Technical Assistance Consultant’s Report
Project Number: 45916 May 2014
Bangladesh: Industrial Energy Efficiency Finance Program (Financed by the Technical Assistance Special Funds)
Prepared by: Tetra Tech ES India Limited Plot No 511 5Th Floor D-Mall Netaji Subhash Place, Pitampura, New Delhi – 110034, Delhi, India
This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. (For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project’s design.
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Industrial Energy Efficiency Opportunities and Challenges in Bangladesh
Final Report
2014
Prepared by: Tetra Tech ES, Inc. 1320 North Courthouse Road Suite 600, Arlington, VA 22201 United States
Web: www.tetratech.com
Confidentiality and Privacy : This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without Asian Development Bank (ADB) authorization. Acknowledgement
The Tetra Tech team expresses its sincere appreciation to the Asian Development Bank (ADB) for initiating the Bangladesh Industrial Energy Efficiency Finance Program and providing guidance throughout its implementation. The team wishes to convey thanks to the executing agency, Industrial and Infrastructure Development and Finance Company (IIDFC) Bangladesh for providing local financial guidance to the project.
This report has been prepared on the basis of 120 energy audits carried out in Bangladeshi industrial facilities and has benefited from the observations, comments and inputs of a cross section of knowledgeable industry experts and stakeholders. We are grateful to Mr. Martin Lemoine (Sr. Investment Specialist, Asian Development Bank) for his expert guidance in structuring the program. We would like to acknowledge the guidance and support received from Ms. Juliette Leusink (Investment Specialist, Asian Development Bank), in her assistance in framing key issues, participating in workshops in Bangladesh and providing insightful comments on this report. We express our profound thanks to the Bangladesh Resident Mission Director, Ms. Teresa Kho and Mr. Maruf Hossain (Unit Head – Finance and Administration, Bangladesh Resident Mission) and his team for extending logistics support in organizing workshops and visits by international consultants.
We are especially grateful for valuable time and unique insights provided by Mr. Matiul Islam, Chairman IIDFC. We thankfully acknowledge the cooperation shown by Mr. Asaduzzaman Khan, Managing Director IIDFC and Mr. Shafiqul Alam, Deputy Manager, Carbon Finance IIDFC in arranging informational meetings and facilitating the participation of financial institutions and banks in the program’s workshops. The report benefited greatly from discussions with a wide range of financial institutions and banks, industry bodies, factory owners, utilities and manufacturers.
We express our profound thanks to Kazi Akram Uddin Ahmed, President, The Federation of Bangladesh Chambers of Commerce and Industry and Md. Delwar Hossain, Member, Bangladesh Electricity Regulatory Commission, who provided their blessing and encouragement to proceed in this novel program. It was the team’s honor to obtain the knowledge and guidance of such distinguished experts.
Last but not least, we thankfully acknowledge the many individuals mentioned above, as well as many more that remain unnamed, for extending the support needed to complete this task in an orderly fashion.
i Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Table of Contents
Executive Summary ...... vii
1. Introduction ...... 1
2. Energy Efficiency in the Industrial Sectors of Bangladesh - External and Internal Drivers . 3 2.1. The Existing Energy Scenario in Bangladesh...... 3 2.2. Energy Efficiency Challenges and Opportunities in Bangladesh ...... 5 2.3. Key Drivers for Energy Efficiency in Bangladesh ...... 8
3. Sector Outlook ...... 12 3.1. Sector 1: Textiles, Garments, Leather and Related Industries ...... 15 3.2. Sector 2: Iron and Steel Industries...... 24 3.3. Sector 3: Cement and Clinker Industries...... 32 3.4. Sector 4: Ceramics and Glass Industries ...... 40 3.5. Sector 5: Chemical, Fertilizer, Pulp and Paper, Plastics Industries ...... 49 3.6. Sector 6: Agro-industries, Including Sugar and Jute Industries ...... 60
4. Policy Support...... 70 4.1. India...... 71 4.2. Japan...... 72 4.3. The Netherlands ...... 73 4.4. United Kingdom ...... 74 4.5. United States ...... 74 4.6. Bangladesh...... 75 4.7. Proposed Policy Package for Bangladesh ...... 76
5. Capacity Building for Promoting Energy Efficiency in Bangladesh...... 80 5.1. A Need for Capacity Building ...... 80 5.2. Project Findings ...... 80 5.3. Top-Down Approach...... 81 5.4. Industrial Energy Efficiency Finance Program...... 82 5.5. Program Findings...... 83 5.6. Priorities for Capacity Building ...... 84
6. Conclusion ...... 85
ii Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Consultant Team
Name Designation Asian Development Bank (ADB) Martin Lemoine Sr. Investment Specialist Juliette Leusink Investment Specialist Industrial and Infrastructure Development Finance Company Limited ( IIDFC) Matiul Islam Chairman, IIDFC Asaduzzaman Khan Managing Director, IIDFC Shafiqul Alam Deputy Manager, Carbon Credit, IIDFC Tetra Tech Consultant Team Rakesh Kumar Goyal Team Leader Sumedh Agarwal Deputy Team Leader (International) Md. Allauddin Al Azad Deputy Team Leader (National) Zafrul Siddique Deputy Team Leader (National) David Jones Technical Editor and Graphics Expert T. Shankar Narayanan International Sector Expert – Textile, Garment and Leather R. Virendra International Sector Expert – Cement and Clinker Dr. Gurpreet Grewal International Sector Expert – Iron and Steel Anjan Kumar Sinha International Sector Expert – Agro-Industries International Sector Expert – Chemical and Fertilizer, Pulp B. P Bhandary and Paper Nagesh Kumar Jayaramulu International Sector Expert – Ceramics and Glass Hamidul Haq National Sector Expert – Textile, Garment and Leather Md. Sarwar Jan National Sector Expert – Textile, Garment and Leather Mafizul Haque National Sector Expert – Cement and Clinker Md. Asraf Hussain National Sector Expert – Cement and Clinker Fazlul Haque National Sector Expert – Ceramics and Glass Mazharul Islam National Sector Expert – Ceramics and Glass Md. Kaikobad National Sector Expert – Iron and Steel Md. Zane Alam National Sector Expert – Iron and Steel National Sector Expert – Chemical and Fertilizer, Pulp and M. Rahman Paper National Sector Expert – Chemical and Fertilizer, Pulp and Rageb Ahsan Paper J Charagee National Sector Expert – Agro-Industries Md. A Hamid National Sector Expert – Agro-Industries
iii Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Glossary
Abbreviation Term 3G Global Growth Generator ADB Asian Development Bank ASM American Standard Method BACT Best Available Control Technology BCIC Bangladesh Chemical Industries Corporation BCMA Bangladesh Cement Manufacturer’s Association BCWMA Bangladesh Ceramic Ware Manufacturers Association BDT Bangladeshi Taka BEE Bureau of Energy Efficiency BERC Bangladesh Energy Regulatory Commission BFA Bangladesh Fertilizer Association BGMEA Bangladesh Garment Manufacturers and Exporters Association BIEEFP Bangladesh Industrial Energy Efficiency Finance Program BIPET Bangladesh Institute of Plastic Engineering and Technology BITAC Bangladesh Industrial Technical Assistance Centre BJMA Bangladesh Jute Mills Association BJMC Bangladesh Jute Mill Corporation BJSA Bangladesh Jute Spinners Association BKMEA Bangladesh Knit Manufacturers and Exporters Associations BMET Bureau of Manpower Employment and Training BOI Bangladesh Board of Investment BPDB Bangladesh Power Development Board Bangladesh Plastic Goods Manufacturer and Exporters BPGMEA Association BSEC Bangladesh Steel and Engineering Corporation BSFIC Bangladesh Sugar and Food Industries Corporation BTMA Bangladesh Textile Mills Association CAA Clean Air Act CC Continuously Cast Billets CCA Climate Change Agreement CCC Criterion Continuous Concentration CCL Climate Change Levy CNG Compressed Natural Gas CPP Captive Power Plant Cub. M Cubic Meter DAP Di-ammonium Phosphate EAF Electric Arc Furnace iv Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Abbreviation Term ECA Energy Conservation Act (India) EE Energy Efficiency EEA Energy Efficiency Assessment Program EESL Energy Efficiency Services Limited EGB Exhaust Gas Boiler EMB Energy Mass Balance EPC Energy Performance Contracts EPB Export Promotion Bureau of Bangladesh, ESCO Energy Service Company ESM European Standard Methods EU ETS European Union Emissions Trading System FEEED Framework for Energy Efficiency Economic Development FYP Five Year Plan GC Galvanized Corrugated Sheets GDP Gross Domestic Product GEG Gas Engine Generator GHG Green House Gas GI Galvanized Iron GOB Government of Bangladesh GP Galvanized Plain Sheets gpl Grams Per Liter GSP Generalized System of Preferences HCl Hydro Chloric Acid HEM High-Efficiency Motor HSD High Speed Diesel ID Induced Draft Fans IF Induction Furnace IIDFC Industrial and Infrastructure Development and Finance Company ILO International Labor Organization IMM Injection Molding Machine IREDA India Renewable Energy Development Agency JVETS Japanese Voluntary Emissions Trading System KMPL Karnaphuli Paper Mills Limited KW Kilo Watt LED Light Emitting Diode MS Mild Steel NITTRAD National Institute of Textiles Training, Research and Design NTL National Tube Limited OECD Organization of Economic Cooperation and Development OPC Ordinary Portland Cement v Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Abbreviation Term PAT Perform Achieve and Trade PCC Portland Composite Cement PPC Pollution Prevention and Control PPP Public Private Partnership REDA Renewable Energy Development Agency RMG Ready Made Garment SBRI Ship Building and Recycling Industries SEC Specific Energy Consumption SREDA Sustainable Renewable Energy Development Authority SEP Superior Energy Performance Program SME Small and Medium Enterprises TA Technical Assistance TCE Tons of Coal Equivalent TOE Tons of Oil Equivalent TSP Triple Super Phosphate TTC Technical Training Centre USD United States Dollar VFD Variable Frequency Drive VRM Vertical Roller Mills WHO World Health Organization WTO World Trade Organization
vi Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. EXECUTIVE SUMMARY
Goldman Sachs expects that within the next 50 years, 5 of the G-7 nations will be replaced by emerging economies. Many of these economies have large populations, cheap labor and high levels of productivity. The Bangladeshi economy, which has maintained 6% growth over the last 10 years, possesses these characteristics, leading to the country’s inclusion in Goldman Sachs’ list of “The Next Eleven (or N-11)” - economies that are expected to have a high potential for driving global growth in the 21st century. Such growth has historically been led by the industrial and services sectors. This sustained growth in recent years has generated higher demand for electricity, transport, and telecommunication services, and has contributed to widening deficits in the infrastructure and investments needed for future growth.
As per the projected growth and potential demand, the primary source of energy in Bangladesh, compressed natural gas (CNG), is expected to last until 20301. The country is already facing gas shortages however, in the form of low distribution pressure and delays in new industrial and residential gas connections . Because securing new sources of energy will take time, Bangladesh is in the process of promoting a more efficient use of existing resources, both on the supply and demand sides. On the supply side, power plants are mandated to increase efficiency and new coal reserves are under exploration. On the demand side, industry has been made a key focus area for energy efficiency initiatives, as the industrial sector directly and indirectly consumes about 40% of Bangladesh’s energy.
Energy efficiency (EE) does not comprise a single market; it covers measures in a diverse range of end-user sectors, end-use equipment and technologies and over a very large number of small, dispersed projects represented by a wide range of decision makers. Overall, many EE technologies are relatively easy and fast to implement, technically proven and financially viable: if properly implemented, the investment costs are paid back over short periods through energy cost savings. Yet projects with compelling economic returns remain unimplemented. Major causes for this gap are the lack of EE finance and delivery mechanisms that suit the specifics of the EE projects and a lack, in some markets, of pipelines of bankable energy efficiency projects.
The financing for energy efficiency projects in Bangladesh is gaining momentum and has increased with the adoption of improved models from developed countries. Driving this trend is development assistance from donor-funded agencies that are ready to offer loans to banks and financial institutions (FI) for on-lending to suitable energy efficiency projects or conducting demonstration projects based on energy audits. However, to make EE financing sustainable, FIs and banks need to increase technical know-how regarding the appraisal of energy efficiency projects, performing evaluations based on energy units rather than currency (BDT v/s Cubic Meter), and exploration of new financing products.
The Bangladesh Industrial Energy Efficiency Finance Program is one such effort by the Asian Development Bank (ADB), which has extended a non-sovereign loan facility and technical assistance to the Industrial and Infrastructure Development Finance Company (IIDFC) and other financial institutions for on-lending to eligible energy efficiency projects.
1 Energy and Power Fortnightly Magazine, 2013 vii Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. The ADB has engaged Tetra Tech ES, Inc., United States (‘The consultant’); in association with Sodev Consult, Bangladesh; the National Productivity Council, India; and the Electrical Research Development Association, India; to provide technical assistance (TA) on EE to 120 companies, IIDFC, other financial institutions and banks under TA 45916-01 BAN Industrial Energy Efficiency Finance Program.
This program focuses on six target industrial sectors that show large savings potential in Bangladesh. These industrial sectors include: Sector1:Textiles, garments, leather, and related industries (hereon referred to as textiles); Sector 2: Steel, iron, and related industries (steel); Sector 3: Cement, clinker, and related industries (cement); Sector 4: Ceramics, glass, and related industries (ceramics); Sector 5: Chemicals, fertilizers, pulp and paper, plastic, and related industries (chemicals) and Sector 6: Agro-industries, including food processing, sugar, pulp and paper, and jute (agro-industries).
The focus under this program is to identify and suggest global best practices in energy efficiency improvement technologies relevant to these sectors. This includes the selection of 120 target industrial clients, followed by energy audits, an economical and technical analysis, feasibility studies and recommendation reports prepared for those target clients.
The consultant conducted energy audits of 120 industrial facilities, about 20 in each sector, and created bankable energy efficiency reports and recommendations that can form the basis of a business model acceptable to financial institutions, helping to advance client objectives. In order to increase the knowledge on EE financing within IIDFC and raise the awareness of other financial institutions and banks, the consultant team conducted three capacity building workshops throughout the contract period of the program. The first workshop laid the foundation by creating awareness of drivers, barriers, policy frameworks and energy audits. As part of this program, a financing manual has been prepared to specifically address the concerns of bankers who would like to consider extending loans based on cash-flow analysis, rather than just asset-based analysis. This manual presents around 12 financial tools based on the high potential opportunities identified for each sector. The second workshop provided step-by-step walkthroughs on the operation of the financial tools. We believe these tools will bridge the gap among FIs regarding the analysis of EE projects based on energy units rather than currency.
The third workshop presented case studies from each of the six sectors, paying specific attention to key areas of potential savings. The workshop participation was extended to the 120 audited companies, as well as industrial associations, financial institutions and banks in order to increase the extent of awareness and foster engagement among stakeholders.
A team of 25 consultants, comprising national and international experts, worked from December 2012 to November 2013 to achieve the objectives of this program. The culmination of the consultant’s efforts is represented in this sector outlook report which characterizes each sector by its principal types of industries, their end products, the current state of processes, technology and equipments in use, sources of energy, specific energy consumption and opportunities for energy conservation, investment potential and human resources capacity. It also highlights the opportunities for energy conservation, expected gains and the investments required in each sector. The results of the 120 companies audited aresummarizedinFigureE.1 viii Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Figure E.1: Summary of audit findings by sector
Carbon Companies Investment Annual Energy Avg. Avg. Emissions Sector Audited Opportunity Savings Savings Pay Back IRR Reduction (No.) (USD million) (USD million) (%) (years) (%) (Tons) Sector 1 – Textiles, 22 4.45 1.37 19,309 32 3.25 25 Garment & Leather Sector2–Steel& 20 10.42 5.11 52,605 41 2.04 32 Iron Sector 3 – Cement 20 70.9 22.85 28,116 23 3.1 28 & Clinker Sector 4 – 20 37.3 10.12 28,961 25 3.69 23 Ceramics & Glass Sector 5 – Chemicals, 20 4.25 1.33 16,530 24 3.24 25 Fertilizer, Paper and Plastic Sector 6 – Agro- industries including Food Processing, 18 12.34 4.69 24,921 18 2.63 25 Sugar, Pulp, Paper and Jute Total 120 139.76 45.5 170,342 30 3.07 25
Although the concept of energy efficiency has been boosted through this program, additional focus will be required on capacity building and policy approaches. Perhaps the biggest driver for the Bangladesh Industrial Energy Efficiency Finance Program remains the impact of anticipated energy shortages on the country’s growth due to loss of production. An appropriate skill level among the local workforce will be required in order to execute successful EE projects, which must be accomplished through capacity building and outreach. Furthermore, it was found that there is a need for a database of EE resource materials and the development of accreditation systems.
Achieving the economic potential of energy efficiency is complex. Market players have different approaches and different priorities. Energy efficiency per se is usually not a major consideration in investment decisions, except during periods of crisis when it is often too late. In a crisis, demand can quickly be reduced by restricting services. But, improved energy efficiency at a regional or national level has to occur through a thoughtful, planned approach over a fairly long period. Policy and supporting measures are necessary to increase industrial energy efficiency in Bangladesh. Therefore, the consultants have suggested a policy-based approach which defines policies and supporting measures to be adopted in near term. The challenges and opportunities regarding drivers of energy efficiency, policy support and capacity building are also addressed in this report.
Through the analytical evidence gathered during the energy audits, discussions with stakeholders (factory owners, policy makers, entrepreneurs, financial institutions), and due attention and planning, this Industrial Energy Efficiency Finance Program has exposed an untapped potential which can augment Bangladesh’s growth rate over the next three to five years. ix Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 1. INTRODUCTION
Increasing industrial energy efficiency is an effective way for Bangladesh and its utilities to achieve significant cost savings, particularly in regions that have not fully taken advantage of the simplest and least expensive efficiency measures. Bangladesh consumed an estimated 4,980 MW of electricity in 2012, around 12% more than in 2011. Approximately 40% of the total electricity consumed in 2012, around 1,990 MW, was used by the industrial sector. This 1,990 MW of energy consumption represents a unique energy-saving opportunity for Bangladesh, because the industrial sector’s energy consumption is the primary means to growing the economy country wide2. This energy consumption allows for a much higher return on investment for energy efficiency improvements when compared to reducing energy consumption in the commercial and residential sectors, where energy consumption is far less concentrated. Put another way, the energy that is locked into inefficient systems and processes is limiting economic growth in Bangladesh.
Due to the relatively low and subsidized energy prices, the commercial use of energy remains inefficient and wasteful. To reduce energy wastage, proper incentive structures will have to be designed and regulation made to be far more effective. This is a technological as well as a regulatory challenge. The potential for cost and energy savings, however, are huge. Access to finance is still an issue as financial institutions are not familiar with this line of credit and potential of this low risk business opportunity. For example in India, energy efficiency financing represents a business case of USD 250 billion to financial institutions and banks3.
To address these concerns, the ADB’s Bangladesh Industrial Energy Efficiency Finance Program (BIEEFP) focuses on six target industrial sectors that show large savings potential in Bangladesh: Textiles; Iron and steel; Cement and clinker; Chemicals; Ceramics and glass and Agro-industries. These sectors are highly energy intensive and have tremendous opportunity to reengineer technological processes, enhance manpower and improve management capacity. The focus under this program is to identify and deploy global best practices in energy efficiency improvement technologies relevant to these private sectors and establish investment opportunities for interested financial institutions.
Identifying the characteristics of each sector allows energy efficiency program managers and financial institutions to more easily develop programs based on the unique attributes of their services. This report attempts to address this objective. More importantly, this comprehensive compendium will provide a valuable resource for planners and policy makers across the country to develop programs with a better understanding of industrial energy conservation measures, appropriate energy saving targets, the role and need for capacity building and gains to be expected from such programs. Furthermore, this report will allow technology providers to anticipate the key technologies that will impact the efficiency potential of the target sectors. In summary, this report begins to outline the savings potential inherent to each sector by utilizing readily identifiable and available energy efficiency
2 Bangladesh consumes 41% of natural gas in the industrial sector. 3 Bureau of Energy Efficiency, India
1 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. improvement technologies. The report also presents investment, annual savings, internal rate of return and carbon savings expected from each sector in the implementation of energy saving measures. This will help managers at financial institutions and banks to justify their active participation in energy saving programs.
This report aims to characterize each sector by its principal types of industries, their end products, the current state of processes, technology and equipment in use, sources of energy, specific energy consumption and opportunities for energy conservation, investment potential and human resources capacity. These characteristics will be examined to determine their influence on investment, savings and expected gains for each sector and on the success of prospective programs. A variety of companies were visited to conduct energy audits of their facilities, gain insights into their efficiency programs, understand their present practices and identify gaps in capacity. The resulting sectoral analyses, included in this report, helps to form a picture of the best practices in each sector as well as the state of specific energy consumption with respect to global benchmarks. Companies that are interested in initiating or expanding their industrial efficiency program will be able to use this report and the results of BIEEFP in determining which energy conservation measures will offer the greatest return on investment. For banks and financial institutions, this will in turn help to identify projects with a high rate of return and low risk. We have also included chapters on: external and internal drivers for industrial efficiency in Bangladesh, policy support and capacity building. These chapters will be useful to policymakers in understanding how the region’s unique characteristics can shape policy and ultimately influence the drive and commitment of industries towards improving energy efficiency.
2 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 2. ENERGY EFFICIENCY IN THE INDUSTRIAL SECTORS OF BANGLADESH - EXTERNAL AND INTERNAL DRIVERS
Developing countries around the world are projected to account for around 87% of the world’s primary energy demand growth by 2030. Much of this growth in energy demand will occur in Asia, which is witnessing rising populations, high economic growth and rapid urbanization. Many countries are averse to the notion of energy conservation and efficiency and consider it their priority to first ensure economic growth through higher production and harness new energy sources, dealing with energy savings later.
Refuting this approach, however, is a recent analysis which concludes that economic productivity is more closely tied to energy efficiency than energy production4. Coupled with this fact are the key drivers of energy efficiency in developing Asian countries: the continuous depletion of internal energy sources, rising volatile external energy prices, budgetary pressures due to energy subsidies and the need to mitigate the impacts of climate change. Not surprisingly, then, that every segment of the Asian economy is increasingly aware of the need for energy efficiency.
Bangladesh, with a GDP growth rate of 6%, is conscious of this need and is well aware of the potential to build a diverse, energy efficient industrial sector. Bangladesh appreciates the fact that a well-conceived energy efficiency strategy will not only allow it to achieve its goals with much lower energy consumption but will also enable it to improve the standard of living and quality of life for its population.
This chapter outlines the potential drivers to energy efficiency in the industrial sectors of Bangladesh. It considers the existing energy situation in the country, its burgeoning industrial output, the prevailing supply-demand imbalance and the external and internal drivers that can help energy efficiency to grow and prosper.
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Bangladesh has natural gas, coal and marginal oil reserves. Prior to independence, the country was touted as floating on natural gas. The availability of gas at low prices has played a major role in the economic development of the country and in raising the social standards of the population. It has also allowed the country to use this energy source in electricity generation, industrial consumption and residential cooking. To date, natural gas generation constitutes 85% of the total net generation of electricity, and 70% of country’s commercial energy consumption.
However, after years of rapid industrial and population growth, the increased demand has strained the available supply. Recently, the country has started to feel the pinch of shortages in the natural gas that feeds its economic growth. It has been estimated that the current natural gas supply-demand gap is around 14% but is estimated to go up to 54% by 2030
4 American Council for Energy Efficient Economy, Report,2012 – US Energy efficiency industry is bigger than Energy Supply
3 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. (see Figure 15). There is a significant possibility that the available gas reserves are depleted well before that date.
