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CHAPTER 3: S UMMARY OF COUNTRY STUDY - BANGLADESH

3.1 Overview of Energy Situations, Policies & Strategies

3.1.1 Overview of energy situation in Bangladesh

The known conventional energy sources of Bangladesh are natural gas, coal, peat, oil, hydropower and biomass fuels. Natural gas Out of the non-renewable resources of energy, only natural gas is being extracted commercially. According to Bangladesh natural gas statistics as of October 1998, the total reserve of gas is 23.093 tcf (trillion cubic feet) of which 13.737 tcf is recoverable; 2.855 tcf had been extracted up to January 1977. During the last thirty years the Government has made consistent efforts in expanding the use of natural gas. Its share in total primary commercial fuels increased from 30.7 to 61.4 per cent during the period 1973 to 1997 whereas the share of petroleum fuel consumption has decreased from 67.7 to 37.6 per cent for the same period. During the preparatory stage of formulation of the National Energy Policy, the constraints of natural gas supply beyond 2010 were highlighted to draw the attention of policy makers. Subsequently the government accepted the findings and allowed the participation of International Oil Companies (IOCs) in the exploration and development of hydrocarbon sector. Coal Coal resource deposits of about 1,782 million tons have been discovered in three locations. Total coal reserve at Jamalgonj is about 1,054 million tons whose extraction has not yet been found to be economically viable. About 285 million tons of coal deposit has been discovered in Dinajpur. Another coal reserve of 400 million tons has been discovered in Rangpur. Though there is no power plant operating with coal as fuel at present, coal mining from Barapukuria will probably take a significant part in electricity generation after 2000. More than 80 per cent of coal from Barapukuria is expected to be used in a 250 MW coalbased power plant. Total peat reserves of Bangladesh have been estimated as 600 million tons. In some rural areas, locally extracted peat is used for domestic cooking and in small industries. Oil A small oil deposit has been discovered in Haripur (Sylhet) with an estimated recoverable reserve of 1.6 million tons of crude oil. Indigenous oil supply makes very little contribution in meeting the total demand of petroleum fuels that is met from imported resources. Bangladesh Petroleum Corporation (BPC) is responsible for overall management of petroleum fuels in the country. Electricity Bangladesh Power Development Board (BPDB) is fully responsible for the electricity generation and distribution network in Bangladesh, except Dhaka city area and some rural areas which are managed by Dhaka Electric Supply Authority (DESA) and Rural Electrification Board (REB). Though the installed capacity is 3,091 MW, maximum generation on 28 July 1997 was only 1,600 MW against the maximum demand of 2,168 MW. On average, there is a shortfall of between 300 and 450 MW. Only about 19 per cent of total population are electrified at present. The demand for electricity is expected to rise at a rate of 15 per cent annually. Gas-based generation (especially combined cycle power plants) has

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the least cost compared to other sources mentioned above, whereas the long-term perspective of alternative energy sources contributing to meet the power demand needs to be further studied. Hydropower Hydropower potential is still quite low in Bangladesh, because rivers are mostly on flat surfaces with low gradients. Presently, the only hydroelectric plant in the country (Karnafuli) has a capacity to produce 230 MW of electricity. There is a potential to produce 250 MW of power at Sangu and Matamuhuri river, though the cost of new storage is very high; such projects are not encouraged by the government considering their adverse environmental and social impacts. Fifteen prospective sites have been identified as having potential for on-site small hydropower generation. Solar Solar power utilization is being accepted gradually, but its slow progress is due to high initial cost, low daily operation time, and lower output level. Bangladesh is ideally located for tapping solar energy effectively (3 - 6 kWh/m 2 per day). Solar energy has been used in Bangladesh for drying crops and fishes since many decades. Bangladesh Atomic Energy Commission (BAEC) has commissioned pilot project for beacon lighting, refrigeration for vaccines storage, and water pumping. The Rural Electrification Board (REB) has introduced solar photovoltaic electricity in Narsingdi District. Government has waved duty and taxes on solar and other renewable energy applications to encourage both public and private sectors. Bangladesh University of Engineering Technology, Bangladesh Centre for Scientific and Industrial Research, Dhaka University and a few other organizations are continuing efforts to improve solar utilities in Bangladesh. Biomass and biogas Most of the rural people are fully dependent on biomass energy for their daily energy needs. It is estimated that as much as 70 per cent of total energy requirement in Bangladesh is met by biomass. Different forms of biomass-use include rice husk (26 per cent), cow dung (19 per cent), rice straw (16 per cent), twigs and leaves (14 per cent), badges (7 per cent), fuel wood (5 per cent), and jute sticks (4 per cent). Because of the high rate of biomass use at present, there is serious concern about preservation of limited forests in the country and striking a balance between ecological, social and environmental needs. About 400 biogas plants have already been installed in different parts of the country. Limited success has resulted from high capital cost, insufficient supply of raw material and lack of maintenance support.

3.1.2 Status and future prospect of electricity demand and supply

BPDB with its meagre per capita generated capacity and limited coverage area had been serving its consumers fairly satisfactorily until 1990, after which the reserve margin fell, ultimately reaching a very low level in 1994. Though the 1985 Power System Master Plan Study called for addition of new generation to keep in pace with load growth, due to the unsatisfactory commercial operation, international donors virtually suspended all new lending to BPDB from 1990. On the other hand many of the power stations have outlived their economic life while some others are not functioning due to lack of timely maintenance. The problem was further aggravated with the gas supply constraint. There was a shortfall of about 300-450 MW during the summer of 1997, resulting in severe load shedding during peak hours. Real improvement of gas situation is expected when Sangu gas field will go in operation along with salna. Overall power supply situation is now gradually improving with the implementation of rehabilitation programme of old power stations. A number of private and public sponsored power plants are coming up to overcome the crisis.

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3.1.3 Share of electricity use in industrial and commercial sectors

Industrial and domestic sectors are the major consumers of electricity, accounting for 46 and 38 per cent respectively in 1996-97, whereas the commercial sector has had a steady share of around 11 per cent over the last decade. With the industrialization, the share of industries has gone up from 39 to 46 per cent while that of domestic sector has gone down from 44 to 38 per cent over a 10-year period.

3.1.4 Status of industrial development and growth in energy Use

The industrial development and growth of energy use is shown in Figure 3.1. Industrial development is expressed as industrialization ratio, which refers to share of value added of manufacturing and mining sectors to GDP at current prices (1992). Industrialization ratio of the country increased from 1975 to 1983, declined from 1983 to 1987 and has an increasing trend from the year 1989. Per capita energy consumption has increased continuously over the years.

70 60 50 kgOE 40 30 20 10 0 1973 75 77 79 81 83 85 87 89 91

15

10 % 5

Per Capita Energy, (kgOE)

Industrialization Ratio (%)

Figure 3.1 Annual growth of energy use and industrialization ratio

3.1.5 Prevailing costs of energy

The different energy tariffs are summarized in Table 3.1. The industrial and commercial electricity tariffs given here do not include minimum charge, demand charge, service and other taxes.

