Final Report

Power System Master Plan 2016

Summary

Supported by

Japan International Cooperation Agency (JICA) Tokyo Electric Power Services Co., Ltd.

Tokyo Electric Power Company Holdings, Inc.

Power Division

Ministry of Power, Energy and Mineral Resources Government of the People’s Republic of Bangladesh

September 2016

Contents

Chapter 1   PSMP2016 Summary........................................................................................... 1-1

1.1 Abstract............................................................................................................................... 1-1

1.2 Background and Purpose.................................................................................................... 1-1

1.3 Vision Paper........................................................................................................................ 1-3

1.4 Policy Vision...................................................................................................................... 1-4

1.4.1 PSMP2016 Objective.................................................................................................... 1-4

1.4.2 Five Viewpoints of PSMP2016..................................................................................... 1-5

1.4.3 Importance of Contribution and Responsibility to the International Community............ 1-6

1.5 Practical Vision................................................................................................................... 1-8

1.5.1 Relationships between the Five Key Viewpoints and the Master Plan Investigation Items 1-8

1.5.2 Methodologies for this Study........................................................................................ 1-9

1.5.3 Scope of work............................................................................................................ 1-12

1.5.4 Survey Implementation Feamework............................................................................ 1-14

1.5.5 JICA Study Team........................................................................................................ 1-16

1.5.6 Past Activities.............................................................................................................. 1-17

1.6 Focal points...................................................................................................................... 1-21

1.6.1 PSMP 2010 Review.................................................................................................... 1-21

1.6.2 Economic Development Policy................................................................................... 1-25

1.6.3 Primary Energy.......................................................................................................... 1-27

1.6.4 Natural Gas (Domestic)............................................................................................... 1-30

1.6.5 Natural Gas (LNG Imports)......................................................................................... 1-33

1.6.6 Coal........................................................................................................................... 1-35

1.6.7 Oil and LPG................................................................................................................ 1-38

1.6.8 Power Development Plan............................................................................................ 1-39

1.6.9 Hydropower development.......................................................................................... 1-57

1.6.10Renewable Energy.................................................................................................... 1-61

1.6.11Power Imports........................................................................................................... 1-63

1.6.12Nuclear Power.......................................................................................................... 1-66

1.6.13Power System Plan.................................................................................................... 1-72

1.6.14Improvement of Power Quality................................................................................. 1-77

1.6.15O&M Legal Framework............................................................................................ 1-84

1.6.16Thermal Power Plant O&M....................................................................................... 1-87

1.6.17Tariff Policy.............................................................................................................. 1-93

1.7 Road-map....................................................................................................................... 1-100

Chapter 2   Recommendations on the Implementation & Monitoring of the Master Plan..... 2-1

2.1 Capacity building for master plan revision.......................................................................... 2-1

2.1.1 Collaboration and Cooperation between Organizations................................................. 2-1

2.1.2 Periodical Rolling Revision of the Milestone Plan......................................................... 2-1

2.1.3 Strengthening of integrated statistical processing functions........................................... 2-2

2.1.4 Introduction of Key Performance Indicators................................................................. 2-2

2.2 Measures to Facilitate Improvement of Investment Climate................................................. 2-3

2.2.1 Outline.......................................................................................................................... 2-3

2.2.2 Project Implementation Structure.................................................................................. 2-3

2.2.3 Risks directly concerned with the Government.............................................................. 2-4

2.2.4 Risks to be controlled mainly by contractors................................................................. 2-5

2.2.5 Recommendations for Improvement............................................................................. 2-5

2.3 Economic Development...................................................................................................... 2-6

2.4 Domestic Natural Gas [Gas]................................................................................................ 2-7

2.5 LNG Import [Gas]............................................................................................................ 2-10

2.6 Renewable Energy [Introduction of energy storage technology]....................................... 2-12

2.7 Power System Plan............................................................................................................ 2-14

2.8 O&M Legal Framework [O&M]....................................................................................... 2-15

2.9 Thermal Power Plant O&M [O&M].................................................................................. 2-16

2.10 Tariff policy.................................................................................................................... 2-20

2.11 Realization Of Low Energy Consumption Society........................................................... 2-20

2.11.1New Technologies for Power Generation with Different Energy Sources................... 2-20

2.11.2New technologies in the electric power infrastructure sector...................................... 2-21

2.11.3Responsible Energy Consumption and Development of Bangladesh.......................... 2-22

List of Tables

Page

Table 1-1 Link between PSMP2016 and the SDGs.................................................................... 1-7

Table 1-2 Contents of the Study.............................................................................................. 1-12

Table 1-3 PSMP2010 Review (Economic Development)......................................................... 1-21

Table 1-4 PSMP2010 Review (Coal Supply)........................................................................... 1-22

Table 1-5 PSMP2010 Review (Gas Supply)............................................................................ 1-23

Table 1-6 Projection of GDP and GDP per capita up to 2041.................................................. 1-25

Table 1-7 Projection of Primary Energy Supply – Scenario 3................................................. 1-29

Table 1-8 3E Evaluation Results of Each Power Development Scenario.................................. 1-53

Table 1-9 3E Evaluation Results of Each Power Development Scenario.................................. 1-54

Table 1-10 Renewable Energy Potential in Bangladesh........................................................... 1-61

Table 1-11 Electrification Rate Calculation Details by Power Division..................................... 1-73

Table 1-12 Supply Trip Amount and Factors Which Should Be Considered in Each Year....... 1-82

Table 1-13 Problems in Organizational Resources................................................................... 1-88

Table 1-14 Solution Proposals................................................................................................. 1-89

Table 1-15 O&M Solution Proposals and Implementation Plans.............................................. 1-90

Table 1-16 Impacts of Electricity Tariff Increase on Economy (single-year analysis).............. 1-94

Table 1-17 Scenarios of Electricity Tariff Increase: Case 1 (cost increase)............................... 1-94

Table 1-18 Scenarios of Electricity Tariff Increase: Case 2 (no cost increase).......................... 1-95

Table 1-19 Impacts of Electricity Tariff Increase on Bangladesh National Economy (Case 1).. 1-95

Table 1-20 Impacts of Electricity Tariff Increase on Bangladesh National Economy (Case 2). 1-95

Table 1-21 Impacts of Gas Price Increase on Bangladesh National Economy.......................... 1-96

Table 1-22 Scenarios of Gas Price Increase............................................................................. 1-96

Table 1-23 Impacts of Gas Price Increase on Bangladesh National Economy.......................... 1-96

Table 1-24 Example of Scenarios for Electricity Tariff Increase.............................................. 1-98

Table 1-25 Scenarios of Gas Price Increase............................................................................. 1-98

Table 1-26  Roadmap for PSMP2016.................................................................................... 1-100

Table 2-1 Items Required in Feasibility Assessment................................................................. 2-18

Table 2-2 Areas of research by type of energy........................................................................ 2-21

Table 2-3Areas of assistance in research in the electric power infrastructure sector.................. 2-21

List of Figures

Page

Figure 1-1 Overall Workflow for This Study............................................................................. 1-9

Figure 1-2 Steering Committee and Working Groups.............................................................. 1-15

Figure 1-3 PSMP2010 Review (Economic Development)....................................................... 1-21

Figure 1-4 PSMP2010 Review (Coal Supply).......................................................................... 1-22

Figure 1-5 PSMP2010 Review (Gas Supply)........................................................................... 1-23

Figure 1-6 PSMP2010 Review  (Power Development Plan)..................................................... 1-24

Figure 1-7 Value Added by Large and Middle Scale Manufacturing Industries....................... 1-26

Figure 1-8 Illustration of Industrial Development in Bangladesh Toward 2041....................... 1-26

Figure 1-9 Stages of Industrial Development and Necessary Policy Measures to Support This. 1-27

Figure 1-10 Projection of Final energy Consumption (BAU Scenario)..................................... 1-27

Figure 1-11 Projection of Final Energy Consumption (Energy Efficiency Scenario)............... 1-28

Figure 1-12 Projection of Primary Energy Supply – Scenario 3.............................................. 1-29

Figure 1-13 Gas Resource Balance.......................................................................................... 1-30

Figure 1-14 Gas Supply Forecast 2016~2041.......................................................................... 1-33

Figure 1-15 Forecast of Coal Demand and Supply.................................................................. 1-35

Figure 1-16 Oil Demand and Supply Balance, 2014 to 2041................................................... 1-38

Figure 1-17 Power Development Planning Flow..................................................................... 1-40

Figure 1-18 Estimated Composite Daily Load Curve in the Summer in Bangladesh................. 1-41

Figure 1-19 Comparision of peak power demand in both models............................................ 1-42

Figure 1-20 Relationship between the Time Scale and the Change in PDP............................... 1-43

Figure 1-21 Annual Trend of Each Power Plants（MW）........................... 1-45

Figure 1-22 Transition of estimated power demand during 2015-2041 (Unit: MW)................ 1-45

Figure 1-23 Reserve Margin.................................................................................................... 1-46

Figure 1-24 IEACrude Oil Scenario........................................................................................ 1-47

Figure 1-25 Simulation schem of the supply/demand operation............................................... 1-48

Figure 1-26 Generation pattern in 2041.................................................................................. 1-49

Figure 1-27 Image for demand and supply simulation............................................................ 1-49

Figure 1-28 Annual Trend of Energy Mix in Different Scenarios............................................ 1-50

Figure 1-29 Power generation cost under each scenario and Ratio of coal （US cent/kWh） 1-50

Figure 1-30 Scenario-Wise CO2 Emissions（CO2 kg-C/kWh）....................... 1-51

Figure 1-31 Physical Energy Delivery Routes and Risks.......................................................... 1-52

Figure 1-32 An Example of Probability Density of Energy Delivery....................................... 1-52

Figure 1-33 3E Evaluation Results (Each Value) Figure 1-34 3E Evaluation Results (Total) .. 1-53 Figure 1-35 3E Evaluation Results (Each Value)................................................................................... 1-54

Figure 1-36 3E Evaluation Results (Total)............................................................................... 1-54

Figure 1-37 3E Evaluation Results (Total)............................................................................... 1-55

Figure 1-38 Best mix including expansion of renewable enegy............................................... 1-56

Figure 1-39 Location Map of Potential PSPP Sites.................................................................. 1-58

Figure 1-40 Location Map of Potential Sites for Ordinary and Small Scale Hydropower......... 1-59

Figure 1-41 Future Power Import Volume and its Share (High Case Scenario)....................... 1-64

Figure 1-42 Future Power Import Volume and its Share (Low Case Scenario)........................ 1-65

Figure 1-43 Nuclear Power Development on PSMP2016........................................................ 1-66

Figure 1-44 Structure of IAEA Safety Standards..................................................................... 1-67

Figure 1-45 Nuclear Industry Information Center................................................................... 1-69

Figure 1-46 Asian Nuclear Safety Network (ANSN)............................................................... 1-70

Figure 1-47 Roadmap for nuclear power development........................................................... 1-71

Figure 1-48 The Existing Bulk Power Network System of Bangladesh (2014)........................ 1-72

Figure 1-49 Development of Access to Electricity (BPDB definition)...................................... 1-74

Figure 1-50 BREB On-grid Extension Plan Comparison......................................................... 1-75

Figure 1-51 Number of SHS under IDCOL Program.............................................................. 1-75