Figure 1: Natural Gas: Supply-Demand Gap in Bangladesh (2013-2030)
4,500 4,000 3,500 3,000 2,500 2,000 Cub. M. 1,500 1,000 500 0
Producon Demand
The Government of Bangladesh (GOB) has taken steps to shift electricity generation resources from gas to coal. The Bangladesh Power Development Board (BPDB) Annual Report 2012 suggests that in the next five years 6,230 MW of additional power generation capacity is being planned, of which 3,120 MW, about 50%, will be from coal. Greater use of renewable energy sources is another step being taken by GOB. In order to have a long term sustainable energy plan for Bangladesh there is a need to take similar steps on the demand side of the energy equation.
As a heavy gas user with marginal oil resources, Bangladesh has a structural need for energy efficiency. Even if the per capita commercial energy consumption is only 8% of the world average (2% of that of the US, and 3% of that of Europe and Japan)6, 57 million people currently live without basic electricity services, representing a large, untapped consumer demand for electricity services on an already stressed power sector (see Box 1). Aside from growth in energy usage due to population demands, inefficient energy use cuts across the whole economy. Energy intensity per unit of GDP is 3 times that of Japan and 2 times that of the US in key sectors like steel and ammonia7.
With forecasts of electricity sector growth rates reaching 12%8, driven mainly by the industrial sector, BPDB is finding it very difficult to maintain an uninterrupted electricity supply as most of its generating units are old (some are older than 35 years). Moreover, the
5 Energy and Power Fortnightly Magzine,2013
6 CIA, 2013
7 WEA Energy Statistics
8 http://www.eia.gov/countries/country-data.cfm?fips=BG
4 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. generating units have become unreliable due a lack of spare parts and improper maintenance.
Facing difficulties due to power Box 1 : Power Sector Challenges shortages, the country’s pace of industrialization is now being affected. Transmission and Distribution losses – 14.7% The Government of Bangladesh of the total Generation* promoted captive generation by supplying gas for power generation to industries at Access to Electricity - 47% a reduced tariff (at present the gas tariff for power generation is BDT 4.18 per Cub Peak deficit - 25% M. against the gas tariff of BDT 5.96 per Cub M. for industrial processes). This High dependence on imported energy - 12% has helped in arresting the fall in industrialization but has resultedinsub- Gas deficit of 500 million cubic ft. per day optimal utilization of natural gas. Many Carbon Emissions – 46,930 kilo tonnes industries have to plan for captive generation. These captive generators are Electricity sector growth rate - 12% (forecast) of small capacities and are operated inefficiently in open cycle mode, putting tremendous pressure on the gas grid, *Technical loss only. The consultant believes commercial especially in some industrial clusters. losses to be much higher.
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2.2.1. HURDLES IN THE ROAD
Although efficiency is probably Bangladesh’s cheapest energy source, the opportunity is not yet fully visible. Technology advances have become more cost-effective, but energy efficiency investments face economic constraints, political barriers, technical challenges, and institutional shortcomings. Although savings are quantifiable through lower electricity bills, efficiency matters most if your bill reflects the true cost of power. For many Bangladeshis this is not the case – there are high discount rates for energy costs, a barrier to efficiency investments. Lower greenhouse gas (GHG) emissions, reduced pollution, better quality power––all are desirable but difficult to pin to energy efficiency. Despite quick payoffs on many investments (Bangladesh’s industry is a mix of old, sub-standard plants, equipment, and infrastructure), moving to energy efficient lighting, motors, drives, and boilers will cost consumers and business, and the incentives are fragmented and asymmetric.
Box 2 presents some of the most significant barriers to realizing energy savings measures. Despite these hurdles opportunities exist which promise returns from energy efficiency that are sufficiently high in commercial and industrial sectors to incentivize investing in energy saving measures.
5 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Box 2: Challenges in Realizing Potential Energy Savings
1. Cross subsidized and subsidized energy prices leading to waste.
2. Limited information about the benefits of energy efficiency investments and technologies, lack of familiarity with energy efficient products, lack of awareness of benefits, and a perceived risk when evaluating potential investments.
3. Lack of enforcement, standards and labeling. Some equipment may not be available or product distribution networks or local capacity may not exist.
4. Weak contract enforcement, leading to increased perceived risk by financial institutions, manufacturers and service providers.
5. Bias against the counterintuitive disposal of existing plant equipment.
6. Competing objectives in planning for new investments and developments.
7. Differential energy (gas and electricity) prices. All industries prefer to use only gas as their primary energy source.
8. Perceived risk of loss of production.
9. Inadequate investments in supporting institutional mechanisms and human resources.
10. High transaction costs from legal, technical, and transactional complexities, like non- standardized deal structures and the substantial technical needs of project appraisal, development, and monitoring.
11. Absence of energy measurements and instruments to gauge energy at various stages of industrial process cycles.
2.2.2. THE PROMISE OF ENERGY EFFICIENCY
Bangladesh has maintained 6% plus growth over most of the last 10 years through strong export and remittance growth. Growth has been led by the industrial and services sectors. Bangladesh is in the top 10 countries of the world in production of textile, leather and ceramic tableware’s. These growth developments are inducing additional demand for energy.
Because securing new sources of energy will take time, Bangladesh is in the process of promoting the more efficient use of existing resources, both on the supply and demand sides. On the supply side, power plants are mandated to become more efficient and there is a plan to shift fuel focus from gas to coal. On the demand side, industry has been made a key focus area for energy efficiency initiatives (industry directly and indirectly consumes
6 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. about 40% of Bangladesh’s energy consumption). Figure 2 illustrates the promise of demand side intervention for reducing the supply-demand gap.9
Figure 2: Effect of DSM on Reducing Maximum Demand (MW) in Bangladesh
10,000
8,000
6,000
4,000
2,000
0 2009 2010 2011 2012 2013 2014
Dependable Capacity* Maximum Demand (MW) Maximum Demand (MW) considering DSM
*Based on growth projections and potential demand, the Government of Bangladesh has set an electricity production capacity target of 20,000 megawatts by the year 2020.
Cross-cutting technologies, such as combined heat and power, better separation processes, advanced materials that resist corrosion, better steam and process heating technologies, new fabrication processes, high efficiency motors, variable frequency drives and better sensors could lower energy use in many industries. Table 1 presents the interventions with the greatest energy saving potential for each of the six sectors based on energy audit of 120 companies carried out by the Consultant. It has been estimated that by 2020 improvements in energy efficiency could reduce energy use by 10% to 36%, compared to the business-as- usual projection.
Table 1: Energy Savings Potential of the Audited Companies
Total Energy Sector Savings Major Interventions Required Potential Sector 1 – Textiles, Garment 32 % High-efficiency motors, drives, boilers & Leather Sector 2 – Steel & Waste heat recovery, furnace insulation, automation 41% Iron of rods making process Sector 3 – High efficiency motor & Drives, Use of Pre-grinder 23% Cement & Clinker roller press and VRM, Automatic air flow control Sector 4 – Waste heat recovery, High efficiency motors and 25% Ceramics & Glass drives Sector 5 – 24% Waste heat recovery, Improved Insulation, Efficient
9 Source: Presentation by Shafiqul Alam, Deputy Manager IIDFC
7 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Total Energy Sector Savings Major Interventions Required Potential Chemicals, machines and combustion efficiency Fertilizer, Paper and Plastic Sector 6 – Agro- industries, Food Cogeneration, waste heat recovery, high efficiency 18% Processing, Sugar motors and drives and Jute
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One of the hallmarks of modern international trade is significant integration and optimization of supply chains across the world. Bangladesh’s energy industry is no stranger to this kind of integration. With increasing economic momentum and industrial growth, energy shortages and rising production costs, one desirable option, generate savings from decreased energy consumption, has appeared. It is this need that is driving the current demand for industrial energy efficiency.
These recent energy efficiency drivers also have bearing on government policies. Furthermore, increasing competition from Chinese firms has resulted in many Bangladeshi firms searching for ways to cut costs. If such conditions continue to build up, enterprises that provide innovative energy technologies and services will not only be poised to capture enormous economic opportunities but will help to lead Bangladesh into an environmentally- sustainable reality.
The following key drivers for implementing energy efficiency measures in Bangladesh’s industrial sector stand out for special attention:
2.3.1. RISING ENERGY SHORTAGES
Power and gas shortages have undermined external competitiveness. According to garment industry leaders, garment orders cannot be filled because of energy constraints. The consultant was told by industry experts that about 135,000 residential flats remained unoccupied in 2012 due to the inability to issue domestic gas connections. Similarly there was prohibition for about one year in issue of any new electricity or gas connection for industrial use. Frequent power cuts and low gas pressure add to production time, forcing exporters to airfreight merchandise at their own cost. Many industrial and commercial establishments depend on expensive and inefficient captive generation during power interruptions and use liquid fossil fuels such as high-speed diesel (HSD), liquid natural gas (LNG), etc. Overall, the energy crisis is said to be responsible for an estimated loss of two percentage points in GDP growth potential.10
10 ADB, Bangladesh Comprehensive Private Sector Assessment Draft. Manila June-2011
8 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 2.3.2. ENERGY SUBSIDY IS A SHORT TERM SOLUTION
Adding to the effects of energy shortages is the artificially low price of gas vis-à-vis grid electricity prices. Current tariffs do not reflect the real cost of energy. Though the government is trying to keep the prices steady due to inflationary concerns11, the national budget will not be able to support this deficit on an ongoing basis. Eventually, fuel prices will need to increase and any slight increase in power prices will have a significant impact on the profit margins of energy intensive firms, which are in constant and fierce competition to produce less expensive products.
2.3.3. HIGHER PRODUCTION COSTS
Not only are power prices going up, but other costs are also rising for Bangladeshi firms. For example, the July 2012 Producer Price Index reported that production costs grew by 21% from the same month in 2011.12 This production price inflation was driven in part by an outpour of investment in the iron and steel, textiles and chemical industries, which created excess demand for raw materials. The increase in the cost of production cuts profit margins and pushes investors to follow other avenues for savings.
2.3.4. CONDUCIVE GOVERNMENT POLICIES
The Government of Bangladesh recognizes energy efficiency as necessary to the transition to a low carbon economy. It aggressively fosters the adoption of energy efficient technologies. The Sustainable Renewable Energy Development Authority (SREDA) Act of 2012 focuses on cutting the energy consumption of energy-intensive industries, including steel, nonferrous metals, construction materials, and chemical processing. Such high-level focus has unleashed a series of government initiatives including energy efficiency and conservation regulations. International models are arriving via overseas development assistance, consulting firms, equipment manufacturers and others.
Another necessary focus for government is to build capacity at the local level. Efforts to develop capacity-building grants for knowledge creation and training resources, both online and on the ground, are critical to promoting efficiency.
2.3.5. TOUGHER COMPETITIVE LANDSCAPE
What makes this situation particularly tough for Bangladesh’s industrial sector is that they have not been able to transfer the burden of higher overheads onto consumers because of the threat from low-cost Chinese manufacturing companies and government export controls. Thus, industrial profit margins are declining. If energy intensive industries in sectors with
11 Total energy subsidies for FY12 are estimated at more than Tk 282 billion (US$3.4 billion), 90 percent of the total amount spent on all subsidies. Nearly 34% of these subsidies are off-budget, such as government loans for Bangladesh Power Development Board at favorable lending rates. Although the government periodically adjusts prices to bring them closer to world market levels, subsidies have remained substantial
12 http://www.tradingeconomics.com/bangladesh/indicators
9 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. high savings potential start utilizing energy efficient technologies they will be poised to capture enormous economic opportunities.
2.3.6. AVAILABLE FINANCING VEHICLES
Financing for energy efficiency projects in Bangladesh is available and has been increasing with the adoption of improved models from developed countries. Commercial banks are opening doors for access to energy efficiency finance at lower borrowing costs and improved terms. Government is also considering models such as green banks and green financing that involve partial risk guarantees to promote investments in this arena. Driving this trend is development assistance from donor funded agencies that are ready to offer loans to banks and financial institutions for on-lending to suitable energy efficiency projects. Under the ADB BIEEFP, USD 30 million is available for financing energy efficiency projects identified from this energy audit exercise. Similarly, other donor agencies such as USAID, IFC and World Bank are ready to invest money in energy efficiency projects. It is expected that this monetary support will further evolve the existing energy efficiency portfolio of financial institutions.
2.3.7. EXPANSION PLANS
A growing economy and the continued year-on-year growth in manufacturing means that many companies are ready to double their production and are eager to provide a range of solutions to meet the demands of local and foreign clients. However, limited energy supplies are curbing industrial expansion. Progressive industries appreciate the importance of energy savings and want to purchase energy efficient equipment rather than submit requests for gas or electricity load increases.
2.3.8. REALIZING QUICK SAVINGS FROM LOW-HANGING FRUIT
Over the next few decades, energy efficiency will be one of the lowest cost options to drive inclusive growth in Bangladesh. The studies done by the consultant under BIEEFP point to an annual savings of USD 45.5 million, assuming a 17% discount rate, no price on carbon and using only “net positive value” investments. This figure is representative of the six targeted industrial sectors (textiles, steel, cement, ceramics, chemicals, agro-industries) where 120 companies were audited. Energy conservation measures such as: waste heat recovery, furnace insulation and general housekeeping measures payback in months.
2.3.9. LOW CARBON ECONOMY – POTENTIAL ECONOMIC GAINS
In line with the urgency of the Kyoto Protocol, there are procedures for reducing carbon emissions through carbon-trading. Countries that emit more carbon dioxide than permitted under the treaty have an opportunity to compensate for those extra emissions. This involves financial transactions between those entities that do not comply with the emissions limits and those that emit less than the limit. Reports13 suggest that, in 2009, this type of carbon trading was worth USD 136 billion. Bangladesh’s carbon trading projects may result in an annual
13 Energy Global Article, Global carbon market grew by 68% in 2009
10 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. reduction of about 170,343 tons of carbon emissions. Therefore, Bangladesh could earn US$ 0.85 million14.
2.3.10. IDENTIFICATION OF TARGET SECTORS
There is significant energy efficiency potential in Bangladesh’s industrial sector. Industry is a big energy consumer, and most manufacturing plants are inefficient in their energy consumption when compared to international benchmarks. Barriers to energy efficiency adoption are relatively high for industries because a shift to energy efficient technology is difficult to justify financially when considering energy efficiency alone. However, the anticipated shortage of energy and loss of production is currently a major driver of industrial energy efficiency15. Industrial investments are large compared to household projects. A lack of awareness and access to technical solutions can be addressed through energy audits and pilot studies.
For Bangladesh, the process of integrating energy efficiency has only just begun with this early phase targeted towards ensuring the participation of stakeholders across sectors, industries, professional services providers, and others. There is no doubt that a long road lies ahead, but with the emphasis on large scale energy efficiency efforts, enabling government policies, and appropriate economic signals, the future looks promising.
Several promising industrial sectors have been identified for the Bangladesh Industrial Energy Efficiency Finance Program. Six sectors in particular show great energy efficiency potential: textiles, steel, cement, ceramics, chemicals and agro-industries. For all of these industries the energy savings potential is large and the energy efficiency improvement technologies are readily identifiable.
The next section provides the outlook for the identified sectors and features insights into the most commercially attractive energy efficiency measures for each.
14 Based on the audit of 120 companies and price per ton carbon emission reduction is taken as USD 5only.
15 The restrictions in the release of new industrial electricity and/or gas connections have led industries using HSD and CNG from the open market. This is neither financially nor economical solution.
11 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 3. SECTOR OUTLOOK
In this section six Bangladeshi industrial sectors that have shown great potential in energy efficiency are discussed in detail. These six sectors are highly energy intensive and have tremendous opportunities to reengineer technological processes, enhance manpower and improve management capacity. These include:
Sector 1: Textiles, garments, leather, and related industries
Sector 2: Steel, iron, and related industries
Sector 3: Cement, clinker, and related industries
Sector 4: Ceramics, glass, and related industries
Sector 5: Chemicals, fertilizers, pulp and paper, plastic, and related industries
Sector 6: Agro-industries, including food processing, sugar, pulp and paper, and jute
For each sector, the consultant has done a thorough review of the technical potential for increased energy efficiency, and has estimated the payback periods that decision makers require in order to commit funds to energy efficiency projects. This exercise was carried out in 120 industries, approximately 20 from each sector. In the following section, challenges faced by the Consultants and the solutions developed during the course of this program has been described. It also describes how the analysis and results for each sector is obtained.
One of the major challenges in this undertaking was the standardization of the analysis and report framework for the 120 facilities being audited The Consultants felt that the report should not only demonstrate energy efficiency measures in the context of a specific company but also highlight opportunities responding to the sector as a whole, and technologies along the entire value chain. Hence, each report includes information about the company, its production processes, a description of the energy and utilities system, an energy use analysis, benchmarks, suggested operational practices, an organization analysis, energy efficiency options, their financial analysis, and over-arching recommendations; all supported by energy records obtained after each site visit.
Another challenge that was identified relates to measurement, data collection and validation. The instrumentation needed to measure energy consumption is almost non-existent in the audited facilities. Gas utilities supply gas for industrial purposes and/or for power generation. The gas companies supply separate meters for each. Most facilities do not sub-meter individual industrial equipment (e.g. boiler, furnace, heating, cooling) to ascertain how the gas is utilized. Many facilities do not even meter the captive power produced by their gas generators. Since the load on gas generators varies based on the need for process gas it becomes very difficult to determine the efficiency of the gas generator. In many boilers there arenoinstruments to measure gases in the exhaust of the boiler to ascertain the combustion efficiency. For many processes, outlet and inlet process parameters are not being measured
12 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. to calculate the energy consumption in the process. Consultants addressed this challenge by utilizing an input/output methodology16 and utilized available sources of existing data, both internal and external to the organization. These data and information are verified by the consultant through on-the-spot measurements and observations.
Each sector is discussed independently and characterized by the kind of industries it comprises, the types of end products, its current energy-intensity status, sources of energy, and opportunities of energy conservation. The sector reports also contain their technical potential for energy savings, identifying key technologies and measures to improve energy efficiency. In the energy audit reports energy saving measures specific for each company has been identified. The high impact interventions and their potential for each sector have been provided in the sector summary of this report. In Figure E.1, the energy savings of the sector based on the energy audit of the companies in that sector have been mentioned.
We undertook detailed surveys and energy audits at target companies and compared them with operations across the world to ascertain the efficiencies of the best technologies and practices available now and benchmark them with respect of specific energy consumption. Since industrial operations in Bangladesh are mostly captive and gas based, the specific energy consumption was found to be high compared to international benchmarks. Hence specific energy consumption benchmarks are provided as a range. The financial analysis is based a minimum acceptable rate of return of 17.2%, assuming project life cycle of 5/10 years.
Specific Energy Consumption (SEC) is an important tool for comparative analysis within an industry or sector. The value helps in determining the monthly/annual energy usage per unit of production. It gives an idea of the overall energy usage, energy intensity and helps in setting achievable benchmarks for the company based on existing equipment and processes. The consultant calculated the SEC for each of the 120 companies based on data and records maintained in the facility’s log book. For each company, the observed SEC has been compared with the international benchmarks to estimate the energy saving potentials for that company. Based on this analysis of SEC for 20 companies, a sector-wide SEC has been estimated and included in this report.
We also conducted an extensive literature search to catalogue the current export/import potential, of industries from databases available on web, and conducted discussions with factory owners.
For each of the 120 audited facilities, we have also conducted a ‘human resource skill assessment’ analysis developed by the UK Oxfordshire based Carbon Trust’s Energy Efficiency – Best Practice Programme (EEBPP) energy management matrix. (see Table 2) The matrix presented in Table-2 assists to rate an organization in six different areas of management namely policy, organization, communication, information, marketing and investment. The Energy Management Matrix rates five levels starting from level 0 (no provisions for energy management in the organization) to level 4 (the organization is adhering to the industry best practices). The consultants have carried out this analysis for all
16 Input Output Methodology of Energy Audit estimate the loss of energy in the production and benchmark it with accepted global practices.
13 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 120 companies and identified the status of the company in each area. The results are extrapolated to provide on the status of the sector under consideration. This organizational analysis was done with the consideration that energy efficiency is not a one-time activity. It needs to be made sustainable.
Table 2: Energy Management Matrix
Policy Organization Communication Information Marketing Investment
Energy policy, Marketing the Positive Energy action plan and Comprehensive value of energy discrimination in management fully regular review Formal and informal system sets efficiency and favour of ‘green’ integrated into have channels of targets, monitors the schemes with management commitment of communication regularly consumption, performance of detailed structure. Clear top exploited by energy identifies faults, energy investment 4 delegation of management manager and energy quantifies savings management appraisal of a responsibility for as part of an staffatalllevels. and provides bothwithinthe new-build and energy environmental budget tracking. organization refurbishment consumption. strategy. and outside it. opportunities.
Energy manager M&T reports for Formal energy accountable to individual policy but no energy committee Energy committee used premises based Program of staff Same pay back active representing all as main channel on sub-metering. awareness and criteria employed commitment 3 users, chaired by a together with direct But savings not regular publicity as all other from top member of the contact with major users reported campaigns investment management managing board. effectively to users
Monitoring and Unadopted Energy manager in targeting reports energy policy post, reporting to Contact with major based on supply set by energy ad-hoc committee users through ad-hoc Some ad-hoc Investment using meter data. manager or but line committee chaired by staff awareness short term pay Energy unit has 2 senior management and senior departmental training back criteria only ad-hoc departmental authority are manager. involvement in manager. unclear budget setting
Energy Cost reporting management the based on invoice Informal An unwritten part time Informal contacts data. Engineer contacts used Only low cost set of responsibility of between engineer and a compiles reports to promote measures taken 1 guidelines someone with only few users for internal use energy limited authority or with technical efficiency influence department
No energy No information No investment in management or any system. No No promotion of No explicit increasing energy formal delegation of No contact with users accounting for energy policy efficiency in 0 responsibility for energy efficiency premises energy consumption consumption
14 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 3.1. SSEECCTTOORR11::TTEEXXTTIILLEESS,,GGAARRMMEENNTTSS,,LLEEAATTHHEERRAANNDDRREELLAATTEEDDIINNDDUUSSTTRRIIEESS
3.1.1. GENERAL DESCRIPTION
Bangladesh’s textiles and garments industry contributes 13% to the country’s total GDP. As one of the major sources of export earnings, this sector positions the country as the world’s second largest apparel exporter of western brands, after China. See Box 3 for more detail on the textiles industry.
Apart from the liberalization initiated as a policy Box 3: Textiles Sector Profile measure by the Government, two main reasons behind the phenomenal growth in this sector are: Sector Export Earnings (FY 2011-12): availability of cheap labor and low energy costs. $24.29 billion Labor costs are only USD 0.23/hr whereas, in India, Pakistan and China the labor costs are Industry Growth since 1993-94: 1. Ready Made Garments – 196% USD 0.43/hr, USD 0.41/hr and USD 0.89/hr, 2. Yarn Production – 148% respectively. Natural gas energy costs in 3. Fabric Production – 38 times Bangladesh are less than USD 0.02/kWh in comparison to USD 0.933/kWh, USD 0.672 and Workforce: Currently, this sector has provided jobs to USD 0.784/kWh in India, Pakistan and China, over 5.0 Million people, of which 80% are respectively. Environmental and safety women. compliance has just started to gain attention, and past periods of growth can also be attributed to Consumer Market: the moderate standards set for labor safety and 50% of the export contracts are with European buyers and about 35% with environmental compliance. American buyers. Others include Canada and Japan. Bangladesh holds 9.02% and Continued growth in this sector has also been 3.57% of the share of exports to the US facilitated by the trade encouragement policies of and EU markets, respectively. the western countries such as the WTO Agreement on Textiles and Clothing (ATC), Trade Associations: Bangladesh Garment Manufacturers Everything but Arms (EBA), Generalized System and Exporters Association (BGMEA). of Privilege (GSP) in the EU countries and The Bangladesh Knit Manufacturers & US 2009 Tariff Relief Assistance. These policies Exporters Association (BKMEA). Bangladesh Textile Mills Association have provided Bangladesh with huge potential in (BTMA) the global clothing market, especially in the EU and America.
3.1.2. TYPES OF INDUSTRIES
The sector is mostly comprised of manufacturing in two major areas:
1. Textile 2. Leather Tanneries
15 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 3.1.2.1 TEXTILE
In the textile sector, the major industry is readymade garments (RMG). As of 2012 there were 5400 garment factories in Bangladesh (see Figure 317 for past growth). The country has projected that the sector’s contribution will grow to USD 34.5 billion by 2015, adding 20.5% to the total GDP. Bangladesh is the second largest garment exporter in the world and the industry plays a significant role in the country’s total exports.
Figure 3: RMG Industry Exports
30,000 24,288 25,000 22,924
78.60% 20,000 78.15% 15,566 16,205 14,111 15,000 79.32% 77.12% 75.83%
Million US$ 10,000
5,000
0 2007-08 2008-09 2009-10 2010-11 2011-12
RMG Export ( Million $) Total Export ( Million $)
3.1.2.2 LEATHER INDUSTRY
The leather sector is the 4th largest export sector by earnings, after ready made garments, jute and frozen food, contributing 1.54% of total exports. The skin and hides of the country’s vast domestic livestock population, which are used as raw materials, and the low cost of available skilled labor are the two natural competitive advantages that the leather industry of Bangladesh has as compared to other countries. The annual supply of hides and skins in the country is about 300 million square feet consisting of 63.98% cow hides, 2.19% buffalo hides, 32.74% goat skins and 1.09% sheep skins18.
3.1.3. END PRODUCTS
3.1.3.1 TEXTILES
As per BTMA data of registered firms, the textiles industry in Bangladesh produces:
1. Yarn: There are a total of 373 different yarn manufacturing unit’s – 97 ring spinning units, 195 ring spinning with open-end capacity, about 51 rotor/open-end, and around 30 synthetic yarn mills. These units amount to a total production capacity of 17 billion tons of yarn.
17 Bangladesh Garment Manufacturers and Export Association, Trade information 18 Business Promotion Council, Ministry of Commerce, Bangladesh
16 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 2. Fabric: There are total of 743 fabric manufacturing units producing woven, denim, home textiles and knit fabrics. Total production capacity is around 2 billion meters of fabric.
3. Dyeing/Printing/Finishing: There are around 238 dyeing/printing/finishing mills.
3.1.3.2 LEATHER
The leather industry constitutes two major end products apart from tanning industries:
1. Footwear Industry: There are about 40 mechanized footwear industries and about 4,500 small and cottage units producing various types of footwear with a production capacity of about 178.74 million pairs.
2. Leather Goods Industry: There are 5 large and 15 medium and small mechanized and semi-mechanized units and more than 1,500 cottage level leather goods manufacturing units in the country.
3.1.4. PROCESS, TECHNOLOGY AND EQUIPEMENT (PRESENT STATUS)
Table 3 and Table 4 represents the process, technology and equipment currently used in Bangladesh’s textiles and leather industries:
Table 3: Bangladesh Textile Industry – Technology and Equipment
Process, Technology and Present Practice Equipment Production Equipment in Dyeing/Washing and Most units rely on imported equipment. Processing Some units have direct gas fired stenters. Others utilize hot Stenters oil based stenters. Steam Boilers and Thermic Most units use two-pass steam boilers while some units have Fluid Heaters three-pass steam boilers. Most units utilize air compressors purchased from scrapped ships or reconditioned air compressors to reduce the initial Air Compressors cost.
Large units utilize the latest screw compressors. Most units use locally available submersible/centrifugal water Water Pumps pumps. Most units have generators purchased from scrapped ships or reconditioned high capacity power generators to reduce Stand-by Power Generators the initial investment.
Large units utilize high efficiency generators, operating as base load power sources.
17 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. All of the major textile processing units utilize a large number Plant Lighting T8 type lights with electromagnetic ballasts.
Source: Tetra Tech analysis
Table 4: Bangladesh Leather Industry – Process, Technology and Equipment
Process, Technology Present Practice and Equipment Locally manufactured drums are used in small units. Large Washing Drums production units have imported drums. Tunnel and Toggle Units have locally fabricated (brick work) gas fired tunnel dryers Dryers with separately installed burner arrangements. Units use semi-automated spray dryer or steam as heating media Spray Dryers with all control systems. Small units have single plate hot water vacuum dryers. Large Vacuum Dryers production units have imported vacuum dryers with control systems using hot water for heating. Hydraulic Heat Press Most production units use an imported hydraulic heat press. Units utilize separate hot water boilers for drum hot water and Hot Water Boilers vacuum dryers. Some units have a single steam boiler with hot water generated in a separate tank. Most units utilize motors purchased from scrapped ships or old Electric Drives imported motors. Most units have air compressors purchased from scrapped ships or Air Compressors reconditioned air compressors to reduce the initial cost. Source: Tetra Tech analysis
3.1.5. SOURCES OF ENERGY
The industries in this sector require both thermal and electrical energy in their operation. Electrical energy is available from:
1. State Electricity Grid/State Utility: Almost every unit is connected to the national grid (through different grid service providers) at different voltage levels i.e. 33KV/11KV/0.4KV.
2. Captive Power Generation Utilizing Natural Gas: Common practice is to generate electricity through on-site generators and use it for continuous factory production. 80% of the units have their own captive power plant. The textile sector alone has a captive generation capacity of 1,100 MW, while the country as a whole has a total generation capacity of about 8,525 MW as of December 2012.
3. Diesel Generators: As a source of back up supply.
18 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 4. Thermal energy: Used for steam generation and hot water. Since the most common steam generators are gas powered, there is frequent interruption in the production of steam whenever gas pressure reduces. Currently, new gas connections to industrial facilities have been halted due to the demand-supply gap. New facilities are therefore utilizing diesel-fired boilers, furnace oil boilers, compressed natural gas (CNG) boilers, etc. Some factories have started to use exhaust gas boilers (EGB) to get steam from generator, boiler and furnace exhaust; based on our audit experience, however, utilization of such technology is less than 50%.
Interestingly, in Bangladesh, electricity from the grid is often used as stand by supply while most companies rely on captive generation from gas. This is due to an imbalance in the gas and electricity tariffs i.e. electricity is being supplied to the industries at a rate of about BDT 6.95/kWh by distribution companies while the cost of electricity generation from self-supply, without any waste heat recovery, is about BDT 3/kWh. To reduce costs, most industrial facilities have captive generation.
3.1.6. OPPORTUNITIES FOR ENERGY CONSERVATION
The main focus of technology must be the efficient use of electricity, fuel and steam for enhancing overall process efficiency. Source: Tetra Tech Analysis
Following are the energy conservation measures identified by the Consultants for the most of the companies in this sector.
Figure 4 shows the breakdown of electricity end-users in the textiles industry, while Figure 5 presents thermal energy end-users.
Figure 4: Electrical Energy Usage Pattern in Figure 5: Thermal Energy Usage Pattern in the the Textiles Industry, Bangladesh Textiles Industry, Bangladesh i
Sream Others, Distribuon 6% losses, 10%
Humidifi caon, Spinning, Boiler Plant 19% 38% Losses, 25% Bleaching Wet and Humidificat Processing, Finishing, ion, Sizing 10% 35% Lighng, and Others, Weaving, 15% 15% 12% Dyeing and prinng, 15%
Source: Tetra Tech Analysis
19 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Following are the energy conservation measures identified by the Consultants for the most of the companies in this sector.
1. Motor Efficiency: About 80% of electrical energy is consumed by the motors used in manufacturing equipment and utilities. These motors are operated for 6,000 to 7,000 hours a year. Currently, high-efficiency motors (HEMs) are not installed in factories. HEMs have 10%-20% greater efficiency as compared to motors used in Bangladesh. The payback for replacing the existing motors with HEMs is only 12-18 months.
2. Boiler Efficiency: In textiles facilities boilers are used for steam generation and hot water. The current stock of boilers in Bangladesh is old. There is no measurement of air to the boiler, which plays a crucial role in the efficiency of the boiler. Generally, air dampers are found to be set at one position and not adjusted even when load fluctuates. By adjusting air dampers based on the continuous measurement of oxygen in the flue gases, boiler efficiency can be improved by 6-8%. In several of the facilities audited, the boiler insulation is not sufficient.
In some facilities it was found that single pass boilers are in used. Replacing these boilers with three pass boilers will increase the boiler efficiency by 15-20%.
3. Variable Frequency Drives: Adding a variable frequency drive (VFD) to a motor- driven system can offer potential energy savings when system loads vary over time. For example, in the stitching of garments VFDs are used to reduce the speed of sewing machines during unload conditions.
In general, controlling the speed of a pump rather than controlling flow through the use of throttling valves or nozzles, can yield energy savings of 50% for a reduction in speed of 20%19. VFDs can be installed on washer pump motors, fan motors to control flow, in humidification plants, and in air compressors.
4. Lighting: Lighting accounts for about 15-20% of total electricity use in a textile plant. The ready-made garments and footwear industries require adequate lighting during stitching, sewing and finishing processes. Only a few factories have progressed towards energy efficient lighting systems by replacing T-8 tubes with T-5 tubes. Furthermore, in Bangladesh, high-intensity discharge lamps with metal halide or high pressure sodium are not common; these can yield 50-60% energy savings over fluorescent alternatives. Replacing magnetic ballasts with electronic ballasts fluorescent lighting can save 25%. Industry should move toward Light Emitting Diode (LED) lighting rather than T-5 or T8, which saves roughly 25% and 35%, respectively, has a longer life and is more environmentally friendly.
19 Why Use Variable Frequency Drive? written by Filtrex, Inc. distributed by Paddock Pool Equipment Company, Inc. & Filtrex, Inc. www.paddockindustries.com
20 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 5. Replace Diesel/Furnace Oil Water Boilers with Solar Water Boilers: The long- term average solar irradiation data indicates that the period of high-intensity (i.e., more than 200 W/m2) sun-hours in Bangladesh varies from 3 to 11 hours daily and that the global radiation varies from 3.8 to 6.4 kWh/m2 /day20. These data indicate that there are good prospects for solar, thermal and photovoltaic, applications in Bangladesh such as solar heating. Furthermore, as the cost of solar generators has been decreasing while the cost of diesel has been increasing, they are now in a position to replace diesel generators.
Table 5 briefly illustrates the project findings regarding the potential percentage of energy savings achieved if the key measures described above are implemented.
Table 5: Energy Savings Potential
Intervention Potential Energy Savings High Efficiency Motors, Drives etc. 10-20% Energy Efficient Boilers 15-20% Variable Frequency Drives 15% Lighting 20% Source: Project Findings based on Energy Audit Report under ADB Bangladesh Industry Energy Efficiency Finance Program
3.1.7. GLOBAL BENCHMARKS FOR SPECIFIC ENERGY CONSUMPTION (SEC)
International benchmarks for specific energy consumption for the textiles and leather industries are illustrated in Table 6 below.
Table 6: Specific Energy Consumption (SEC) – International Benchmark Values: Textiles and Leather Industries
International Saving Type of International In Unit Best Potential Industry Range Bangladesh21 Practice (%)22 toe/million Textile units 250 250-300 333 25 Industry produced Leather toe/million 50 50-60 76 34 Industry sq. ft.
20 Research Article, Potential of Wind and Solar Electricity Generation in Bangladesh, Sanjoy Kumar Nandi, Mohammad Nasirul Hoque, Himangshu Ranjan Ghosh, and Swapan Kumar Roy, Received 29 October 2011; Accepted 11 December 2011 21 Values are determined on the basis of the energy audit conducted by the consultant. 22 Expected energy saving potential, if industries in Bangladesh achieve the international best practice SEC.
21 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. In Bangladesh, the mean specific energy consumption of the audited textile industry is 333 toe/million units produced and 76 toe/million sq. ft. for the leather industry showing that it takes more energy to get a piece of textile produced in Bangladesh than elsewhere.
3.1.8. INVESTMENT, SAVINGS AND EXPECTED GAINS
The consultant has identified energy savings opportunities in the audited textiles industries (inclusive of leather and readymade garments). It was found that for the 22 target facilities audited, if the suggested conservation measures implemented, they would lead to USD 1.37 million in annual savings23 for a one time investment of USD 4.45 million. The measures can also contribute towards a CO2 emissions reduction of 19,309 tons every year. The payback for this investment was found to be around 3.2 years, with an IRR of 25%24.
3.1.9. HUMAN RESOURCE SKILL ASSESSMENT
In 2012, textiles and related industries accounted for 45% of all industrial employment in Bangladesh, yet only contributed to 5% of the total national income. This is because the insufficient size of the skilled workforce impedes an increase in productivity and a shift towards more sophisticated products. It is estimated that currently, there is a 25% shortage of skilled workers in Bangladesh’s textiles and related industries25. Along with high labor turnover, the future growth of this sector will require up to 6 million workers by 2020.
It has been observed that small manufacturers are dependent on very few technicians for the entire plant’s operation. Also, existing challenges have multiplied as suppliers aren’t able to find higher-skill, middle management positions. Moreover, the factory owners are not convinced that skilled management can improve productivity or quality enough to justify its cost. They are still running the factories in the traditional manner, employing semi-skilled and unskilled workers.
Other key factors limiting efficiency improvements are:
Educational institutions for technical skills are few or non-existent The RMG industry’s image is not attractive enough to interest young graduates. ‘Importing’ middle management creates several problems, such as increased costs and cultural issues.
Understanding the importance of this sector, the Government of Bangladesh has prioritized investment in education as one of its broad initiatives. An institution such as the National Institute of Textiles Training, Research and Design (NITTRAD) was established to provide a degree in textiles. The Government is also planning to establish skill management training institutes via public-private partnerships.
23 The savings do not include gains obtained from carbon emission reductions.
24 Assumed a project life of 5 years
25 Mckinsey, Report on Bangladesh RMG landscape
22 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. An analysis of the current state of energy management at the sector level was done by the consultant using the Energy Management Matrix analysis (Ref Table-2) for all the 22 companies audited in this sector. The ratings of the companies in each area were averaged and a summary representing sector-wide findings was established. A summary of the ratings ofthesectorisshowninTable7.
Table 7: Energy Management Score Summary – Textiles and Leather Sector
Matrix Area Of Management Matrix Reading Interpretation Reading Policy 0 No explicit policy No energy management or any Organization 0 formal delegation of responsibility for energy consumption Informal contacts between Communication 1 engineer and few users Cost reporting based on invoice data, Engineers compile report for Information 1 internal use with technical department Informal contacts used to promote Marketing 1 energy efficiency No investments in increasing Investment 0 energy efficiency in premises
23 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 3.2. SSEECCTTOORR22::IIRROONNAANNDDSSTTEEEELLIINNDDUUSSTTRRIIEESS
3.2.1. GENERAL DESCRIPTION
The production output of mild steel (MS) structural products in Bangladesh was about 0.29 million tons in FY 2008-09, about 0.17 million tons in FY 2009-10, and about 0.23 million tons in FY 2010-11. The per capita consumption and/or production of steel are often taken as an indicator of the state of development of a nation. The per capita consumption of mild steel in Bangladesh in 2012 was 1.43 kg/person. This is far below the world average steel use per capita of 216.7 kg/person26. Recent estimates show that the demand for steel in Bangladesh is growing at a rate of about 10% annually. See Box 4 for more iron and steel sector data.
The world-wide steel industry can be divided into Box 4: Iron and Steel Sector Profile two types of producers: those who convert iron ore into steel (known as integrated producers), As per International Trade Centre: and mini steel plants, which make steel by melting Sector Export in Value (FY 2011): scrap, sponge iron or a mixture of the two (known US$ 40.35 million; 0.15 % of total exports. as secondary producers). The steel products that Sector Import in Value (FY 2011): are currently manufactured locally in Bangladesh US$ 1.48 billion; 4.78% of total imports. are made by secondary producers. Industry Annual Import Growth (FY Theonlyintegratedsteelmilleversetupinthe 2007-11): 13.85% country was Chittagong Steel Mills Limited (CSM), an enterprise of Bangladesh Steel and Trade Associations: Engineering Corporation (BSEC), at Chittagong. It Bangladesh Steel and Engineering was closed in 1996 due to its adoption of a rather Corporation (BSEC) obsolete method of steel production and logistical Bangladesh Steel Mills Association Bangladesh Foundry Owners constraints. Since then, no major private Association. integrated steel production facilities have been Ship breaking and recycling industry developed in Bangladesh. Therefore, the country (SBRI) still relies on import-based steel processing facilities run by private enterprises and the Ship Building and Recycling Industries (SBRI), which account for 50% of the nation’s steel supply. The majority of steel units in the country are only engaged in re-rolling of steel scrap and solids obtained predominantly from “ship breaking” operations which are a major business activity in Bangladesh.
3.2.2. TYPES OF INDUSTRIES
The present structure of the Bangladesh iron and steel industry is composed of the following types of units:
3.2.2.1 ELECTRIC ARC FURNACE AND INDUCTION FURNACE UNITS
There are a number of electric arc furnace and induction furnace (EAF/IF) units making billets, pencil ingots and channel cast billets. These units cater to the level of quality
26 World Steel Association, 2012
24 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. demanded locally. The billets produced are used in on-site and off-site re-rolling mills belonging to the same, or a different, producer.
3.2.2.2 ROLLING MILL UNITS
The re-rolling units essentially reheat ship yard scrap and re-roll it into rods and bars. Existing re-rolling mills are meeting the entire domestic demand of the Bangladesh, except for imports of a small quantity of high quality steel products. There is still unutilized capacity in the re-rolling sector, which is likely to meet increasing demand of the steel products in future years. The raw material for the re-rolling mills is ferrous scrap which comes mainly from the ship breaking industry. At present ship breaking industry provide about 1 million tons ferrous scrap per year. Bangladesh has re-rolling units with an installed capacity of around 1.5 million tons per year. Some of the steel products produced in Bangladesh are not of standard specification and quality, and as such for important engineering applications or quality construction sectors like high rise buildings, bridges, etc. steel products are imported.
Cold Rolling Mill Units
There are 6 steel cold rolling mills in Bangladesh which use imported hot rolled coil for production of cold rolled coil. Their installed capacity is presented in Table 8.27
Table 8: Cold Rolling Mills in Bangladesh
Name Capacity (M Ton/yr.) Alam Cold Rolled Steels Ltd. 120,000 PHP Cold Rolls Mills 240,000 Abul Khair Steel Products Ltd. 250,000 K1Y. Cold Rolled Mills Ltd. 300,000 Karnaphulli Steels Ltd. 80,000 Appollo Cold Rolled Mills Ltd. 200,000 Total 1,380,000
Source: Tetra Tech- Field Survey
3.2.2.3 STEEL PIPE AND TUBE MANUFACTURING UNITS:
Bangladesh has steel pipe and tube manufacturing units but their capacity utilization is very low, resulting in an import of about 58,000 tons per year at present. The shortage was 10,000 tons in 2009-10, which increased to 20,000 tons in 2011-12.
27 The blue color indicated for the mills in the Table 8 have been part of audit in this industrial energy efficiency finance program
25 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 3.2.2.4 GALVANIZED PLAIN AND CORRUGATED SHEETS AND GALVANIZED PIPES MANUFACTURING UNITS
There are a number of units producing galvanized plain (GP) and galvanized corrugated (GC) sheets in Bangladesh. Overall, the installed capacity of galvanized sheet manufacturing in Bangladesh is reported to be about 700,000 tons per year. More than 80% of that production is of corrugated sheets, meeting demand from the construction industry for roofing and side sheeting.
National Tube Ltd (NTL) is the major producer of galvanized iron (GI) pipes and tubes with a capacity of 45,000 tons per year. Other major units are Asia Pipes Ltd and Kusthia Pipes Ltd. NTL and Asia Pipes Ltd are manufacturing MS non-galvanized pipes also. Overall capacity is reported to be 80,000 tons per annum whereas existing production is only 20,000 tons per year.
3.2.3. END PRODUCTS
The major end products of the steel and iron industry in Bangladesh are shown in Table 9.
Table 9: End Products in the Steel and Iron Industry
Products Production (in Tons) Year 2008-09 2009-10 2010-11 Semi-finished products CC billets 180,000 250,000 320,000 Pencil ingots/channel cast billets 75,000 75,000 75,000 Sub-total 255,000 325,000 395,000 Finished products Bars & rods and structural 1,200,000 1,270,000 1,300,000 CR coils/sheets 270,000 280,000 300,000 GPI/CGI sheets 595,000 600,000 675,000 Pipes & tubes 30,000 35,000 40,000 Sub-total 2,095,000 2,185,000 2,315,000 Total 2,350,000 2,510,000 2,710,000 Source: Bangladesh Bureau of Statistics
3.2.4. PROCESS, TECHNOLOGY AND EQUIPEMENT (PRESENT STATUS)
Since Bangladesh is a secondary producer of steel, the main raw material used for production is steel scraps.
The main steps employed in the secondary steel making process are:
• Melting and refining of steel scrap to produce clean liquid steel (sometimes other sources of iron are also used) • Converting liquid steel into intermediate shapes, i.e. ingot or billet. • Size reduction of billets by rolling into products, e.g. rods, deformed bar, flats, etc.
26 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Table 10 illustrates the present status of process, technology and equipment utilized in the Bangladesh iron and steel sector.
Table 10: Bangladesh Steel Industry – Process, Technology and Equipment
Process, Technology and Present Practice Equipment The induction furnaces in use are of relatively older designs and small capacities with hardly any refining facilities. Some steel makers do uses ladle Furnaces for Melting - Induction furnaces for refining, but these also have very Furnaces and Electric Arc Furnaces. limited refining capability. As a result, the chemical composition and metallurgical quality of steel are not consistent and are mainly a reflection of the characteristics of the raw material. Tatus)Reheating/Heating/Process Most of the steel foundries use traditional cupola Furnaces furnaces. Some units add value to their scrap product by post melt refining, and tend to use the continuous casting technique for making billets. In contrast, Casting Technologies units undertaking only melting of scrap without or with only minor refining, conduct casting operations into “channel cast billets” or “pencil ingots”. The latest technology, such as 6-High Cold Rolling Hot Rolling and Cold Rolling Mills Mills is in use. By using this technology, the sheet width can be reduced considerably
3.2.5. SOURCES OF ENERGY
Electricity, natural gas and HSD are the main sources of energy for the iron and steel industry in Bangladesh. In fact, this sector is the largest private sector consumer of natural gas in Bangladesh. Induction furnaces use electricity from grid as their primary energy source, natural gas use is predominantly in re-rolling mills. Natural gas is provided by the local gas utility Petro Bangla.
Some iron and steel manufacturers generate electricity through gas based self-generation and use it for continuous factory production. The captive generation is up to 30% cheaper than the electricity from the grid. HSD is predominantly used for utility purposes and is kept as a source of back up supply to utility services.
Most of the iron and steel industries are connected with grid at 33/11 KV voltage level.
3.2.6. OPPORTUNITIES FOR ENERGY CONSERVATION
When comparing the processes and practices followed in Bangladesh to the international standard, significant opportunities for energy conservation exist in the iron and steel sector. Major savings can come through the installation of top pressure recovery systems, exhaust gas recovery/waste heat utilization, and furnace insulation. The details of the present practice and scope for improvement are outlined in Table 11.