3.1.6 Government policies and strategies for private power generation

In comparison to the 11,666 GWh electricity generated annually at present, the Power System Master Plan (PSMP) projects a requirement of 16,500 GWh in 2000 and 24,160 GWh in 2005. This implies an increase in the peak demand from 2,200 MW presently to 3,150 MW by 2000 and 4,600 MW by 2005 for which capacity addition of about 3,350 MW will be required by 2005. Hence, an average of 300 MW of generation capacity has to be added every year from 1998. At present load shedding has risen to the level of 300 MW causing more than 20 per cent of working hours to be wasted in the industries. This indicates the necessity of power generation in private sector.

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Table 3.1

Prevailing tariff for primary fuels and electricity Electricity Price (Taka/kWh) 3.30 2.55 4.75 4.45 3.10 7.10 3.10 2.50 5.75

Primary Fuels Type of fuel Natural gas Market price (Taka)* 1.68/m 3

Type of users Small industries: flat rate Furnace oil 4.51/litre off-peak hours peak hours LDO 11.89/litre Commercial: flat rate HSD 12.41/litre off-peak hours peak hours SKO 12.41/litre General use (11 kV): flat rate Fuel wood 2/kg (average) off-peak hours peak hours * Exchange rate (1998): 1 US$ = 48 Taka

The Government is restructuring the power sector and promoting private sector participation in the generation of electricity for attaining higher economic efficiency. The Government is strongly committed to attract private investment for installing new power generation capacity on a Build-Own-Operate (BOO) basis. A Power Cell under the Ministry of Energy and Mineral Resources (MEMR) was created in 1995 to facilitate promotion, development, implementation, commissioning and operations of private power generation projects. The modalities for implementing private power project are as follows. Financing regulation The funds for the private power projects will be raised without any direct sovereign guarantee of repayment. The project sponsor(s) must look to the revenues earned by the sale of electricity for their returns on equity and debt servicing. Minimum requirement for equity investment will be 20 per cent. A Private Sector Infrastructure Development Fund (PSIDF) will be established and money would be available at market-based interest rates with extended maturity periods. As corporate debt securities market is essential for raising local financing for power development projects, provisions for corporate bonds, shares and tax facilities with the recognition by Securities and Exchange Commission (SEC) will be allowed. Security package Model Implementation Agreement (IA), Power Purchase Agreement (PPA) and Fuel Supply Agreement (FSA) will be prepared for private power projects to eliminate the need for protracted negotiations. The government will guarantee power purchase agreement for performance obligations of the concerned utilities and the performance of the fuel supplier, which is a public sector organization. For private power projects, protection will be provided against specific force major risk and changes in certain taxes and duties. Allocation of project/plant site and provision of fuel The government will select project/plant site in consultation with the investor/project sponsor, and determine the fuel, keeping in view the preference for indigenous resources but the use of imported fuels may also be allowed. Investors may be asked to bid for projects based on renewable and/or non-conventional sources of energy.

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Tariff for bulk purchase of power at busbar The tariff structure would consist of two parts. 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), but denominated in both Dollars and local currency. 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. Fiscal incentives The private power companies shall be exempted from corporate income tax for 15 years. Repatriation of equity along with dividends will be allowed freely. Income tax will be exempted for foreign companies. The foreign investors will be free to enter into joint ventures but this is optional and not mandatory. The companies will be allowed to import plant and equipment without payment of customs duties, VAT and any other surcharges. Private power companies will be exempted from the requirements of obtaining insurance/reinsurance only from the national Insurance Company and exempted from duty payments. Power generation companies are eligible for all concessions that are available to industrial projects. Private parties may raise local and foreign finance in accordance with regulations applicable to industrial projects as defined by the Board of Investment (BOI). Local engineering and manufacturing companies shall be encouraged to provide indigenously manufactured equipment of international standard to private power plants. Other facilities and incentives for foreign investors: Several other incentives extended by the government include tax exemption on royalties, technical assistance fees, and facilities for their repatriation; tax exemption on interest on foreign loans; tax exemption on capital gains from transfer of shares by the investing company; avoidance of double taxation in case of foreign investors on the basis of bilateral agreements; exemption of income tax for up to 3 years for the expatriate personnel employed by the industry, etc. Starting from 1997, the government is considering to install a capacity of 1,500 MW through IPPs. Four agreements have so far been made, two of which are being implemented while several other projects are in the pipeline. An Independent Power Producer (IPP) is generally required to sign four contract agreements. These are the Power Purchase Agreement with BPDB; Implementation Agreement with the Government; Fuel Supply Agreement with the buyer and the supplier of fuel; Land Lease Agreement with the buyer. Many special features included in the IPP contract are very much in favour of the IPP, and are not extended to BPDB which is working presently with an installed generating capacity of 2,900 MW. The tariff charges in some cases are above the international price.

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3.2

Technical Potential for Cogeneration

3.2.1 Identification of sub-sectors with cogeneration potential

Industrial cogeneration is a vital part of any strategy designed to reduce emissions of carbon dioxide. The advantage of cogeneration is that it is available now, a true no-regrets technology justified in many applications on economic grounds alone. Cogeneration is a well-tried technology in Bangladesh, already meeting around 10 per cent of the total electricity requirements of Bangladesh. These include mainly industrial plants like fertilizer factories, sugar mills, paper mills, textile spinning mills, etc. Cogeneration of process steam and electricity is widely recognized to be one of the most important single measures for achieving energy savings in the industrial/commercial sector. After extensive site visits and surveys the following industrial and commercial sectors of the country were identified with cogeneration potential. Industrial Sectors: pharmaceutical industry, edible oil refinery, paper recycling mill, textile processing mill, textile spinning mill, jute mill, tobacco curing, food processing, tea estate, tannery plant, knitting and hosiery plant, soap and chemical industry, cement plant, food industry, ceramic industry, distillery plant, and industrial estate. Commercial Sectors: hotel, hospital, cinema hall, housing complex, shopping complex, and office complex.

3.2.2 Existing cogeneration facilities in the country

Cogeneration in textile spinning mill The company analyzed here is one of the largest spinning mills in Bangladesh, with a capacity to produce 70,230 spindles. It went into production in July 1992. At present the turnover is nearly 1,480 million Taka. The mill operates 24 hours a day, for 360 days a year. The mill requires both electrical energy and thermal energy for production. There are seven Waukesha Gas Generators in the mill, with a total generation capacity of 6.4 MW. Each generator has an electricity generation capacity of 920 kW. Electrical energy is mainly used to run different 3-phase motors. Besides, there are a few single-phase motors, fans, lights, heaters, etc. There is only one fire-tube boiler operating with natural gas as fuel, with a rated capacity to produce 1.5 ton/hour of steam at around 5 bar for the process. The mill opted for cogeneration due to the following reason. The ambient temperature in the processing section was very high, at around 40-45C, making it difficult for people to work continuously at high temperatures. Moreover the quality of the product was affected as the machines were not running properly at high temperatures. On the other hand, the temperature of the exhaust gases from gas engine generator was around 500C. The management of the mill incorporated two waste heat boiler so that about 5 ton/hour of steam generated at 6 bar is used to drive vapour absorption chillers. The chilled water produced with no energy cost decreases the air temperature in the production section from 42C to 20C. As a result, total energy cost is reduced while ensuring reliability of power supply, reducing environment pollution and increasing overall efficiency. The power output from the generators and the cooling capacity of the two chillers as functions of time are presented in Figure 3.2 and 3.3.

