We’ve published a report today that explains how the proposed coal-fired Rampal Power Plant in southwest Bangladesh would drive up electricity rates, cost far more than its promoters say, and put investors and consumers at a myriad of risks.
Our report, “Risky and Over-Subsidized: A Financial Analysis of the Rampal Power Plant,” outlines why the project should be cancelled and why Bangladesh would do better to invest in solar energy.
We believe the Rampal project is fraught with unacceptable hazards and out of step with the times. It would set Bangladesh back.
The project’s finances are made up largely of public subsidies channeled through intermediaries supported by the Bangladeshi and Indian governments, and our report notes that the true nature of the proposal has not been well publicized. We suspect the project is being promoted as a means to sell Indian coal to Bangladesh and as a way to skirt Indian policy against building a coal plant so near the Sundarbans, a protected forest and World Heritage Site.
OUR REPORT OUTLINES SEVERAL CORE FINANCIAL WEAKNESSES IN THE PROPOSAL. THEY INCLUDE:
Our study also sees risks in community opposition to the project and doubts whether the project would perform as advertised. It describes how Rampal’s reliance on imported coal would needlessly expose ratepayers to the vagaries of global coal and currency markets and how the project would be an environmental hazard. We question the chosen site for the plant in the official “wind risk zone” of Bangladesh and the seeming lack of a contingency management plan.
While the Rampal project would expose all project promoters and consumers to steep financial risks, it poses specific peril for the Indian EXIM Bank. The Rampal project would constitute a large chunk of EXIM Bank’s loan book, it would put the EXIM Bank’s international fund-raising capacity at risk, and it would create refinance risk for the EXIM Bank.
Rampal project backers and customers generally would be exposed as well to potential loss of government subsidies if the Bangladesh government decides to not long fully support electricity-system losses as it does no.
OUR RESEARCH INDICATES THAT SOLAR ENERGY DEVELOPMENT IS A VASTLY SUPERIOR CHOICE BECAUSE IT IS FASTER TO DEPLOY, POTENTIALLY MUCH CHEAPER, AND HAS PROBABILITIES ON ITS SIDE THAT INCLUDE:
Bangladesh is entirely justified in seeking to diversify and grow its power generation capacity, but adding imported-coal-fired power capacity to it mix comes with far too high a cost and with far too much risk. And the Indian government would be better served promoting its credentials as a growing and integrated solar sector powerhouse; facilitating and accelerating the transition towards lower-emission sustainable economic growth across the region.
Tim Buckley is director of energy finance studies, Australasia, for IEEFA. Jai Sharda is an IEEFA energy consultant.
Full report here