Figure 1-52 Conceptual Map of Locations of Large Scale Power Stations Planned Up to 2035 1-76

Figure 1-53 Comparison between the Necessary Reserves and the Available Reserves............. 1-80

Figure 1-54 Trend of Power Frequency Quality Improvement................................................ 1-81

Figure 1-55 Schematic Diagram of the Frequency Deviation Immediately.............................. 1-82

Figure 1-56 Trend of minimum values of frequency immediately.......................................... 1-82

Figure 1-57 Schedule for Legal Reform................................................................................. 1-86

Figure 1-58 Site Selection....................................................................................................... 1-87

Figure 1-59 Target Site List.................................................................................................... 1-88

Figure 1-60 O&M Efficiency Improvement Supported by Information Management............. 1-91

Figure 1-61 Demand/Supply and Shutdown Planning............................................................ 1-91

Figure 1-62 Thermal Power Plant O&M Roadmap................................................................. 1-92

Figure 2-1 PSMP2010 Review (Power Development Plan)....................................................... 2-3

Figure 2-2 Organaization of IPP............................................................................................... 2-4

Figure 2-3 Advanced Electronic Mapping - Object Model System............................................ 2-8

Figure 2-4 Introduction of energy storage technology (1)...................................................... 2-12

Figure 2-5 Introduction of energy storage technology (2)...................................................... 2-13

Figure 2-6 Introduction of energy storage technology (3)...................................................... 2-13

Figure 2-7 Steam Turbine Rehabilitation Plan......................................................................... 2-16

Figure 2-8 Combined Cycle Power Generation Remodeling Plan............................................ 2-16

Figure 2-9 Training Course Plan............................................................................................. 2-17

Figure 2-10 System Functions and Data Flows for a Power Plant in Bangladesh...................... 2-19

Abbreviations

Chapter 1 PSMP2016 Summary

1.1    Abstract

The Power System Master Plan (PSMP) 2016, sponsored by Japan International Cooperation Agency (JICA), aims at assisting the Bangladesh in formulating an extensive energy and power development plan up to the year 2041, covering energy balance, power balance, and tariff strategies.

Bangladesh has an aspiration to become a high-income country by 2041. The development of energy and power infrastructure therefore pursues not only the quantity but also the quality to realize the long-term economic development.

Since Bangladesh is facing to the depletion of domestic gas supply, various issues such as sustainable development harmonizing with economic optimization, improvement of power quality for the forthcoming high-tech industries, and the discipline of operation and maintenance (O&M) for power plants need to be addressed holistically.

Furthermore, energy subsidy is also a tough challenge, because there’s always a concern that drastic increase of fuel and electricity prices may trigger another negative effect on the national economy. A meticulous analysis is required to find the best pathway to attain the sustainability of the energy and power sectors in balancing with the economic growth.

The new PSMP study covers all the aforementioned challenges comprehensively, and come up with feasible proposals and action plans for Bangladesh to implement.

1.2    Background and Purpose

The energy source of the People’s Republic of Bangladesh (hereinafter “Bangladesh”) mainly depends on Domestic Natural Gas. The Government of Bangladesh formulated the Power System Master Plan 2010 (PSMP2010) targeting, among others, for a long term energy diversification due to the foreseen decrease in the production volume of Natural Gas.

However, energy development is not on track compared with the PSMP2010 plan, because various assumptions about expected sources for base load energy have subsequently changed. In particular, a review is needed reflecting namely exponential increasing of oil based rental power plants and development constraints of domestic primary energy.

Currently, many of power plants in Bangladesh cannot generate electricity as specified in terms of power, thermal efficiency etc. for each unit. Daily shortage of power does not allow to stop facilities and to undertake periodical maintenance in a planned way. Legal framework does not stipulate preventive maintenance works as an obligation for plant owner. Low financial soundness of public generating companies due to low electricity tariff does not permit to purchase in advance necessary spare parts. In order to secure a stable electricity supply, we need to find out solutions to all of these issues and to establish a comprehensive institutional framework. Moreover, hydro power generation studies (on small scale hydropower plants of 30 kW ～ 5MW and a pumped storage power plant as a regulator between demand and supply) have become an urgent issue through the government’s renewable energy promotion policy.

Based on the aid policy of the Government of Japan for Bangladesh, the Japan International Cooperation Agency (JICA) is considering the power sector as one of priority areas assisting Bangladesh not only by Yen Loans to the construction of power plants (gas combined cycle, super-critical using import coal and hydropower), transmission and distribution lines and development of renewable energy but also by Technical Assistance such as the master plan for energy efficiency. JICA is thus supporting the entire power and energy sector. It was under such circumstances that JICA decided to undertake the Power System Master Plan 2016 (PSMP2016) in order to grasp middle to long term development issues and risks and to formulate a comprehensive and result-oriented aid strategy for the energy sector by examining effective approaches for each issue.

After the start of this survey, however, the Government of Bangladesh announced, in its new policy“Vision 2041”, an important target of becoming one of the developed nations by 2041. Consequently, for the power and energy sector which receives quite dominant development budget, it has become newly necessary to secure the consistency between the economic development strategy of the country toward joining the developed countries and the master plan of the power and energy sector (PSMP). With such consistency only, JICA will be able to make the best use of the result of this survey as basic information for the future cooperation.

To study consistency between an economic growth strategy and PSMP, an additional survey on estimated changes of the industrial structure that will be brought by the coming strategy and a precise forecast of future demand of primary energy and corresponding supply policy must be added to this survey, since the power sector is one of the largest sectors which consume primary energy. It was therefore decided to estimate in this survey the most rational and probable demand and supply scenarios of primary energy for other sectors than power sector such as fertilizer, industry, commerce, and transportation.

Moreover, the power sector will be required to cope with the changes of industrial structure in line with the economic growth as expected in order for Bangladesh to join the developed nations. Specifically, improvement of the quality of electricity is indispensable given the view of the government that sophistication of industries is generally essential for the nation to become one of the developed countries.

After the commencement of this survey, Bangladesh started considering also a specific plan to expand power import from neighbouring countries such as India, Bhutan and Nepal. Usually, international cooperation in power system is oriented toward direct cooperation by means of alternate current and, to do so, quality of electricity is required to be equivalent or better than that of counterpart countries. It is therefore necessary for the promotion of international cooperation to improve the quality of electricity. Since this issue will be a concern to the entire power sector in revising PSMP, it was also decided to add to this survey collection of additional basic information and examination of feasible measures responding to the specific needs of quality improvement.

Therefore, the collection and analysis of the information on the plan for the supply and demand for primary energy sources and the needs for the improvement of the quality of power supply were included in this survey that had consisted of the revision of power development plan and the studies on the institutional reform for the improvement of O&M and the introduction of hydropower generation. This inclusion of the new survey subject enabled the formulation of a new master plan that covers not only the power sector but also the energy sector comprehensively and describes the interface between the two sectors. The new master plan is the output of the first joint survey of the two divisions in the Ministry of Power, Energy and Mineral Resources (MoPEMR), Power Division and Energy Division, and this survey is expected to serve as a good precedent of the cooperation between them in the implementation of policies in the power and energy sectors.

Power  System  Master  Plan 2016

Final Report

1.3    Vision Paper

1-3

  Policy Vision                                                                                                                                           

1.4    Policy Vision

The Government of Bangladesh declared its intention to develop the country in order to become one of the advanced countries by 2041 as the key goal of VISION2041. To achieve the VISION, this master plan defines the intended goal and “five key viewpoints” that are to be kept in mind by all the members who are involved in the realization of the goal.

1.4.1    PSMP2016 Objective

To show the targets and approach in the Energy and Power Sectors in order to achieve Bangladesh’s national goal: to achieve VISION2041 and become a high-income country by 2041

1.4.2    Five Viewpoints of PSMP2016

For Bangladesh to become one of the high-income nations by 2041, the country needs to achieve continuous economic growth of 7.4% annually for the period from 2016 to 2020 to initially reach the standard of the medium to high income nations. Subsequently, its GDP would then grow steadily although the growth rate may slow down slightly. With this economic growth, the demand for primary energy, in particular in the industrial sector and the transport sector, is expected to increase sharply under both the BAU and the energy efficiency scenario.

To meet this rapidly increasing demand for primary energy, the country needs to undergo a major change from its existing dependency on domestic natural gas to a dependency on various imported energies. During the period where imported energies are consumed in large quantities, the existing inefficient energy resource consumption would directly lead to an enormous amount of economic loss. In the future, the efficient use of energy, its supporting infrastructure and improvements to related policies and systems will be essential. The infrastructure improvements include the domestic facilities as well as interaction with neighboring countries. The policy and system improvements include the strategic positioning of various energy resources and a legal system that promotes efficient use of energy by revising the current inefficient practices.

While the amount of deposits of natural gas discovered domestically is decreasing, the limited resources must be utilized to the maximum by developing an efficient development structure. Achievements in mining and the development of undiscovered resources are limited under the existing structure and a drastic review is necessary, such as PSC reform and the introduction of technologies from other countries. In addition, as mentioned in “1”, development of an infrastructure for the economical and efficient use of gas and development and implementation of the system are necessary. Since the domestically produced coal is of a high quality and the reserves are abundant, the future development of an economical domestic coal development structure is important. Since domestic coal development has a serious impact on the surrounding environment and society and requires a long period of time, the necessary actions must be taken sufficiently in advance in anticipation of VISION2041.

To meet the rapidly increasing demand for power and to realize its stable supply, large-scale power supply development and construction of system facilities are necessary. In terms of new issues and opportunities for power supply development, power imports from neighboring countries (international cooperation), and nuclear power generation can be considered. System enhancement is essential in addition to these power supply developments.

In order to realize future rapid economic development, industrial development such as the transition to higher value-added industries is essential for Bangladesh, necessitating high-quality power to support such an advancement. Therefore, in the future, Bangladesh requires improvements in its infrastructure and the development and implementation of a system that provides high-quality power for electrical frequency stabilization, as well as the development of the power system.

For Bangladesh, which is susceptible to climate change, the development of low-carbon energies is extremely desirable, not simply from the aspect of the international trend, recommending renewable

energies and energy diversification, but from the point of improving energy access for rural people. Therefore, development of domestic renewable energies is indispensable.

However, there is a limit to the introduction of renewable energies on a large scale in Bangladesh due to the availability of appropriate land. Importing power from neighboring countries  using hydroelectric power generation has much greater possibility than supplementation programs for the limited degree of renewable energy introduction in Bangladesh.

To realize advanced utilization and the stable supply of energy and power for Bangladesh, non-material support such as reform of the existing system, development of a new system, and development of human resources for their implementation is essential, as well as material support such as the construction of infrastructure. In particular, to cope with the coming era of mass consumption of imported energy, efficiency improvement of gas fired power plants, and the development of legal systems and human resources for its realization, are urgently necessary.

In the same way, significant improvements are required in many aspects of international cooperation and nuclear power generation from Bangladesh’s existing power supply development and system operation. Although the development of legal systems and human resources relating to international cooperation and nuclear power generation is an extremely difficult task for Bangladesh, this task needs to be achieved.

For power rates, structural reform of the existing below-cost power rates is necessary in terms of the sustainability of the power sector. In the future, an increase mainly in household power rates is required, which does not inhibit Bangladesh’s economic growth. In this case, cost reduction measures must be taken by analyzing the possibility of cost reductions in the power generation, supply, and distribution sectors prior to the decision-making on an increase in power rates, while alleviating the impact on the lower socio-economic classes.