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5000 4500 4000 3500

kW

3000 2500 2000 1500 1000 500 10 12 14 16 18 20 22 24 6 8 2

4

Time of the Day

Figure 3.2 Power generation at the textile mill as a function of time

590 570

Ton of Refrigeration

550

530 510
490 470 450 6 8

Chiller-1 Chiller-2

10

12

14

16

18

20

22

24

Time of the Day

Figure 3.3 Cooling provided by chillers as a function of time The management of the mills cites several advantages of the cogeneration plant, such as primary fuel savings, reduced energy costs, enhanced reliability of power supply, and reduced environment pollution. Following are the benefits from the process side: reduced lapping, reduced end breakage, improved product quality due to cleaner environment, reduced burnout of the motors. Moreover, turnover of technical staff has reduced considerably, workers feel less fatigued and there is reduced absenteeism. As a result, there is 30 per cent increase in overall productivity. The gas engine generator with vapour absorption chillers is found to be an effective performance enhancement option. The result of this specific study should encourage other process industries to look seriously into the prospects of opting for cogeneration in their respective plants. This will not only be rewarding to them, but also to the country as a whole

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since the indigenous energy sources will be exploited more rationally and the national power utility would have a lower burden of coping with the ever-increasing power demand. Cogeneration in sugar mill There are 15 sugar mills in Bangladesh. These mills are owned by the government but controlled and managed by 'Bangladesh Sugar and Food Industries Corporation (BSFIC)'. Sugarcane required by each mill is collected from its surrounding areas. The industry meets the major requirement of country's sugar. Sugar mills also produce molasses and bagasse, two very important by-products that are used as raw materials in distilleries and paper industry respectively. Bagasse is also the main fuel for sugar mill boilers, producing steam that is required in the manufacturing process of the mill. In 1993-94, these mills crushed 2.7 million tons of cane, producing close to a million tons of bagasse. Data on installed capacity, cane crushed, turbine capacity, on-site power generation, power purchased, are shown in Table 3.2. Table 3.2
No Sugar mills

Data of sugar mills in Bangladesh for the milling season 1993-94

Installed capacity (TCD) 1,016 1,524 1,250 1,016 1,321 2,032 2,000 1,500 1,500 1,524 1,150 1,500 1,016 1,016 300 19,665 Cane crushed (ton) 143,952 200,213 135,872 125,111 154,421 220,294 234,072 263,941 270,979 162,325 185,752 218,985 171,431 143,091 16,674 2,647,113 Turbine generating capacity kW 2,000 3,000 4,000 2,000 2,600 2,500 3,500 4,000 2,000 3,000 3,000 2,000 2,000 2,000 500 38,100 Annual operation Days 150 148 114 138 131 136 162 167 166 130 175 156 160 155 67 Power Power generated purchased MWh 2,967 3,878 3,838 2,897 3,879 3,586 5,519 5,972 4,159 3,104 3,446 1,888 299 3138 564 49,134 MWh 678 538 631 510 462 1,121 1,462 786 1,487 855 2,778 736 648 739 178 13,610

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Panchagar Thakurgan Setabganj Shyampur Rangpur Jaypurhat Rajshahi Natore North Bengal Kushtia Carew Mobarakganj Faridpur Zeal Bangla Deshbandu Total

As most sugar mills have similar configurations, one of them is described here with more details. This mill has three water tube boilers, each with a steam generating capacity of 16 ton/hr. The pressure and temperature of the steam are 15 kg/cm2 and 246C respectively. Bagasse is the primary source of which is burnt in boiler furnace to generate steam which in turn is used to drive steam turbine generators for electricity generation required for motor drives, driving mill drive turbines and for meeting process steam needs. One steam turbine generator is normally operated during milling season to meet the entire electric demand. One standby diesel generator is also available and run during emergency. Electricity is purchased from Bangladesh Power Development Board (BPDB) as required during cleaning days and during off-season. There are also two crusher drive steam turbines, each of 580 HP capacity and two steam turbine generators, each of 1 MW capacity. About 30 tons/hour of steam is produced in the boiler that has an average efficiency of 56 per cent. High-pressure steam is mainly used for steam turbine generator and crusher drive turbines. An automatic pressure reduction valve reduces steam from 15kg/cm 2 pressure to 3 kg/cm2 that is mainly used in centrifugals for purging molasses and washing/cleaning

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heaters, evaporators and pans, etc. Turbine exhaust steam is used in processing juice, i.e. mainly heating purposes. Another automatic steam reduction valve reduces 3 kg/cm2 steam to 1 kg/cm2 to supply make up steam. Totally 80 per cent of the condensate is recovered and about 20 per cent make up water is needed for the boiler. During plant visit, it was observed that steam used in heating air of 6 forced air supply units of sugar dryer was being operated with an open bypass valve of traps causing live steam discharge to drains. Though all sugar mills have cogeneration facilities, they operate only during the season, i.e. 150 days per year. If they can be operated during off-season by applying Balancing, Modernization, Rehabilitation & Expansion (BMRE) Programme, more power generated can alleviate the power shortage in the country. Most sugar factories have low-pressure (15 bar) boilers. By installing high-pressure boilers, these can produce more power efficiently. The choice of boiler pressure of 64 kg/cm2 and above appears inevitable for mills intending to sell power to the national grid. Typically, a well-designed 2,500 tons crushed/day plant can sell 10 MW of power to national grid. There are several technical financial and institutional impediments to the use of energy efficient sugar mills, the most important ones being the policy initiatives and shortage of financial resources. In most sugar factories, there is a lack of sound technical management to maintain high-pressure boilers. The existing low-pressure boiler is itself not being maintained satisfactorily in most cases with the result that there are interruptions in crushing sugar cane. In any event, sugar being still a highly regulated industry, the management is occupied with sugar cane farmers, and the financial and administrative problems of producing and selling, and very few have the time to take up the additional responsibility of electricity cogeneration. Cogeneration with improved technology should be seriously considered in sugar factories of Bangladesh as it offers the following advantages: It causes no pollution as the bagasse does not produce flash, or sulphur compared to coal used in a thermal plant; It needs no foreign exchange as the machinery needed for cogeneration boilers, turbines, etc., is indigenously available; It has a low gestation period of two years compared with four to six years of construction period for a coal-based thermal plant; It has a much lower installation and recurring cost compared with a conventional fossil fired power plant; It is small in size and is invariably in the rural area, so the transmission and distribution losses are minimal compared with any centralized plant requiring long lines of distribution; It places no financial and administrative burden on the utility as it is executed and managed by the sugar factory; It improves the financial position of the sugar factory. Cogeneration in paper mill A newsprint paper mill having a steam turbine cogeneration facility is covered here. The mill presently generates 13.1 MW and purchases 2.5 MW from the utility grid to meet all the electrical energy needs of the site, including the residential zones. Furnace oil is used in boilers for steam generation. Steam generated at 42 bar and 400C in three boilers with a total installed capacity of 161 ton/hour, is mainly used in three backpressure turbines to generate electricity. After partial

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expansion of the steam in turbine a significant amount of steam at 6 bar is used by paper machine and autoclaves. Presently, 13.1 MW is self-generated and a 2.5 MW is bought from the national grid to run the factory and provide residential lighting. The electrical and thermal energy data of the factory for the year 1994 are shown in Figures 3.4 and 3.5.
12

Self Power Generation

Purchased power

MWh (Thousand)

10 8 6 4 2 May Mar Aug Nov Nov Apr 0

Month
Figure 3.4 Electricity consumption data of the paper mill in 1994

3500 3000

Thermal Energy (GJ)

2500 2000 1500 1000 500 May Aug Apr 0 Feb Jan

Mar

Month
Figure 3.5 Thermal energy consumption data of the paper mill in 1994 Cogeneration in fertilizer plant This fertilizer factory is one of the largest in the country, with a capacity to produce over 1.8 million tons of urea per year. Main energy source used in this fertilizer factory is natural gas that is used in boilers as fuel. Most of the electrical energy used in the fertilizer factory is self-generated and there is provision for buying electricity from the national grid.

