Despite a gas supply shortage that has left two dozen power plants idle, two private LNG-run power plants in Bangladesh recently commenced commercial operations. Sources indicate that at least two more LNG plants will become operational in the coming months.

The newly operational plants will now receive capacity payments from the government, a form of compensation known as ‘capacity charges,’ which are paid regardless of whether the plants generate electricity. 

Energy experts are raising concerns about the financial burden on consumers, given the country’s already surplus generation capacity and existing transmission infrastructure limitations.

According to State Minister for Power, Energy, and Mineral Resources Nasrul Hamid, the government paid approximately Tk 1.05 trillion in capacity payments to power plant owners up to August 2023. 

With the addition of new plants, this amount is expected to increase further.

Summit’s Meghnaghat 589-megawatt (MW) plant is the latest addition to Bangladesh’s LNG-fired power sector. 

According to a senior Petrobangla official, this plant recently achieved its commercial operation date (COD) and began commercial operations. Data from the Bangladesh Power Development Board (BPDB) shows that the plant generated around 500 MW of electricity on May 13.

Despite this addition, the country’s overall electricity generation during peak evening hours was approximately 15,019 MW, against a total generation capacity of 26,354 MW. 

Capacity payments act as penalties for the BPDB, the lone buyer of electricity from power plants when the government fails to buy a certain portion of the readily available power. 

The government has long been paying capacity payments to various types of power plants, including those run by independent power producers (IPPs), as well as rental, quick-rental, oil-fired, and coal-fired facilities. 

The inclusion of LNG-fired plants in the capacity payment structure will further strain the BPDB’s financial situation.

Summit’s 589 MW power plant is one of three LNG-fired plants in the private sector that received government approval under the Quick Enhancement of Electricity and Energy Supply (Special Provision) Act 2010. 

Unique Meghnaghat’s power plant began commercial operations earlier this year but did not generate electricity on May 13. Adjacent to these plants in Narayanganj, a joint venture between India’s Reliance Power and Japan’s JERA has constructed the 718 MW Reliance-JERA Power Plant, which is awaiting its COD.

In the public sector, the construction of the Rupsha power plant, owned by the North-West Power Generation Company Ltd (NWPGCL), is nearly 80% complete. According to a senior NWPGCL official, the first unit of this 800 MW plant is scheduled to start operating in September. The BPDB has power purchase agreements (PPAs) with all these LNG-fired power plants.

However, a power transmission bottleneck is currently preventing the BPDB from purchasing electricity from the new LNG-fired plants despite their lower generation costs. 

The state-run Power Grid Company of Bangladesh (PGCB) has been unable to complete the construction of six substations needed to evacuate electricity generated by these new plants. These substations are unlikely to be ready before December, meaning that several near-operational LNG-fired plants cannot run even after obtaining their CODs, likely resulting in additional capacity payments for the BPDB.