1.4.3    Importance of Contribution and Responsibility to the International Community

In 2015, the United Nations adopted the Sustainable Development Goals (SDGs) as the international development goals. These goals have been established by using the development goals for the period from 2000 to 2015, Millennium Development Goals (MDGs), as the foundation.

Plainly speaking, the old goals, MDGs, were development goals targeting “developing countries” and adopted eight goals for poverty countermeasures for the period up to 2015.

The new goals, SDGs, are development goals that are set in 17 fields under “sustainable development” as cross-cutting themes, including developed countries as well as developing countries. In particular, the following goals are closely related to the energy and power fields.

To become one of the advanced countries, proper recognition of contribution to the international society and its accompanying responsibilities are necessary. To establish this master plan, further agreement with the major direction of the international society is required. The relationships between these SDGs and this master plan are shown below.

Table 1-1 Link between PSMP2016 and the SDGs

Source: UNDP Website and JICA Survey Team

  Practical Vision                                                                                                                                           

1.5    Practical Vision

1.5.1    Relationships between the Five Key Viewpoints and the Master Plan Investigation Items

The table below shows the relationship between “the five key policy viewpoints” mentioned above and the components of the master plan. The master plan is composed of a policy for the economic growth, a plan on the primary energy balance, a plan on the power balance mainly based on the power development plan and a policy on energy prices. The components of the master plan are closely related to the five key viewpoints required for achieving the vision mentioned in the previous section as shown in the table below.

1.5.2    Methodologies for this Study

(1) Implementation flow

The overall methodologies and tasks for this study are summarized in the following flow chart.

Source: JICA Survey Team

Figure 1-1 Overall Workflow for This Study

(2) Study on the Future Scenarios of Economic Development

To begin with, this Study considers the future scenarios of economic development in Bangladesh as the baseline data for energy supply and demand projections.

Taking into account that this study is targeting the period up to 2041, which is considerably long, structural changes to the Bangladesh economy are expected to occur during its course. That is, macroeconomic parameters for energy demand forecasts such as GDP and industrial production need to be projected on the condition that non-linear structural changes to the national economy will take

place along with the development of Bangladesh economy.

Though it is hardly possible to determine such structural changes quantitatively, this study considers the future scenarios of economic development that are likely to occur in Bangladesh, as ascertained through discussion with local stakeholders. The Government of Bangladesh (GoB) has set an ambitious target for the country to become a member of the “High-income Countries” by 2041, though the details to support this have not been provided. This Study also evaluates the feasibility of this target through the economic development projections and provides policy recommendations for achieving the economic development target.

(3) Energy Demand Forecast and Projection of Necessary Volume of Primary Energy Supply

Referring to the projection of economic development, this Study formulates the energy demand forecast and then estimates the necessary supply that meets the energy demand in the future.

It also needs to be noted that the optimized set of energy supply varies among countries depending on their geographical and geopolitical conditions. Especially for a country like Bangladesh, where the domestic energy production such as natural gas has mainly satisfied the domestic demand but the depletion of energy production and increased dependence on imported energy sources are expected in the future, it is appropriate to develop the energy supply plan by prioritizing the optimized utilization of domestic energy production and then by incorporating the imported energy sources in the energy supply system to fill the insufficiency.

Therefore, this study first estimates the total volume of primary energy supply necessary for Bangladesh based on the energy demand forecast and then estimates the requirement for each energy source as the combination of domestic energy production and imports.

(4) Power Supply Master Plan

For the meanwhile, this Study also formulates the energy supply and demand balance in terms of the modes of energy supply to end consumption of energy. Among the various modes of energy supply,  the electricity supply needs more specific considerations for infrastructure development, thus this study segregates the sections related to power supply and presents the “Power Supply Master Plan”.

In order to determine the optimized set of supply modes, this study takes approaches from both the demand-side and supply-side. From the demand-side, each mode of energy supply (electricity, natural gas, oil products etc.) is projected as a part of the aforementioned energy demand projection and the electricity demand is determined. In Bangladesh, the electrification of unelectrified villages is still in progress and even in the already electrified villages a shift of energy supply to electricity from other modes will continue to occur. These transitions need to be considered in an appropriate timeline.

From the supply-side, how to match the primary energy supply sources with the modes of energy supply is analyzed. Because forming energy supply infrastructure requires a considerably long lead-time, drastic change of energy supply modes in a short time is not possible. Hence, an appropriate timeline for infrastructure development also needs to be considered so that the existing energy infrastructure will be gradually strengthened and modified. For example, the industrial sector, which is supposed to increase energy demand rapidly in Bangladesh, may consume more electricity from the grid if sufficient volume of electricity supply from the grid exists. However, because of the limitation with grid power supply and the considerable capacity of existing captive power generation that has been installed in the past, it may take time to phase out the use of electricity from captive power generation, which is generally less efficient than the power supply from the grid.

Then, the analyses from both the demand-side and supply-side are harmonized to determine how to establish the energy supply to end consumption. The future requirements of the primary energy supply will be finalized by calculating back from the energy supply to end consumption, considering that the energy loss from transfer (e.g. power generation), transport and consumption differs among different modes of energy supply.

(5) Quantitative Evaluation of 3E

For identifying the best energy mix scenario for “Power Supply Master Plan”, 3E (economic viability, environmental quality, and energy security) evaluation is employed.

Needless to say, for a country like Bangladesh where energy demand is expected to increase rapidly to sustain the economic development, economic viability, i.e. “assuring that energy supply meets the energy demand in an economically reasonable way”, needs to be considered as a priority.

However, as the country’s economic development is expected to reach a certain level of maturity by 2041, which coincides with GoB’s national target of the country becoming a member of the “High-income Countries”, this Study expects that the energy policy will need to assume responsibility beyond “low-cost supply” and that it will affect the structure of energy supply in Bangladesh. The country is expected to raise its domestic and international commitments to reduce environmental burdens such as greenhouse gas emissions. Considering that these environmental commitments can affect the plan for future energy supply, this study discusses with the stakeholders the policy options that the country will need to prepare.

In addition, as the Bangladesh economy will continue to be enhanced and modernized, the necessity for stability of energy supply is expected to gain importance. In order to achieve stability of the energy supply, not only improving the energy supply infrastructure itself but also improving stability in the upstream of the supply chain, i.e. stability of quantity and prices to secure primary energy supply, will gain more importance. There is some literature both in Japan and overseas that has attempted a quantitative evaluation of energy security, but standardized methodologies have not been established. It also needs to be noted that the main concerns about energy security may differ among countries. Therefore, in evaluating the energy security of Bangladesh, these past studies are reviewed but their methodologies are not strictly followed. An appropriate set of performance indicators is introduced through discussion with stakeholders in Bangladesh.

This study proposes a future energy supply that is appropriate for Bangladesh as a “responsible” developed country, taking also into account quantitative evaluations not only from the aspect of economic viability but also from the aspects of environmental commitments and energy security.

(6) Analysis of the Financial Conditions of the Power Sector and the Costs of Power Supply

Following the results of supply and demand projections for energy and power conducted in the previous sections, this study analyzes the financial conditions of the power sector in Bangladesh and the costs of the power supply.

In order to achieve self-contained and sustainable management of the power supply, the power supply tariff should be set at a level so that these supply costs can be appropriately recovered from end-consumers. The current status in Bangladesh, however, is that the tariff is set at a low level that can hardly recover the costs appropriately. This study discusses the direction of power tariff reforms while ascertaining the overall picture of the power sector’s financial conditions and the costs of power supply.

(7) Estimation of the Impact of Energy Tariff on National Economy

On the other hand, it is common worldwide that raising energy tariffs is a politically sensitive issue and that tariff reforms may need to be made gradually. In addition, drastically raising the energy tariff at the time when the manufacturing sector of a country starts to develop and to be exposed to international competition may affect the sector’s international competitiveness.

Therefore, the study on the energy supply tariff in Bangladesh up to 2041 needs to analyze how the “cost-reflective tariff will affect the national economy depending on the timeline to achieve this”, taking into consideration the level of economic development.

In order to evaluate the effects of raising energy supply tariffs on the national economy quantitatively, this study runs the simulation model called GTAP (Global Trade Analysis Project). Referring to the results of this simulation, this study makes a policy recommendation on the future energy supply tariff.

1.5.3    Scope of work

The Survey had been carried out according to the minutes between JICA and the Bangladesh government. The JICA Survey Team conducted the following items and make reports on the basis of the survey policy and considerations. The Survey started at the end of October 2014, be carried out as per following Table, and the Final Report had submitted in September 2016.

Table 1-2 Contents of the Study

Source: JICA Survey Team

1.5.4    Survey Implementation Feamework

Five years have already passed since the latest PSMP2010 was prepared, so the Survey targeted not only a review of PSMP2010 but also studied the plan up to 2041. The review of the Survey was discussed and confirmed with the government and relevant agencies in Bangladesh, and also with JICA.

The Survey was conducted with one steering committee and four subordinate working groups to facilitate consensus building over a wide area of the relevant organizations. The committee and all technical discussion meeting were set up on the initiative of the Power Division (PD) of the Ministry of Power, Energy and Mineral Resources (MPEMR).

(1) PSMP2010 Review Steering Committee

The Steering Committee members include PD of MPEMR, Energy and Mineral Resources Division (EMRD) of MPEMR, Power Cell (PC) of MPEMR, Bangladesh Power Development Board (BPDB), Power Grid Company of Bangladesh (PGCB), Secretary, Economic Relations Division (ERD) of Ministry of Finance (MF), Financial Division (FD) of MF, Ministry of Law, Justice, & Parliamentary Affairs (MLJPA), Ministry of Water Resources (MWR), and the Prime Minister’s Office. The Steering Committee is the organization that makes the highest decisions based on the discussions with the 5 subordinate technical discussion meeting.

(2) PSMP2010 Review Technical discussion meeting

The PSMP2010 Review Working Group members include PD of MPEMR, EMRD of MPEMR, PC of MPEMR, Sustainable and Renewable Energy Development Authority (SREDA), BPDB, generation corporation, PGCB including National Load Dispatch Centre (NLDC), Infrastructure Development Company Limited (IDCOL), Petrobangla and its subordinate companies, ERD of MF, and FD of MF. Technical discussion meeting will discuss the reduction of subsidiaries for energy utilities, the impact on the amount of LNG imports and the prices of electricity and gas, the coexistence of off-grid renewable energy and on-grid equipment, and issues across the executing agencies.

(3) Thermal Power Plant O&M Technical discussion meeting

The O&M Working Group members include PD of MPEMR, PC of MPEMR, BPDB, generation corporation, PGCB including NLDC, Petrobangla and its subordinate companies, and MLJPA. Technical discussion meeting will discuss the amendment of the Electricity Act, and related laws and regulations.

(4) Hydropower Development Technical discussion meeting

The Hydropower Development Working Group members include PD of MPEMR, MWR, and BPDB. Technical discussion meeting will discuss the impacts and countermeasures downstream due to the planned dam construction, and issues related to the executing agencies.

(5) Primary Energy Technical discussion meeting

The Primary Energy technical discussion meeting was composed as a counterpart agency to PD of MPEMR, and as a new counterpart agency to the Energy Division (ED).

