India-Bangladesh power project a risk for investors and consumers, says think tank

An IEEFA report calls for cancellation of the Rampal power plant project

GN Bureau | June 18, 2016


#India   #Bangladesh   #IEEFA   #Rampal power plant  


The proposed coal-fired Rampal power plant in southwest Bangladesh is no longer economically viable as it would “drive up electricity rates, cost far more than its promoters say, and put investors and consumers at a myriad of risks”. This was stated in a report published by the Institute for Energy Economics and Financial Analysis (IEEFA), a US-based think tank.

The proposed 1,320-megawatt power station is to be built in Khulna, Bangladesh, near the Sunderbans. It is a joint venture between India and its neighbor with a memorandum of understanding being signed in 2010.

The report titled ‘Risky and Over-Subsidized: A Financial Analysis of the Rampal Power Plant’, is of the view that the project should be cancelled and that Bangladesh would do better by investing in solar energy.

As per the report, there are several flaws in the proposal. It says that revenue requirements of the Rampal plant would require tariff levels that are 32 percent higher than the current average cost of electricity production in Bangladesh and will therefore increase electricity rates in Bangladesh. And that without subsidies, the plant’s generation costs are 62 percent higher than the current average cost of electricity production in Bangladesh.

The report says that the true cost of the plant is being hidden by three subsidies worth more than $3 billion and that further delays would only raise the capital cost of the plant and place additional upward pressure on tariffs.

It adds that apart from opposition from local residents, there is no guarantee that the plant would achieve 80-85 percent plant load factor (PLF), as assumed. Citing various examples, the report says that the PLF for coal-fired power plants in China dropped below 50 percent in 2015, and has been below 60 percent since 2013. In the US too, it says, the average coal power plant operates at 55 percent PLF, and in India, the average coal-fired power plant operated at an estimated 58 percent in 2015-16.

The report also warns of the plant’s reliance on imported coal which could expose consumers to global coal market risk. It adds that the plant is located in the ‘wind risk zone’ representing a significant financial risk since it would be vulnerable to storm surges and, therefore, to outages and damage.

Other concerns mentioned in the report talk about the seeming lack of contingency management plans that would pose a risk to plant operations, loan risk to India’s EXIM Bank, and the possible further worsening of the Bangladesh electricity system that is already losing $1 billion every year.
 

Comments

 

Other News

Why sanitation should matter to you

How many times a day do you flush the toilet? This number is probably between five and eight times for an average person. How many times a day do you spare a thought towards what happens to the human waste after you flush it away? The answer to this is likely to be close to zero for most people.

Who is Eknath Shinde, the auto driver who became CM?

Hailing from Satara district of Maharashtra, Eknath Sambhaji Shinde had to leave his education midway to financially support his family. He worked as an auto rickshaw driver, a lorry driver and also said to have worked in a brewery before he came in contact with Anand Dighe, Shiv Sena’s Thane unit pr

Metro 3 car shed to stay at Aarey, say new CM Shinde

Former Maharashtra chief minister Davendra Fadnavis stunned all at a press conference Thursday and named Eknath Shinde, the rebel MLA from Shiv Sena, as the next chief minister. Though Fadnavis said he would stay out of the government, a few hours later the BJP leadership announced he would be the deputy c

Uddhav Thackeray resigns as chief minister of Maharashtra

Minutes after the Supreme Court ordered a floor test on Wednesday night, Uddhav Thackeray in a televised address resigned as the chief minister of Maharashtra and also as a member of legislative council (MLC). He later drove down to Raj Bhavan and tendered his resignation to the governor Bhagat Singh Koshi

Gig workforce expected to expand to 2.35 crore by 2029-30

The gig economy has arrived in India, as the Covid-19 pandemic has propelled a flexibility of employment. As many as 77 lakh workers were engaged in the gig economy, constituting 2.6% of the non-agricultural workforce or 1.5% of the total workforce in India. The gig workforce is expected to expand to 2.35

How Antyodaya Saral is simplifying everyday life in Haryana

From obtaining an electricity connection to a driver`s licence, ration card, or old-age allowance, delivery of government schemes and services is an aspect of governance that impacts citizens at various points throughout their lives. The Haryana state government provides over 600 such schemes and services.

Visionary Talk: Sanjay Pandey, Mumbai Police Commissioner with Kailashnath Adhikari, MD, Governance Now


Archives

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter