The Godda Power Project: India’s Transnational Energy Venture and Its Wider Implications
Context:
Recently, Reuters reported a significant amendment to India’s power export regulations, allowing Indian power exporters to reroute electricity output to Indian grids in case of payment delays from partner countries.
- This policy shift is widely seen as a safeguard against political and economic uncertainties, particularly in Bangladesh, a key recipient of Indian power.
Background:
- The Godda power project in Jharkhand, operated by Adani Power, is central to this dynamic, as it supplies its entire output to Bangladesh.
- Despite these new rules, Adani Power has reaffirmed its commitment to honoring its contract with Bangladesh. This editorial analysis delves into the Godda power project, the concerns it has raised, and the broader implications of this transnational energy endeavor.
Dimensions of the Article:
- About the Godda Project
- The Concerns and Challenges
- Implications of the Godda Project
About the Godda Project:
- India-Bangladesh Power Relations:
- Operated by Adani Power’s Jharkhand subsidiary, the plant has a net capacity of 1,496 megawatts (MW), all of which is supplied to Bangladesh under a Power Purchase Agreement (PPA) signed with the Bangladesh Power Development Board (BPDB) in November 2017. This agreement, set for a 25-year period, marks India’s first transnational power project where the entire output is dedicated to another nation.
- The Godda plant is a state-of-the-art ultra super-critical thermal power plant, a technology that promises higher efficiency and lower emissions compared to traditional thermal power plants.
- The plant’s operations began in earnest in 2022, with Adani Power asserting that the electricity generated at Godda would positively impact Bangladesh’s energy scenario by replacing more expensive power generated from liquid fuels.
- According to BPDB’s annual report for 2022-23, Bangladesh’s total installed generation capacity was 24,911 MW as of June 2023. Of this, 2,656 MW (more than 10%) was imported from India, with the Godda plant contributing 1,496 MW, accounting for approximately 6% of Bangladesh’s total power capacity.
- Strategic Significance:
- The Godda project is not just a commercial venture but also a strategic asset in India’s broader energy diplomacy in South Asia.
- India’s Ministry of Power had, in 2016, articulated a vision for cross-border electricity trade in South Asia, emphasizing that such exchanges would promote economic growth and improve the quality of life across the region.
- The Godda project, therefore, is a realization of this vision, deepening energy ties between India and Bangladesh, and potentially serving as a model for similar projects with other neighboring countries.
The Concerns and Challenges:
- Environmental and Economic Criticisms:
- The Godda project has faced significant criticism, particularly concerning its reliance on coal imported from the Carmichael mine in Australia.
- The Institute for Energy Economics and Financial Analysis (IEEFA), in an analysis of the PPA in April 2018, highlighted that the agreement allowed Adani Power to pass on the high costs of importing and transporting coal into India, as well as the cost of transmitting electricity across the border, to Bangladesh. This raised concerns about the financial burden on Bangladesh, particularly given the high price of coal quoted by Adani Power.
- In February 2023, BPDB reportedly wrote to Adani Power requesting a revision of the PPA, arguing that the coal price of $400 per metric ton (MT) quoted by Adani was “excessive” and should be closer to $250/MT, in line with the prices paid for imported coal at other Bangladeshi thermal plants.
- Furthermore, the PPA has been criticized for imposing high capacity and maintenance charges on Bangladesh, regardless of whether the plant generates electricity.
- Underutilization and Overcapacity Issues:
- Another major challenge facing the Godda project is the underutilization of Bangladesh’s existing power generation capacity.
- As of June 2023, Bangladesh’s total power generation capacity stood at 28,098 MW, but the highest recorded generation was only 16,477 MW, leaving an unutilized capacity of about 11,621 MW.
- In July 2022, Bangladesh sought financial support from the International Monetary Fund (IMF) to mitigate the economic impact of volatile energy prices. The country faced widespread blackouts, sometimes lasting up to 13 hours a day, as utilities struggled to source enough diesel and gas to meet the growing demand.
- In this context, the high cost of imported coal for the Godda project, coupled with the underutilization of existing domestic power plants, has raised questions about the long-term sustainability of relying on imported electricity.
Implications of the Godda Project:
- Economic and Political Implications:
- Politically, the Godda project is a symbol of the deepening energy cooperation between India and Bangladesh. However, it also highlights the challenges of managing such transnational projects, where the interests of both parties must be carefully balanced.
- The recent amendment to India’s power export rules, allowing for the rerouting of electricity to Indian grids in case of payment delays, reflects the need for flexibility in managing these complex relationships.
- While Adani Power has reiterated its commitment to supplying electricity to Bangladesh, the amendment signals India’s intent to protect its economic interests in the face of potential political and economic instability in partner countries.
- Environmental and Sustainability Concerns:
- The reliance on imported coal from Australia’s Carmichael mine has been criticized not only for its high cost but also for its environmental impact.
- The transportation of coal over long distances, coupled with the emissions from burning coal in thermal power plants, contributes to global greenhouse gas emissions, undermining efforts to combat climate change.
- While the Godda plant’s ultra super-critical technology is more efficient than traditional coal plants, it still represents a significant source of carbon emissions. As Bangladesh continues to expand its power generation capacity, the challenge will be to balance the need for reliable electricity with the imperative to transition to cleaner, more sustainable energy sources.
Way forward:
- Reevaluate the Power Purchase Agreement (PPA): Revisiting the PPA terms between Adani Power and BPDB is crucial to ensure fairness, considering Bangladesh’s financial limits and global energy market shifts. Renegotiating coal prices and adjusting charges will enhance the project’s sustainability.
- Diversify Bangladesh’s Energy Mix: Bangladesh should focus on diversifying its energy sources by investing in renewables like solar and wind power. Increasing the use of natural gas, which is abundant locally, can reduce dependence on imported coal and lessen environmental impacts.
- Boost South Asian Energy Cooperation: Strengthening regional energy collaboration is essential for realizing the full potential of projects like Godda. Developing an integrated energy market and joint investments will improve energy security, reduce costs, and support sustainable development.
- Enhance Transparency and Accountability: Ensuring transparency and accountability in managing cross-border energy projects is key. This involves involving local communities in decision-making and holding developers accountable to environmental and social standards.
- Promote Trust and Shared Benefits: Building trust between India and Bangladesh is vital. By ensuring transparency and accountability, both countries can ensure that the benefits of projects like Godda are equitably shared among all stakeholders.