(6) Improvement Measures for Power Quality Technical discussion meeting

Improvement Measures for Power Quality technical discussion meeting cooperates with the Master Plan technical discussion meeting and Thermal Power technical discussion meeting. Technical discussion meeting examines proposals for Preparation of a Legal Framework, rules and improvements for work procedures, and a draft plan for frequency quality improvement.

Source: JICA Survey Team

Figure 1-2 Implementation framework

1.5.5    JICA Study Team

The JICA Study Team is composed of the following members.

1.5.6    Past Activities

(1) 1^st Seminar (1^st Steering Committee)

n Date: 29 October 2014

n Venue: Board Room of BPDB at Buddyut Bhaban, Dhaka

n Discussion Point: Explain for Inception Report

ü  Establishment of Steering Committee (SC) and the Working Group (WG) for the Survey.

ü  Explained the survey objectives, methodologies, member, and implementation schedule

(2) 2^nd Seminar (2nd Steering Committee)

n Date: 4 Jun 2015

n Venue: Board Room of BPDB at Buddyut Bhaban, Dhaka

n Discussion Point:

ü  Primary Energy Balance for Power Sector

ü  Power Demand Forecast

ü  Power Development Plan

(3) 3^rd Seminar (3rd Steering Committee)

n Date: 15 December 2015

n Venue: Board Room of BPDB at Buddyut Bhaban, Dhaka

n Discussion Point:

ü  Project Outline

ü  Primary Energy

ü  Power Demand Forecast and Power Development Plan

ü  Power Quality

ü  Operation and Maintenance (O&M)

(4) Pre- High Level Discussion Meeting (Tokyo)

n Date: 5 Apr 2016

n Venue: TEPCO Headquarter (Tokyo)

n Discussion Point:

ü  Economic Development

ü  Primary Energy Balance

ü  Power Balance

ü  Cost and Tariff Balance

(5) High Level Discussion (Dhaka)

n Date: 7 April 2016

n Venue: Bijoy Hall, Bidyut Bhaban, Power Division, MoPEMR

n Discussion Point:

ü  PSMP 2010/2016 comparison

ü  Macroeconomic Projection & Industrial Policy

ü  Energy Balance Strategy

ü  Energy Efficiency Target Setting & Supply-Demand Balance

ü  Power Balance Strategy

ü  A Project Outline and Road Map

(6) 4th Seminar (4th Steering Committee)

n Date: 18 June 2016

n Venue: Bijoy Hall, Bidyut Bhaban, Power Division, MoPEMR

n Discussion Point: Explain for Draft Final Report

ü  Economic Development

ü  Primary Energy Balance

ü  Power Balance

ü  Cost and Tariff Balance

(7) Official comments meeting for Final Report (FR)

n Date: 1,2,4 August 2016

n Venue: TEPSCO Headquarter (Tokyo)

n Discussion Point:

ü  Economic Development

ü  Primary Energy Balance

ü  Power Balance

ü  Cost and Tariff Balance

(8) Official comments meeting for Final Report (FR)

n Date: 7 September 2016

n Venue: TEPCO Headquarter (Tokyo)

n Discussion Point:

ü  Continuous Technical Support for Post-PSMP2016

  Technical Focal Poits                                                                                                                     

1.6    Focal points

1.6.1    PSMP 2010 Review

(1) Economic Development

Table 1-3 and Figure 1-3 compares the actual performance of GDP growth rate with the projected growth rate in PSMP 2010 and the target of GDP growth rate in the Sixth Five-Year Plan that was set forth by the GOB in 2011. During the period of the Sixth Five-Year Plan, Bangladesh achieved annual average of 6.3% growth rate. This was higher than the actual growth rate in each of the past five-year plans (1^st-5^th) and the result implies that the country started taking a path of rapid economic growth.

However, the economic growth rate still underperformed the target of the Sixth Five-Year Plan (average 7.3% growth) every year and the gap was widened in the later years. The actual growth rate was also lower than the projection of PSMP2010 that expected the Bangladesh economy to attain 7% growth. The main factor of this gap is supposed to be the delay of economic reforms for inducing further economic growth. The country may not be able to fully reap the opportunity of economic development and the growth rate may continue underperforming the government’s expectation unless economic policies to promote the development are not in place as planned.

Table 1-3 PSMP2010 Review (Economic Development)

Source: JICA Survey Team Note: the average in the table is the five-year average from FY2010-2011 to FY2011-2012

GDP Growth Rate (real)

9.0%

8.0%

7.0%

6.0%

5.0%

4.0%

3.0%

2.0%

1.0%

0.0%

2009/10         2010/11         2011/12         2012/13         2013/14         2014/15

Source: JICA Survey Team

Figure 1-3 PSMP2010 Review (Economic Development)

(2) Domestic Coal Production

Table 1-4 shows the performance and the forecast of coal production in PSMP2010 and Figure 1-4 shows them by chart. Annual production of 1 million tones will be possible using existing facilities.

New longwall mining equipment called LTCC (Longwall Top Coal Caving) for thick coal seams was introduced in May 2013 from China and the mining height was increased from 3 meters to about twice this. Actual mining height is not clear, but mining efficiency was obviously improved. The coal production in 2013/14 achieved 0.947 million tons. However, in 2014/15, the figure decreased to 0.676 million tons. The main reason for this was a delay in the withdrawal and installation of the new equipment on-site. It is normal for people to take time to become skilled in the use of new equipment. If they can master the operation technology of the new facilities, it is surmised that 1,000,000t is quite possible.

Table 1-4 PSMP2010 Review (Coal Supply)

Source: JICA Survey Team

Source: JICA Survey Team

Figure 1-4 PSMP2010 Review (Coal Supply)

(3) Gas Supply

Five year gas supply projection in the PSMP2010 was reviewed against the actual supply records from 2009/10 through to 2014/15. The results show that the actual supply figure is 15 points lower than that of the projected figures. The projection was made based on the gas reserve data by Hydrocarbon Unit (HCU) (2011); however, the projection did not reflect the gas field development plan or investment plan for new and/or existing gas fields after 2010/11. There are also differences in gas reserve data between Hydrocarbon Unit (HCU) (2011) and USGD/Petrobangla. Hydrocarbon Unit (HCU) (2011) uses P90/P50/P10 while USGD/Petrobangla uses P95/Mean/P05 for gas reserve assessment, hence the USGD/Petrobangla gas reserve appears smaller. The difference between the projection and actual is considered as a combination of all these factors.

Table 1-5 PSMP2010 Review (Gas Supply)

Source: JICA Survey Team, based on the HCU and Petrobangla data

Source: JICA Survey Team, based on the HCU and Petrobangla data

Figure 1-5 PSMP2010 Review (Gas Supply)

(4) Power Demand and Power Development Plan

The figure below shows the five-year power demand forecast in PSMP 2010 and the actual power demand. When PSMP 2010 was formulated five years ago, the demand was estimated to increase to around 10,000 MW by 2015. However, the actual demand in 2015 was approx. 80% of the estimate, around 8,000 MW.

The increase in the power demand including potential demand driven by the rapid economic development in recent years is expected to continue. The shortage of supply is considered to be the main cause of the continuation of this imbalance between the supply and demand. The figure below shows that the actual outputs of the gas and coal thermal power generation were only at 40% and 60% of the outputs described in PSMP 2010, respectively. In the case of the coal thermal power generation, a very important base load power source in the energy mix, while the output in 2015 was forecast at 1,850 MW in PSMP 2010, even the construction of coal power plants has not been commenced five years after the formulation of the plan. The lack of integrated planning and implementation of the construction of large-scale port facilities indispensable for the stable import of fuel and the construction of the power plants and the increased difficulty in fundraising for such a large-scale infrastructure development are considered to be major factors for the failure to develop power generating facilities as planned.

Therefore, it is considered necessary for the Energy Division and the Power Division to develop an organizational structure and operating system more integrated than before and take concerted  measures to formulate a joint infrastructure development plan, to raise fund in the public-private partnership and to develop infrastructure systematically for the achievement of the stable energy supply, a source of the future economic development.

1.6.2    Economic Development Policy

(1) Current Status and Issues

Bangladesh’s economy has seen steady growth since independence was declared in 1971. GDP per capita has been steadily expanding since the 1990s, when the ready-made garments (RMG) sector emerged as a major export industry for the country. GDP annual growth rate during the Sixth Five-Year Plan from 2011 to 2015 averaged 6.3%. According to the Seventh Five-Year Plan formulated by the Government of Bangladesh, the average GDP growth rate from 2016 to 2020 is expected to reach 7.4%.

Based on this, the JICA Survey Team conducted Bangladesh’s economic forecasting up to the year 2041 and the result is summarized in the following table. This projection assumes that Bangladesh’s economy continues to grow as projected in the Seventh Five-Year Plan during the first half of the 2020s, and GDP growth rate is expected to become moderate after the mid-2020s, when the country’s economic development reaches a certain level of maturity. Bangladesh’s economy will continue to grow steadily so that its GDP per capita (nominal base) is expected to reach 10,993 US$ in 2041.

According to the income classification by the World Bank, Bangladesh will become a member of the upper-middle-income economies in the 2020s and will get close to the high-income economies by 2041 if the economic development is achieved as projected.

Table 1-6 Projection of GDP and GDP per capita up to 2041

Note: Average growth rate is a five-year average except in the column for 2041, which is a six-year average.

*1: Real Basis at 2005 price

*2: Nominal Basis Source:  JICA  Survey Team

Until now, Bangladesh’s economic growth has been maintained by labor-intensive industries such as the garment industry. However, heavy dependence on these industries is not sufficient to sustain further economic growth on a long-term basis. It is necessary to achieve industrial structural changes in Bangladesh by diversifying industries and to foster high value added industries by implementing proactive industrial policies.

Present value added by sub-sectors in the manufacturing sector of Bangladesh is shown in the figure below. The textile industry is the largest in the manufacturing sector and accounts for approximately 60% of the total value added in the sector. In addition, there exist other industries such as “machinery and parts”, “processed foods”, “plastic products” and “metal products” in the manufacturing sector, but these industries’ share in value added is still limited. These industries may possibly change the industrial structure of Bangladesh’s economy.

Note: (p) indicates “provisional”.

Source: Prepared by JICA Survey Team referring to BBS “Bangladesh National Account Statistics: Sources and Methods 2013-14”

Figure 1-7 Value Added by Large and Middle Scale Manufacturing Industries

The following figure is a conceptual illustration of Bangladesh’s future industrial development up to 2041. While Bangladesh’s economy will continue to depend greatly on traditional industries, namely the RMG, jute and leather industries, until the beginning of the 2020s, new industries will grow gradually. Export items are expected to become diversified, such as light engineering products, processed foods and pharmaceutical products. From then on, i.e. toward 2041, this diversification will expand to higher value added new industries and products such as electronics, information and technology/software, automobile parts, machinery and shipbuilding.

To achieve such industrial development, it is necessary to implement various industrial policies including incentives for foreign direct investment, infrastructure development and industrial human resource development.

Diversification of Export

Source: JICA Survey Team

Figure 1-8 Illustration of Industrial Development in Bangladesh Toward 2041

(2) Targets to Achieve

• Achieve high economic growth rates with an average annual growth rate of 7.4% until 2025 and become a member of upper-middle-income economies (at a GNI (Gross National Income) per capita of 4,126 US$ or more) in mid-2020s.
• Maintain high economic growth from 2025 onward and achieve GDP per capita equal to that of high-income economies (at a GNI per capita of 12,736 US$ or more) by 2041.