27 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Table 11: Bangladesh Iron and Steel Industry – Energy Conservation Measures
Energy Conservation Measures Present Practice Proposed Practice Exhaust Gas Heat Recovery for Heating Combustion Air: Charge metal is heated by a natural gas air mixture flow in a re-heating Exhaust gas furnace at 1,000°C to 1,250°C, depending on coming out of the the thickness of charge material. As a result, gas generator/re- A portion of the exhaust pressure rises in the re-heated furnace. The heating furnace is gas heat can be utilized excess pressure is released through the dissipated into the to pre-heat the charged materials before chimney. The burned gases in the furnace atmosphere charging into the also flow through the chimney due to the resulting in energy furnace or to pre heat pressure difference between the furnace and losses and thecombustionair. the atmosphere. The burned gases that flow increases in through the chimney are known as exhaust carbon emissions. flue gases. The temperature of exhaust flue gas varies from 600˚C to 800˚C . Regular Improved Insulation: A hot surface radiates In most cases maintenance of heat to the environment, thus losing energy, furnaces are old and furnace insulation making the surrounding environment less not properly and renew of comfortable for workers and cooling the maintained insulation every 5 charge. years. Hot metal is retrieved Replace the present manually through the manual system with Automation of Re-heating Furnace: Raw sliding door by tongs. an automatic materials are charged by a pusher at one end This method is time retrieval and of the re-heating furnace and discharged at consuming and leads transportation the other. The hot metal is carried out either to heat loss. As a conveyor system by conveyors or manually sent to the roll result, production is that can take hot stand for rolling decreased to some metal to the roll extent. stand directly.
Facilities utilizing electricity from grid are subjected to peak hour restrictions in Bangladesh. Such restriction result in the cooling of charged material and significant energy losses. Most of the iron and steel manufacturers in other countries of South Asia do not encounter such restrictions and are exempted from peak hour under “continuous process industry category”.
Table 12 briefly illustrates the project findings regarding the potential percentage of energy savings that can be achieved if the key measures described above are implemented in this sector.
28 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Table 12: Energy Savings Potential – Iron and Steel Industry
Intervention Potential Energy Savings Exhaust Gas Heat Recovery 20% Improved Insulation 5-10% Automation of Re-Heating Furnace 20-25% Source: Project Findings based on Energy Audit Report under ADB Bangladesh Industry Energy Efficiency Finance Program 3.2.7. GLOBAL BENCHMARKS FOR SPECIFIC ENERGY CONSUMPTION
International benchmarks for specific energy consumption (SEC) in the steel and iron industries are illustrated in Table 13.
Table 13: Specific Energy Consumption – International Benchmark Values: Iron and Steel Industry
Internationa Saving Type of International In Units l Best Potential Industry Range Bangladesh21 Practice (%)22 Cold Rolling Toe/Ton 0.0382 0.0382-0.066 0.159 76 and Finishing MS Rod Toe/ton 0.046 0.046-0.088 0.091 49 MS Ingot Toe/ton 0.089 0.089 -0.101 0.169 47
As shown in Table 13, the SEC of Bangladesh’s steel sector, on average, is greater than the international benchmark. One of the reasons for this variation is due to conversion of gas into electricity and intermittent peak hour restrictions. In Bangladesh, due to shortage of electricity, during peak hours industries are not permitted to use electricity. As an result furnace cools down during peak hours and has to be reheated again after peak hours. This also increases the SEC.
3.2.8. INVESTMENT, SAVINGS AND EXPECTED GAINS
Were the suggested conservation measures implemented in the 20 audited facilities, they would lead to USD 5.1 million in annual savings for an investment of USD 10.42 million. The measures can also contribute a CO2 emissions reduction of 52,605 tons every year. The payback of the investment was found to be around 2.03 years, with an IRR of 32%28.
3.2.9. HUMAN RESOURCE SKILL ASSESSMENT
The managing staff at iron and steel plants comprises professionals, engineers and other support staff. The number of engineers, professionals and other staff is not well balanced in small plants. Some firms have very few engineers and are operated solely by technicians. It has been observed that multiple roles are often assigned to employees. This can reduce productivity and detracts from process improvements. Figure 6 illustrates the profile of people employed in the iron and steel industry.
28 Assumed Project Life of 5 years
29 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Figure 6: Profile of the Iron and Steel Industry Workforce
LargeUnits:MBA/M.Eng. Unit Small Units: Engineer, with 10-15 Manager years' experience
Procurement Engineering graduates, Diploma Producon Maintenance Administrav and Markeng holders with 7-8 years' experience Head Manager / Tesng eStaff
University graduates, Diploma holders Line Technicians with 3-4 years' experience Supervisors
12th standard or below, with 1-2 years' experience, ITI's, short-term Machine cerficaon courses Operators
Passed 10th to 12th standard or below, with 1-2 years' experience, Unskilled ITI's, short-term cerficaon courses Labor
Source: Tetra Tech Survey and Analysis
Table 14 represents the education levels of employees across the steel sector in Bangladesh. Most of those employed are minimally educated, having studied until the 10th standard or below:
Table 14: Distribution of Human Resource by Education Level
Industry Total Employment Aggregate Employment with Management Education 1-2% Post Graduates 1% Graduates 10% Diploma Holders/Certificate Holders 3% 10th Standard or below (those requiring ‘short-term/modular’ 80% capacity building of some form) Daily Wages/Contractual 5% Source: Tetra Tech Survey and Analysis There is a dearth of skilled human resources in the manufacturing sector, particularly at mid- level management. This can mainly be attributed to narrow career opportunities, unattractive salary packages, and better opportunities in textiles and other sectors. Mills suffer from a lack of engineers since most prospective engineers are not motivated to join the industry. More importantly, there is no specialised technical engineering institution in Bangladesh for the iron and steel sector.
An analysis of the current state of energy management at the sector level was done by the consultant using the Energy Management Matrix analysis (Ref Table-2) for all the 20 companies audited in this sector. The ratings of the companies in each area were averaged
30 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. and a summary representing sector-wide findings was established. A summary of the ratings of the sector is shown in Table-15.
Table 15: Energy Management Score Summary – Steel and Iron Sector
Matrix Area Of Management Matrix Reading Interpretation Reading Policy 0 No explicit policy No energy management or any formal Organization 0 delegation of responsibility for energy consumption Informal contacts between engineer Communication 1 and few users Cost reporting based on invoice data, Information 1 Engineers compile report for internal use with technical department Marketing 0 No promotion of energy efficiency No investments in increasing energy Investment 0 efficiency in premises
31 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 3.3. SSEECCTTOORR33::CCEEMMEENNTTAANNDDCCLLIINNKKEERRIINNDDUUSSTTRRIIEESS
3.3.1. GENERAL DESCRIPTION
With Bangladesh’s growth economy, the real estate sector is leaping to prominence in the major cities. It has been estimated that the overall GDP contribution of the cement sector was 7.02% in 2009-2010. In a crude measure, the total volume of the sector was approximately BDT 265.7 billion in 2010-201129.
Cement, as the most important ingredient of concrete, is essential in the development of Box 5: Cement Sector Profile infrastructure and constructioningeneral.The expansion of the cement industry in Bangladesh Sector Earnings: Approximately 265.7 billion BDT is underway due to government plans for big infrastructure projects, as well as increasing Industry Growth: demand in the construction sector. BCMA: 10% - 12% per annum
According to the Bangladesh Cement Workforce: Manufacturer’s Association (BCMA), the cement Unskilled Labor: 37,100 Skilled Labor: 2,900 industry is growing at an average rate of 10-12% Percentage share in Total Employment: per annum. In addition, cement is exported to 0.08 different states of India and export demand has increased gradually over the years. According to Consumer Market: the BCMA, export of cement from Bangladesh Major portion is consumed locally. stood at 152,000 tons in 2010 versus 100,000 Cement is exported to India, Myanmar, tons in 2009. Nepal and some other countries on a smaller scale. Despite the increasing demand, per capita consumption remains low when compared with Trade Associations: Bangladesh Cement Manufacturers the world average; only 65 kg (FY 2009) while Association (BCMA) neighboring countries, India and Pakistan, have Bangladesh Cement Traders per capita consumption of 135kg and 130kg, Association respectively. This underlines the tremendous scope for long term growth in the Bangladeshi cement industry.
Cement is a high-volume, low-value commodity. Transporting it over long distances adds to the cost, resulting in lower margins to the producers. This makes cement a regional commodity where lower distribution cost makes it remunerative to producers. Cement consumption varies regionally because the demand-supply balance, per capita income and level of industrial development differ in each region. In Bangladesh, Dhaka, Chittagong and Mongla account for 91% of total consumption. Most of the exports are to India, Myanmar and Nepal.
Bangladesh’s cement industry is the 40th largest in the world. In 1995, the government first permitted the establishment of cement industries in Bangladesh. Currently 123 companies
29http://www.rehab-bd.org/ Comprehensive Study On The Real Estate Sector Of Bangladesh.pdf
32 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. are listed as cement manufacturers in the country. The cement companies operating in Bangladesh have a total production capacity of 21.043 million tons per annum. As shown in Table 1630, the top 13 companies alone control over 78% of the total industrial capacity. The capacity balance still remains quite fragmented. It has been found that the average production capacity of the sector over last 4.5 years was about 66%.31
Table 16: Market Share of Major Cement Companies
Company Market Share Shah Cement 14.2% Heidelberg Cement 9.3% Meghna Cement 7.4% Seven Circle BD Ltd. 6.9% Lafarge Surma Cement Ltd. 6.7% Holcim BD Ltd. 6.4% Unique Cement 6.1% MI Cement 4.9% Premier Cement 4.0% Akij Cement 3.7% Royal Cement 3.0% Mongla Cement 2.9% MTC Cement 2.8% Source: Bangladesh Bureau of Statistics
With the exception of Lafarge Cement which makes cement from basic raw material, all cement companies in Bangladesh make cement from imported clinker obtained from neighboring countries such as India, Vietnam, Thailand, China, Indonesia, etc. In some cases the clinker is imported from a country and then again exported back to same country as cement.
3.3.2. ABOUTCEMENTINDUSTRIES
The main ingredients for cement include clinker, gypsum, slag, limestone and fly ash. The mills that produce cement from imported clinker are located mostly around Dhaka, Chittagong, and Mongla to take the advantage of water transportation of raw material and cement. Raw material and limestone deposits are situated in the St. Martin’s Island, Joypurahat and Sylhet areas. However, they are few in number and of limited capacities.
The energy cost of Portland cement (see description below) production is 10% to 20% of the total production cost. It has been observed during audits that efforts have been made to reduce energy consumption in cement production through improvements in processes and auxiliary facilities. If the energy cost is reduced, the manufacturing cost is lowered, resulting in increased company profits.
30 Note: Blue denotes that the company was audited under this program
31 Prospectus of Premier Cement Mills Ltd.
33 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 3.3.3. END PRODUCTS
Bangladesh produces only bagged cement. The dominant types of cement used in Bangladesh are Portland Composite Cement (PCC) and Ordinary Portland Cement (OPC)32.
Due to intense competition, cement prices from many companies in the industry are very close to one another. Currently, the standard price for one bag of cement produced by multinational and local cement companies ranges from BDT 400 to BDT 500.
3.3.4. PROCESS, TECHNOLOGY AND EQUIPEMENT (PRESENT STATUS)
Only OPC was available in Bangladesh until 2002, which was produced following the American Standard Method (ASM). From the year 2003, other types of cement also became available, which helped the cement industry to provide differentiated and improved products to customers. The cement which has been widely used since 2003 is PCC made by following the European Standard Methods (ESM). Currently, the ratio of production between PCC and OPC is 19:1. Although PCC is of equal strength and durability to OPC, they rely on different manufacturing technologies. PCC contains only 60-70% clinker while OPC contains 95% clinker. So, worldwide, PCC has become more popular.
A cement production consists of the following three processes.
1. Raw material process
2. Clinker burning process
3. Finish grinding process
The raw material process and the clinker burning process may each be classified into the wet process and the dry process methods. Energy (natural gas) consumption is almost 50% less in the dry process, hence most new cement plants in Bangladesh are implementing the dry process for production. The process flow diagram for a dry process cement grinding plant is shown in Figure 7.
32 Heidelberg Cement, 2004
34 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Figure 7: Production Process Flow Diagram of Dry Process Cement Production in Bangladesh
3.3.5. SOURCES OF ENERGY
The primary energy source for cement factories in Bangladesh is electricity, which is required to drive motors in several production processes. This electricity is either drawn from the national grid or generated from on-site, captive power generators using natural gas. Only 20% of the units have their own captive power plant. In terms of specific energy consumption (toe/ton of production) self-generation has higher specific energy consumption (SEC) than grid electricity, as the typical efficiency of a captive power plant is only 30%.
All cement industries prefer to have their own gas connection and generate electricity from natural gas to run the plant. If a gas connection is not available the industry prefers to obtain grid connection at the 33 KV level.
35 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Efforts at the policy level are needed to bridge the imbalance between gas and grid electricity prices. This will avoid sub-optimal generation of electricity through captive power plants.
3.3.6. OPPORTUNITIES FOR ENERGY CONSERVATION
Significant opportunities for energy conservation exist in the cement sector in terms of the technology, processes and equipment’s used in Bangladesh when compared to international standards. Major savings can be achieved through the installation of pre-grinding high press roller mill, the use of vertical roller mills (VRM), efficient motors and drives, maintenance of induced draft (ID) fans, and maintaining mill air flow. The details of the present practices and scope for improvement are summarized in Table 17.
Table 17: Bangladesh Cement Industry – Energy Conservation Measures
Energy Conservation Present Practice Proposed System Measures Ball Mill: For grinding of Installation of a pre-grinding clinker, gypsum and dry or Mills operating without a pre- roller press mill before the ball moist additives to any grinder generally produce mill. This helps in reducing the type of cement. The mill material of less than 40 mm in material size to between 2 operates in either an open size.Thisaffectsthequalityof mm and 0.08 mm, leading to a or closed circuit and the end product and leads to reduction in SEC . generally without a pre- high rejection rates. grinder. . Ball Mill: For grinding of Replacement of ball mill by clinker, gypsum and dry or vertical roller mill (VRM) which moist additives to any The SEC of the ball mill is operates on the principal of type of cement. Balls are about 35-45 kWh /ton. centrifugal force. The SEC of used to crush the raw VRM is 28-32 kWh/ton. material. High efficiency motors should be used. Improving efficiency by even 1-2% results in significant savings as motors Motors and Drives: In a The motors are not energy are of MW size. Preventive cement plant, ball mills efficient and there is no maintenance helps in avoiding usemotorintheMW system of preventive deterioration in efficiency and capacity range. maintenance or vibration increases the life of motors. analysis. Semi-annual vibration analyses helps in avoiding sudden breakdown of the motors. Since cement dust is Induced Draft Fans constantly in contact with the Blades: Used to create a fan blades, they become ID fans blades should be vacuum or negative air highly corroded. Anti- cleaned regularly to avoid pressure in a system or corrosives are not available on high deposits on the blades. stack. It also assists in the market. The corrosion of Fans may be changed every maintaining elevated the fans may also be due to 4-5 years to keep efficiency ventilation, resulting in the unavailability of exhaust levels high. increased system gas controls. Moreover efficiency. cement dust is deposited on
36 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Energy Conservation Present Practice Proposed System Measures the fan blades. Measurement instrumentation Mill Air Flow: Maintaining It has been observed that the and airflow controls should be air flow within the mill and airflow at the outlet duct is not suitably placed to maintain air outlet duct improves adjusted according to load and flow at the design value as efficiency. is kept at a fixed position. determined by the load.
In Bangladesh, most cement factories are only performing grinding processes, thus major electrical energy savings can be achieved by using a pre-grinder roller press, VRM mills, and using high energy efficiency motors.
Figure 8 presents the consumption of energy in various sections of the cement plant.
Figure 8: Energy Use Breakdown for the Cement Industry
Raw mat. Unloadg & transp o storage 7% 2%1%2% 5% Cement Mill 2% 1% Seperator Bag Filters 10% IDFan Air Compressors 70% Conveyors & Elevators Other appliances Lighng & office
Source: Tetra Tech Analysis
Table 18 briefly illustrates the project findings regarding potential energy savings for the key measures described above.
Table 18: Energy Savings Potential – Cement Industry
Intervention Potential Energy Savings Replace Ball Mill with VRM 15% Motor and Drives 5-8% Induced Draft Fans 3% Mill Air Flow 5-10% Source: Project Findings based on Energy Audit Report under ADB Bangladesh Industry Energy Efficiency Finance Program
37 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 3.3.7. GLOBAL BENCHMARKS FOR SPECIFIC ENERGY CONSUMPTION
International benchmarks for specific energy consumption in the cement industries are compared to those for Bangladesh in Table 19.
Table 19: Specific Energy Consumption - Global Benchmark Values: Cement Industry
International Saving Type of International In Units Best Potential Industry Range Bangladesh21 Practice (%)22 Grinding SEC toe/ 0.00215 – (Clinker to 0.00215 0.004 46 ton 0.0004 Cement)
The large gap in the global and Bangladesh SEC may be due to conversion of gas to electricity where about 70% loss of energy take place.
3.3.8. INVESTMENT, SAVINGS AND EXPECTED GAINS
If the suggested conservation measures were implemented in the 20 audited cement facilities, they would lead to USD 22.85 million in annual savings for an investment of USD
70.9 million. The measures can also contribute a CO2 emissions reduction of 28,116 tons every year. The payback of the investment was found to be around 3.2 years, with an IRR of 28%33.
3.3.9. HUMAN RESOURCES AND SKILL ASSESSMENT
Bangladesh offers a substantial human resource advantage in terms of the availability of low cost labor. The country boasts a trainable, enthusiastic, hardworking and low-cost labor force, suitable for any labor-intensive industry. According to the Labor Force Survey, 2005- 06, the cement sector in Bangladesh employs 37,100 unskilled laborers and 2,900 skilled laborers. The percentage share of the sector in total employment is 0.08.
As it is a manufacturing sector, the requirement for unskilled labor is much greater than that for skilled labor. The nominal wage rate index for the manufacturing industry in 2009-10, taking the year 1969-70 as an index, is BDT 6,536.53.
The management of cement mills comprises professionals, engineers and other support staff. The number of engineers, professionals and other staff is not well balanced. Some firms have no engineers and operate through technicians.
Table 20 represents the educational profile of employees across the cement sector in Bangladesh. Most of the employees are minimally educated, having studied until the 10th standard or below.
33 Assumed Project Life of 10 years
38 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Table 20: Distribution of Human Resource by Education Level – Cement Industry
Industry Total Employment Aggregate Employment with Management Education 1-2% Post Graduates 1% Graduates 10% Diploma Holders/ Certificate Holders 2% 10th Standard or below (those requiring ‘short term/modular’ 80% capacity building of some form) Daily Wages/Contractual 6% Source: Tetra Tech Survey and Analysis
For capitalization of the high-end technologies and equipment suggested in earlier sections, it is important that the industry has highly skilled and trained manpower. The availability of such labor is low. Several actions must be taken in terms of capacity building and work place culture in order to increase skilled labor.
An analysis of the current state of energy management at the sector level was done by the consultant using the Energy Management Matrix analysis (Ref Table-2) for all the 20 companies audited in this sector. The ratings of the companies in each area were averaged and a summary representing sector-wide findings was established. A summary of the ratings ofthesectorisshowninTable21.
Table 21: Energy Management Score Summary – Cement Sector
Area Of Management Matrix Reading Matrix Reading Interpretation Policy 1 An unwritten set of guidelines No energy management or any formal Organization 0 delegation of responsibility for energy consumption Informal contacts between engineer and Communication 1 few users Cost reporting based on invoice data, Information 1 Engineers compile report for internal use with technical department Informal contacts used to promote Marketing 1 energy efficiency No investments in increasing energy Investment 0 efficiency in premises
39 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 3.4. SSEECCTTOORR 44:: CCEERRAAMMIICCSS AANNDD GGLLAASSSS IINNDDUUSSTTRRIIEESS
3.4.1. GENERAL DESCRIPTION Box 6: Ceramics and Glass Sector Profile The global ceramics industry is worth USD 34 20 billion . Global production of ceramic Export / Import Statics of the Sector FY-2011-12 tiles increased from 9,515 million sq. ft in (‘000’US$) 2010 to 10,512 million sq. ft in 2011. Exports Imports However, the most noticeable trend in Commodity Exports Imports Growth Growth production is the geographical shift in manufacturing from the traditional Ceramic 41,176 65,019 2% 33% European base to the nascent economies products of Asia, North Africa and the Middle East. Glass and This is due to the fact that the traditional 904 82,917 -36% 33% Glassware ceramic industry is a labor-intensive sector and companies in developed Source: International trade Centre: countries face difficulties being http://www.intracen.org/country/bangladesh/ competitive in the face of rising labor costs and economic slowdown due to the recent Sector Growth: According to the Export Promotion Bureau (EPB), earnings from ceramics export global financial crisis. stood at US$ 34.42 million during July-May of FY 2012-13 as compared to US$ 31.09 million a year This shift in production has benefitted before, growth of 10.71%. Bangladesh, which can offer low-cost labor and relaxed trade policies Export Earnings: Ceramic exports were $41.75 million in FY 2011-12, 38.58 million in 2010-11 and (Bangladesh has also enjoyed the benefits $35.78 million in 2009-101. of the generalized system of preferences (GSP) that allows duty-free exports Workforce: Currently employs around 100,000 without any quota restrictions to Europe workers. and the USA). The country’s ceramic products enjoy a good reputation in the Consumer Market: Of the different ceramic products, ceramic table wares are exported to international markets of North America about 50 countries including the USA and Canada, and the EU. It is perfectly positioned to be tiles to India, Nepal and Bhutan and sanitary ware a strategic partner in the global production to the Middle East, especially to the UAE. and supply of ceramic goods35.SeeBox6 About 75% of the total exports go to Europe, about for more data on Bangladesh’s ceramics 15% to the US and the remaining 10% to other and glass sector. markets
Currently, ceramics products (including Trade Associations: stone tableware, porcelain tableware, Bangladesh Ceramic Ware Manufacturers Association (BCWMA) bone china tableware, tiles and sanitary
34 Nusrat Jahan et al, Bangladesh Ceramic Industry
35 Board of investments, Bangladesh
40 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. ware) produced in Bangladesh only account for 0.17%36 of the global ceramics market.
Meanwhile, Bangladesh has emerged as one of the most successful manufacturing and exporting countries of quality ceramic tableware. With traditional skills and craftsmanship handed down from generation to generation and the favorable economic environment created for investment and export, Bangladesh has now reached such a stage of development that it is rated as one of the best in the world for the ceramics industry. The growth in overall investment projects in Bangladesh, registered by the Bangladesh Board of Investment (BOI), is shown in the Figure 9. Glass industries have also flourished in recent years in Bangladesh. Almost all manufacturers have succeeded in establishing their brand names in the international ceramic tableware market. To ensure proper quality and maintain good standing, all ceramic tableware production units use high quality raw materials. The production equipment used is modern and conforms to the latest technology and standards.
Figure 9: Total Investment in Ceramics and Glass Sector
600,000 100% 558,806 90% 500,000 539,076 80% 400,000 70% 60% 300,000 274,978 50% 194,154 40% Million Taka 200,000 30% 173,247 100,000 11.66 % 20% 0.89% 2.35% 0.27% 0.38% 10% 0 0% 2007-08 2008-09 2009-10 2010-11 2011-12
Total Investmen n Ceramics and Glass Sector Total Investmen n All Sectors
Source: Bangladesh Board of Investment (BBOI)
The rise of the real estate and housing sector in the last decade has driven growth in the demand for sheet glass considerably. With access to advanced bone china technology and creative human resources, ceramic and glass industries are one of the top growth sectors for foreign trade.
3.4.2. TYPES OF INDUSTRIES
The sector features prominently with units/factories in two major areas:
1 Ceramics Industry 2 Glass Industry
36 ASA University Review, Vol. 5 No. 1, January–June, 2011;Marketing Strategies of Tableware Ceramics Industry of Bangladesh: Some Empirical Evidence from International Players
41 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 3.4.2.1 CERAMICS INDUSTRY
The first ceramics factory in Bangladesh was established by Tajama Ceramic Industries in the 1962. Presently, there are 40 ceramics companies throughout the country, which produce table wares, tiles, sanitary ware, insulators, firebricks, etc. There is a local annual demand for ceramic products worth BDT 2,000 million. According to the Bangladesh Ceramic Association, during for year 2011-12, local industries produced 50,000 metric tons of ceramic table wares, 64 million square meters of tiles and 21,900 metric tons of sanitary ware.
