The Centre for Policy Dialogue (CPD) has called on the interim government to expedite the phasing out of inefficient power plants in Bangladesh.

The recommendation was made during a media briefing titled ‘Power and Energy Sector Reform Agenda for the Interim Government’ held at the CPD office yesterday. The think-tank presented a detailed reform strategy to address the inefficiencies and financial burdens in the country’s power sector.

Khondaker Golam Moazzem, Research Director at the CPD, highlighted the substantial financial strain caused by capacity payments to power plant owners, urging the government to renegotiate power purchase agreements.

Moazzem provided a list of 28 power plants identified as inefficient based on factors such as net electricity generation, generation cost, and carbon dioxide emissions. These plants, with a combined capacity of 3,655 MW, could be phased out by 2030 following the expiration of their contracts.

Many of these inefficient plants are quick rental power plants, which the previous government had pledged to retire but failed to do so.

According to Moazzem, 13 of the 16 quick rental power plants that were supposed to be decommissioned by 2023 remain operational. Two plants continue to receive capacity payments, while the other 11 operate under the “no electricity, no pay” provision.

The CPD also pointed out the issue of over-generation capacity in the country’s power sector. According to their analysis, Bangladesh currently has an over-generation capacity of 41 percent, significantly exceeding the recommended maximum reserve margin of 30 percent.

Moazzem suggested that the capacity could be reduced by 6,677 MW without causing any major disruption to the electricity supply.

Despite high subsidies and recent upward revisions in electricity tariffs, the Bangladesh Power Development Board (BPDB) continues to operate at a loss. Moazzem advised against further tariff hikes, warning that such measures could unfairly shift the financial burden onto consumers.

The CPD also criticized the automated fuel pricing formula introduced in March, describing it as opaque.

Concerns were also raised about the procurement and bidding processes for power plants. The CPD argued that these processes’ non-competitive and confidential nature has compromised fairness, particularly in determining power purchase rates and capacity payments.