• Foster high value-added industries and facilitate export-oriented industrialization so as to achieve high economic growth rates. Toward this end, implement appropriate industrial policies according to the stage of industrial development.

(3) Roadmap

It is estimated that Bangladesh is currently on the way to Phase 2 of the following industrialization process and is likely to move toward Phase 3. To maintain long term economic growth without stalling current favorable economic conditions, it is necessary to implement the following measures for further advancement of domestic industries.

• Short and medium term: incentives for foreign direct investment; various infrastructure developments such as construction of industrial parks like SEZ, ports, roads, railways and power plants.
• Medium and long term: construction of industrial parks; facilitation of infrastructure  development; industrial human resource development such as development of skilled labor force; promotion of deregulation and economic liberalization.

Phase 1

Phase 2

Phase 3

Source: JICA Survey Team

Figure 1-9 Stages of Industrial Development and Necessary Policy Measures to Support This

1.6.3    Primary Energy

(1) Current Status and Issues

Based on the aforementioned economic growth outlook, energy consumption outlook by sector until 2041 was studied. Final energy consumption outlook and the sectoral breakdown in the BAU scenario without considering the effects of energy-saving measures are indicated in the figure below.

140,000

120,000

100,000

80,000

60,000

40,000

20,000

0

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040

Source: JICA Survey Team

Figure 1-10 Projection of Final energy Consumption (BAU Scenario)

With the rapid advancement of industrialization in Bangladesh, it is expected that there will be a shift

in the industrial sector from labor-intensive industries like RMG to energy-intensive industries. As a result, energy consumption in the industrial sector is expected to increase rapidly. In addition, in the transport sector, as growth in GDP per capita is expected to facilitate vehicle ownership from the middle of the 2020s onward, it is estimated that energy consumption in the transport sector will significantly exceed that of the residential sector in the future.

It is estimated that the average annual growth rate of total final energy consumption including the aforementioned two sectors will be 6.3% between 2014 and 2041. According to this BAU scenario, the growth in energy consumption will slightly exceed the GDP growth rate (annual average real GDP growth rate is 6.1%). Though total energy consumption per GDP tends to decrease until the middle of the 2020s, it is expected to turn upward and, in 2041, reach the same level as the actual figure in 2014 (3.42 toe/million BDT).

For the purpose of relieving rapid growth in energy consumption in Bangladesh in the future, “Energy Efficiency and Conservation Master Plan up to 2030” (EECMP) was formulated in March 2015, supported by JICA. In light of the survey results from EECMP and based on the assumption that measures proposed in the Master Plan will be properly implemented, it is estimated that total energy consumption per GDP will decrease as follows in the Energy Efficiency Scenario. The difference between the figure in this Scenario and the target set in the EECMP (energy consumption per GDP in 2030 is -20% compared to 2014) was due to the difference in definition. For example, calculation in this Scenario considered the transport sector, which was not included in the EECMP’s calculation. If calculation is carried out on the basis of the same definition, energy consumption per GDP in 2030 is

-20% and that in 2041 is -23% compared to 2014.

l  2.65 toe/million BDT as of 2030 (decrease of 23% compared to 2014)

l  2.56 toe/million BDT as of 2041 (decrease of 25% compared to 2014)

140,000

120,000

100,000

80,000

60,000

40,000

20,000

0

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040

Source: JICA Survey Team

Figure 1-11 Projection of Final Energy Consumption (Energy Efficiency Scenario)

The projection of primary energy supply calculated based on this is shown in the following figure and table (in the case of Scenario 3 among the five scenarios that are discussed in Chapter 12). Average annual primary energy supply will grow at a moderate rate of 4.8% up to 2041. However, in addition to significant growth in energy supply from coal and renewable energy, which is mainly used for power generation, energy supply from oil slightly exceeds the average figure due to increasing demand in the transport sector.

140,000

120,000

100,000

80,000

60,000

40,000

20,000

0

2000                2005                 2010                2015                 2020                2025                 2030                2035                2040

Source: JICA Survey Team

Figure 1-12 Projection of Primary Energy Supply – Scenario 3 Table 1-7 Projection of Primary Energy Supply – Scenario 3

Source: JICA Survey Team

(2) Targets to Achieve

• Based on the assumption of introducing energy-saving measures proposed in EECMP, GDP intensity of total energy consumption will decrease by 23% in 2030 compared to 2014 (-20% if calculated based on the same definition as EECMP) and will decrease by 25% in 2041 compared to 2014 (-23% if calculated based on the same definition as EECMP).
• To attain the above goal, the aim is to achieve reductions in energy consumption of 16% in 2030 and of 28% in 2041 compared to the BAU scenario.
• Though energy saving in the transport sector was not taken into consideration in EECMP, it needs to be noted that motorization will be accelerated significantly due to income growth. As a result, energy consumption in this sector is expected to expand dramatically. To achieve the above goal, the aim is to realize a reduction in energy consumption in the transportation sector of 33% compared to the BAU scenario.

(3) Roadmap

To implement the Action Plans proposed in the EECMP.

• Energy management system (targeted for demand in the large-scale industrial sector and the commercial sector)
• Performance labeling and minimum performance standards for electrical appliances (mainly targeting energy demand in the residential sector)
• Implementation of energy-saving construction standards (i.e. revised BNBC)
• Low-interest loan programs for the installation of EEC equipment

In the transport sector, not only the improvement of fuel consumption efficiency for passenger vehicles but also the improvement of traffic conditions in urban areas (within Dhaka city), which are affected by chronic heavy traffic congestion, needs to be considered.

• Policy measures for improvement of passenger vehicles’ combustion efficiency (e.g. eco car program)
• Improvement of road network development in urban areas (e.g. road widening, construction of flyovers)
• Development of railway network (e.g. MRT development within Dhaka city, Dhaka-Chittagong railway network development)

1.6.4    Natural Gas (Domestic)

(1) Current Status and Issues

Natural resources, if used, will run out someday. This also applies to natural gas in Bangladesh. Recoverable Proven reserve of natural gas in Bangladesh is 20.8 TCF. 12.1 TCF had been produced and consumed by 2014, and therefore the remaining gas reserve will be 8.7 TCF, corresponding to a Reserve Production Ratio of 9.5 years.

Source: Field-wise natural gas reserve estimates (Petrobangla, Nov. 2014), and Draft Five Year Gas Supply Strategy 2015-2019)

Figure 1-13 Gas Resource Balance

From an international economic point of view, the people of Bangladesh should recognize the true value of domestic natural gas. They need to maximize its recovery and use it efficiently.

In the area of oil and gas field development, significant technological advancement has been made since 1990, and oil and gas recovery has improved significantly. Gas development in Bangladesh needs to benefit from such advancement and to introduce some mechanism to take advantage of it.

Bangladesh has invited IOCs (International Oil Companies) for offshore development; however, it has not been particularly interested in working with technologically advanced and financially sound IOCs for onshore gas field development.

In order to maximize the recovery of gas from onshore fields and develop them more efficiently, it is important to invite these IOCs for onshore gas development. Existing PSC should be amended to attract such IOCs. International tenders to be carried out under the revised PSC, and partnerships between domestic production companies (BAPEX, BGFCL, and SGFL) and IOCs should be encouraged.

Natural gas will run out someday. The role of BAPEX should be changed to allow it to acquire energy asset overseas in order to contribute to energy security in future, in a similar manner to that of ONGC in India.

Gas Use Efficiency is one of the critical issues that needs to be introduced. “Cheap gas” will not be available in the future and gas users need to enhance their efficiency to save the country’s indigenous gas resources. Both the Urea Manufacturing Sector and Power Sector are major gas users and have a significant impact on the overall gas consumption.

Urea is manufactured from natural gas. The world benchmark efficiency for Urea Manufacturing is 25mcf/ton, while average efficiency in Bangladesh was 44 mcf/ton as of 2014 FY, much higher than that of the international benchmark. Provided that the international benchmark is used in the country, 130 mmscfd of gas would be saved in manufacturing 2,375,000 tons in 2014 and this figure would translate into the power plant equivalent of 1000 MW.

Gas Consumption for the Power Sector (under BPDB) was 337.4 BCF in FY 2014 while Power Generation Capacity was 8,340 MW and Generated Power was 42,200 GWh. From these figures, it is assumed that current power generation efficiency is around 38%. Provided that efficiency can be raised to 45%, which is considered the international benchmark for a gas based power plant, Energy gas consumption will be reduced to 285 BCF, and the difference of 52 BCF can be said to be wasted. This is equivalent to 1,300 MW in power plant annual operation.

In addition, it appears that power generation efficiency of Captive Power is not necessarily high enough. Further investigation is necessary but low gas efficiency is a waste of resources and some penalty should be imposed.

It is necessary to enhance the efficiency to the international level and a supporting legal framework and regulations need to be put in place.

(2) Targets to Achieve

1)  In order to attain efficient and economical development of domestic gas resources, introduction of technologically advanced and financially sound IOCs is considered very important. Policy and legal framework should be reviewed and changed. A new legal/regulation scheme should be developed by 2019.

2) Acquisition of energy resources from overseas is necessary in order to maintain and/or increase the national energy assets belonging to Bangladesh. (Mid/Long Term)

3)  Gas Use Efficiency to be enhanced to the international level with the use of the best commercially available technology (Short/Mid Term).

(3) Roadmap

• Amendment of PSC by 2019 to attract IOCs and encourage them to make investments in Bangladesh

-       International Tender based on new PSC

-       Encourage forming of partnerships between IOCs and domestic gas production companies, i.e., BAPEX 、 BGFCL (Bangladesh Gas Field Company Limited), SGFL (Sylhet Gas Field Limited)

• Role of BAPEX and associated legal framework to be changed by 2019

-       Acquisition of Energy resources overseas by 2028

• Legal framework to enhance gas efficiency to be in place by 2019

-       Efficiency to be enhanced to the international level and discourage the use of substandard facilities.

• Gas Transmission and Distribution infrastructure to be modernized by 2019

-       Transmission and Distribution gas Infrastructure should be electronically mapped and able to introduce advanced monitoring and control systems to support the efficient use of gas.

1.6.5    Natural Gas (LNG Imports)

(1) Current Status and Issues

Gas Production from the current domestic gas fields in 2015 was 2,500 mmcfd and will reach a peak production of 2,700 mmscfd in 2017, then start to decline. However, Gas demand in Bangladesh forecasts a significant increase in future. The demand and supply gap must be filled by gas (LNG) imports. The first LNG will be introduced in 2019 at the rate of 500 mmscfd, which corresponds to 17% of gas demand. This percentage is forecast to increase to 40% in 2023, 50% in 2028, and 70% in 2041.

Figure 1-14 Gas Supply Forecast 2016~2041

Source: JICA Survey Team

Under these circumstances, gas (LNG) import infrastructure, including an LNG Import and re-gasification terminal, and connecting pipeline to the existing transmission and distribution infrastructure, needs to be constructed urgently to fill the supply and demand gap.

Currently, introduction of LNG via FSRU, initiated by Petrobangla, is underway, and concurrently, construction of a land LNG terminal by Power Cell is also under discussion. It is important to understand the difference in these systems in view of economics, construction schedule and operational risk, and it is advisable to prepare in the Master Plan the introduction of LNG to Bangladesh.