The prime raw materials of ceramic products are white clay and sand. About 95% of the raw materials needed for making quality and exportable ceramic products in Bangladesh are imported from abroad. The materials are imported mainly from Japan, Germany, New Zealand, South Korea and India.
Big industrial houses such as Monno Bone China37, Shinepukur, Bengal Fine Standard, Peoples and National Ceramic are engaged in tableware production while RAK, Dhaka Shanghai, Fu Wang, China- Bangla and Mir are engaged in the production of tiles and sanitary ware. Most of the companies are export oriented. For instance, the local tableware industry has the capacity to supply the BDT 3 billion domestic market but local manufacturers account for less than BDT 500 million of that. This is because overseas demand is increasing and the country’s major manufacturers are pumping 80% of their production into the international market, thus creating a demand-supply gap in Bangladesh. The major competitor for Bangladesh’s ceramic industry is inexpensive ceramics produced in China. The trend has led to increasing imports of ceramics products to Bangladesh which are increasing in parallel to the growth in export. Figure 10 illustrates the total exports and imports in the ceramic industry up to 2011.
Figure 10: Import and Export of Ceramics Products
70 60 50 40 30 20 mllion US$ 10 0 2007 2008 2009 2010 2011 Export 35,779 46,184 35,862 38,833 41,176 Import 24,100 34,209 39,590 53,904 65,019
Source: BCWMA, Annual Report 2012
37 These industries were audited during the program.
42 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 3.4.2.2 GLASS INDUSTRY
By the end of 2002, Bangladesh’s entrepreneurs took the first move toward manufacturing glass locally, noticing the growth in high-rise buildings and the dearth of quality glass. Previously, the country was fully dependent on imported glass, whereas by 2008, the local sector supplied 95% of total domestic demand while only 5%, corresponding to demand for colored or luxurious designer glass, was imported from China, Thailand, Malaysia and Indonesia. Local entrepreneurs started to establish glass factories in the private sector to capture this opportunity. Presently, there is a market demand for glass products of BDT 2 billion which is increasing. Nasir Glass Industries, PHP Float Glass Industries Ltd., Usmania Glass Sheet Factory Ltd. and MEB Glass Industries Ltd33 are the main producers of glass products in Bangladesh. Of these, Usmania Glass Sheet Factory Ltd. is publicly owned, the others are privately owned. The daily production capacity of Nasir Glass Industries33 is 250 metric tons, which serves around 48% of domestic demand; PHP Float Glass Industries Ltd. produces 150 metric tons of glass daily. Apart from these companies, some factories produce mirror glass, tampered glass and glass containers as value added items.
Most of the raw materials, including dolomite, limestone and chemicals for float and sheet glass need to be imported from abroad. However, specialized sand, another essential material for producing glass, is available on the local market. Local glass companies are exporting their products primarily to South Asian countries, including India, Nepal, Bhutan and Sri Lanka. See Figure 11 for import and export data for Bangladesh’s glass industry.
Figure 11: Export/Import Details for Glass and Glassware Products
90 80 70 60 50 40 billion US$ 30 20 10 0 2007 2008 2009 2010 2011 Export 3,745 6,587 3,682 3,515 904 Import 26,144 41,715 44,155 68,298 82,917
Source: International Trade Center
3.4.3. END PRODUCTS
The ceramics sector in Bangladesh produces sanitary ware, table ware, tiles and insulators. The ceramics products used for dining and showcase wares are called tableware products. The tableware market can be divided into three categories:
43 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Dinnerware: Plates, bowls, cups, saucers and mugs
Glassware: Beverage ware, stemware and barware of both glass and crystal
Flatware: Eating utensils
3.4.4. PROCESS, TECHNOLOGY AND EQUIPEMENT (PRESENT STATUS)
Ceramics are made from a non-metallic mineral, hardened at high temperatures. Industrial ceramics comprise all industrially used solid materials that are neither metallic nor organic. Naturally occurring inorganic substances are heat-treated after adjusting grain size and moisture, and some must be completely molten in order to be formed into ceramics; while others are formed, heat-treated and made into the ceramic products in the sintered state, immediately before being molten. The former product, formed in the molten state, is known as glass. The latter product is finished in the sintered state and includes pottery, refractories, sanitary ware, tiles and cement. These ceramics are called traditional ceramics. By contrast, advanced ceramics are sintered at a high temperature and consist of extremely fine, high-purity particles of inorganic substances such as alumina (AL2O3), silica (SiO2), zirconia (ZrO2) and silicon nitride (Si3N4). These advanced ceramics are used in electronics and mechanical parts.
Figure 12 depicts the ceramics manufacturing process used in Bangladesh.
Figure 12: Manufacturing and Production Process of Ceramics in Bangladesh
Glaze Procelain Clay Feldspar Clay Water Plaster
Refining, Mixing/ Sieving, Mud Feeding Plaster Mold Pulverizing Deironing
Body Base Glazing Drying Forming Molding Inspecon
Firing Inspecon Packing Shipping
3.4.5. SOURCES OF ENERGY
Almost every facility has a connection to the national grid (through different grid service providers) at different voltage levels i.e.33KV/11KV. However, this is mostly used as backup power when gas supply is interrupted or is of low pressure. Most of the kilns in Bangladesh
44 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. use natural gas. Since the gas does not contain any Sulphur, ceramic products from Bangladesh tend to look brighter.
New gas connections have been suspended since March 2009, causing newer factories to remain idle. A few new companies resort to using CNG or HSD due to restrictions in release of gas/electric connections for industrial usage. Otherwise, HSD is predominantly used as a back-up supply for plant lighting purposes only.
The ceramics industry is uniquely vulnerable to low voltage electricity and low gas pressure. Ceramics manufacturers have lamented that they’ve lost a portion of the export market as their output witnessed a sharp decline as a result of low voltage electricity and low gas pressure. In fact, the industry needs uninterrupted power and gas supply around the clock to maintain the required 360°C temperature required for ceramic tableware processes. Drops in temperature take at least 12 hours to recover from, causing a huge loss in production. A below temperature operation in ceramics processes cause issues with colour and quality, resulting in high rejection rates.
3.4.6. OPPORTUNITIES FOR ENERGY CONSERVATION:
Major energy and cost savings can be achieved in Bangladesh’s ceramics sector by taking advantage of the equipment and process upgrades summarized in Table 22.
Table 22: Bangladesh Ceramic Industry – Energy Conservation Measures
Energy Conservation Present Practice Proposed System Measures Waste heat from exhaust Utilize Exhaust from flue gas can be used in Furnaces and Kilns in Most of the factories do not dryers. High capacity Dryers: In most facilities deploy waste heat recovery plants may even install waste heat in the kiln/furnace systems. waste heat recovery on exhaust is not being utilized. an on-site generator. In Bangladesh, the motors found HEMs show efficiency at ceramics plants are generally gains of 5% to 10% when Utilization of High taken from ship wreckage. Thus, compared to the motors Efficiency Motors: they are typically over-sized and currently in use. Typically, ceramics plants of lower efficiency. When motors Replacement of will utilize as many as 50 depreciate, plant owners often depreciated motors by motors of various sizes, tend to have them rewired rather HEMs makes a good operated from 4000 hours to than replace them with new business case in 6,000 hours a year. motors. Most facilities do not comparison to rewired have high efficiency motors. motors. Jacket Cooling of Gas Engine Exhaust: Waste Jacket cooling water can heat in jacket cooling water Waste heat in the jacket cooling be used in chillers with is not being utilized. The water is not being utilized. vapor absorption quantity of heat becomes systems. significant in high capacity captive power plants. Raw Material- Natural raw It is essential to set up Checking of raw material materials contain a mixture material acceptance constitutes are random of various components. The standards to inspect
45 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Energy Conservation Present Practice Proposed System Measures quality of ceramics products chemical components, will deteriorate if too much refractoriness, ignition iron or titanium are included. loss and other related factors for each batch. Ideally, material should Crushing- Ore is crushed to be crushed to finer get raw materials. The Checking is by experience and particles for both forming forming and sintering random. and sintering. It should be properties vary according to checked by proper the grain size. sample and instruments. Since the ceramics will Forming- Metal mold and shrink when fired, it is Molds are manufactured with plaster mold patterns are necessary to take such proper consideration of used in most ceramics shrinkage into account shrinkage. forming processes. when determining the shape of these molds. Drying- Inappropriate drying Instruments should be Generally no parameters of the may cause products to be provided and used for drying chamber such as cracked or broken; this controlling the drying temperature, humidity and requires appropriate process and checking the duration are measured temperature, humidity and completeness of the Experience is used. duration. process. Glazing- The purpose of Glazes should be applied glazing is to provide a by spraying only. The smooth, shiny surface that dipping or flooding should Glazes are generally applied by seals the ceramic body. Not not be used to apply spraying, but dipping or flooding all ceramics are glazed. glazes. The temperature also is used to apply glazes. Metal oxides, such as (from 600 degree Temperature is maintained by chromium oxide, cobalt centigrade - 1500 degree experience. oxide, and manganese oxide centigrade) should be often are used to color maintained depending on glazes. type of glaze applied.
Table 23 briefly illustrates the project findings regarding potential of energy savings for the key measures described above.
Table 23: Energy Savings Potential – Ceramics and Glass Sector
Intervention Potential Energy Savings Exhaust of Furnace Air for Drying 10-15% High Efficiency Motors 5-10% Jacket Cooling of Gas Engine Exhaust 3-7% Source: Project findings based on energy audit report under the ADB Bangladesh Industry Energy Efficiency Finance Program
46 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 3.4.7. GLOBAL BENCHMARKS FOR SPECIFIC ENERGY CONSERVATION
International benchmarks for specific energy consumption in the ceramics and glass industry are illustrated in Table 24 and Table 25, respectively.
Table 24: Specific Energy Consumption – Ceramics Industry
Internatio Saving International In Type of Industry Units nal Best Potential Range Bangladesh21 Practice (%)22 toe/ Ceramic wares 0.6 0.6 - 0.7 1.23 51 ton
Table 25: Specific Energy Consumption – Glass Industry
Internatio Saving International In Type of Industry Units nal Best Potential Range Bangladesh21 Practice (%)22 Glass Sheet and toe/ 0.4 0.4-0.7 0.75 46 Glasswares ton
3.4.8. INVESTMENT, SAVINGS AND EXPECTED GAINS
The Consultants were able to identify important energy savings potential in the 20 audited facilities, totaling USD 10.12 million in annual savings for a total investment of USD 37.3 million. The measures would also reduce CO2 emissions by 28,961 tons every year. The payback on this investment was found to be around 3 years, with an IRR of 23%38.
3.4.9. HUMAN RESOURCE SKILL ASSESSMENT:
According to the Bangladesh Ceramic Ware Manufacturers Association (BCWMA), the sector employs as many as 35,000 skilled workers. Still, the ceramics sector has been facing a shortage of skilled manpower due to a lack of related educational institutes in the country. Furthermore, production is being hampered from a shortage of skilled technicians. Currently the ceramics sector suffers a 25% shortage in manpower. Since ceramics industries are not able to employ the necessary skilled manpower from the domestic sources, they employ experts from countries like India, Pakistan, Sri Lanka, and China, at an additional cost39.
Therearetwotypesof workers engaged in the ceramics industry: ceramics technologists and ceramics designers. The ceramics designers use sand and clay for basic ceramics materials while the technologists use materials produced through complex chemical
38 Assumed Project Life of 10 years
39http://www.daily-sun.com/details_yes_19-06-2012_Career-in-glass-and-ceramics- engineering_179_1_19_1_0.html#sthash.khR5y6rO.dpuf
47 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. processes. Ceramics designers play an important part by designing new products, meeting buyers’ expectations with regard to functionality and aesthetics in order to top competitors.
Some ceramics technologists are specialized in glass work in industries involved in the manufacture of tableware, fiber optics, bulbs, window panes and electronic ancillaries. Others are specialized in structural clay work in the manufacture of enameled articles, pipes, artificial limbs, cement used in construction or ceramic wares such as tiles, pottery, or bathroom and kitchen fixtures.
The Bangladesh Institute of Glass and Ceramics, located at Tejgaon, Dhaka is the only public technical institute that offers a four-year professional education program leading to a diploma in glass and ceramics engineering. Established in 1951, it is the oldest institution of its kind and generates most of the workforce for the ceramics industry. In 2010 Rajshahi University of Engineering & Technology (RUET) also opened a four-year honors program in glass and ceramics engineering. In addition, the Bangladesh University of Engineering and Technology (BUET) has a post-graduate program on the subject. Some private institutes are also opening up glass and ceramics engineering courses; The National Institute of Engineering & Technology (NIET) Bangladesh is one such institution.
Still, the sector is lacking in valuable skilled labor as the labor pool has not expanded to keep up with growth in the industry. At ceramics association and trade organization meetings, charges and counter-charges fly between factory owners about luring away skilled workers. This situation, of course, is advantageous for the factory employees and workers; since those with high skill levels find themselves in a seller’s market40.
An analysis of the current state of energy management at the sector level was done by the consultant using the Energy Management Matrix analysis (Ref Table-2) carried out for the 20 companies audited in this sector. The ratings of the companies in each area were averaged and a summary representing sector-wide findings was established. A summary of the ratings ofthesectorisshowninTable26. Table 26: Energy Management Score Summary – Ceramics and Glass Sector Area Of Management Matrix Reading Matrix Reading Interpretation Policy 0 No explicit policy No energy management or any formal Organization 0 delegation of responsibility for energy consumption Informal contacts between engineer and Communication 1 few users Cost reporting based on invoice data, Information 1 Engineers compile report for internal use with technical department Marketing 0 No promotion of energy efficiency No investments in increasing energy Investment 0 efficiency in premises
40 http://www.bangladesh-business.net/PageDetails.php?Id=124#sthash.o2vDJTAu.dpuf
48 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 3.5. SSEECCTTOORR 55:: CCHHEEMMIICCAALL,, FFEERRTTIILLIIZZEERR,, PPUULLPP AANNDD PPAAPPEERR,, PPLLAASSTTIICCSS IINNDDUUSSTTRRIIEESS
3.5.1. GENERAL DESCRIPTION Box 7: Chemical, Fertilizer, Pulp and Paper Basic chemical manufacturing and Plastics Sector Profile capability is a strong indicator of a country’s development. As production Export / Import Statics of the Sector US$ of chemicals makes a country Exports Imports independent of multinational supply Commodity Exports Imports Growth Growth chains, they are essential for manufacturing within other industries.. Inorganic 22,799 169,834 -9% 7% Chemical industries have been chemicals developed in Bangladesh to cater to Organic 286 415,441 -39% 19% the paper, urea, textiles, dying, leather, chemicals water treatment, waste water treatment and other industries. See Box 7 for Miscellaneous more information on the chemical chemical 683 299,362 23% 17% products industry in Bangladesh. Fertilizers 37,355 901177 -10% 32% The Bangladesh Chemical Industries Corporation (BCIC) was established in Plastics 83,055 1,008,617 20% 15% July, 1976 by the Government of Bangladesh to promote Chemical Pulp 0 109,376 - 21% industries in Bangladesh. It is currently Paper 3,322 462,425 2% 17% managing 13 enterprises (medium and large). Urea and Triple Super Source: International trade Centre: Phosphate (TSP) fertilizer, paper and http://www.intracen.org/country/bangladesh/ hardboard, cement, glass sheet, insulator, sanitary-ware, etc. are Trade Associations: Bangladesh Chemical Industries Corporation produced in BCIC factories. The only (BCIC) fertilizer plant in the Bangladesh is Bangladesh Plastic Goods Manufacturer and managed by BCIC. This fertilizer plant Exporters Association (BPGMEA) has been the target of criticism in last Bangladesh Fertilizer Association (BFA) few years for its inefficient operation. The plant could not be stopped partially or fully to implement efficiency improvements due to fear of reduction in agriculture production. BCIC has been playing a major role in the development of these sectors. However, free market reforms in the 1990’s opened up the industry to development by the private sector. Figure 13 below presents the investment projects in the chemical sector, as registered with Bangladesh Board of Investment (BOI), between FY 2005-06 and FY 2011-12.
49 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Figure 13: Investment Projects in Chemical Sector Registered with BOI (FY 2005-06 to 2011-12).
600,000 558,806
500,000 539,076
400,000
300,000 274,978
187,056 194,154 200,000 Million Taka 198,042 173,247 28.19% 100,000 20.18 % 17.64% 11.66% 17.74% 7.71% 11.55% 0 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Total Investment in Chemical Sector Total Investment in All Sectors (Million Taka)
Source: Bangladesh Board of Investment (BBOI)
3.5.2. TYPES OF INDUSTRIES:
The sector includes following industries:
1. Basic Chemicals Industries 2. Paper Industries 3. Plastics Industries
3.5.2.1 BASIC CHEMICALS INDUSTRIES
The basic chemicals sector was started by the government to produce chemicals for other government-owned factories. Gradually, all government-owned chemical plants were closed and the vacuum filled by private sector enterprises. ASM Chemical Industries Ltd., Global Heavy Chemicals Ltd, Samuda Chemical Complex Ltd., Tasnim Chemical Complex and HP Chemicals are reputable names dominating the sector. Chemical factories are mainly chlor- alkali plants, chlorinated product plants and hydrogen peroxide plants. The raw materials used for the chemical plants are sodium chloride (common salt), Sulphur, and natural gas. Chemical production in Bangladesh over the last five years is shown in Table 27.
Table 27: Chemical Production (2007-2012) Paper Fertilizer Year ('000' tons) ('000' tons) 2007-08 24.08 1581.68 2008-09 24.2 1347.36 2009-10 18.68 1165.21 2010-11 21.01 1013.54 2011-12 53.16 1047.21
Source: Bangladesh Bureau of Statistics
50 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 3.5.2.2 PAPER INDUSTRIES
The paper industry comprises one government-owned mill, Karnaphuli Paper Mills Limited (KPML), governed by a public sector parent body, Bangladesh Chemical Industries Corporation (BCIC), and around 80 private firms. 25 years ago, KPML used to produce around 90% of the paper used in Bangladesh, but today it produces less than 5% thanks to the influx of private sector production. The major private sector factories in Bangladesh have been developed in the Dhaka and Chittagong regions along the bank of Meghna, the Buriganga, the Sitalakhya and the Karnaphuli rivers to take advantage of water transportation. Per capita paper and board consumption in Bangladesh is currently only 3.5- 4 kg compared to an average of 300 kg for advanced countries, and 50 kg in Asian countries. Paper mills have a total installed capacity of 2,500 tons per day, with actual production of about 2,000 tons per day. It is sufficient to meet the existing domestic demand.
KPML is the only integrated pulp and paper manufacturer in Bangladesh, other mills fully depend on foreign pulps and recycled fiber as they do not produce their own pulp. KPML produces both bleached and unbleached virgin pulps. Among the varieties of paper produced are: writing, printing, packaging (Kraft/brown sulphate) and specialty papers.
The major private sector paper mills include T.K. Group (paper, board, and tissue), Basundhar Group (paper, tissue, and newsprint), Magura Paper Mills, Sonali Paper Mills, MAQ Paper Mill, Pearl Paper Mill, Hakkani Paper Mill (writing, printing/newsprint), Hossain Pulp and Paper Mills (duplex, cigarette paper).
3.5.2.3 PLASTICS INDUSTRY
The total export market of plastics was 75 million in 2011. A UN report indicates41 that Bangladesh can play a significant role in global plastics production by raising revenue in the plastic industry to USD 2 billion by 2015 and USD 4 billion by 2020. Over the last twenty years the consumption of plastics has grown by a factor of 50, from a low of 14,000 tons in 1990 to 750,000 tons at present. Currently, the per capita consumption of plastics in Bangladesh is 5 kg/year, as compared to the world average of 20 kg. This symbolizes the huge potential of the plastics industry. Domestic market size is estimated to be around USD 875 million.42
Importantly, this industry includes plastics manufacturing and recycling units. There are more than 3,000 manufacturing units of plastic and 300 recycling units which produce recycled products from about 140 tons/day of plastic waste. According to BPGMEA, of the 3,000 plastic manufacturing firms 66% fall into the ‘small’ enterprise category, 1.7% into the ‘large’ enterprise category and the rest belong to medium enterprises. Most firms are located in major cities like Dhaka and Chittagong. Some of the large players are RFL Plastics, Bengal Plastics, Navana Plastics, Gazi Tanks, Boss Plastic Industries, Leos Plastic, Bismillah Plastics, Dutch Bangla, Sino Bangla and N. Mohd. Plastics. Small and medium
41 World Economic and Social Survey, 2013 - published by Department of Economic and Social Affairs of the United Nations Secretariat
42 Bangladesh Bureau of Statistics -2012
51 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. manufacturing firms consist of highly fragmented clusters scattered around the country with the largest cluster being the Lalbagh-Islambagh cluster in Old Dhaka.
The import of polymers has increased from 10,000 tons in 1989 to 289,000 tons in 2007. This is because Bangladesh has no polymer production units, thus demand is satisfied mostly by imports. The availability of inexpensive labor and the fast development of the postconsumer plastic recycling industry in Bangladesh points to the sector’s competitiveness advantage in the global market. E
3.5.3. END PRODUCTS
3.5.3.1 BASIC CHEMICAL INDUSTRY
The end products produced in Bangladesh’s chemical and fertilizer industry are illustrated in Table 28.
Table 28: Bangladesh Basic Chemical Industry Production (tons/Day)
ASM Global Samuda Tasnim Present Product Chemical Heavy Chemical HP Total Chemical Market name Industries Chemicals Complex Chemicals Production Complex Demand Ltd Ltd Ltd. Caustic 60 Soda (100% 275 - (expandable 70 60 100 - 290 basis 300 to 100) Flake/Liquid) Chlorine (Cl2) From Electrolizer 53 62 53 89 - 257 250-300. Membrane Cell Hydrogen Peroxide (50% 60 - 70 60 28 218 200~250 Concentrate d, H2O2) Hydrochloric 150 to Acid (32% 110x2 100x2 100 140x2 - 800 170 HCl) Sodium Hypochlorite 10 10 20 15 - 55 10 to 15 (NaOCl) Stable Bleaching 20 15 16 - - 51 15 to 20 Powder (SBP) Source: Chemical and Fertilizer Sector in Bangladesh: Challenges and Scope of Development, Journal of Chemical Engineering, IEB Vol. Ch.E. 26, No. 1, December 2011
3.5.3.2 PLASTIC INDUSTRY
Product lines currently offered by the Bangladesh plastics industry are shown in Table 29 .
52 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Table 29: End Products Manufactured in Bangladesh: Plastics Industry
End Products Market Segment Packaging material, bags, hangers, etc. Accessories for RMG Tableware and kitchenware: buckets, jugs, plates, Household Items glasses, containers, etc. All kinds of food and non-food packaging material, Packaging Flexible Intermediate Bulk Containers (FIBC) Toiletries (soap cases, tooth brushes), medical accessories (blood bags, saline bags, syringes, Health Care medicine containers) Plastic pipe, door, toilet flush, etc. Building and Construction Electrical cables and wires, switches, regulators, Electrical and Electronics computer accessories, telecommunications Equipment equipment, etc. Plastic pipes for irrigation, and plastic films for Agricultural Products shedding crops Engineering parts Industrial Applications
Source: Market Research, Tetra Tech
3.5.3.3 PULP AND PAPER INDUSTRY
Different grades of paper produced by the private paper mills in Bangladesh are writing, printing, packaging, liner, media, simplex, duplex, board, newsprint, tissue, cigarette, etc. Paper Board is also produced by many units like Anant Board Mill, and Eastern Paper Mill.