Dec

Sep

Oct

Jun

Jul

Dec

Feb

Sep

Oct

Jan

Jun

Jul

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The fertilizer factory has two boilers with capacities to produce 180 tons/hr and 171 ton/hr of steam, respectively. The steam generated at 60 bar and 510C is mainly used in two backpressure steam turbines to generate up to 11 MW of electricity. After partial expansion in the turbine, steam at 10 bar is used for processing. Self-power generation and thermal energy consumption data of the factory are given in Figures 3.6 and 3.7, respectively.
8000

Self Power Gen. (MWh)

7000 6000 5000 4000 3000 2000 1000 Mar May Apr Aug Nov Oct Dec Feb Jan Jul 0 Sep Jun

Month

Figure 3.6

Self-power generation data of the fertilizer factory in 1997

700000 600000

Thermal Energy (GJ)

500000 400000 300000 200000 100000 0

May

Mar

Aug

Nov

Apr

Oct

Month

Figure 3.7

Thermal energy consumption data of the fertilizer factory in 1997

3.2.3 Assessment of the technical potential on the basis of questionnaire

A survey of the different manufacturing and commercial facilities in the country using technical criteria as defined by ESCAPs preliminary assessment questionnaire allowed to make a very rough estimation of the technical cogeneration potential in the different subsectors (see Table 3.3), which amounted to almost 1,000 MW. More precise determination would require more time and resources, which was beyond the scope of this study.

Dec

Feb

Jun

Jul

Sep

Jan

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3.2.4 Identification of suitable sites for pre-feasibility study

For the purposes of this pre-feasibility study, major energy consuming enterprises were identified in the following areas: industries (pharmaceutical, chemical, tobacco, edible oil, pulp and paper, textile processing and spinning, jute) and commercial buildings (hotel, hospital, cinema hall, housing and shopping complex, office). Information on their thermal and electrical energy consumption was collected through site visits and survey using a questionnaire. The selection process was based on screening and analysis of the energy usage pattern. The energy usage was analyzed in detail before assessing the pre-feasibility of cogeneration. Results of selected enterprises are presented in the following section. Table 3.3 No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Industrial and commercial cogeneration potential in Bangladesh No. of Mills 50 50 50 70 14 20 50 10 20 180 15 10 15 5 50 150 10 150 5 Assumed Average Installation Potential of the Plant (MW) 2 1 0.6 1.5 3 0.8 0.6 0.8 1.5 0.9 1 0.6 10 5 0.5 0.5 1 0.5 5 Total (MW) 100 50 30 105 42 16 30 8 30 162 15 6 150 25 25 75 10 75 25

Type of Activity Textile Spinning Mills Textile Processing Mills Knitting & Hosiery Plant Jute Mills Paper Recycling Mills Soup & Chemical Industry Tannery Cement Mills Ceramic Industry Tea Gardens Food Industry Distillery Sugar Mills (surplus generation) Industrial Estate Hotel Hospital Housing Complex Office Complex Export Processing Zone

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3.3

Pre-feasibility Studies at Selected Industrial and Commercial Sites

For the purpose of economic analysis, the total installed costs of the cogeneration plants were assumed as follows: steam turbines: US$ 1,200/kWe; gas turbines: US$ 1,000/kWe; and reciprocating engines: US$ 900/kWe. Some common financial data gathered or assumed before conducting the pre-feasibility studies are summarized in Table 3.4. Table 3.4 Parameters Exchange rate Tax rate Discount rate Cogeneration plant service life Electricity purchase price Electricity buy-back rate Fuel price escalation rate Electricity price escalation rate Electricity stand-by rate Fuel purchase price (natural gas) Financial data used for the pre-feasibility study Unit Taka/US$ Per cent/year Per cent/year Year Taka/kWh Per cent of purchase price Per cent/year Per cent/year Taka/kW.month Taka/m 3 Value 48.00 35.00 15.00 15.00 3.60 80 per cent 5.00 6.00 80.00 1.68

3.3.1 Recycled paper mill

This factory operates 24 hours a day and 350 days a year. Natural gas is used in boiler furnace for steam generation. The electrical energy is required to drive the motors. The rate of production is maintained up to the target level. Analysis of the monthly electricity and steam consumption in 1997 led to the following: Total Electricity Consumption in 1997: Maximum Electricity Demand: Minimum Electricity Demand: Total Steam Consumption in 1997: Maximum Steam Demand: Minimum Steam Demand: 23,412 MWh 3,100 kW 2,750 kW 69,386 tons 9.65 ton/hr 7.15 ton/hr

The average power-to-heat ratios were found to be 0.52 in 1997. Typical cogeneration system for this site would be based on steam turbine. However, reciprocating engine, gas turbine cogeneration systems were also considered as potential alternatives. Results of the feasibility study are summarized in Table 3.5. Obviously, the steam turbine option does not seem feasible: (i) with steam turbine thermal match (STTM), less than 25 per cent of the power requirement is generated; (ii) with steam turbine power match (STPM), too much excess heat is generated. With the reciprocating engine thermal match (RETM) option, 200 per cent excess power is generated. The project profitability will depend on the buy-back rate. This may not be a good option as the purpose is not to earn from electricity sale. Reciprocating engine power match (REPM) option seems feasible as almost all the power needed can be met though an auxiliary boiler will be necessary to make up for the 30 per cent shortfall in the heat supply.

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Table 3.5 Major Parameters

Summary of pre-feasibility study of the recycled paper mill Steam Turbine Gas Engine Gas Turbine

Thermal Power Therm al Match Match Match

Installed power (kW) Fuel consumption (TJ/year) Electricity generated (MWh) Heat generated (TJ/year) Excess/deficit(-) power (MWh/year) Excess/deficit(-) heat (TJ/year) Equipment power-to-heat ratio Total investment (million Taka) Net present value (million Taka) IRR (per cent) 582.00 197.00 4,647.00 157.90 -18,765.00 -4.10 0.106 33.54 43.28 34.00 2,750.00 930.20 21,945.00 745.90 -1,467.00 509.30 0.11 158.40 68.05 21.70 9,047.00 856.90 72,197.00 157.90 48,785.00 -4.10 1.87 390.84 56.20 35.90

Power Therm al Match Match

2,750.00 260.50 21,945.00 48.00 -1,469.00 -114.00 1.87 118.80 225.05 41.90 3,872.00 444.90 30,889.00 157.90 7,487.00 -4.10 0.80 185.86 273.09 36.30

Power Match
2,750.00 316.00 21,945.00 112.20 1,467.00 -49.80 0.80 132.00 213.44 38.30

With gas turbine thermal match (GTTM) option, about 30 per cent excess electricity is generated which may be acceptable. Gas turbine power match (GTPM) option is also good as the 30 per cent deficit in the heat supplied can be met by auxiliary natural gas firing in the recovery boiler. Accordingly, sensitivity analysis done to see the impacts of the increase in the investment, fuel and electricity price escalation, was limited to REPM, GTTM and GTPM options. What if the investment cost increases?
Int er na l Ra(IR te R) of Re tur n
42% 40% 38% 36% 34% 32% 30% REPM GTPM

1%

3%

5%

8%

10%

13%

15%

% of Increase Investment Cost

What if the fuel price escalates faster?

