MW has already gone into retirement in between February and June this year while the remaining 200 MW will be retiring in August," said a highly-placed source at the state-owned Bangladesh Power Development Board (BPDB).
Once all the plants are retired, it will save the government around Tk2,250 crore per year, the source added.
As per the BPDB Annual Report 2021-22, the country's total grid-connected generation capacity is 22,482 MW, of which diesel-fired plants contributed 1290 MW, or 5.7% of the total capacity.
Up to date BPDB data shows that grid-connected installed capacity is closing in on 25000 MW in 2023-24.
In fiscal 2021-22 fiscal year, the cost per kilowatt-hour of electricity by diesel was Tk154.11, while for gas-fired power plants it was Tk3.46. It was Tk9.17 for coal-fired plants and Tk22.10 for furnace oil-based plants.
"The current situation when both the US dollar rate and diesel price have increased, the production cost has spiked substantially," said the top BPDB official.
He informed that all the power purchase agreements (PPAs) were signed on the basis of US dollar rates and payments are made in dollars under an arrangement with the central bank.
So if the existing US dollar rates and current diesel rates are calculated, the production cost of diesel-fired power plants will be much higher in 2023-24 than that of 2021-22.
He noted that in the existing situation, the tariff for each unit of power produced by diesel-fired plants is over Tk172.5.
The current dollar price is Tk109 while it was Tk85 when the agreements were signed.
Similarly, per litre of diesel price was Tk65 and then increased to Tk80 in November 2021 and Tk114 in August last year, he noted.
Official sources said in the last 5 years, the owners of such costly diesel-fired power plants were paid $1.03 billion or Tk11,281.5 crore.
Welcoming the move for retirement of diesel-fired power plants, eminent energy expert Dr M Tamim said it is "a very good decision".
"It was just meaningless to keep the costly diesel-fired plants in the system… the government should retire all the remaining diesel-fired plants as early as possible," he told UNB.