3.5.4. PROCESS, TECHNOLOGY AND EQUIPEMENT (PRESENT STATUS)
3.5.4.1 PAPER INDUSTRY
Paper production machines are based on the principle of the Fourdrinier Machine. The Fourdrinier consists of a head box full of wet pulp and a specially woven plastic fabric mesh conveyor belt, known as a wire (as it was once woven from bronze), that takes wet pulp from the heatbox to create a continuous paper web, transforming pulp into paper. Figure 14 shows the different sections of the process.
53 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Figure 14: The various sections of Fourdrinier Machine.
Heatbox Slice Dolly Roller Felt Felt Dryer Heated Dryer Top Felt Felt Dryer
Wire Mesh Section Boxes
Breast Roller Couch Roller Pickup Roller Bottom Felt Felt Dryer
Wet End Wet Press Section Dryer Section Calender Section Source: http://en.wikipedia.org/wiki/File:Fourdrinier.svg
Table 30 shows present practice of process, technology and equipment used in the paper industry.
Table 30: Bangladesh’s Paper Industry – Process, Technology and Equipment
Process, Technology and Present Practice Equipment A hydra pulper, a tank with an integrated agitator, is typically used to Pulp Making melt down the dry sheets and blocks of pulp. Secondary fiber, like waste paper, is treated with some alkaline De-Inking chemical to remove ink. Refining Normally, disc and conical refiners are used in series. Different grades of stored pulps are blended by a mixing pump in a Blending blend chest. Wire Part The wire part process is basically the casting of pulp to form paper. The pressing process consists of three to four presses, each with two granite press rolls, one on top and the other on bottom. The top roll is Pressing pressed into the bottom by pneumatic or hydraulic pressure ranging from 30 to 60 bar. Press rolls can also be driven by electrical motors. Drying equipment consists of 20-30 carbon steel cylinders. The cylinders are heated from inside by saturated steam. Paper is run along Drying their surfaces to dry. Each drier sub section is driven by one electric motor. Calendering is done using stacks. A paper machine may have more Calendering than one stack. Each stack has two to four carbon steel calender rolls. Every stack is driven by a motor.
The raw material for these mills is primarily imported waste paper. Because paper making machines are extremely expensive, many of these mills use imported, second hand machines. Due to the age of these machines, energy consumption is high. Newer machines have many heat saving features. The pulping section, which does not require sophisticated equipment, is either fabricated locally or imported at very low cost from manufacturers that sell inferior technologies.
54 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 3.5.4.2 CHEMICAL AND FERTILIZER INDUSTRY
The raw materials for urea production are natural gas, air and steam. After the removal of Sulphur from natural gas, reactions take place in primary and secondary reformers, high and low temperature shift convertors, methanators and finally the ammonia synthesis convertor. The ammonia and carbon dioxide produced in the ammonia plant are used as feedstock to produce Urea. Industries have utilized process technologies, for example Criterion Continuous Concentration (CCC - USA) (for ammonia generation), Vetrocoke (for Urea generation) and Chinese technologies for carbon dioxide removal.
Chlorine, caustic soda and hydrogen are produced through electrolysis of concentrated Brine (Sodium Chloride solution) using a membrane cell process. Hydrochloric acid (HCl) is produced from Hydrogen (H2) and Chlorine (Cl2) gases, which are cooled and filtered before being sent to a hydrochloric acid synthesis unit. The HCl synthesis reactor includes a burner, a hydrochloric acid absorber and a tail gas scrubber, used to avoid atmospheric air pollution. The reaction is highly exothermic.
Sodium hypochlorite is produced by mixing Sodium Hydroxide (NaOH) and Cl2.Thereaction takes place under continuous operation in a liquid jet ejector. Concentration ranges between 100 and 150 gpl.
3.5.4.3 PLASTICS INDUSTRY
The prevailing level of technological sophistication in the industry is considered to be low to intermediate. Automated equipment is largely imported, although semi-automatic and manually operated machines are manufactured locally. Injection molding machines are manufactured locally and supplied to small manufacturing units. Large manufacturers operate machinery imported from China, Taiwan, Japan and Germany.
The whole industry relies on molds that are usually imported. Although around 200 local mold manufacturers exists in the Lalbagh cluster, these still only cover 10% of existing demand. Usually, small manufacturers are supplied by the cluster’s mold makers. Large manufacturers’ molds are supplied either from a local source or imported from China. Major types of processing techniques include: blowing, extrusion and injection molding. Injection molding machines produce solid plastic goods, such as buttons and furniture. Blow machines produce goods such as bottles and polythene. Extrusion molding is very similar to injection molding and it is used to make pipes, tubes, straws, hoses and other hollow pieces. A combination of injection blow molding and extrusion blow molding called rotational molding is also widely used.
Small contract manufacturers acquire raw materials and molds and subcontract the manufacturing stage to existing machine owners. Such machine owners lease machine/operator time for a defined hourly or daily rate. Machine leasers are much sought after but delivery time may be uncertain due to high demand.
55 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 3.5.5. SOURCES OF ENERGY
The fertilizer industry is very much reliant on natural gas as it is not only a source of energy but also the main raw material in the production of the basic fertilizer product, Urea. Petro Bangla supplies gas to the fertilizer industry.
The electricity supply situation is particularly bad in the Dhaka area, where the largest clusters of the plastics sector’s SMEs are located. Frequently, particularly in the summer, the firms experience five to six hours of ‘load shedding’. Productivity is badly affected by sharp fluctuations in power supply and frequent energy shortages. However, firms with gas connections rely on self-generation to ensure uninterrupted power supply and hence enjoy higher productivity. Since early 2009, even large firms have experienced difficulties with their planned expansion projects as the government has stopped issuing new gas supply connections.
A common practice adopted in chemical, plastics and paper plants is to generate electricity through self-generation and use it for continuous factory production. About 55% of units have their own captive power plant.
Factories with both gas and electricity connections use grid electricity as backup power when gas supply is interrupted or of low pressure. HSD is predominantly used only as a backup for emergency lighting purposes only.
3.5.6. OPPORTUNITIES FOR ENERGY CONSERVATION
Significant opportunities for energy conservation exist in this sector in terms of the processes technology and equipment followed in Bangladesh when compared to international standards. Major savings can be achieved through the installation of waste heat recovery from gas engine generators (GEG), improvement of combustion efficiency in boilers/generators, co-generation in paper mills and efficient injection molding machines in the plastics. The details of the present practices and scope for improvement are summarized in Table 31.
Table 31: Bangladesh Chemical, Fertilizer, Plastics and Paper Industry – Energy Conservation Measures Energy Conservation Present Practice Proposed System Measures. The heat from the generator In most factories GEG Waste Heat Recovery from exhaust can be recovered exhaust is not being GEG exhaust -Theexhaustof by installing a waste heat utilized. It is being GEG and jacket cooling water boiler, economizer or air released into the carries a considerable amount pre-heater, depending upon atmosphere, resulting in a of energy. The average the quantity of heat and the huge waste of energy and temperature of the exhaust gas usage. an increase in carbon was found to be between 400°C emissions. We have not and 600°C and the temperature The heat from jacket cooling come across any company of the jacket cooling water was water can be utilized in which is recovering heat 80°C. chillers and/or for air from jacket cooling water. conditioning using vapor absorption technology.
56 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Energy Conservation Present Practice Proposed System Measures. An automatic combustion In most factories, air-fuel control system which Combustion Efficiency: ratio in boilers/ furnaces is constantly adjusts the Combustion in a furnace/boiler controlled by manual air dampers based on load/fuel requires fuel and air (Oxygen). inlet dampers. Generally, on the boiler/furnace load. Efficient combustion requires a dampers are not operated specific air/fuel ratio. Any based on load/fuel. A boiler or furnace should deviation from that ratio creates Furthermore, there is no always be equipped with inefficient combustion and online/offline continuous oxygen results in the suboptimal use of instrumentation to check measurement system to fuel. the combustion efficiency. check combustion efficiency. Injection Molding Machines (IMM) and extruder machines are High temperature IMM and Improved Insulation: A hot used extensively in the extruder machine barrels surface radiates heat to the plastics industry. These may be insulated with rock environment, thus losing energy machines use electrical wool or glass wool blankets. and making the surrounding heaters arranged inside a In general, any surface environment less comfortable barrel to melt greater than 50°C should be for workers. Polypropylene and similar insulated to avoid heat loss raw materials. In most due to radiation. cases, barrel surfaces are not insulated. Energy Efficient Injection Molding Machine (IMM): IMM In most factories injection inject polymers into a mold at molding machines are high pressure in order to Use of energy efficient either old or the barrel achieve a desired shape. injection molding machines insulation is not wide Material for the part is fed into a saves approximately 30% of enough, resulting in heat heated barrel, mixed, and the energy consumed. loss. forced into a mold cavity where it cools and hardens to the desired shape.
Table 32 briefly illustrates the project findings regarding potential of energy savings for the key measures described above.
Table 32: Energy Savings Potential – Chemicals, Fertilizers, Plastics, Pulp and Paper Intervention Potential Energy Savings Waste Heat Recovery from GEG Exhaust 10-15% Combustion Efficiency Improvements 5-10% Improved Insulation 1-5% Energy Efficient Injection Molding Machines 20-30% Source: Project Findings based on Energy Audit Report under ADB Bangladesh Industry Energy Efficiency Finance Program
57 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 3.5.7. GLOBAL BENCHMARKS FOR SPECIFIC ENERGY CONSUMPTION
International benchmarks for specific energy consumption in the ceramics industry are illustratedinTable33.
Table 33: Specific Energy Consumption - Global Benchmark Values: Chemicals, Plastics and Paper Industry
Saving Type of International International In Units Potential Industry Best Practice Range Bangladesh21 (%)22 Plastic Industry toe/ton 0.1 0.1-0.16 0.18 44 Paper Industry toe/ton 0.26 0.26-0.3 0.32 19
Plastic industry in Bangladesh has higher SEC than international bench mark probably due to conversion of gas into electricity by using gas generator instead of directly using grid electricity. In the paper industry generally co-generation is used which nullifies this impact.
3.5.8. INVESTMENT, SAVINGS AND EXPECTED GAINS
Were the suggested conservation measures implemented in the 20 facilities audited in the chemical, plastics and paper sector, they would lead to USD 1.33 million in annual savings for an investment of USD 4.25 million. The measures would also reduce CO2 emissions by 16,530 tons every year. The payback on the investment was found to be around 3.24 years, with an IRR of 25%43.
3.5.9. HUMAN RESOURCE SKILL ASSESSMENT
The chemical and fertilizers industries are composed of well-organized corporate entities that offer standard wages to their employees. Chemical Engineers have been critical in the adoption on modern technologies and processes. Public sector companies employ Chemical Engineers with long experience in relevant enterprises. Lately, these experts have been involved in the evaluation of new technologies; however, the institutional arrangements to assess, adapt and transfer the largely imported technology are still at an early stage. Thus, the sector in general and the chemical industry in particular, has not yet gained the experience and momentum to reach advanced levels of chemical engineering expertise, innovation and creativity.
Over the last two decades, the plastics industry has evolved to be the most labor intensive industry in this sector. There are more than 3,000 manufacturing units in the plastics industry, providing direct and indirect employment to half a million people. The plastics recycling subsector, composed of around 300 small units in Dhaka, employs 25,000 workers. The average number of regular employees per company is 18, of which 14 are production workers and 4 white-collar workers. Remaining staff is on contract basis. Female workers are almost not existent in paper mills, but represent about 5% of workers in the
43 Project Life of 5 years is assumed.
58 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. chemicals industry and 50% of the workforce in the plastics industry. The workers in these enterprises have an average of 8 years’ experience.
Existing training facilities are scarce and not adapted to the industry’s needs. Currently, training is done on the job, but generally poor working conditions have led to a drain of skilled workers. During the early 1950’s, Ahsanullah Engineering College provided large corporations in the public sector, the initial manpower for development of chemical and process industries.
The other training institutes in the sector include:
Bangladesh Industrial Technical Assistance Centre, Ministry of Industries (BITAC): The Plastics Division in BITAC was established with UN assistance. This division still lags well behind the current needs of the plastics industry in Bangladesh, however, mould making expertise at BITAC is suited to advancements in technology. Bangladesh Institute of Plastic Engineering and Technology (BIPET): Providing technical education in plastics industry. Bureau of Manpower, Employment and Training (BMET) delivers skills training through 37 Technical Training Centers (TTCs) and one Institute of Marine Technology (BIMT). Six TTCs are reserved exclusively for women.
An analysis of the current state of energy management at the sector level was done by the consultant using the Energy Management Matrix analysis (Ref Table-2) carried out for all the 20 companies audited in this sector. The ratings of the companies in each area were averaged and a summary representing sector-wide findings was established. A summary of the ratings of the sector is shown in Table 34.
Table 34: Energy Management Score Summary – Chemical, Fertilizer, Plastics and Pulp and Paper Sector
Area Of Management Matrix Reading Matrix Reading Interpretation Policy 0 No explicit policy No energy management or any formal Organization 0 delegation of responsibility for energy consumption Informal contacts between engineer Communication 1 and few users Cost reporting based on invoice data, Information 1 Engineers compile report for internal use with technical department Informal contacts used to promote Marketing 1 energy efficiency Investment 1 Only low cost measures taken
59 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 3.6. SSEECCTTOORR 66:: AAGGRROO-- IINNDDUUSSTTRRIIEESS,, IINNCCLLUUDDIINNGG SSUUGGAARR AANNDD JJUUTTEE IINNDDUUSSTTRRIIEESS
3.6.1. GENERAL DESCRIPTION Box 8: Agro-Industries Sector The agricultural sector contributes around 29% of Profile Bangladesh’s Gross Domestic Product (GDP) and Sector Export Earnings (FY 2011-12): generates employment for 63% of the total labor US$ 402.70 million; force44. The sector is dominated by cultivation of rice crops, jute, cotton, sugarcane, flowers, Industry Growth: sericulture, horticulture, fisheries, vegetables, BCMA:10%-12%perannum livestock, soil development, and seed development and distribution. See Box 8 for more Workforce: 63% of available 77 million labor force. information on the agro-industries sector. Industry Growth: Less than 2.0% per Although the country faces challenges due to year during the first two decades after independence in 1971 to around 3.0% frequent fluctuations in food prices, the basic during the last decade supply of raw materials, improved marketing techniques and modern processing facilities have Trade Associations: enabled agro-processing industries to grow Bangladesh Jute Mills Corporation (BJMC) (Public Sector) domestically as well as in export markets. Bangladesh Jute Spinners Association (BJSA) (Private Sector) BJMA Bangladesh Jute Mills Figure 15 illustrates the growth in local investment Association (Private Sector). projects in agro-based industries registered with Bangladesh Sugar and Food Industries the Board of Investment over the period from Corporation (BSFIC). Financial Year 2005-2006 to 2011-2012.
Investments have been aggressive, with the growth of around 600% registered over the last seven years. The main reason for such phenomenan growth is the increase export of yarn and conducive trade policies for agro based industries in Bangladesh.
44 Ministry of Agriculture, Bangladesh
60 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Figure 15: Local Investment Projects Registered with the BOI over the Period FY 2005- 06 to 2011-12 in Agro-based Industries
70,000 61,195 60,000 52,007 50,000 40,000 30,000 23,251
Million BDT 20,000 9,657 8,162 9,511 8,223 10,000 - 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Local Investment Projects
Source: Board of Investment
3.6.2. TYPES OF INDUSTRIES
The sector features prominently with units/factories in two major areas:
1. Jute Mills 2. Agro and Sugar Mills
3.6.2.1 JUTE MILLS
Bangladesh is the largest producer of jute goods in the world. One fourth of the country’s population is directly or indirectly involved in different activities of the jute sector. Jute mills are either government owned or privately managed. Government mills are directly controlled by the government-controlled Bangladesh Jute Mills Corporation (BJMC). Private mills are represented by the Bangladesh Jute Spinners Association() BJSA and Bangladesh Jute Mills Association (BJMA), see Table 35 for a breakdown of the major jute mills.
Table 35: Jute Mills in Bangladesh
BJSA Mills BJMA Mills BJMC Mills TOTAL Number of jute mills 81 UNITS 97 UNITS 27 UNITS 205 UNITS Number of workers employed 55,868 39,000 61,681 1,56,549 (Approx.) Source: Bangladesh Jute Mill Corporation A sizeable quantity of locally produced raw jute is used in the local jute industry. Jute mills are overwhelmingly dependent on the export market, with more than 85% of their total production (including raw jute and jute products) exported every year. The plastics industry has become the biggest competitor for jute manufacturers in Bangladesh which observed abysmal performance in last decade. However, recent interest in the export market, environmental pressures and conducive trade policies are reviving the jute industry. According to the Export Promotion Bureau (EPB) of Bangladesh, during FY2011-12, export
61 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. of jute and jute products accounted for USD 974 million, a growth of more than 40% over the previous year both in terms of value and volume . This rise can be mainly attributed to an increased export of yarn. Yarn exports have increased at a compound annual growth rate of 4.5% over the last six years. The jute industry’s recent export performance can additionally be attributed to a rise in the price of jute products in the global market.
Over the last six years, prices for sacking materials, yarn and hessian, has increased by 14%, while the volume of export has increased by 1% for yarn and 4.5% for hessian. Contributing to this price rise is a high cost of production, due to the high cost of raw jute.
3.6.2.2 SUGAR MILLS
The sugar industry ranks second among major agro-based industries in Bangladesh. It has had a significant impact on the country’s economy, especially in the rural sector. Total land use dedicated to sugarcane cultivation is 0.17 million hectares, with an average annual sugarcane production of about 7-7.5 million tons45.
In Bangladesh, there are 21 sugar factories, of which 15 are in the public sector under the Bangladesh Sugar and Food Industries Corporation (BSFIC) and the remaining 6 are private sector. Sugar export is low; most of the production is currently for domestic use. The annual production capacity of the 15 public sugar mills of BSFIC is 210,000 tons. The present annual demand for sugar in the country is about 1,400,000 tons. Compared to the actual demand of sugar in the country, the production of sugar in sugarcane-based sugar mills under government supervision is insufficient. As a result, the shortage of sugar is met by sugar refineries established in the private sector. Most of the industries in the private sector are basically sugar refineries. They import raw sugar and supply refined sugar to the local market. A production target of 135,376 tons of sugar was set in FY 2011-12, but only 69,346.80 tons of production were achieved. Production of sugar was less than the target due to the high price of molasses and other competitive by-products of sugarcane.
Several manufacturers have ventured away from the sugar industry and into agro products, as witnessed by a recent trend among packaged food manufacturers like Pran Group. These manufacturers have done well by serving rising income among Bangladeshis. These industries are not only meeting the local need but also exporting products to South Asian and neighboring countries.
3.6.3. END PRODUCTS
Jute mills in Bangladesh are mainly concentrated on producing end products like:
1. Yarn and Twine: Prominently used in carpet weaving, core in cable/wire, ropes, tapestries, soft luggage, etc. 2. Sacking Cloth: Made up of low quality jute fibers, sacking cloth is loosely woven heavy cloth used for packing sugar, food grains, cement, etc.
45 BSFIC Report on 03-01-2013.
62 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 3. Hessian Cloth: A plain woven, superior quality jute fabric. Also known as burlap, this cloth is widely used in applications including sacks, plant bags, etc. 4. Other Products: These include carpet backing cloth, tobacco sheets, hydrocarbon free jute cloth, geo-textile, canvas, serim cloth, bags, hessian tapes and gaps.
Sugarcane is used in three main products:
1. Sugar production (32.6% of total production) 2. Gur and Khandsari production (52.6% of total production) 3. Seed and Juice production (14.39% of total production)
Government-owned sugar mills buy sugarcane from farmers (in some instances it is cultivated directly) and processes it into sugar. Private sector mills either import or purchase raw sugar and further refine it to meet export quality. Gur and Khandsari production is mostly confined to the unorganized sector.
3.6.4. PROCESS, TECHNOLOGY AND EQUIPMENT (PRESENT USE)
3.6.4.1 JUTE MILLS
The technology used in the jute manufacturing sector has not changed much over the years, possibly due to minimal changes in product demand. Most of the equipment used in jute mills are old and are running beyond their typical life.
Some composite mills are found to use both softener and spreader machines in the production process; others use trollies for handling output from the spreading and carding sections. Some mills use overhead blowers in spinning frames for cleaning and smoothing operations. Others use flyers and bobbins to increase production, while some have replaced ring flyers with Baxter flyers to attain higher rotations per minute (rpm).
New techniques are being applied by the mills. For example, drawing operations in some mills take place at four stages; similarly, 110-spindle frames are being used in some mills; yarn teasers and teaser card machines are used to recycle wasted fibers; dust shakers are used in some mills; hydrometers are used at the collection zone to measure the humidity ratio of raw jute; rail tracks are available on-site for transportation of raw materials.
While old machines dominate the overall equipment stock, installation of new machines, either for replacement or expansion of operations, is becoming more apparent these days. A number of jute mill equipment manufacturers, like Lagan Engineering Company Ltd., Milltex Engineering (P) Ltd., GSL (India), and Zhejiang Golden Eagle Co., Ltd. (China) manufacture and supply jute processing equipment to Bangladesh’s jute industry.
Table 36 shows the different practices and equipment presently used in the jute industry.
63 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Table 36: Bangladesh’s Jute Industry – Process, Technology and Equipment
Process, Technology Present Practice and Equipment Softener has historically been used to soften raw jute. Now, spreader is gradually Batching replacing the softener. Manpower and space requirements are less when spreader is used, due to the automatic doffing and ejection of rolls. Traditionally, there are three stages in the carding process: breaker, inter and finisher. Advancements have reduced this to two stages, breaker and finisher. Carding The industry in Bangladesh, however, has still not been able to achieve this reduction in stages or increase the speed of existing process. Wooden cylinders have been replaced by steel cylinders. The stages of the drawing process have not changed (1st drawing, 2nd drawing and 3rd drawing) and speeds have also not increased significantly. The only Drawing change has been that push bars have been replaced by screws and rotary gills, resulting in productivity enhancement. The speed of the spinning frames has remained largely unchanged. Apron draft is now used in place of slip draft, which improves the yarn regularity, and the two Spinning legged flyer has mostly been replaced with the Baxter flyer. Ring spinning has been very limited in the jute industry as it requires better back processing and higher quality raw jute. The industry is still running traditional shuttle looms that are mostly used for Weaving hessian and sacking. These looms run at slower speeds, create a lot of noise and produce a lower quality product when compared to shuttle-less looms.
3.6.4.2 SUGAR MILLS
Private mills in the sugar sector produce refined sugar from raw sugar. The present practices, process, technology and equipment used in this industry are described in Table 37.
Table 37: Bangladesh’s Sugar Industry – Process, Technology and Equipment
Process, Technology and Present Practice Equipment
Furnaces for open pan boiling use dried bagasse as fuel but can vary in design and size to suit local conditions and preferences .These are of different types: Furnaces Simple permanent single-pan furnaces Simple temporary single-pan furnaces Permanent multi-pan furnaces Temporary multi-pan furnaces Two types of centrifuges are used: Centrifugal Batch type: used for separating high purity messecuite Machines Continuous type: used more on lower purity and higher viscosity material
64 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Used for heating raw, Sulphur and clear juice from 30°C to 40°C, 40°C to Juice Heaters 60°C, 60°C to 75°C or 75°C to 105°C. These are of three types: Robert (300 – 4000 sq. meter heating surface) Evaporator Falling Film (300 – 5000 sq. meter heating surface) Semi Kestner Batch and continuous type pans are designed to achieve rapid boiling, uniform grain sizes, a uniform degree of super saturation and large down take for rapid circulation. Batch: 30 – 120 ton/hr Continuous: 15 – 100 ton/hr Vacuum Pans Continuous pans are made with floating calandria for effective circulation and an optimum circulation ratio of 1:1. Multiple entry points for steam/vapor and the efficient use of low pressure vapors with steady consumption results in stabilized operation of evaporators and subsequent steam economy. Crystallizers Air cooled, water cooled and vertical crystallizers are in use.