Internal Rate of Return (IRR)

40.0% 35.0% REPM 30.0% 25.0% 5. 0 % 6. 0 % 7. 0 % GTPM GTTM 8. 0 % 9. 0 % 10 .0 % 11 .0 % 12 .0 % 13 .0 %

Fuel Price Escalation Rate

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What if the electricity price escalates faster?

Internal Rate of Return
50% 45% 40% REPM 35% 30% 6% 7% 8% 9% 10% 11% 12% 13% GTPM GTTM

Electricity Price Escalation Rate

From the sensitivity analysis of the potential cogeneration alternatives for the recycled paper mill, the reciprocating engine power match option meeting power requirement of 2750 kW is found to be the most suitable cogeneration system. It represents an initial investment of 118 Million Taka and leads to an internal rate of return of 41.9 per cent.

3.3.2 Vegetable oil refinery

This factory operates 24 hours a day and 340 days a year. Natural gas is used in boiler to generate steam that is required for the process. Energy alone accounts for 35 per cent of the production cost. Analysis of the monthly electricity and steam consumption in 1997 led to the following: Total Electricity Consumption in 1997: Maximum Electricity Demand: Minimum Electricity Demand: Total Steam Consumption in 1997: Maximum Steam Demand Minimum Steam Demand: 4,229 MWh 650 kW 510 kW 12,260 tons 1.68 ton/hr 1.43 ton/hr

The average power-to-heat ratio was 0.53 in 1997. Typical cogeneration system for this site would be based on steam turbine, though its size will be quite small. However, reciprocating engine, gas turbine cogeneration systems were also considered as potential alternatives. Results of the feasibility study are summarized in Table 3.6. Obviously, the steam turbine option does not seem feasible: (i) with steam turbine thermal match (STTM), less than 20 per cent of the power requirement is met; (ii) with steam turbine power match (STPM), 300 per cent excess heat is generated. With the reciprocating engine thermal match (RETM) option, 235 per cent excess power is generated. The project profitability will depend on the buy-back rate. This may not be a good option as the purpose is not to earn from electricity sale. Reciprocating engine power match (REPM) option seems feasible as almost all the power needed can be met though an auxiliary boiler will be necessary to make up for the 30 per cent shortfall in the heat supply.

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Table 3.6

Summary of pre-feasibility study of the vegetable oil refinery Steam Turbine

Thermal Power Match Match 101.00 520.00 36.80 190.50 771.00 3,984.00 30.20 156.30 -3,458.00 -245.00 1.60 112.00 0.092 0.09 5.79 29.95 6.61 6.23 31.90 18.30

Major Parameters

Gas Engine
Thermal Match 1,804.00 164.00 13,819.00 30.20 9,950.00 1.60 1.87 77.93 102.69 34.30 Power Match 520.00 47.30 3,984.00 8.70 -245.00 -19.90 1.87 22.46 39.82 40.30

Gas Turbine
Thermal Match 772.00 85.20 5,914.00 30.20 1,685.00 1.60 0.80 37.06 49.27 34.40 Power Match 520.00 57.40 3,984.00 20.40 -245.00 -8.30 0.80 24.96 37.61 36.80

Installed power (kW) Fuel consumption (TJ/year) Electricity generated (MWh) Heat generated (TJ/year) Excess/deficit(-) power (MWh/year) Excess/deficit(-) heat (TJ/year) Equipment power-to-heat ratio Total investment (million Taka) Net present value (million Taka) IRR (per cent)

With gas turbine thermal match (GTTM) option, about 35 per cent excess electricity is generated which may be acceptable. Gas turbine power match (GTPM) option is also good as the 30 per cent deficit in the heat supplied can be met by auxiliary natural gas firing in the recovery boiler. Accordingly, the sensitivity analysis carried out to see the impacts of the increase in the investment, fuel and electricity price escalation, was limited to REPM, GTTM and GTPM options. What if the investment cost increases?
45%

Internal Rate of Return

40% 35% 30% 25% 20% 1% 2.50% 5% 7.50% 10% 12.50% 15%

REPM GTPM GTTM

% of Increase Invesrment Cost

What if the fuel price escalates faster?

Internal Rate of Return (IRR)
45%

40%

35% REPM 30% GTPM GTTM 25% 5%

6%

7%

8%

9%

10%

11%

12%

13%

Escalation Rate of Fuel Price

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What if the electricity price escalates faster?

Internal Rate of Return (IRR)
50% 45% 40% REPM 35% 30% 6% GTPM GTTM 7% 8% 9% 10% 11% 12% 13%

Escalation Rate of Electricity Price

From the sensitivity analysis of the potential cogeneration alternatives for the vegetable oil refinery, the reciprocating engine power match option meeting power requirement of 520 kW is found to be the most suitable cogeneration system. It represents an initial investment of 22 Million Taka and leads to an internal rate of return of 40.3 per cent.

3.3.3 Textile spinning mill

This factory operates 24 hours a day and 350 days a year. Natural gas is used in boiler to generate steam that is required for the process. The production is greatly affected by any fluctuations or micro-cuts in the power supply. Analysis of the monthly electricity and steam consumption data of 1997 led to the following: Total Electricity Consumption in 1997: Maximum Electricity Demand: Minimum Electricity Demand: Total Thermal Energy Consumption in 1997: Maximum Steam Demand: Minimum Steam Demand: 20,096 MWh 2,500 kW 2,350 kW 66 TJ 3.520 ton/hr 3.225 ton/hr

The power-to-heat ratio of the site was estimated as 1.1 for 1997. Typical cogeneration system for this site would be based on reciprocating engine. However, steam turbine and gas turbine cogeneration systems were also considered as potential alternatives. Results of the feasibility study are summarized in Table 3.7. As expected, the steam turbine option is not suitable: (i) with steam turbine thermal match (STTM), less than 10 per cent of the power requirement is met; (ii) with steam turbine power match (STPM), 770 per cent excess heat is generated. With the reciprocating engine thermal match (RETM) option, 62 per cent excess power is generated. The project profitability will depend on the buy-back rate. This may not be a good option as the purpose is not to earn from electricity sale. Reciprocating engine power match (REPM) option seems feasible as almost all the power requirement can be met though the heat generated is largely inadequate to meet the demand. An auxiliary boiler will be necessary to make up for over 65 per cent shortfall in the heat supply.

