Adani produces most expensive coal power for Bangladesh

Black_cats · Jun 1, 2023

Adani produces most expensive coal power for Bangladesh

Emran Hossain | Published: 00:03, Jun 01,2023

Electricity generated by the Adani Godda power plant has turned out to be the most expensive coal power in Bangladesh, according to Power Development Board officials.

Imported electricity is usually less expensive than electricity produced in Bangladesh. But the 1,600MW Adani power plant, set up in Jharkhand, India, exclusively for supplying electricity to Bangladesh, surpassed even costly Bangladesh power with its generation cost.

A unit of power produced by the Adani Godda power plant during its almost one month of test transmission starting from March 9 cost over Tk 11, according to PDB.

The Adani Godda power plant began commercially supplying electricity in April. PDB officials estimated that Adani power was likely to be 20 per cent costlier than other coal power.

The power cost during the test run included only fuel cost as the capacity charge, which is Tk 3.26 per unit of electricity produced in the Adani Godda power plant, cannot be applied to the cost unless commercial operation commences.

Bangladesh consumed about 15 crore units of electricity during test transmission at the Adani Godda power plant.

If the capacity charge was applied along with the wheeling charge of Tk 0.29, which is paid for transmitting electricity for over 100km from the Adani Godda power plant to the India-Bangladesh border, the cost of Adani electricity would rise to about Tk 15 - close to the average cost of electricity generated in 2022 from furnace oil—Tk 16.86 a unit.

‘Fuel costs account for 70 per cent of electricity costs,’ Power Cell director Mohammad Hossain told New Age, adding that a drastic fall in coal prices is likely to keep the overall Adani power cost at Tk 11.

The price of coal used for generating electricity during test transmission was $240 a tonne, which dropped to $132 a tonne on May 30 on the Newcastle Index.

‘But Adani power would be the costliest coal power in Bangladesh,’ said Mohammad Hossain.

A study released by the Bangladesh Working Group on External Debt in June 2022 estimated Adani power to be 56 per cent costlier than the average imported coal price, and more than four per cent costlier than domestic coal power.

In 2022, the price of a unit of power produced using domestic coal was Tk 8.32, according to PDB data.

Including imported coal used in production, a policy brief released by the BWGED on May 19 said that the average price of a unit of coal power was Tk 13.40 in 2022 when the coal price stayed above $200 a tonne in the international market.

Hossain said that Adani power turned out to be costlier because of the extra expense needed for transmitting electricity from the Godda power plant to the India-Bangladesh border.

The transmission cost will increase by one per cent every year, according to the power deal signed between Bangladesh and the Indian corporate giant Adani.

PDB officials aware of electricity bills placed by Adani identified two other reasons making Adani power costlier - the lack of discount on the coal price in the event of it exceeding $55 a tonne and the coal carrying cost from the seaport in India to the Godda power plant - covering 690km of distance.

‘Carrying a tonne of coal a kilometre from the seaport costs $17,’ said the PDB official on condition of anonymity.

The US-based think tank Institute for Energy Economics and Financial Analysis had earlier attributed the potential of Adani power becoming costlier than other coal power to the need to transport coal for almost 700km by train from the seaport to the Godda power plant.

IEEFA predicted that the cost of a unit of electricity generated by Adani would reach Tk 36 at the end of the power plant’s lifetime, 25 years later, in 2047.

The absence of a provision for a discount on energy prices in the Adani power deal is estimated by the PDB to earn the Indian company an extra income of between $1.5 million and $66 million every month.

The discount provision is commonly found in other major power projects, such as the Payra and Rampal power projects with an installed capacity of 1,320MW each, offering up to a 45 per cent cut in coal price in case it reaches or surpasses $55 a tonne.

PDB estimated that a coal price of $115 a tonne entitles them to a discount of 45 per cent on the coal purchase cost.

Power experts have repeatedly interpreted the absence of the discount option as a deliberate attempt to help Adani make an exorbitant profit.

In the worst-case scenario, with a $400 a tonne coal price, the Godda plant, operating at 85 per cent capacity, would earn $6,60,38,882 every month due to the omission of the discount provision, the PDB estimated.

In the best-case scenario, with per tonne coal trading at $55, the Godda plant would make an additional income of $15,50,539 every month, the PDB account said.

At the time of getting embroiled in a global fraud controversy in January, Adani reportedly demanded $400 for a tonne of coal, triggering outrage in Bangladesh, which was buying coal for other power plants for less than $250.

The power deal also allows coal price manipulation by allowing the Godda power plant to combine Australian and Indonesian coal prices in its fuel bill, even though the coal used in the plant was imported entirely from Indonesia, according to PDB.

Indonesian coal is way cheaper than Australian coal because of the quality difference and energy content.

The Adani power deal is so lucrative, the BWGED said in its report in June 2022, that Adani would have its investment of about $2 billion returned in a maximum of six years.

With its capacity charge and producing no power, the power deal would still earn Adani 15 times its investment throughout its lifetime, according to another estimate by the BWGED.

The Adani power is opposed to Bangladesh’s growing overcapacity problem. Bangladesh’s current installed capacity is 24,143 MW and half remains unused.