3.6.5. SOURCES OF ENERGY
Jute mills in Bangladesh have run primarily on electricity since their early days. Almost every facility has a connection to the national grid (through different grid service providers) at different voltage levels i.e.11/0.4 KV.
In agro based plants, a common practice is to generate electricity through self-generation and use it for continuous factory production. 50% of the units have their own captive power plant, utilizing diesel and gas as fuel sources. Some industries which are unable to get a gas connection or which receive low gas pressure utilize diesel for production and lighting. Since diesel is costly, the production cost of such industries becomes high, any possible electricity savings can prove substantial in reducing of the overall cost.
3.6.6. OPPORTUNITIES FOR ENERGY CONSERVATION
Breakdowns of energy consumption within the sugar and jute industries are shown in Figure 16 and Figure 17 respectively. Figure 16: Energy Consumption by End Use - Sugar Industry Ulies 4% Decolorizaon 6%
Boiler 13% Sugar Drying Centrifuging 6% 38% Pan Boiling Clarificaon 18% 15% Source: Tetra Tech Analysis
65 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Figure 17: Energy Consumption by End Use - Jute Industry
Other Lighng 3% 5%
Twisng 17% Spinning 45% Carding 10% Loom 20%
Source: Tetra Tech Analysis
3.6.6.1 WASTE HEAT RECOVERY FROM GAS ENGINE GENERATORS
Large quantities of hot flue gases are generated from boilers. If some of this waste heat could be recovered, a considerable amount of primary fuel could be saved. In the sugar industry steam is used for refining and in the jute industry it is used in calendering. A typical example of waste heat recovery in this case would be pre heating boiler feed water or process water.
3.6.6.2 COGENERATION
All the sugar mills require high quantities of low pressure steam. Low pressure steam generation is usually inefficient. Therefore most of the industries resort for cogeneration – generating steam at high pressure using initially for power generation and then for process. However in the absence of attractive policy for feeding power to the grid most of the factories generate only enough power for their own use. The power plant is operated inefficiently at 40-50% capacity.
3.6.6.3 USE OF ENERGY EFFICIENT MOTORS
In the jute industry, most energy is consumed by motors. Manufacturers purchase motors fromtheshipbreakingyardataverylowpricewithcompletedisregardtothedesign capacity and efficiency of the motor. In one of the new jute plants the Consultant noticed 20 year old motor in use. It is widely accepted that replacing standard motors with high efficiency motors is a sound business case with payback of 12-18 months.
3.6.6.4 VARIABLE FREQUENCY DRIVE
Adding a variable frequency drive (VFD) to a motor-driven system can offer potential energy savingsinasysteminwhichtheloadsvarywithtime.VFDscanbeinstalledonair compressors and in other drives.
66 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Table 38 briefly illustrates the project findings regarding potential of energy savings for the key measures described above.
Table 38: Energy Savings Potential – Agro-Industries
Intervention Potential Energy Savings Waste Heat Recovery from Gas Engine Generator 10-15% Cogeneration 20% High Efficiency Motors 10-15% Variable Frequency Drives 8-15% Source: Project Findings based on Energy Audit Report under ADB Bangladesh Industry Energy Efficiency Finance Program
3.6.7. GLOBAL BENCHMARKS FOR SPECIFIC ENERGY CONSUMPTION
International benchmarks for specific energy consumption in the sugar and jute industry are illustrated in Table 39.
Table 39: Specific Energy Consumption (SEC) - Benchmark Values
Saving International International In Type of Industry Unit Potential Best Practice Range Bangladesh21 (%)22 Sugar Industry toe/ton 0.52 0.52-0.63 0.75 30 Jute Industry toe/ton 0.034 0.034-0.043 0.06 43
3.6.8. INVESTMENT, SAVINGS AND EXPECTED GAINS
The energy conservation measures identified at the 18 audited facilities would lead to USD 4.69 million in annual savings for an investment of USD 12.34 million. The measures would also reduce CO2 emissions by 24, 921 tons every year. The payback on the investment was found to be around 2.7 years, with an IRR of 25%.46
3.6.9. HUMAN RESOURCE SKILL ASSESSMENT
There is no standard practice for the use of workers in different sections of the jute mill. The man-machine ratio is more homogenous in the carding, drawing, spinning and weaving sections; but less so for softening, winding and calendaring sections in the companies.
Jute mill operations are male-dominated, female workers are found mostly in the drawing, carding and softening areas, where the activities are relatively less skill-oriented and less labor intensive.
46 Project Life of 5 years is assumed.
67 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. It is important to note that the average number of workers employed in jute mills in 2011 was about 39% less than in 2007. Reductions in employment were as high as 44% in the case of spinning mills. This is due to the difference in wages between the jute manufacturing sector and the other sectors. The average wage of workers in December 2010 was estimated to be BDT 163, while pulling a rickshaw/van would provide a daily wage of BDT 300. Although workers in jute mills are compensated through in-kind benefits such as housing, schooling, etc., compensation is still not considered to be adequate compared to high-paid off-farm jobs.47
A large portion of the agro sector value chain is in the unorganized sector and is highly fragmented, starting with the farmer, to the market and then to the processor. The organized sector contributes about 65% of the value of the output to the sector. Figure 18 illustrates the profile of people employed in agro and jute industries.
Figure 18 : Profile Agro and Jute Sector Workforce
Large Units: MBA/ M. Eng. Small Units: Engineer, persion with Unit Manager 10-15 years' experience
Engineering graduates, Diploma Procurement and Producon Maintenance/ Administrave Staff holders with 7-8 years' experience Markeng Head Manager Tesng
University graduates, Diploma Line Technicians holders with 3-4 years' experience Supervisors
12th standard or below, with 1-2 Machine years' experience, ITI's, short-term Operators cerficaon courses
Passes 10th to 12th standard or below, with 1-2 years' experience, Unskilled ITI's, short-term cerficaon Labor courses
Source: Tetra Tech Survey and Analysis
The management of jute and sugar mills comprises professionals, engineers and other support staff. The number of engineers, professionals and other staff is not well balanced in small jute mills. Some firms have no engineers and rely on technicians.
Table 40 represents the educational profile of employees across the agro and jute sector in Bangladesh. Most of the employees are minimally educated, having studied until the 10th standard or below.
47 Technological Up gradation in the Jute Mills of Bangladesh Challenges and Way Out; CPD working Paper 100; published by Centre for Policy Dialogue Bangladesh
68 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Table 40: Distribution of Human Resource by Education Level Industry Total Employment Aggregate Employment with Management Education 1-2% Post Graduates 1% Graduates 10% Diploma Holders/ Certificate Holders 1% 10th Standard or below ( those requiring ‘short term/modular’ training skills building of some form or the 80% other) Daily Wages/ Contractual 7% Source: Tetra Tech Survey and Analysis Managers at most of the firms have had years of work experience in the sector. However, such long work experience does not always result in operational efficiency and better productivity. The methods and processes followed by mill management for operations and maintenance seem to be less effective for higher productivity and efficiency. Most of the operations are manually driven with limited automation and computerization. There is a dearth of human resources in the manufacturing sector, particularly at mid-level management. This can mainly be attributed to narrow career opportunities, unattractive salary packages, and better opportunities in textiles and other sectors. Mills suffer from a lack of engineers, since most prospective engineers are not motivated to join jute mills. More importantly, there is no specialized technical institution in Bangladesh for the jute sector. Most of the engineers in jute mills have been trained in textiles colleges. A lack of skilled manpower has put the industry in a grave situation. An analysis of the current state of energy management at the sector level was done by the Consultant using the Energy Management Matrix analysis (Ref Table-2) carried out for all the 18 companies audited in this sector. The ratings of the companies in each area were averaged and a summary representing sector-wide findings was established. A summary of the ratings of the sector is shown in Table 41.
Table 41: Energy Management Score Summary – Agro-Industries
Area Of Management Matrix Reading Matrix Reading Interpretation Policy 0 No explicit policy No energy management or any Organization 0 formal delegation of responsibility for energy consumption Informal contacts between Communication 1 engineer and few users Cost reporting based on invoice data, Engineers compile report for Information 1 internal use with technical department Marketing 1 Informal contacts used to promote energy efficiency No investments in increasing Investment 0 energy efficiency in premises
69 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 4. POLICY SUPPORT
Energy efficiency is widely considered to be an important and often low-cost option to reduce GHG emissions and bridge a nation’s energy supply-demand gap. It also offers many other advantages (reducing energy costs and improving competitiveness, improving access to energy and security of supply, and reducing local air pollutants) and often brings a range of process improvements to industry. These significant benefits and co-benefits make improving energy efficiency, in many cases, a no-regrets strategy, especially in developing countries such as Bangladesh.
Industry accounts for about a fifty percent of the world’s final energy consumption48 and this is no different in Bangladesh. Substantial energy efficiency improvement potential exists within this sector. However, there are various barriers (financing, information and skilled man power etc.) towards achieving those energy savings, which are preventing companies from changing their business practices and making necessary investments. Therefore, industrial energy efficiency policies have an important role to play in removing or reducing these barriers and in encouraging action.
This chapter proposes that an effective policy package is required in Bangladesh to promote energy efficiency in the industrial sector. A policy package comprised of sufficiently ambitious, effort-defining policies to outline energy efficiency goals, and supporting policies and measures that address various barriers and that are mutually reinforcing and encourage action (i.e. in the form of sticks and carrots). An implementation toolbox should be developed to support the implementation of such policies and measures in a transparent and efficient manner. Before discussing policy packages for Bangladesh, a best practices analysis of the policy packages of six countries, China, India, Japan, Netherlands, UK and US, are presented. The best practice analysis is based on the following review of national level energy efficiency policies and strategies taken from “Insights into Industrial Energy Efficiency Policy Packages, 2012” by Julia Reinaud and Amélie Goldberg. This report also introduces the concept of a pyramidal approach to energy efficiency policy consisting of: effort-defining policies; supporting measures and an implementation tool box The Consultants have recommended this pyramidal approach for Bangladesh also.
Thus the policy package suggested for Bangladesh is based on this best practices analysis, the experience of the Consultants, the energy audits of 120 Bangladeshi companies and through interaction with the Government of Bangladesh, regulators, entrepreneurs, financial institutes, banks, industry associations and other stakeholders. Consultations were held with the stakeholders on several occasions, such as during marketing of the program, energy auditing, pre-report submission discussions, two workshops and other formal and informal one-to-one meetings. China
As industrial energy use accounts for approximately 70% of the total national energy consumption in China, strong efforts are made to address the high energy-intensity and outdated technology of the industrial sector. Economy-wide targets under the central
48 http://www.eia.gov/tools/faqs/faq.cfm?id=447&t=1
70 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. government’s Five Year Plans are a key driving force in all industry-related policies and measures. The target in the 11th Five Year Plan (FYP) was to reduce energy use per unit of GDP by 20% between 2006 and 2010. In February 2011, China announced that it had met the target, with a final reduction of 19.1%. To meet 11th FYP targets, a wide array of policies were implemented, some of which have continued into the 12th FYP period. The major effort-defining policy in the industrial sector that supports the achievement of China’s 12th FYP targets is the Top 10,000 Enterprise Program.The Top 10,000 Program aims to cover two thirds of China’s total energy consumption, and will include 15,000 industrial enterprises that consume more than 10,000 tons of coal equivalents (tce) per year. To underpin the Top 1,000 and Top 10,000 Programs, a number of mandatory supporting measures have been instituted, including: Assignment of energy managers, implementation of energy conservation plans and implementation of energy management systems (under the Top 10,000); Reporting of energy consumption data; Energy audits according to the Chinese audit standard GB/T 17166-1997; and Energy efficiency benchmarking (under the Top 10,000).
China has also introduced regulatory backstops to improve minimum performance at the bottom-end of the market. These include industrial energy performance standards introduced in 2008 and covering over 20 industrial products as well as regulations that mandate small plant closures and phasing out of outdated production capacity. All new investments must undergo independent assessments and government reviews on their energy saving status before being approved by regulators.
Several other supporting measures that encourage industrial energy efficiency and supplement the effort-defining policies include: the use of differentiated electricity pricing, in which electricity prices are higher for companies with higher electricity intensity, which differs from common practice in other countries. Measures not targeted specifically at the industrial sector but which are aimed to facilitate industrial energy efficiency include: fiscal incentives for qualifying ESCOs, demand-side management for utilities, energy efficiency financing regulations, instruments targeting financial institutions and financial rewards for energy- saving technical retrofits. The program supports boiler/furnace retrofitting, waste heat and waste pressure utilization, motor system energy conservation, energy system optimization, green lighting, and energy conservation in buildings. China’s implementation toolbox contains a range of guidelines and tools such as training programs, standards for energy management and audits, facility closure thresholds, efficiency standards for various industries, and eligibility criteria for ESCOs to receive fiscal incentives.
4.1. IINNDDIIAA
While the energy intensity of industry is, on average, still relatively high compared to other regions in the world, India has made reasonable progress in recent years. There are, however, large variances in India’s industrial sub-sectors due to a wide range of vintages, production capacities, raw materials quality and product mixes.
The Energy Conservation Act (ECA) of 2001 provided for the establishment of the Bureau of Energy Efficiency (BEE), the development of energy efficiency standards according to
71 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. industrial product/process, a requirement to have energy audits carried out by an accredited energy auditor and assign an energy manager in energy-intensive industries and other high energy consumers (known as designated consumers).
In practice, India’s industrial energy efficiency policy was, until recently, limited to the mandatory energy management component of the ECA and the Energy Conservation Awards. In 2010, the Government of India developed a new certificate scheme (trading of energy savings) following a 2010 amendment to the ECA. This so-called Perform Achieve and Trade (PAT) scheme is a comprehensive policy, aiming to achieve energy savings of over 10 million metric tons oil equivalent over three years. The PAT scheme is India’s main effort-defining policy. SEC targets have been set through several performance categories based on historical performance (i.e. “clusters”) within each of the sectors. Each category will have targets based on benchmarking. The PAT can provide an effective mix of regulation by setting mandatory energy intensity targets for energy savings combined with a flexible market mechanism, the trading of energy saving certificates (“white certificates”) to ensure overall cost effectiveness.
India’s annual Energy Conservation Awards have been in place since 1991, and historically have played an important role in India’s policy package in the absence of mandatory measures. In this program, enterprises from a number of sectors submit a questionnaire to the BEE and are entered into a competition, judged by government officials, culminating in an awards ceremony. It has grown significantly since its inception with close to 600 participants from 35 industrial sectors. In 2011, India also introduced a range of financing mechanisms administered by the India Renewable Energy Development Agency (IREDA); and preferential loans, venture capital funds and guarantees administered by Energy Efficiency Services Limited (EESL) under and the Framework for Energy Efficiency Economic Development (FEEED). The implementation toolbox is focused on energy management and auditing, with certification and training of auditors from the Bureau of Energy Efficiency.
4.2. JJAAPPAANN
From 1990 to 2008, Japan’s energy use in the industrial sector declined to 30% of total consumption. This is the result of several factors, including energy efficiency changes in major industrial sectors, shifts in the mix of production, and changing production levels.
Over the past decades, the Japanese Government has strongly relied on voluntary approaches to stimulate industrial energy efficiency, mostly due to competitiveness concerns. A new mandatory benchmarking policy introduced in 2010 sets Japan towards a greater emphasis on regulatory approaches. Also in 2010, Japan announced mandatory energy efficiency standards based on the highest international benchmarks. This policy requires energy efficiency targets in the form of benchmarks and introduced a 1% annual energy efficiency improvement obligation. For designated sectors (steel, electricity, cement, paper and pulp, oil refineries and chemical), targets have been set at the energy efficiency level of the best performing companies (the top 10%-20%) within that industrial sub sector. These targets must be met in the medium term (2015) and long term (2020). Those industries that have taken early actions and have achieved the benchmark target level can
72 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. ask for an exemption from the annual 1% target by helping small and medium-size companies achieve higher energy efficiency levels.
Prior to the mandatory benchmarking, Japan relied on two voluntary policies for encouraging industrial energy efficiency: the Keidanren Voluntary Action Plan (VAP) and a voluntary emissions trading scheme, known as JVETS. The Keidanren VAP for industry was considered the pillar of Japan’s industrial energy and emissions policy. The VAP is comprehensive in coverage (40% of Japan’s total emissions and 80% of industrial emissions) and successful in terms of reaching its set targets. In addition, mandatory energy management has been a prominent feature of Japan’s policy package since the 1970s. Over the years, the Rational Use of Energy Act has been amended to provide greater coverage and increase energy management requirements. All factories (Class 1 – using more than 3,000 kL crude oil equivalent - and Class 2 – using more than 1,500 kL but less than 3000 kL) are required to appoint a certified energy manager. For higher energy users (Class 1 only), companies must also develop and report a mid- and long-term energy efficiency plan. The implementation toolbox has a relatively strong focus on energy management and auditing, with guidelines, training and an energy audit support program.
4.3. TTHHEE NNEETTHHEERRLLAANNDDSS
An energy-intensive industrial economic structure, along with a very open, export-oriented economy, has led to long-lasting attention to industrial energy efficiency in the Netherlands. High industrial energy-intensity has led to much emphasis on improving energy efficiency and the use of benchmarking to measure performance in energy efficiency and carbon intensity.
The Netherlands’ policy package has had a strong emphasis on negotiated agreements, which have been in place since the early 1990s. More recently, there has been a stronger role for the mandatory EU Emissions Trading System (EU ETS). The Negotiated Agreement contains targets that are negotiated between the industrial sector and the government using independent analysis on mitigation or energy savings potential. Many additional actions are required, such as the obligation to carry out an energy efficiency plan and make investments that are deemed “profitable” according to government-defined guidelines. The scope of these agreements has increased over time, both in terms of sector coverage as well as the eligibility of measures to meet the targets, which has been extended from on-site energy efficiency only to off-site (or chain) efficiency.
Currently EU ETS is expected to be the principal driver of efficiency improvements, superseding the incentive to act under the negotiated agreements. A range of other policy instruments, including various subsidies and fiscal incentives, supports to the negotiated agreements and EU ETS targets. Companies that participate in the agreements and/or the EU ETS are exempt from complying with both the requirements under the Environmental Management Act’s environmental permits (which are similar in nature to the requirements in the agreements) and with the energy/carbon tax. The implementation toolbox in the Netherlands is well equipped with a broad array of tools and resources, including technical support, training and workshops from the energy agency, energy management checklists, benchmarking manuals, technology eligibility lists, and monitoring and reporting protocols.
73 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 4.4. UUNNIITTEEDD KKIINNGGDDOOMM
Industrial energy consumption constitutes about 22% of total energy consumption in the UK.
Approximately 55% of the primary energy used in industry is consumed by energy-intensive sectors. Compared to other industrialized countries (including the Netherlands), industry in the UK accounts for relatively less energy as a proportion of total energy use. Like the Netherlands, the UK’s Climate Change Agreements (CCAs) are one of the country’s central effort-defining policies. The agreements are negotiated between the government and industry associations; while third party experts help the government assesses the ambition of industry’s suggested targets.
Companies participating in CCAs are exempted from the Pollution Prevention and Control (PPC) Act technology requirements. CCAs are supported with advice on saving energy, setting targets, carbon management and receiving financial support from the Carbon Trust; guidance on monitoring, reporting and a fiscal stimulus by means of the enhanced capital allowance scheme. Lists of technologies and products eligible for financial support are also available to companies.
4.5. UUNNIITTEEDD SSTTAATTEESS
Energy production and transport represent a large share of total GHG emissions in the United States and overall energy efficiency is lower in the US in comparison to countries of the Organization for Economic Development and Cooperation (OECD). The major US effort- defining policies at the federal level include GHG permitting and new-source performance standards under the Clean Air Act (CAA), the Better Buildings, Better Plants program (formerly Save Energy Now), Superior Energy Performance (SEP), and the Energy Star Program for Industry. Participants of these programs are given priority access to energy assessments and other resources. New-source performance standards for power generators are also being implemented.
A new certification program relies on voluntary company participation, the Superior Energy Performance Program (SEP). SEP will provide companies with a framework for implementing the international standard for energy management systems ISO 50001 and for achieving awards (silver, gold or platinum) based on a set of predetermined performance criteria. Participating companies’ performance can be recognized according to two “energy pathways”: 1) a pathway for companies that are new to energy management requires that they demonstrate savings of at least 5% over a three-year period; and 2) a mature pathway for companies with longer experience that requires these companies demonstrate at least 15% savings over the last ten years and receive a minimum score according to the “Best Practice Scorecard” (SEP, 2012). The Government will leverage the SEP to deploy other federal programs.
Another voluntary program, Better Buildings, Better Plants is a comprehensive energy efficiency program that includes a 10 year, 25% energy-intensity improvement target and progress reports to the Department of Energy. Partners wishing to pursue more extensive EE activities or exercise leadership in their field can be recognized as “Challenge Partners” (companies that simply meet the requirements are recognized as “Program Partners”). At the federal level, supporting measures include a tax credit scheme, an accelerated
74 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. depreciation scheme, and a loan guarantee program. Underpinning these voluntary effort- defining policies and supporting measures are extensive implementation tools provided by the government: calculation tools, monitoring formats and free energy management support.
4.6. BBAANNGGLLAADDEESSHH
In Bangladesh policy should focus on defining the benchmarks, sector targets, incentives or mechanisms needed to create an environment of industrial energy efficiency. The focal institution for driving industrial energy efficiency in Bangladesh, the Sustainable Energy Renewable Development Authority(SREDA), is under development. The agency is expected to issue regulations and policy guidelines. Other institutions involved in developing policy and regulatory frameworks for industrial energy efficiency are: the Government of Bangladesh, Bangladesh Energy Regulatory Commission (BERC) and Renewable Energy Development Agency (REDA). SREDA, constituted under the SREDA Act of 2012, is the lead body for the promotion of energy efficiency in the Bangladesh. Thus, the legal framework in Bangladesh for energy efficiency consists of following:
National Energy Policy Bangladesh Energy Regulatory Commission Act, 2003. Sustainable Renewable Energy Development Authority Act, 2012 Energy Efficiency and Conservation Regulations
The National Energy Policy sets the key objectives for energy exploration and use in the country. The policy puts emphasis on commercial fuels, biomass and renewable energy sources. The energy requirements of different socio-economic groups, living in different zones of the country must be met. The policy encourages public and private sector participation in the development and management of the energy sector.
To promote professionalism in the utilities and provide them with independence, the Government of Bangladesh enacted the Bangladesh Energy Regulatory Act (BERA) in 2003. It covers both electricity and natural gas. Section 34 of the BERA Act states that the Commission should take energy efficiency into consideration while making any policy. Section 22 of the Act expects the Commission to determine efficiency standards for equipment and appliances and to ensure compliance through energy auditing, verification, monitoring, and analysis - resulting in the economic and efficient use of energy.
As per the SREDA Act, SREDA will be responsible for:
a) Providing public fund(s) in the form of loans and/or grants to SMEs to invest in energy conservation measures; b) Extending technical assistance and consultation services for identifying and implementing energy conservation measures; c) Undertaking energy conservation training programs for SME entrepreneurs; d) Developing and setting criteria for identifying and designating “large energy consumers” for the purposes of applying these rules. The criteria shall be based on energy consumption. Depending on the specific conditions and capabilities of the businesses, these criteria may be set individually for specific categories of industries and facility types;
75 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. e) Creating, maintaining and updating a list of Designated Large Energy Consumers. The list shall be accessible to the public; f) SREDA may require any energy consuming establishments, including those designated as “large energy consuming establishments” to report energy use and other relevant data as prescribed.