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Table 3.7 Major Parameters

Summary of pre-feasibility study of the textile spinning mill Steam Turbine Gas Engine Gas Turbine

Therm al Match
Installed power (kW) Fuel consumption (TJ/year) Electricity generated (MWh) Heat generated (TJ/year) Excess/deficit(-) power (MWh/year) Excess/deficit(-) heat (TJ/year) Equipment power-to-heat ratio Total investment (million Taka) Net present value (million Taka) IRR (per cent)

Power Therm al Match Match

4,080.00 386.40 32,555.00 12,486.00 71.20 5.00 1.87 176.24 287.14 38.40

Power Therm al Match Match

2,350.00 222.60 18,753.00 -1,316.00 41.00 -25.00 1.87 101.52 192.42 41.90 1,746.00 200.60 13,983.00 -6,136.00 71.20 5.20 0.80 83.81 134.34 38.10

Power Match
2,350.00 270.00 18,753.00 -1,316.00 95.90 29.90 0.80 112.80 175.52 37.40

263.00 2,350.00 88.80 794.90 2,096.00 18,753.00 -17,974.00 -1,316.00 71.20 637.40 5.20 507.60 0.106 0.106 15.12 135.36 18.20 41.41 32.80 19.90

With gas turbine thermal match (GTTM) option, about 30 per cent less electricity are generated. Gas turbine power match (GTPM) option takes care of all the power and heat needs but around 46 per cent of excess heat are generated which has no commercial value. Accordingly, the sensitivity analysis carried out to see the impacts of the increase in the investment, fuel and electricity price escalation, was limited to REPM and GTPM options. What if the investment cost increases?

Internal Rate of Return (IRR)

42% 40% 38% 36% 34% 32% 30% REPM GTPM

1%

3%

5%

8%

10%

13%

15%

% of Increase Investment Cost

What if the fuel price escalates faster?

Internal Rate of Return

41% 40% 39% 38% 37% 36% 35% 5% 6% 7% 8% 9% 10% 11% 12% 13% REPM GTPM

Fuel Price Escalation Rate

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What if the electricity price escalates faster?

Internal Rate of Return (IRR)

49% 47% 45% 43% 41% 39% 37% 35% 6% REPM GTPM 7% 8% 9% 10% 11% 12% 13%

% of Increase Fuel Price Escalation Rate

From the sensitivity analysis of the potential cogeneration alternatives for the textile spinning mill, the reciprocating engine power match option meeting power requirement of 2,350 kW is found to be the most suitable cogeneration system. It represents an initial investment of 102 Million Taka and leads to an internal rate of return of 41.9 per cent.

3.3.4 Textile processing mill

This factory operates 24 hours a day, for 340 days a year. Natural gas is used in boiler to generate steam that is required for the process. The production process is sensitive to any fluctuations in the power supply or power failures. Analysis of the monthly electricity and steam consumption data of 1997 led to the following: Total Electricity Consumption in 1997: Maximum Electricity Demand: Minimum Electricity Demand: Total Thermal Energy Consumption in 1997: Maximum Steam Demand: Minimum Steam Demand: 7,433 MWh 1,100 kW 875 kW 89.3 TJ 5.66 ton/hr 3.40 ton/hr

The power-to-heat ratio of the site was estimated as 0.3 for 1997. Typical cogeneration system for this site would be based on steam turbine. However, reciprocating engine and gas turbine cogeneration systems were also considered as potential alternatives. Results of the feasibility study are summarized in Table 3.8. The steam turbine option is found to be not suitable: (i) with steam turbine thermal match (STTM), less than 20 per cent of the power requirement is met; (ii) with steam turbine power match (STPM), 90 per cent excess power and 170 per cent excess heat are generated. With the reciprocating engine thermal match (RETM) option, 325 per cent excess power is generated. The project profitability will depend on the buy-back rate. This may not be a good option as the purpose is not to earn from electricity sale. Reciprocating engine power match (REPM) option seems feasible as almost all the power needed can be met though the heat generated meets up to 80 per cent of the demand. An auxiliary boiler will be necessary to make up for the remaining 20 per cent shortfall in the heat supply.

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Table 3.8

Summary of pre-feasibility study of the textile spinning mill Steam Turbine Gas Engine Gas Turbine

Major Parameters

Ther Powe Therma Powe Therm Powe mal r r al r l Match Match Match Match Match Match
Installed power (kW) Fuel consumption (TJ/year) Electricity generated (MWh) Heat generated (TJ/year) Excess/deficit(-) power (MWh/year) Excess/deficit(-) heat (TJ/year) Equipment power-to-heat ratio Total investment (million Taka) Net present value (million Taka) IRR (per cent) 238.00 875.00 88.90 326.10 1,849.00 6,783.00 73.00 267.80 -5,584.00 -650.00 -16.30 151.80 0.091 0.09 13.74 50.40 16.94 20.37 33.20 21.30 4,157.00 382.50 32,226.00 73.00 24,793.00 -16.30 1.87 179.59 234.12 34.10 875.00 80.50 6,783.00 15.40 -650.00 -73.90 1.87 37.80 68.43 40.80 1,843.00 205.70 14,284.00 73.00 6,851.00 -16.30 0.80 88.44 110.84 33.40 875.00 97.70 6,783.00 34.70 -650.00 -54.60 0.80 42.00 64.59 37.20

With gas turbine thermal match (GTTM) option, about 90 per cent excess electricity is generated. Gas turbine power match (GTPM) option takes care of all the power needs though heat deficit is as high as 60 per cent. This will require the adoption of auxiliary natural gas firing in the recovery boiler. The total installation cost of GTPM is 50 per cent less than that for GTTM. Accordingly, the sensitivity analysis carried out to see the impacts of the increase in the investment, fuel and electricity price escalation, was limited to REPM and GTPM options. What if the investment cost increases?

Internal Rate of Return (IRR)

42% 40% 38% 36% 34% 32% 30% REPM GTPM

1%

3%

5%

8%

10%

13%

15%

% of Increase Investment Cost

What if the fuel price escalates faster?

Internal Rate of Return

41% 40% 39% 38% 37% 36% 35% 5% 6% 7% 8% 9% 10% 11% 12% 13% REPM GTPM

Fuel Price Escalation Rate

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What if the electricity price escalates faster?

Internal Rate of Return (IRR)
49% 47% 45% 43% 41% 39% 37% 35% 6% REPM GTPM 7% 8% 9% 10% 11% 12% 13%

% of Increase Fuel Price Escalation Rate

From the sensitivity analysis of the potential cogeneration alternatives for the textile processing mill, the reciprocating engine power match option meeting power requirement of 875 kW is found to be the most suitable cogeneration system. It represents an initial investment of 37 Million Taka and leads to an internal rate of return of 40.8 per cent.

