Study on Electricity Generation Cost Determination

Abstract

This thesis is on “Study on Electricity Generation Cost Determination”. In the solicited bids, the bidders shall offer bulk power tariff based on the capacity payment and energy payment and also provide the equivalent levelized tariff. The capacity payment will be made in Bangladeshi currency (Taka). This will cover debt service, return on equity, fixed operation and maintenance cost, insurance and other fixed cost. The energy payment will be denominated in local currency to the extent to which the variable costs are in local currency. This will cover the variable costs of operation and maintenance, including fuel. Interconnection of IPP to transmission system: The power will be purchased from the IPP at a specified voltage and frequency at the outgoing terminal of the substation of the power plant. The cost of interconnecting facilities up to outgoing terminals of the private power project will be borne by the private power producers. Severe power crisis compelled the Government to enter into contractual agreements for high cost temporary solution, such as rental power and small IPPs, on an emergency basis, much of its diesel or liquid-fuel based. This has imposed tremendous fiscal pressure. With a power sector which is almost dependent on natural-gas fired generation (89.22%), the country is confronting a simultaneous shortage of natural gas and electricity. Nearly 400-800 MW of power could not be availed from the power plants due to shortage of gas supply. Other fuels for generating low-cost, base-load energy, such as coal, or renewable source like hydropower, are not readily available and Government has no option but to go for fuel diversity option for power generation.