The recent gas tariff increase may not directly translate into a one-for-one rise in cost of power, as the government will now have more options for generation mix.
Generally, the cost of electricity production increases when the price of fuel is increased.
But the Bangladesh Energy Regulatory Commission (BERC) says this will not be the case this time around.
In the latest gas tariff order, the price of gas for power plants has been increased by 41 percent while the weighted average gas price for all sectors increased 32.8 percent.
The BERC chairman Monowar Islam told The Business Standard, “Due to the new price rate BPDB’s (Bangladesh Power Development Board) generation cost may not increase. Now the gas fired power plants will run more efficiently and the production of liquid-fueled power plants will reduce. As a result, the cost of production will be low.”
However, the BPDB, the electricity producer and the sole buyer from Independent power plants, thinks it otherwise.
Its high officials said that gas price definitely increase power generation cost because until June 30, it used to buy gas at Tk 3.16 a cubic feet which has now been hiked to Tk 4.45.
“However, the amount of loss and deficit totally depends on the supply of quality gas to power plants,” one high official however admitted.
The logic is simple. If a plant runs at below par capacity because of gas supply, its production cost will go up. And now with adequate supply because of infusion of LNG into the grid, the plants will run at full capacity.
According to the energy regulators, BPDB’s deficit was TK 7,750 crore last fiscal.
And in this fiscal year, it would go up to Tk 6,000 crore.
Sayeed Ahmed, BPDB's member (Generation), said, “Of course, fuel cost of gas based power will increase. But if the gas supply increases, then we will be able to minimize some cost.”
According to BPDB’s data, currently more than 2,000 MW power generation capacity remains idol due to gas crisis. If gas is available then it may use least costly power plants instead of the costly fossil fuel-based power plants.
Right now 1,000 MW electricity is being generated from fuel-based plants, where the cost comes to about Tk 7.50 a unit.
On the other hand, 6,500MW to 7,000MW electricity is being produced from gas-based plants at a cheaper cost of Tk0.80 to Tk1.05 a unit.
“But now with the gas price hike, even the gas-powered plants will become costlier, BPDFB’s Sayeed Ahmed said. “Each unit of electricity will now cost between Tk 1 and Tk 1.50.”
According to Bangladesh Economic Review 2019, 65.22 percent of electricity is being generated from gas-fired plants. Another 20.49 percent comes from oil-based power stations and the rest of the demand is met from imports (11.63 percent), renewables (0.04 percent) and coal (1.34 percent).