{"id":66447,"date":"2020-08-27T13:43:00","date_gmt":"2020-08-27T13:43:00","guid":{"rendered":"https:\/\/chinadialogue.net\/?p=66447"},"modified":"2021-02-15T10:11:23","modified_gmt":"2021-02-15T10:11:23","slug":"bangladesh-may-ditch-planned-coal-power","status":"publish","type":"post","link":"https:\/\/dialogue.earth\/en\/energy\/bangladesh-may-ditch-planned-coal-power\/","title":{"rendered":"Bangladesh may ditch 90% of its planned coal power"},"content":{"rendered":"\n

Bangladesh\u2019s minister of power, energy and mineral resources, Nasrul Hamid, surprised energy watchers recently when he said the country is planning to \u201creview\u201d all but three of 29 planned coal plants.<\/p>\n\n\n\n

\u201cWe are keeping the three coal-fired power plants that are under construction. At present, we are aiming for [40 to 41GW of total generation capacity], where only 5GW is coal based,\u201d said Minister Hamid during a webinar run by the Centre for Policy Dialogue. \u201cWe are reviewing how we can move from coal-based power plants.\u201d<\/p>\n\n\n\n

Confirming the minister\u2019s comments, Mohammad Hossain, director general of the ministry\u2019s research body, Power Cell, later told China Dialogue that \u201cBangladesh could be set for a paradigm shift away from coal\u201d toward the \u201ctrue alternative\u201d of imported liquified natural gas (LNG).<\/p>\n\n\n\n

Bangladesh has one of the largest coal power pipelines in the world, a total of 29 power plants amounting to 33.2GW of capacity, according to a 2019 study<\/a> by an Australian organisation that tracks fossil fuel investment. Hossain confirmed that 26 power plants accounting for 28GW of capacity \u201care now going through [sic] reviewing process\u201d to find less expensive alternatives. That\u2019s 90% of the coal pipeline.<\/p>\n\n\n\n

\u201cIt would dramatically swing the nation\u2019s power development away from coal,\u201d said Simon Nicholas, energy finance analyst with the Institute for Energy Economics and Financial Analysis (IEEFA).<\/p>\n\n\n\n

Mounting costs of coal<\/h2>\n\n\n\n

In earlier comments at the webinar, Hossain said that: \u201cCoal power is no more a cheap option and it\u2019s becoming more expensive for imported coal. Hence, the government is reconsidering its earlier plan on coal-power generation in its energy mix\u201d.<\/p>\n\n\n\n

The costs of renewables have been undercutting coal for years and recent price crashes in oil and gas mean that these two fossil fuels are now also price competitive with coal. Bangladesh\u2019s coal power dream would also be highly dependent on imports of both equipment and coal, an expense and a liability in the age of Covid-19-induced lockdowns and supply chain disruptions.<\/p>\n\n\n\n

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In addition, Bangladesh\u2019s Power Development Board must also pay costly subsidies to operators of underutilised power plants in the form of \u201ccapacity payments\u201d. With a coal power utilisation rate of just 43%, from 2018-19 the government reportedly burned US$1.1 billion<\/a> in payments to power plant operators. One third of the energy ministry\u2019s budget has been allocated to capacity payments<\/a> for idle power plants in the 2020-2021 financial year.<\/p>\n\n\n\n

With the IMF predicting<\/a> that GDP growth in Bangladesh could slip to just 2% this year, compared to a pre-Covid forecast of 7.4%, power demand is expected to be lower, meaning capacity payments will continue to rise unless steps are taken to revise plans for new capacity. Power Cell\u2019s Hossain also acknowledged in the webinar that the government will need to review the country\u2019s power system masterplan considering the radically changed outlook for the economy and power demand.<\/p>\n\n\n\n

Chinese involvement<\/h2>\n\n\n\n

The 29 coal power plants currently in Bangladesh\u2019s pipeline are at varying stages of development. The three that Minister Hamid suggested will continue as planned \u2013 Rampal, Matarbari and Payra \u2013 have entered construction and are nearing completion. Their financiers include Chinese, Japanese and Indian export credit and international cooperation agencies. Other projects have signed engineering, procurement and construction (EPC) deals, equity investment deals or are only at the stage of memoranda of understanding.<\/p>\n\n\n\n

Engineering, procurement and construction (EPC) deals<\/span>

EPC deals are a common form of contract for infrastructure projects. The EPC contractor takes charge of multiple aspects of the project\u2019s design and engineering, procurement of raw materials and construction equipment, and building work itself. The contract does not include ownership and typically an EPC contractor\u2019s involvement in the project ends when construction is completed.<\/p><\/div><\/div><\/div>\n\n\n\n

Chinese companies dominate both the EPC and equity investment market in Bangladesh. According to information on EPC contracts gathered by Market Forces, Chinese construction companies are involved in up to 16.5GW worth of EPC contracts. Japanese companies, the second largest EPC contractors in Bangladesh, are involved in just 2.4GW of coal power capacity. According to Greenpeace figures<\/a>, up to 98% of proposed Bangladeshi coal power plants with Chinese involvement also include equity investment.<\/p>\n\n\n\n

Coal power was seen as a solid investment that could deliver stable returns from operating plants. But the governments’ review will be of concern to investors and contractors. EPC companies could lose out on a lot of business in one of their most promising markets, although they may be eligible for partial compensation under force majeure<\/em> and other insurance clauses. Equity investments in coal plants that do not reach the commissioning stage will also suffer losses.<\/p>\n\n\n\n