The economics of a land LNG Terminal require large upfront investment for land acquisition and

infrastructure construction; however, gas handling capacity can be increased with the increase in demand with minimum cost and schedule. Unit operation cost will be lower with the increase of handling volume. It is also important to note that larger size tankers can be used for LNG delivery and this will benefit the land LNG Terminal by reducing the unit transportation cost.

In view of the construction schedule, a Land LNG terminal requires 10 years including land acquisition and the associated re-settlement plan. FSRU requires less than 3 years for commercial operation.

It should be noted, however, that the current FSRU project in Bangladesh would require more than 60 times’ the LNG delivery using Ship to Ship Transfer, and would be vulnerable to weather conditions. LNG Terminal Capacity will be expanding and transmission capacity of the pipeline infrastructure from LNG terminals to the existing distribution infrastructure may need to be studied in advance. Sending out gas pressure at the terminal should be studied to allow the use of higher pressure for gas transportation, eliminating booster compressors downstream. Higher pressure in the system will impact existing gas systems and well head separation performances. The LNG Master Plan should be prepared to optimize and solve potential operational issues.

Fluidization of LNG supply has started already and the inflexible Take or Pay Contract has been an old legacy in US and Europe. On the other hand, Asia has suffered from an expensive gas pricing system known as the Asian Premium. It is important to tie up with other LNG importing Asian nations and consider the introduction of spot procurement, and discuss product exchange (trading) among the LNG importing nations. It is advisable to own a slightly larger storage capacity and loading facility for re-export. Terms of sales/purchase agreements for LNG are not simple. It is important to set up a strategy taking the above into consideration.

It should be noted that the current LNG price is about ten times higher than that for Bangladesh’s domestically produced and marketed gas, where the current gas price for the electric power sector is

1.02 USD/Mcf and that for the fertilizer sector is 0.94 USD/Mcf. In the near future the dependence on LNG over the total gas supply will sharply increase, and the dependency on LNG is projected to exceed 70% of the total gas supply in the year 2041. Domestic Gas prices need to accommodate the LNG price. Under these circumstances, existing fertilizer manufacturing facilities will not be able to produce economically competitive product and the power price from old existing facilities will not be able to compete economically with higher efficiency facilities. Similarly, more attention should be given to gas leaks and system loss from gas transmission and distribution infrastructure to prevent economic loss, i.e., “the lost opportunity cost”.

It is very important to review the integrity of the existing infrastructure, and swiftly introduce an electronic mapping system with object orientated features as a first step.

(2) Targets to Achieve

1)  Land LNG Terminal: Commence 500mmscfd of gas supply in 2027, expanded to 2,000mmscfd in 2041

2) FSRU Phase 1: Commence gas supply of 500 mmscfd in 2019, and additional 500 mmscfd as Phase 2 in 2023

(3) Roadmap

• Master Plan for LNG Introduction to be prepared and completed by end of 2017, covering economic analysis, construction schedule, operational risks, energy security, and international cooperation (including joint LNG infrastructure operation)

• Initial land-based LNG terminal commences operation in 2027, supplying 500mmscfd of natural gas. The terminal is expanded to supply 3,000 mmscfd gas in 2041.
• FSRU Phase 1 and connecting pipeline to be completed and start supplying 500 mmscfd of gas in 2019
• Impact of LNG introduction on existing gas infrastructure and gas field facilities to be investigated and reinforcement plan to be prepared by 2019
• LNG Procurement Strategy to be prepared by 2018.

1.6.6    Coal

In this section, the infrastructure for import coal and domestic coal development is considered.

(1) Current Situation and Issues

(a) Infrastructure for import coal

1) As for the quantity of import coal in 2041, 60 million tons is expected.

2)  Because the infrastructure for import coal is closely related to handling cost, it is left to the consideration of each power station plan at present. There are some options such as Coal Center + Barge Transport, Coal Center + Belt Conveyor Transport and Offshore Unloader + Barge Transport etc.

3) On the other hand, a Coal Center will be a major solution playing a key role in the future because a steady coal supply is the most critical issue for a power station.

Source: JICA Survey Team

Figure 1-15 Forecast of Coal Demand and Supply

(b) Domestic coal development

1) Coal will be the cheapest primary energy now and in the future and coal-fired power stations will increase in Bangladesh.

2) On the other hand, the coal-fired power stations in Southern Asia surrounding Bangladesh are increasing rapidly. As a result, the supply, the quality and the price of import coal will become very unstable in the future.

3) From the situation mentioned above, domestic coal development will become more important than at present in future, because high quality coal is abundant in Bangladesh.

4) The understanding of inhabitants is necessary for domestic coal development, and the government needs to perform awareness activities in order to gain the understanding of the nation.

5) Despite the high price paid for the coal mined by the Chinese contractor, the technology transfer from the contractor to Bangladeshi engineers has been limited. If this system of the mining continues, the increase in coal production with the development of new underground coal mines will not lead to the reduction in the production cost and, therefore, the stable supply of domestically produced coal will not be realized.

(2) Targets to Achieve

(a) Infrastructure for import coal

1) Enforcement of F/S for the import coal infrastructure

2) Construction based on the F/S

(b) Domestic coal development

1) Technology acquisition in coal mines for Bangladesh

2) Carrying out pilot operation of open cut mining technology in the Barapukuria coal mine.

3) Development permission for Digipara coal mine and Karaspir coal mine

4)  Approval of small scale open cut mining at Phulbari after the pilot operation at Barapukuria coal mine

(3) Roadmap

(a) Infrastructure of import coal

1) Implementation of import coal infrastructure in the F/S.

-  The F/S for the CTT (Coal Transshipment Terminal) planned in the Matarbari area has already been completed (Source: Preparatory Survey for the Construction and Operation of Imported  Coal Transshipment Terminal Project in Matarbari Area in People's Republic of Bangladesh as a PPP infrastructure project).

-  In this plan, phased development for CTT was recommended to provide sufficient flexibility, i.e., to expand the CTT when the power generation program development and realistic commission operation date (COD) become certain.

-  The first phase of the CTT will commence operation in 2025 (planned amount of coal: 10.4 million t/year); the object of the second phase will include those power stations that commence operation by 2029 (amount of coal: 25.6 million t/year) and use the CTT.

-  For the future, with an increase in the development of new coal-thermal power plants there is a need to implement the F/S for the infrastructure and plan for efficient coal transportation.

-  It will be important to conduct a F/S on the possibilities of the construction of CTT in near future and offshore loading and unloading including an analysis of the actual record of the offshore loading and unloading in the Bay of Bengal.

2) Based on the F/S Construction

- For CTT (Coal Transshipment Terminal), efficient coal supply operation while ensuring long-term stability is desired. When planning in Bangladesh, it is important to take into account the natural characteristics such as the broad expanses of sand, cyclones and high rainfall, and the protection of precious animals and plants.

-  When importing coal over a long period of time, facility planning that can respond to changes in the type of coal is desirable as, depending on the coal mine reserves, future coal mines and countries may change.

-  The promotion of mechanization and securing of stable supply for offshore loading and unloading by floating crane; the implementation of early construction of the CTT.

(b) Domestic coal development

1) Because it will take about 10 years to develop a new coal mine and start production, production will begin in 2025 at the earliest even if it is prepared now. Therefore, it is necessary to carry out the required preparation from a position of being able to do this now due to as much utilization of the excellent domestic resources as possible.

2) Unfortunately, the production of Barapukuria coal mines in 2015 was 0.68 million tons and did not reach 1 million tons as planned, but 1.1 million tons from U/G in 2020 and a total of 3.2 million tons (1.2 million tons from U/G and 2 million tons from O/C) from 2030 to 2041 are assumed.

3) In addition, it is assumed that total production will be 1.1 million tons by 2020, 5.7 million tons by 2030 and 11.2 million tons by 2041, considering the production scenario in which Dighipara and Kalaspir coalfields have high development possibility, including the Phulbari coalfield.

4) The acquisition of coal mine technology by Bangladesh

It should be the case that by 2020 systems have been established through which Bangladesh can learn in technologies such as mining, ventilation and mine safety technology for stable production  in the Barapukuria coal mine, and that Bangladesh can play a key role in developing a new coal mine.

It is considered necessary to establish an institution for training mining engineers and a third-party organization for technology transfer, e.g. a mining college, in order to enable Bangladeshi workers to implement and evaluate the outputs of the programs and extend of the use of transferred technologies to other mines later in the medium- to long-term.

1.6.7    Oil and LPG

(1) Current Status and Issues

Bangladesh’s current oil annual demand is around 5 million tons, and the self-sufficiency rate is only 5%. However, Bangladesh expects continuous economic development, and the industry sector and transport sector demand will lead drastic oil demand growth: 6 times higher in 2041 than in 2016 (average growth rate 7.4% p.a.), even under the “Energy Efficient and Conservation Scenario”.

Bangladesh has several plans to extend or newly develop oil refineries; however, if the oil demand grows as projected, oil imports will be mandatory to meet the demand and keep increasing.

Source: JICA “Southern Chittagong” Survey Team and PSMP2016 Survey Team

Figure 1-16 Oil Demand and Supply Balance, 2014 to 2041

Furthermore, Bangladesh’s LPG demand is only 2% of total oil demand, and less than 0.01% of the total energy demand. However, LPG consumption is expected to grow drastically as an alternative for households’ cooking fuel (currently domestic natural gas) and transportation fuel.

The current price of LPG is two to three times higher than that of the pipelined gas, and may not be affordable for average households in Bangladesh. While Bangladesh rural households spend 4-7 % of their monthly income on traditional solid biomass, LPG at the market price would be 25%. If the government seriously intends to pursue universal access to modern energy, LPG may not be a good solution or may need some policy countermeasures. Subsidy of LPG may work to some degree to increase affordability; however, without sound consideration of the side effects and an exit strategy, LPG subsidy would create huge pressure on the national coffers, given the projected future demand.

In terms of affordability, biogas could be an alternative to promote universal access to modern energy, especially in rural areas.

(2) Targets to Achieve

l The government should define a strategic position for oil products in its holistic energy policy, and economic development policy.

l The government should develop an exit strategy for oil product subsidy.

(3) Roadmap

l A clear strategic positioning for oil products in the energy policy by 2017.

l Exit strategy for oil product subsidy by 2017.

1.6.8    Power Development Plan

(1) Current Status and Issues

As mentioned in Chapter PSMP2010 review, five-year power demand by PSMP2010 and its actual performance had remained in about 8,000MW which is about 80% level of the plan, because it was delayed power plant construction which had been planned and necessary infrastructure such as port which is essential to stable fuel imports has not been established.

Therefore, it is considered necessary for the Energy Division and the Power Division to develop an organizational structure and operating system more integrated than before. They must also make concerted efforts to formulate a joint infrastructure development plan, to raise funds in the public-private partnership and to develop infrastructure systematically in order to achieve a stable energy supply, a source of future economic development.

(2) Targets to Achieve

The power demand forecast is an important factor in the formulation of a future power development plan (PDP). However, the accuracy of the actual demand forecast is at such a level that it is difficult to forecast even the demand for the next day accurately and, in fact, it is almost impossible to accurately forecast the power demand for several years or longer. Because of this unreliability of the demand forecast, it is not advisable to formulate a PDP optimal for a certain condition in future and promote actual power development in accordance with this PDP. In other words, it is very important in formulating a future PDP to consider all the elements, including the demand variables in the estimation, conduct a sensitivity analysis while changing these variables within their respective reasonable ranges for a certain system, and analyze the relationship between power generating facilities in the system and the economic, environmental and energy security values of the system.