3.3.5 Hospital
This hospital operates throughout the year without any stop. Electricity is required for lighting, air conditioning and motors whereas as a lot of thermal energy is needed in the form of steam for various applications. Analysis of the monthly electricity and steam consumption data of 1997 led to the following: Total Electricity Consumption in 1997: Maximum Electricity Demand: Minimum Electricity Demand: Total Thermal Energy Consumption in 1997: Maximum Steam Demand: Minimum Steam Demand: 7,108 MWh 1,200 kW 800 kW 91.5 TJ 4.99 ton/hr 3.90 ton/hr

The power-to-heat ratio of the site was calculated to be 0.68 for 1997. Typical cogeneration system suitable for this site would be based on gas turbine. However, reciprocating engine and steam turbine cogeneration systems were also considered as potential alternatives. Results of the feasibility study are summarized in Table 3.9. The steam turbine option is found to be not suitable: (i) with steam turbine thermal match (STTM), less than 30 per cent of the power requirement is generated and the hospital will have to depend heavily on the utility grid; (ii) with steam turbine power match (STPM), 119 per cent excess heat are generated which has no commercial value. With the reciprocating engine thermal match (RETM) option, 475 per cent excess power is generated. The project profitability will depend on the buy-back rate. This may not be a good option as the purpose is not to earn from electricity sale. Reciprocating engine power match (REPM) option seems feasible as almost all the power needed can be met though there will be small (16 per cent) shortage in the heat supply. There is no need for an auxiliary boiler as this shortfall can be easily made up by auxiliary natural gas firing in the recovery boiler.

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Table 3.9 Major Parameters

Summary of pre-feasibility study of the hospital Steam Turbine Gas Engine Gas Turbine

Ther Power mal Match Match

Installed power (kW) Fuel consumption (TJ/year) Electricity generated (MWh) Heat generated (TJ/year) Excess/deficit(-) power (MWh/year) Excess/deficit(-) heat (TJ/year) Equipment power-to-heat ratio Total investment (million Taka) Net present value (million Taka) IRR (per cent) 321.00 800.00 111.90 279.10 2,668.00 6,658.00 89.50 22,308.00 -4,440.00 -450.00 -2.00 109.60 0.107 0.11 18.47 46.08 25.55 33.32 35.20 26.00

Thermal Power Therm al Match Match Match

4,916.00 485.60 40,9111.00 89.50 33,8030.00 -2.00 1.870 212.370 306.070 35.90 800.00 79.00 6,058.00 14.60 -450.00 -76.90 1.87 34.56 69.86 43.50 2,104.00 252.10 17,509.00 89.60 10,401.00 2.00 .80 100.99 137.00 34.80

Powe r Match
800.00 95.60 6,658.00 34.00 -450.00 -57.60 0.80 38.40 66.51 39.80

With gas turbine thermal match (GTTM) option, about 146 per cent excess electricity is generated, which has to be sold as in the RETM option. Gas turbine power match (GTPM) option takes care of all the power needs though heat deficit is as high as 60 per cent. This will require the adoption of auxiliary natural gas firing in the recovery boiler. Accordingly, the sensitivity analysis carried out to see the impacts of the increase in the investment, fuel and electricity price escalation, was limited to REPM and GTPM options. What if the investment cost increases?

Internal Rate of Return (IRR)

42% 40% 38% 36% 34% 32% 30% REPM GTPM

1%

3%

5%

8%

10%

13%

15%

% of Increase Investment Cost

What if the fuel price escalates faster?

Internal Rate of Return

41% 40% 39% 38% 37% 36% 35% 5% 6% 7% 8% 9% 10% 11% 12% 13% REPM GTPM

Fuel Price Escalation Rate

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What if the electricity price escalates faster?

Internal Rate of Return (IRR)

49% 47% 45% 43% 41% 39% 37% 35% 6% REPM GTPM 7% 8% 9% 10% 11% 12% 13%

% of Increase Fuel Price Escalation Rate

From the sensitivity analysis of the potential cogeneration alternatives for the hospital, the reciprocating engine power match option meeting power requirement of 800 kW is found to be the most suitable cogeneration system. It represents an initial investment of 35.6 Million Taka and leads to an internal rate of return of 43.5 per cent.

3.3.5 Hotel
This hotel operates throughout the year. Electricity is required for lighting, air conditioning and motors, and a lot of steam is required for various applications. Analysis of the monthly electricity and steam consumption data of 1997 led to the following: Total Electricity Consumption in 1997: Maximum Electricity Demand: Minimum Electricity Demand: Total Thermal Energy Consumption in 1997: Maximum Steam Demand: Minimum Steam Demand: 8,580 MWh 1,000 kW 900 kW 137 TJ 9.25 ton/hr 8.02 ton/hr

The power-to-heat ratio of the site was calculated to be 0.23 for 1997. Typical cogeneration system suitable for this site would be based on steam turbine. However, reciprocating engine and gas turbine cogeneration systems were also considered as potential alternatives. Results of the feasibility study are summarized in Table 3.10. The steam turbine option is found to be not suitable: (i) with steam turbine thermal match (STTM), less than 65 per cent of the power requirement is generated and the hotel will have to depend on the utility grid; (ii) with steam turbine power match (STPM), only a small amount of excess heat is generated. With the reciprocating engine thermal match (RETM) option, 900 per cent excess power is generated. The project profitability will depend on the buy-back rate. This may not be a good option as the purpose is not to earn from electricity sale. Reciprocating engine power match (REPM) option seems good as almost all the power needed can be met though there will be small (15 per cent) shortage in the heat supply. There is no need for an auxiliary boiler as this shortfall can be easily made up by auxiliary natural gas firing in the recovery boiler.

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Table 3.10 Major Parameters

Summary of pre-feasibility study of the hotel Steam Turbine Gas Engine Gas Turbine

Ther Powe Therm Powe Therm mal r al r al Match Match Match Match Match
Installed power (kW) Fuel consumption (TJ/year) Electricity generated (MWh) Heat generated (TJ/year) Excess/deficit(-) power (MWh/year) Excess/deficit(-) heat (TJ/year) Equipment power-to-heat ratio Total investment (million Taka) Net present value (million Taka) IRR (per cent) 653.00 900.00 230.00 317.50 5,400.00 7,490.00 184.60 254.60 -3,149.00 -1,090.00 47.00 92.10 0.106 0.11 37.59 51.84 41.11 44.61 31.20 28.00 10,137.00 1,001.50 84,376.00 184.60 75,796.00 47.60 1.87 438.00 597.67 34.90 900.00 88.90 7,490.00 16.40 -1,090.00 -120.60 1.87 38.88 78.61 43.50 4,339.00 520.00 36,112.00 184.60 27,532.00 47.60 0.80 208.29 249.30 32.60

Powe r Match
900.00 107.90 7,490.00 38.30 -1,090.00 -98.70 0.80 43.20 74.83 39.80

With gas turbine thermal match (GTTM) option, about 320 per cent excess electricity is generated, which has to be sold as in the RETM option. Gas turbine power match (GTPM) option takes care of all the power needs though heat deficit is as high as 60 per cent. This will require the adoption of auxiliary natural gas firing in the recovery boiler. Accordingly, the sensitivity analysis carried out to see the impacts of the increase in the investment, fuel and electricity price escalation, was limited to STPM, REPM and GTPM options. What if the investment cost increases?
Internal Rate of Return (IRR)

42% 40% 38% 36% 34% 32% 30% REPM GTPM

1%

3%

5%

8%

10%

13%

15%

% of Increase Investment Cost

What if the fuel price escalates faster?