To fulfill the above energy efficiency objectives, SREDA has prepared rules and circulated a draft for public comment. Energy Efficiency and Conservation Rules are expected to make the most direct impact on industrial energy efficiency in Bangladesh. The following are the key features of the rules49:
a) Designated Large Energy Consumers shall be required to conduct an energy audit on annual basis. The results of the audit, including planned energy conservation measures and targets based on the audit, shall be reported to SREDA as the “annual energy report”. b) Designated Large Energy Consumers will appoint a full-time energy manager to keep account of energy conservation by the establishment, and suggest energy efficiency improvement measures. c) Designated Large Energy Consumers shall be bound to meet the energy conservation measures and targets set in the energy audit report. The requirement will initially be on a voluntary basis, and gradually be made mandatory. The Agency shall provide the framework and timeline for this transition. d) The Agency shall establish a system of accrediting Energy Services Companies (ESCOs) and set specific requirements for qualifications for accredited ESCOs.
4.7. PPRROOPPOOSSEEDD PPOOLLIICCYY PPAACCKKAAGGEE FFOORR BBAANNGGLLAADDEESSHH
Based on the above analysis the Consultant suggests following pyramidal policy package approach for Bangladesh, (See Figure 19).
Figure 19: Policy Implementation Approach for Bangladesh
Effort-Defining Policies
Supporting Measures
Implementation Toolbox
49 Full draft of rules is available at website of Ministry of Power, Bangladesh
76 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 4.7.1. EFFORT-DEFINING POLICIES
Here, Bangladesh needs to set targets for reduction of energy consumption in individual industrial sectors and the country as a whole. Based on the sector-specific analyses provided in this report, the consultant has proposed the targets summarized in Table 42.
Table 42: Suggested Energy Reduction Targets for Bangladesh
Sector Reduction Target Sector 1: Textiles, Garments, Leather, and related industries 32% Sector 2: Steel, Iron, and related industries 41% Sector 3: Cement, Clinker, and related industries 23% Sector 4: Ceramics, Glass, and related industries 25% Sector 5: Chemicals, Fertilizers, Pulp and Paper, Plastic, and related 24% industries Sector 6: Agro-industries, including Food Processing, Sugar and Jute 18%
A timeline for achieving the specified targets must also be defined. This depends upon several factors, such as the supporting policies and measures undertaken, the economic and political situation in Bangladesh, the export market, new energy exploration, the supply- demand gap, etc.
4.7.2. SUPPORTING MEASURES
The hurdles in implementation of energy efficiency measures in industrial sector of Bangladesh have been explained in section 2.2.1. The key obstacles in Bangladesh’s industrial energy efficiency framework from policy perspective have been explained here in further detail:
1. Energy Pricing: Energy prices for major fuels, e.g. natural gas and electricity, must meet their true market values. This will raise the awareness of users towards the importance of energy and encourage them to avoid energy waste, which is currently quite high. 2. Differentiation in Pricing of Different Forms of Energy: Thecurrentpricingof various forms of energy in Bangladesh is shown in Table 43.
Table 43: Energy Prices in Bangladesh
Electricity Gas (Process) Gas (Power) Diesel
Per Per 1000 Per Cu. Per 1000 Per Cu. Per1000 Per Per 1000 Kwh Kcal Meter Kcal Meter Kcal Liter Kcal
6.95 8.08 5.86 0.7 4.18 0.5 68 7.62
77 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Clearly the first choice among energy sources is natural gas. Even industries such as cement, steel, jute, etc. which require electricity as the primary source of energy, prefer to purchase gas rather than electricity. Gas engines are used to generate electricity on site with 30% efficiency, leading to electricity costs of only about BDT 2- 3/kWh. On the other hand, electricity purchased from the utility costs about BDT 6.95/kWh. The electric utility runs large power plants where gas is used to generate electricity at about 45%-50% efficiency; thus a 15% loss in efficiency results from on- site generation. These imbalances in energy prices need to be removed gradually but with a definite target and timeframe. To begin, subsidized gas prices for power generation should be stopped and one gas price for industry should be introduced. This will make metering of gas easier and reduce the appeal of self-generation through gas engines. Instead of on-site self-generation by industry, community-based power stations using combined cycle technology should be encouraged. This will avoid current inefficiencies in power generation from gas, which is currently the source of electricity in more than 90% of the industrial sector. 3. Power Factor: Efforts for maintaining a high power factor are minimal. The current policy imposes a penalty for maintaining a power factor of less than 0.95, but there is no incentive for maintaining higher power factors. The consultant suggests that industrial accounts in Bangladesh should move towards KVAh billing, rather than kWh billing. KVAh billing provides an incentive and penalty in proportion to the power factor. 4. Capacity Building: Massive efforts for capacity building are needed. The proposed Energy Efficiency and Conservation Rules will make it mandatory for industries to have an energy manager and receive energy audits from certified professionals. This will create a huge requirement for qualified energy managers and energy audits. Such a requirement for quality manpower can only be fulfilled through the establishment of a robust and long-term capacity building program. There is an acute shortage of technical manpower among industries. The Consultants found that in some facilities, equipment is either operated inefficiently or is underutilized due to a lack of technical knowhow. More detailed capacity building recommendations are laid out in Section 5. 5. Energy Substitution: It is important that proper forms of primary energy are being used. For example, natural gas should be used for thermal applications, such as furnaces, boilers, and heaters, etc. while electrical energy is used for motors, induction furnaces, compressors, etc. In Bangladesh, use of gas for thermal applications is appropriate, but in a large number of plants gas is also used as the primary source of electricity. This is the low-cost option, but is inefficient from an energy perspective. Similarly, use of solar energy should be encouraged, particularly in textiles and leather tanneries, where it can substitute gas/HSD in water heating applications. 6. Use of Energy Efficient Appliances: Low energy prices are the biggest barrier confronting energy efficiency. The biggest example is motors. The consultant noted that several facilities, including new facilities prefer purchasing old motors from the Chittagong ship breaking yard. These motors are available at very low prices but are more than 20 years old, when efficient motor technology did not exist. Often, proper motor capacity is compromised and oversized motors are installed. This decreases
78 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. the efficiency of the motor further. The same is true for gas engines and other appliances such as compressors, heaters, blowers, pumps, etc. 7. Peak Hour Restriction: Peak hour restrictions are applicable to continuous process industries, such as ingot producing induction furnaces. As a result, furnaces are cooled down during peak hours and need to be re-heated after peak hours. In many Asian countries, such continuous process industries are exempted from peak hour restriction. Similarly only two burners are allowed per gas connection. With two burners it is difficult to heat the product from all directions leading to higher gas consumption. 8. Promotion of Energy Efficient Technology: Energy efficient technologies, such as co-generation in the sugar and paper industry, automation in steel sector, VRM in cement sector etc. (Refer Chapter-3) should be encouraged. This will require a clear and encouraging policy for feeding the surplus power to the national grid. Use of variable frequency drives in motors, and vapor absorption technology for utilizing waste heat are other prime examples for all the sectors.
4.7.3. IMPLEMENTATION TOOL BOX
To control energy use, it must first be measured. Instrumentation and measurement in industrial processes in Bangladesh is extremely uncommon. In many facilities, there is a utility meter for billing but no meters further down the line to measure consumption of energy in specific appliances. Similarly, gas generators are not equipped to meter the gas feed or electricity generated.
Standardization of energy consumption for major equipment will be very helpful, for example, boilers, furnaces, motors, and compressors. This will help companies to determine their potential for savings when investing in efficient equipment. Benchmarking major industrial sectors will also be helpful.
Making information available on the latest in energy efficient technologies, equipment and global benchmarks will also drive industries to become more efficient. The website of SREDA has such information, which is a good starting point. Freely available software tools for calculation of energy consumption and benchmarking against standards will also be helpful. Financial or fiscal instruments e.g. soft loans, subsidies, investment deduction schemes or rebates, will further help in removing the financing barriers. An energy tax or energy tax exemption is also useful tools.
79 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 5. CAPACITY BUILDING FOR PROMOTING ENERGY EFFICIENCY IN BANGLADESH
5.1. AA NNEEEEDD FFOORR CCAAPPAACCIITTYY BBUUIILLDDIINNGG
The organizational analysis carried out on the basis of Energy Management Matrix (Refer Table 2) for the 120 audited plants in Bangladesh and extrapolated for each of their six respective sectors clearly demonstrates that capacity building can be a significant catalyst in the promotion of energy efficiency in the industrial sector of Bangladesh.
Empirical analysis has shown that success in developing profitable energy efficiency business cases depends on the maturity of the market in the respective country and market segment, and on the policies and measures hindering or fostering success of energy efficiency service providers. Political decision-makers and bureaucrats at the national level have a large responsibility in providing a supporting framework for market development and a level playing field that gives equal opportunity to all market actors.
As discussed in earlier chapters, the energy demand of Bangladesh is expected to triple by 2020, and a significant portion of this increase can be avoided by adopting large-scale energy efficiency measures.
At the institutional level, Bangladesh needs to identify, co-develop and invest in commercially viable energy efficiency projects in both the public and private sectors. In doing so, skilled human resources and capacity building measures will not only contribute towards overcoming existing legislative, financial and technical barriers but also promote the sustainable development of a transparent and competitive energy efficiency market through the design and implementation of replicable Public Private Partnership (PPP) models.
A lack of financial and human resources is impeding the realization of national energy goals. The majority of Bangladeshis are not aware of the environmental problems resulting from current energy use, or of the need to use modern, affordable and energy-efficient technologies. Other stakeholders in the power sector of Bangladesh face similar problems.
Capacity building programs can provide development support and build awareness towards financing energy efficiency projects that meet required commercial, technical and environmental standards.
5.2. PPRROOJJEECCTT FFIINNDDIINNGGSS
The Consultants conducted human resource skills assessments while carrying out the energy audits. These assessments have been incorporated into this report, taking an average for all six sectors. It was observed that standard benchmarking skills do not align directly with the requirements of mandatory energy efficiency assessment programs (EEA). The gaps identified include:
Capacity shortfalls are found among the workforce in areas specific to energy data collection and analysis, developing energy mass balances and in the area of the assessment, installation and use of appropriate monitoring equipment.
80 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Competence, the combination of skills and experience that enables a high standard of performance, is required. Employers are unable to fill, or have considerable difficulty in filling, vacancies due to current levels of remuneration and accessibility of their location. Findings indicate that more than 70% workforce has qualification of matriculation (10th Standard) or lower. On the other hand only 3% workforce is post graduate or engineering graduate. There are no current relevant accreditations systems followed in Bangladesh that can guide the selection of consultants for promoting energy efficiency programs. There is limited on-the-job training, other professional development programs, etc. Recent graduates also require additional skills, knowledge or experience before they are able to effectively undertake an EEA. There is demand for a database of resource material which can be used to support the development of training programs and conduct EEAs.
There remains a clear need to increase the skills base of the existing workforce, and to complement those skills with increased knowledge and experience. Any skills development strategy must also take into account the need to build capacity for those responsible for executing the skills development program – i.e. the training workforce.
Knowledge gaps, in both industry and energy services providers, exist in relation to the process and compliance requirements of energy audit programs. The demand for more experienced personnel is hard to address, however, providing resources that increase the confidence of the personnel learning on the job will be of great benefit. There is a need to create institutions for skill development and higher education in upcoming industrial sectors such as ceramics, leather etc.
5.3. TTOOPP-- DDOOWWNN AAPPPPRROOAACCHH
It is often difficult for organizations to change or develop without external assistance or incentives. Thus, capacity building typically involves the provision of financial and/or other resources to organizations from external sources. Bangladesh is in the position to benefit from a large influx of development assistance from funding bodies which can shape these initial efficiency programs. The focus for these programs must be spread across four logical phases:
Phase A: Capacity building for financing and implementation of energy efficiency projects for the Ministry of Energy, the Bangladesh Power Development Board, Petro Bangla board, stakeholders at the national and district levels, and selected community-based energy suppliers. Phase B: Raise awareness among commercial banks and other financial institutions to increase the availability of financing to private companies interested in implementing energy efficiency measures. Phase C: Conduct further energy audits. Assist in the development of the tools and methodologies required to carry out and monitor the sustainable implementation of energy efficiency projects (performance indicators, best practice guides, network analysis tools, impact calculation models). Phase D: Establish contract models which would govern projects with public or Energy Services Companies (ESCOs), such as energy performance contracts
81 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. (EPC), using standard industry models adapted for the regulatory regime in Bangladesh.
Figure 20 shows the recommended timing for the energy efficiency market capacity building phases.
Figure 20: Capacity Building Measures for Energy Efficiency Market Transformation in Bangladesh
Phase A Phase B Phase C Phase D IC/ES
Energy Savings (ES)
2013 2014 2015 2016 2017 2018 2019 2020 and onwards
Energy Efficiency Market Transformation Successful EE Policy
5.4. IINNDDUUSSTTRRIIAALL EENNEERRGGYY EEFFFFIICCIIEENNCCYY FFIINNAANNCCEE PPRROOGGRRAAMM
Phase A and Phase B are important as they will be fundamental to a sustainable, long-term market transformation. These phases will involve capacity development for industrial units in growth-intensive sectors of Bangladesh. It will therefore involve project-specific technical assistance to industrial enterprises to demonstrate and transfer state-of-the-art efficient energy systems and energy management technologies.
Related activities to be accomplished in these phases also include:
Institutional capacity-building on development, implementation and monitoring of industrial energy efficiency policies and programs, including energy management standards. Tailor-made intensive training programs on industrial energy system optimization (motor, pump, steam, compressed air systems, etc.). Intensive training programs on the development and use of energy management standards.
82 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 5.5. PPRROOGGRRAAMM FFIINNDDIINNGGSS
The analysis of the current state of energy management at the national level (considering all six sectors surveyed in this study) was done by the consultant using the Energy Management Matrix developed by the UK Oxfordshire based Carbon Trust’s Energy Efficiency – Best Practice Program (EEBPP) – Good Practice Guide 119: Organizing Energy Management – A Corporate Approach. (Refer Table-2)
The ratings for each target sector were averaged and a summary representing the full scope of BEEIFP findings was established. A summary of the ratings is shown in Table 44, while the comprehensive scoring matrix is shown in Table 45.
Table 44: Energy Management Score Summary – National Level
Area Of Management Matrix Reading Policy 0 Organization 0 Communication 1 Information 1 Marketing 0 Investment 0
Table 45: Energy Management Matrix – National Level
Policy Organization Communication Information Marketing Investment
Energy policy, Marketing the Positive Energy action plan and Comprehensive value of energy discrimination in management fully regular review Formal and informal system sets efficiency and favour of ‘green’ integrated into have channels of targets, monitors the schemes with management commitment of communication regularly consumption, performance of detailed structure. Clear top exploited by energy identifies faults, energy investment 4 delegation of management manager and energy quantifies savings management appraisal of a responsibility for as part of an staffatalllevels. and provides bothwithinthe new-build and energy environmental budget tracking. organization refurbishment consumption. strategy. and outside it. opportunities.
Energy manager M&T reports for Formal energy accountable to individual policy but no Programme of energy committee Energy committee used premises based Same pay back active staff awareness representing all as main channel on sub-metering. criteria employed commitment and regular 3 users, chaired by a together with direct But savings not as all other from top publicity member of the contact with major users reported investment management campaigns managing board. effectively to users
Monitoring and Unadopted Energy manager in targeting reports energy policy post, reporting to Contact with major based on supply set by energy ad-hoc committee users through ad-hoc Some ad-hoc Investment using meter data. manager or but line committee chaired by staff awareness short term pay Energy unit has 2 senior management and senior departmental training back criteria only ad-hoc departmental authority are manager. involvement in manager. unclear budget setting
83 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. Energy Cost reporting management the basedoninvoice Informal An unwritten part time Informal contacts data. Engineer contacts used Only low cost set of responsibility of between engineer and a compiles reports to promote measures taken 1 guidelines someone with only few users for internal use energy limited authority or with technical efficiency influence department
No energy No information No investment in management or any system. No No promotion of No explicit increasing energy formal delegation of No contact with users accounting for energy policy efficiency in 0 responsibility for energy efficiency premises energy consumption consumption
These ratings suggest that industrial companies in Bangladesh must pay more attention to energy policy and require staff training to increase their awareness of energy use, targets, and success stories every quarter; this must be formalized by their human resources management. Top management of these companies need to drive this process initially until it is implemented and appreciated by lower level staff.
An energy management team needs to be created in each company. The team should include the internal energy auditor, factory manager, production manager and utility manager. The team will develop energy programs, communicate to all staff and provide monthly updates on implementation and results. The team should also set an annual target for energy consumption. The energy management team should be extended the full support of General Management and the Managing Director. To improve staff awareness, energy saving tips should be circulated, publicly posted in the staff cafeteria and addressed in quarterly staff meetings and newsletters.
Investments in developing an energy policy and building the energy management capacity of the staff will help this sector to drive the energy efficiency measures on a sustainable basis.
5.6. PPRRIIOORRIITTIIEESS FFOORR CCAAPPAACCIITTYY BBUUIILLDDIINNGG
There is a notable lack of awareness and resource material in the area of energy efficiency in Bangladesh. Companies follow an unwritten set of guidelines with no formal energy saving policy in place. Low cost energy efficiency measures, which require almost no investment, are taken in some progressive companies.
At a national level, promotion of energy efficiency is not represented in government energy policy documents. Sharing of best practices across various levels, training and policy initiatives can help to improve the progress towards an energy efficiency market transformation.
As industrial sectors are most energy intensive, they have the potential to achieve the greatest levels of energy efficiency through the installation of upgraded equipment such as energy-saving lighting, heat pumps, and motors. Capitalizing on energy efficiency training for human resources can substantially reduce industrial consumers’ energy profile and costs and can help the country to free up supply capacity to meet rising demand.
84 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. 6. CONCLUSION
Bangladesh has maintained about 6% economic growth over the last 10 years, which is poised to increase over the next couple of decades. To achieve this continued growth, it has been estimated that energy consumption should grow at a rate of at least 10%. Coupled with this is a deficit in the ‘common man’s fuel’ in Bangladesh, i.e. CNG, which is only expected to last until 2030 given increases in demand. Efforts to secure new energy resources for generation, such as coal, are underway, but it will take time, as it requires reasonable political commitment and policy level developments to make progress possible.
In the current energy situation of Bangladesh, industrial energy efficiency is among the most promising solutions, and the Industrial Energy Efficiency Finance Program is a timely advance in this direction. This study’s analysis suggests that the textile sector, which brings the highest amount foreign exchange into the country, holds a potential of about 32% energy savings. The energy audits of 22 textiles and leather facilities identified a one-time investment of USD 4.45 million against an annual savings of 1.37 million USD. This indicates that the textile and leather sector is a very attractive target for investment in energy efficiency. The energy audit of all 120 facilities identifies an investment of USD 139.6 million with simple payback period of 3 years. The highest energy saving potential of 41% is found in iron and steel sector.
The Consultants concludes that successful industrial energy efficiency program in Bangladesh will require implementation of energy efficiency process, technology and equipment’s; policy support; capacity building; installation of instrumentation & control and developing interest & participation of financial institutions and banks. In the following text the Consultants have provided their key conclusions in respect of each of these areas.
The Consultants observed that all industries in Bangladesh are either currently using gas generators for electricity production or wish to use a gas generator, provided they obtain a gas connection. Analytic evidence shows that the efficiency of gas generators across the audited sectors is around 30%. The manufacturers claim that efficiency can go up to 80% with the use of waste heat from exhaust gas and jacket cooling. The Consultants noticed the utilization of waste heat from exhaust gases in a few facilities, but there was no evident use of waste heat from jacket cooling.
Another striking observation was the use of small capacity, open cycle captive generation, which is an inefficient solution. The Government of Bangladesh needs to drive industries to transition from small capacity captive generation to community based captive generation and/or encourage the use of grid power generated in higher efficiency combined cycle plants. In several industries, particularly in leather tanneries, jute mills and the agro sector, HSD is used if gas or grid electricity supply is not available. Most of these facilities operate during the day time; thus the Consultants suggested the use of solar based heating and generation of electricity rather than HSD.
Bangladesh’s largest ship breaking yard is in Chittagong, which plays an important role in the nation’s economy by contributing towards steel production. A good number of local enterprises have developed out of this industry offering the resale of used motors and gas/
85 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. diesel engines at low prices. These motors and engines are typically 15-20 years old, when high efficiency motors and engines available today did not exist. During the audits, the Consultants found that a considerable percentage of industries (especially jute mills50) purchase these old, used motors and engines without any regard to their capacity or efficiency. This results in low capacity operation and at low efficiency.
Although interest in the energy efficiency sector is evidently increasing across the financial institutions and industries surveyed, for the most part, the conditions are not yet in place to create opportunities to make EE an interesting investment opportunity ‘at scale’. Part of this challenge is at the industry level, and lies in the perceived loss of production through testing ‘new waters’ which may impact the bottom line (fear of reputation and export loss).
In most cases, it is difficult to build a strong business case for energy efficiency based on the energy savings alone. The argument becomes more interesting if profits from increased production due to energy savings are taken into account. Some foresighted entrepreneurs have been willing to implement energy efficiency from a purely energy security perspective. The Consultants also noticed a concern towards the environment among a few young entrepreneurs. Other drivers, such as low price subsidy incentives, are the same in Bangladesh as they are in other developing Asian countries.
On the policy front, support is very patchy as political initiatives in Bangladesh are not yet providing an overriding, clearly visible framework for sustainable energy that is specific enough to indicate EE as a priority. There is a need for setting sector targets, identifying the top energy consuming industries, deploying energy efficiency recommendations at demonstration companies, providing incentives for the substitution of fossil fuels with renewable energy and encouraging policy for feed-in supply. An effective and integrated policy approach is needed, not only to reflect the urgency and the level of economic transformation required to cope with energy security issues, but also to create the conditions for scalable, bankable investment opportunities.
There remains a clear need to increase the skills base of the existing workforce, and to complement those skills with increased knowledge and experience. The observed knowledge gaps also include demand for a database of resource materials and a current lack of relevant accreditation systems. In several industries, particularly textiles, plastics and ceramics, the consultant has noticed the use of modern equipment and advanced technology. But the benefits have not been fully exploited due to the absence of skilled manpower capable of operating such equipment. Capacity building is also required for lower and mid-level management to manage plant operations based on quantitative measurement and testing in addition to qualitative experience.
The Consultants have noticed that the instrumentation needed to measure energy consumption is almost non-existent in the audited facilities. In many facilities the only energy measuring instruments are the utility meters. General housekeeping and cleanliness standards are also not properly followed. The Consultants have also noticed that there is no system of preventive or regular maintenance as recommended by manufacturers. The energy audit reports prepared for the companies highlight and suggest various measures to
50 Jute mills have multiple motors in comparison to any other industries.
86 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program. improve housekeeping which can indirectly contribute in avoiding industrial accidents and providing safe working conditions for the workforce.
The Consultants observed a lack of awareness about industrial energy efficiency on the part of banks and financial institutions. Most lenders are unfamiliar with EE technologies and approaches and require technical support to appraise and manage loans for EE projects. Also, there is a limitation in bank appraisal methods. There is a need to sensitize them to these low risks, high return business opportunities. Increasing awareness for a need to develop special units with trained manpower and capacity to apply new financing tools for quick appraisal can internally encourage FIs and banks to proactively participate in financing energy efficiency.
There is a ‘chicken and egg’ element to the energy efficiency situation in Bangladesh. At this point in time, however, appears to be the beginning of a very significant and exciting wave of activity and investment interest in this area, as evidenced in the numerous sector reports and analyses that have been developed. It is critical that these reports, and the present, are not allowed to gather dust, but are acted upon to further spur energy efficiency development.
87 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program.