Therefore, a long-term vision for the power source composition created by making a rough estimation of the future demand based on a scenario of the macro economic growth, simulating a demand/supply operation somewhat simply using the estimated demand scenario as a variable and formulating the optimal PDP is presented as a recommendation. The planning flow is as follows.

Source: JICA Survey Team

Figure 1-17 Power Development Planning Flow

1) Peak Power Demand Projection

As for the methodology of peak demand projection for PSMP2016, this study adopted the “GDP elasticity method”, which is an easier approach and thus easy for technology transfer to local counterpart agencies who are expected to take over the work in a rolling plan. However, it has to be noted that this methodology disregards various factors that may also affect the power demand; hence, the results may differ significantly from other methodologies. This study therefore also tried the peak demand projection based on the “Sectorial analysis method” to confirm the appropriateness of the “GDP elasticity method”.

(a) Estimation of the maximum power that includes potential demands

Because of the particular situation in Bangladesh whereby rolling blackouts have been used as a measure to circumvent power shortages at the peak hours, the recorded maximum power consumption does not include such potential power demand. Therefore, an accurate forecast of the maximum demand including the potential demand requires a theoretical estimation of load curves from the daily operational data with particular attention on the characteristics of the seasonal changes in the daily load curve and the frequency and durations of rolling blackouts.

Because rolling blackouts have been relatively rare on weekends and holidays in the winter (between November and January), a daily load curve gives an actual peak load (at the hours of the peak power consumption for lighting) that is quite accurate. A daily load curve in the summer gives estimates of the base and intermediate loads close to the recorded values.

Therefore, a composite daily load curve representing the peak power demand was created from the daily load curve in the summer with part of the peak hours replaced by the same part of the daily load curve in the winter as shown in the figure below. The peak power demand in FY 2014, which was used as the baseline for the peak demand forecast, was set at 8,039 MW by adding the base and intermediate load in the summer (5,487 MW and 1,043 MW, respectively) and the peak load in the winter (1,811 MW) recorded in FY 2015. The peak power demand in FY 2016 was estimated at 8,921 MW in the same way and this value was used as the reference value in the peak power demand forecast.

Source：JICA Survey Team

Figure 1-18 Estimated Composite Daily Load Curve in the Summer in Bangladesh

(c) Verification of GDP elasticity method by using Sectorial analysis method

In comparing the power demand projection between the “GDP elasticity method” and the “Sectorial analysis method”, this study concluded that the results are almost identical, though the latter exceeded the former by about 5%. Therefore, this study adopted a peak demand projection using the "GDP elasticity method”, which is an easier approach and thus easy for technology transfer to local counterpart agencies who are expected to take over the work in a rolling plan.

Source: JICA Survey Team

Figure 1-19 Comparision of peak power demand in both models

(d) Integration of Peak Power Demand Projection and Energy Supply-Demand Projection

Following the projection of peak power demand as formulated above, this study calculated the available electricity supply from the power grid by multiplying the annual load factor, and then compared this with the projection of total electricity consumption that was discussed in the previous section in the projection of primary energy supply and demand.

2) Power DevelopmentPlan

Short-term and medium-term power development plans are to be formulated after verifying the appropriateness of matters with a little short-term uncertainty (the state and retirement plans of the existing facilities and the plans approved by the Government) in the formulation of a long-term power development plan. The basic CODs of the gas and coal power plants in the long-term and candidate plans are to be determined in conformity with the port and fuel depot infrastructure development plan to be formulated separately in the “Data Collection Survey on Integrated Development for Southern Chittagong Region (Southern Chittagong MP Survey).”

The optimum power source composition is to be determined in the preparation of the future vision of the power source composition by conducting a quantitative evaluation of the economic, environmental and energy security (3E) values of scenarios with different composition ratios for the gas and coal power generation. Different composition ratios for the gas and coal power generation within ranges that are consistent with the infrastructure development plan in the Southern Chittagong MP Survey are to be used in the scenarios, particularly for the highly unpredictable periods for the long-term and candidate plans.

Source：JICA Survey Team

Figure 1-20 Relationship between the Time Scale and the Change in PDP

(a) Existing plants

The installed capacity of existing plants was determined as described below after discussions with the organizations concerned in Bangladesh. The installed capacity of existing plants is 10,895MW as of 2015.

(b) Retirement Plan

The lists of the existing power generation facilities above show their outputs, CODs, retirement years and operation periods. Analysis of these data has revealed that the average operation period for these power plants is approximately 20 years. It is difficult to improve the efficiency of the existing inefficient plants significantly because of the large cost required for such improvements. For these reasons, it has been concluded that the retirement plans prepared by the government are appropriate. The adoption of a strategy aiming at improving the efficiency of the entire power supply network by retiring the existing inefficient power plants gradually and replacing them with new, efficient facilities is considered essential for realizing the maximum use of the limited resources.

(c) Evaluation of the Plans Approved by the Government (Committed Plan)

Power plants with a total output capacity of approximately 14,000 MW are to be constructed in the next ten years. The current status of each thermal power development plan was confirmed based on the discussion with related companies, such as BPDB, BIFPCL, CPGCBL, NWPGCL, Orion Group, etc.

(d) Consideration of Consistency with the Southern Chittagong MP Survey

Guarantee of the long-term stability of the fuel supply is a very important factor in the formulation of a power development plan. The existence of a port infrastructure required for the importing of fuels including gas and coal during operation has to be a precondition for the decision on the CODs of new power plants, in particular. Therefore, the infrastructure and port development plan formulated with the consent of the Government of Bangladesh in the Southern Chittagong MP Survey, implemented by JICA, was used as reference in this analysis and the CODs of the power supply facilities were set in a way consistent with the plan.

(e) Evaluationb of the Ultra-long term Power Development Plan (Candidate Plan)

A study on increasing the power sources by changing the ratios of the gas and coal power generation in accordance with the progress in the infrastructure and port development planned in JICA’s Southern Chittagong MP Survey is to be conducted for the formulation of the candidate plan. In this section, a scenario that sets the composition ratios of the gas and coal power generation in 2041 at 35% is to be used as the basic power development plan.

(f) Summary of Power Development Plan

The figure below shows the power supply plan formulated by adding the capacity of the existing plants estimated with the retirement plan in the plan for the existing facilities taken into consideration (existing capacity), the capacity of the plants mentioned in the Committed Plan to be constructed by 2025, the capacity of the plants to be constructed later in the Candidate Plan that is subject to changes and the capacity required to ensure supply reliability during peak demand.

Power Development Plan (MW) @ Scenario3 : Coal 35% Gas 35%

60000

50000

40000

30000

20000

10000

0

2015                             2020                             2025                              2030                             2035             2040

(Source: JICA PSMP2015 Team Estimate)

PowerDevelopment Plan (Base case)                        Power Development Plan (Base case)

Gas-based Power Plants (MW)

20,000

15,000

Coal-based Power Plants (MW)

20,000

15,000

10,000

10,000

5,000

0

2015                             2020                              2025                              2030                             2035                              2040

5,000

0

2015                              2020                             2025                              2030                             2035                              2040

Oil-based Power Plants (MW)

20,000

15,000

Gas                                                                          Coal

10,000

5,000

0

2015                             2020                             2025                             2030                             2035                             2040

Oil                                                                         Hydro

Power Import                                                               Nuclear

Source：JICA Survey Team

Figure 1-21 Annual Trend of Each Power Plants（MW）

3) Simulation of Supply/Demand Operation

(a) Preconditions for the Estimation of the Economic and Environmental Values (a-1) Daily load curve

The following estimates the daily load curve in Bangladesh during the 2015-2041 period. The performance records of the daily load curve in Bangladesh in 2015 are represented by a curve having a power demand peak in the evening, as illustrated below. In the meantime, by 2041, the economic growth rate in Bangladesh is estimated to reach the daily load curve of advanced countries, where the peak is found in the daytime and evening, if the growth of the electrification rate is taken into account.

Source: JICA Survey Team

Figure 1-22 Transition of estimated power demand during 2015-2041 (Unit: MW)

(a-2) Power supply reliability

An analysis was conducted on the relationship between the reliability of power supply and  the required capacity based on the power demand forecast (Base Case) and PDP. The relationship between the reserve margin and LOLE changes from year to year. If the value of LOLE is set at the standard value for developing countries of 1.0 to 1.5%, the reserve margin theoretically appropriate for the current state is approximately 25%. If international linkage and nuclear power generation are to be introduced ca. 2025, the reliability of the power supply shall have to be improved, as mentioned in detail in the chapter on power quality. A margin of between 8% and 15% will be required in order to achieve the target of LOLE = 0.3%, which is acknowledged to be a very challenging target. Therefore, it was assumed that the reserve margin shall be reduced from 25% in 2020 to the target of 10% by 2030 and shall be maintained at this level thereafter.

Figure 1-23 Reserve Margin

Source：JICA Survey Team

(a-3) Fuel Price Scenarios

The differences between the prices of fuels in Bangladesh, including the price of domestically produced gas in particular, and the prices in the international market are large and fuel in Bangladesh is provided at prices significantly lower than those in the international market. As the future economic growth will inevitably make it impossible to satisfy the power demand with domestically produced resources, the proportion of imported fuel in the fuel supply is expected to increase rapidly and the prices of fuel are expected to increase to close to those in the international market.

In the discussion with the Government of Bangladesh and the IEA, the international organization on energy, it was decided to use the IEA Scenario for the price of crude oil that projected the price on the basis of a very long-term projection of the supply/demand balance in this analysis.

However, there is a difference between the market price of crude oil in the IEA scenario and the actual price in the market in Bangladesh at present. Therefore, an original scenario for this analysis (F5) has been formulated as the basic scenario for the price of crude oil. In this scenario, the reference price is set at the average price of crude oil in the domestic market in 2015 and the price is projected to follow the New Policies Scenario of the IEA (F1) from 2020 onward.

IEA  Crude Oil Scenario

160

140

120

100

80

60

40

20

0

2010             2015             2020             2025             2030             2035             2040             2045

F1 New Policies Scenario (Base Case)                            F2 Current Policies Scenario (High Case) F3 450 Scenario (Low Case)  F4 Low Oil Price Scenario

F5 PSMP2016 Revised Scenario (F1)

Source: JICA Survey Team

Figure 1-24 IEACrude Oil Scenario

(b) General description of Supply/Demand Operation Simulation

The estimation with the least cost method was used in the quantitative evaluation of the optimum power development plan. A good balance of the economic, environmental and energy security values based on the primary energy supply/demand balance, PDP, power system analysis and power system operation was taken into account in the evaluation. The results of the evaluation were reflected in PDP. PDPAT II and WASP IV were used as the tools for the simulation of supply/demand operation in the formulation of PDP, which was implemented in accordance with the flowchart shown in the figure below.

The annual fuel cost for a certain year was estimated by finding the most cost-effective operation of the given power generation facilities to satisfy a given demand of the year concerned in the simulation of the supply/demand operation. At the same time, a comparison of the fuel cost was conducted, the annual expenses were estimated as a total of the fixed cost, fuel cost and inter-connected cost, the least cost operation, the most cost-effective operation of the total power system, was identified in the simulation and the economic value of the power development plan was evaluated. The optimum development plan was selected by comparing the estimated annual expenses with those of other development plans.