Internal Rate of Return

41% 40% 39% 38% 37% 36% 35% 5% 6% 7% 8% 9% 10% 11% 12% 13% REPM GTPM

Fuel Price Escalation Rate

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What if the electricity price escalates faster?

Internal Rate of Return (IRR)

49% 47% 45% 43% 41% 39% 37% 35% 6% REPM GTPM 7% 8% 9% 10% 11% 12% 13%

% of Increase Fuel Price Escalation Rate

From the sensitivity analysis of the potential cogeneration alternatives for the hospital, the reciprocating engine power match option meeting power requirement of 800 kW is found to be the most suitable cogeneration system. It represents an initial investment of 35.6 Million Taka and leads to an internal rate of return of 43.5 per cent.

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3.4

Conclusions and Recommendations for Follow-up Actions1

Conclusion

From the pre-feasibility study of the selected sites, one can conclude that thanks to the availability of natural gas distribution network in some economic areas, gas-based cogeneration is found to be the most cost-effective option for Bangladesh. In view of the present national power situation, cogeneration in sites having a steady need for heat and power, and access to natural gas, can improve the production reliability and efficiency while reducing the burden on the already stressed national grid. Moreover, natural gas-based cogeneration will reduce the dependency on imported fuel and will have less adverse impact on the environment. Power demand in many sites is not very high, ranging from 0.5 to 2 MW. These sites are ideal for gas-based reciprocating engines that already have a good presence in the local market. The internal rates of return in all the cases were found to be quite high (above 40 per cent) for the best feasible options, mainly due to the low price of gas prevailing in the country. In spite of the significant techno-economic potential for cogeneration applications in Bangladesh, cogeneration has not been widely adopted in the country due to several reasons. The foremost among them is the low level of awareness at all levels about the technological alternatives, economic merits, environmental benefits and business opportunities related to the application of cogeneration as an efficient energy use option. No systematic study has been undertaken so far to assess cogeneration potential by taking into account factors such as energy demand patterns, plant size, power-to-heat ratio, access to gas pipeline, etc. There is practically no interaction between the energy utilities and the energy users to explore the cogeneration option though the government is serious about encouraging private investment in the power sector. Recommendation for follow-up actions Since cogeneration development seems to be very promising, the hurdles (institutional structure, policy and planning, energy pricing and tariff, investment and financing etc.) in this sector may be removed for its further propagation. Regulatory measures are needed for the sale of excess electricity to the grid or third party, and back-up power supply from the grid as and when necessary. The establishment of a national interagency co-ordinating committee may be seriously considered. Government may also initiate demonstration projects using advanced technologies in selected public sector enterprise in the industrial estates/export processing zones/satellite city centres. State energy suppliers (electricity and gas companies) may play a greater role in the propagation of cogeneration by establishing partnership with potential cogenerators, public or private, in making investment, guaranteeing operation and maintenance, and sharing costs and benefits in the process.

These conclusions and recommendations are based on the deliberations of participants in the South Asia Sub-Regional Seminar organized at Dhaka on 14 and 15 November 1998. The programme details of the Seminars are included in Appendix 3A.

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Alternative financing may include third-party participation, leasing, soft loan, bilateral and international funds targeted towards global environmental protection (e.g. clean development mechanism, joint implementation, special environmental Yen loan, global environmental fund). More incentives such as quick depreciation, soft loan, tax benefits, etc., should be extended to those cogeneration projects that satisfy well-specified technical, economic and environmental criteria. An energy conservation act may be established with a view to emphasizing on use of cogeneration and development of energy efficient technologies. To promote cogeneration technology, there should be a separate cell under the Ministry of Energy and Mineral Resources who will look after and will publish information regarding cogeneration regularly. There is a need for introducing courses on renewable energy and cogeneration in the curriculum of technical education in Bangladesh for development of long-term human resources. Large-scale training programme may be contemplated for involvement of national institutions on different aspects of cogeneration. Workshops, seminars and information exchanges are necessary on specialized topics, such as feasibility study, site selection, equipment design, financing and resource management. A comprehensive survey and pre feasibility study should be undertaken for developing an implementation plan. Feasibility studies for cogeneration should be made immediately for all the identified schemes and priorities should be set for their implementation. A cogeneration programme should be incorporated with all suitable existing future projects in Bangladesh. International cooperation through bilateral agreements for technical and financial assistance would be helpful and should be sought.

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APPENDIX 3.A
Programme of the South Asia Sub-Regional Seminar on ROLE OF COGENERATION IN THE NATIONAL ENERGY SCENARIO : PERSPECTIVES FOR ENERGY POLICY Date: Place: Organiser: Saturday, 14 November 1998 Bangladesh University of Engineering Technology (BUET), Dhaka, Bangladesh Centre for Energy Studies and Mechanical Engineering Department (BUET), in Collaboration with Economic and Social Commission for Asia and the Pacific (ESCAP) Government of Japan Registration Official opening Message from ESCAP Mr. Pranesh C. Saha (Chief of Energy Resources Section, ESCAP) Economic and Environmental Benefits of Cogeneration Applications Dr. B. Mohanty (Cogeneration expert) Use of Cogeneration in Japanese Industries Mr. Akira Ishiyama (JICA/ESCAP Expert on Energy Conservation) Tea Break Potential for Use of Cogeneration in the Industrial Sector in Bangladesh National Study Team of Bangladesh Regulatory Framework for Promoting Cogeneration Panel discussion with policy makers and industry representatives Prayer and Lunch Experiences with Promotion of Cogeneration in South Asia Mr. A. S. Bakshi (Ministry of Power, India) Mr. R. Ghimire (Water and Energy Commission, Nepal) Summary and Conclusion Tea Break Tour of the exhibition on Energy Technology

Sponsor: 08h00-08h45 08h45-09h30

09h30-10h00 10h00-10h30 10h30-10h50 10h50-12h00 12h00-12h45 12h45-14h30 14h30-16h00

16h00-16h30 16h30-17h00 17h00-18h00

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Programme of the South Asia Sub-Regional Seminar on BUSINESS OPPORTUNITIES IN COGENERATION Date: Place: Organiser: Sunday, 15 November 1998 Bangladesh University of Engineering Technology (BUET), Dhaka, Bangladesh Centre for Energy Studies and Mechanical Engineering Department (BUET), in Collaboration with Economic and Social Commission for Asia and the Pacific (ESCAP) Government of Japan Registration Official opening Introductory Statement by ESCAP Mr. Pranesh C. Saha (Chief of Energy Resources Section, ESCAP) Business Potentials and Trends in Use of Cogeneration in Industry Dr. B. Mohanty (Cogeneration expert) Results of Pre-feasibility Studies in Selected Industries in Bangladesh National Study Team from Bangladesh Tea Break Cogeneration Case Studies from South Asian Countries Mr. A. S. Bakshi (Ministry of Power, India) Mr. R. Ghimire (Water and Energy Commission, Nepal) Prospects for Cogeneration Development in Bangladesh Discussions and Conclusion Prayer and Lunch Optional: Individual Consultations Potential cogenerators from industries, manufacturers, suppliers, developers, financiers, consultants, etc.

Sponsor: 08h30-09h00 09h00-09h30

09h30-10h00 10h00-11h00 11h00-11h30 11h30-13h00

13h00-13h30 13h30-15h00 15h00-16h30