Source: JICA Survey Team

Figure 1-25 Simulation schem of the supply/demand operation

The energy mix should be examined based on the fixed factor and the variable factor as shown in the figure below. For the fixed factor, nuclear power plants, power imports, hydropower plants, existing coal-fired power plants, existing oil-fired power plants, and candidate coal, gas and oil-fired plants  that the plan is already in progress should be taken into consideration. For the variable factor, assuming that 70% of the total energy source that is considered appropriate for the power generation plan will be covered by coal and gas, in order to study the optimum energy source composition, five scenarios of energy mix with the share of coal and gas in the energy mix as of 2041 changed from P1 to P5 in the figure below are studied.

In this case, the share of oil and other fuels in the energy mix should not change in each scenario. The energy mix by fuel type from 2015 to 2041 in each scenario is as shown in the following figure.

Source: JICA Survey Team

Figure 1-26 Generation pattern in 2041

After determining the optimum share of gas and coal in the energy mix, for Step 2, changing the share of fuels other than thermal power and nuclear power in the energy mix should be considered.

Source: JICA Survey Team

Figure 1-27 Image for demand and supply simulation

Source: JICA Survey Team

Figure 1-28 Annual Trend of Energy Mix in Different Scenarios

(c) Estimation of Economic Value

The following figure shows the trends of five scenarios for generation cost. As the use of coal spreads in stages, the fuel expense will be slashed, helping curve increases in power generation costs. Thus, the power generation cost is estimated at 9 to 12 US cents/kWh for 2040. In addition, comparison of the power generation cost between the five scenarios for energy source ratio (P1 to P5) shows that the power generation cost becomes higher as the ratio of coal to all the energy sources becomes smaller.

Source: JICA Survey Team

Figure 1-29 Power generation cost under each scenario and Ratio of coal （US cent/kWh）

(d) Estimation of Environmental Value

CO2 emissions in different scenarios are shown in the figure below. The CO2 emissions in 2041 are the highest (0.82 CO2 kg-C/kWh) in Scenario P1, with a high share of coal in the energy mix, and the lowest (0.55 CO2 kg-C/kWh) in Scenario P5, with a low share of coal in the energy mix.

Source: JICASurevy Team

Figure 1-30 Scenario-Wise CO2 Emissions（CO2 kg-C/kWh）

As discussed in Chapter 5, which analyzes the environmental policy, climate change is one of the most critical issues among the environmental impacts of power supply. Bangladesh also submitted INDC to UNFCCC in 2015 and projected greenhouse gas emission reductions in the power sector by 2030.

Thus, the environmental value of each power development scenario should be evaluated focusing on CO2 emissions. This study employed CO2 cost per unit of electricity generated to evaluate the environmental value of each power development scenario. CO2 cost is calculated by multiplying CO2 emissions and CO2 price. In this study, 125 USD/tCO2 is used for the CO2 price, referring to the assumption in the 450 scenario of IEA World Energy Outlook 2015.

(e) Estimation of Energy Security Value

Energy security covers many concepts and there are no common approaches to evaluate it unlike previous two values. Here, we focused on risk of sudden shortage in energy supply quantity, which would directly damage Bangladesh economic activities. The difference ratio of coal and gas among power development scenarios brings different dependence on supplier countries and delivery routes, and thus different shortage risks. This energy shortage risk can be quantified in monetary value as potential loss value of economic production.

Proposed index is calculated using the formula below.

To calculate “possible non-delivery rate”, we modeled physical energy delivery routes to Bangladesh and assumed the blockage probability of each point on the routes. The following figure illustrates the model concept. Among many kinds of risk on the energy delivery routes, we focused on three risks: export suspension risk, blockage risk on land route, and blockage risk on sea route. We ignored the risks to deliver domestic energy.

Physical Energy Flow and Risks

(1) Energy imported by land

(2) Energy imported by sea

Risk

Source: JICA Survey Team

Figure 1-31 Physical Energy Delivery Routes and Risks

With the model, energy delivery rate to Bangladesh can be expressed in the form of probability density function as shown in Figure 1-31, considering many different combinations of risk realization. This curve itself reflects the risk situation of the physical energy delivery of the country. Using the parameter of the expectation (m) and the standard deviation (s) of this distribution curve, we can calculate a  value  of  ( m- s)  which  shows  minimum  delivery  rate  with  84%  confident interval mathematically. In the other word, 1- ( m- s) shows maximum non-delivery rate. This number is that we call “Possible non-delivery rate” here.

Probability                      Expectation(m)

0                          m-s

100%

Source: JICA Survey Team

Figure 1-32 An Example of Probability Density of Energy Delivery

3) 3E Evaluation Results in Bangladesh

Power supply is closely related with economic activities and environmental issues. For a certain pattern of energy supply to be sustainable, it has to satisfy the conditions called “3E,” consisting of the economic value, environmental value and energy security value. The Basic Energy Plan of Japan states that the energy policy of Japan shall satisfy the “3E” conditions.

A quantitative evaluation of the 3E values in 2041 of each of the power development scenarios proposed in the previous section conducted for the selection of the most recommendable scenario is described in this chapter.

Based on the aforementioned methodologies, five scenarios of power development were evaluated

using 3E indicators, as shown in the following table. All indicators are expressed in monetary values and they indicate better performance when the number is small. The sum of these three indicators is the total score for the 3E evaluation.

Table 1-8 3E Evaluation Results of Each Power Development Scenario

Source: JICA Survey Team

Source: JICA Survey Team                                                        Source: JICA Survey Team

Figure  1-33  3E  Evaluation  Results  (Each  Value)      Figure 1-34 3E Evaluation Results (Total)

(g) 3E Evaluation including the Possibility of the Use of Renewable Energy

As mentioned above, after determining the optimum share of gas and coal in the enrgy mix, as Step2, changing the share of renewable energy in the energy mix should be considered. In this study, RE10 scenario increasing 10% Renewable energy and RE20 scenario increasing 20% reneawable energy is considered.

Figs. 1-33 and -34 show the 3E values of the scenarios estimated with the “3E” Evaluation Indicator Estimation Method mentioned above. The introduction of power generation with renewable energy in RE Scenarios 10 and 20 will lead to a significant increase in the unit power generation cost because of the increase in the cost for its introduction.

Table 1-9 3E Evaluation Results of Each Power Development Scenario

Source: JICA Survey Team

Because the power generation cost is an economic indicator that has a great impact on the 3E evaluation, a sensitivity analysis was conducted with different costs for the introduction of renewable energy power generation. Fig. 1-36 shows the result of the comparison of cases in which the introduction cost is assumed to have been reduced by 50% and 75% with the case of introduction at the current price.

The 3E evaluation values of the scenarios with the introduction of renewable energy power generation are lower than those of the scenario without the introduction when the cost of the introduction has been reduced by at least 5%. Therefore, it is advisable to decide the proportion of the power supply generated with renewable energy in the total supply with the reduction in the cost of the introduction to be realized by technical innovation taken into account.

Source: JICA Survey Team

Figure 1-37 3E Evaluation Results (Total)

(3) Roadmap

i)  Short term (up to 2020)

n  Capacity building for MP revision

ü  Collaboration between organizations for power and energy master plan

ü  Periodic rolling revisions for milestone mater plan

ü  Comprehensive statistical work function

ü  Introduction of KPI management

n  Improvement in the investment climate

ü  Improvement of PPA

ü  Reinforcing tax exemption for FDI

ü  Prompt procedure

ü  Financial credit approval by international organization

n  Eliminating rolling blackouts

n  Reform of O&M of power plants and revision of electricity charges

ii)  Short- to medium-term (up to 2025)

n  Breaking away from the dependence on costly petroleum and rental power generation

n  Promotion of PPP investment in power generation projects

n  Reform of O&M of power plants and revision of electricity rates

iii)  Medium- to very long-term (up to 2041)

n  Establishment of reliable large-scale base power sources

n  Promotion of PPP investment in power generation projects

n  Reform of O&M of power plants and revision of electricity rates

n  Realization of the best mix of power sources with high 3E values

Regarding acchieve to best energy mix, in order to maximize the 3E value (the total of the economic, environmental and energy security values) of the power source composition of the energy mix, a portfolio consisting of well-balanced proportions of gas, coal and other power sources shall be realized. This shall be done by halving the proportion of gas power generation to depart from the current heavy reliance on gas, and with the systematic expansion of relatively inexpensive large-scale coal power generation and international connection with the neighboring countries as an exit strategy from the reliance on expensive oil-based rental power.

In addition, the investment cost for the use of renewable energy, which is larger than that for the use of conventional energy sources, is expected to reduce in future with technological advancements and the

extension of its use in society. When this condition has been met, a shift to the active use of renewable energy and a reduction in the consumption of fossil fuel shall have to be realized, following the global trend, with the aim of increasing the use of zero-emission power sources.

Source: JICA Survey Team

Figure 1-38 Best mix including expansion of renewable enegy

1.6.9    Hydropower development

(1) Current status and issues

1) Current Situation of hydropower development

Bangladesh’s climate is categorized as a subtropical zone monsoonal climate, and its characteristic is abundant rainfall. As for the topography of Bangladesh, most of the national land is spread over the delta area along the Bay of Bengal on the Indian subcontinent. Most areas are lower than 9 m above sea level. In this regard, Bangladesh has relatively limited hydropower potential even though it has abundant water resources. Only in the Chittagong hilly terrain area are there some potential hydropower resources.

The existing Karnafuli Hydropower Plant is in the Chittagong area and uses the water of Kaptai Lake. It is the only hydropower plant in Bangladesh and its total installed capacity is 230 MW. Its No. 1 and 2 units (2 units of 40 MW) and No. 3 unit (50MW) were installed with assistance from the United States, and operation started in 1962 and 1982 respectively. No. 4 and 5 units were installed with assistance from Japan, and operation started in 1987. Further, No. 6 and 7 units were planned as a Japanese Yen Loan Project in order to strengthen the power supply for peak demand. However, since an Environmental Impact Assessment was not carried out and local consensus was not attained, a Japanese ODA loan was not provided for the project. The problem was caused by conflicts between indigenous people and immigrant Bengali people who were living around Kaptai Lake. Compensation issues during the construction of Kaptai Dam were also one of the causes. Even now, entry to the area is restricted because of law-and-order problems.

Despite such a situation, the Government of Bangladesh expects further hydropower development for reduction of CO2 emissions and power system stability.

2) Results and issues

Under this Study, potential hydropower sites for Pumped Storage Power Plants (PSPP) and Ordinary Hydropower Plants (Ordinary HP) or Small Scale Hydropower Plants (SSHP) were surveyed. The results of the survey and identified issues are shown as follows:

(a) Potential PSPP Sites

The potential PSPP sites identified in the preliminary map study are shown in Figure 1-39. Comparison of the potential sites was conducted based on the results of the literature survey and site reconnaissance. PSPP No. 17 was selected as the most preferable potential site for the first PSPP project in Bangladesh, and PSPP No. 13 was evaluated as the second potential site. However, it is judged that realization of the projects will be difficult at this stage because of limited map data, restrictions on survey activities and difficulties in the acquisition of and compensation for land due to local sentiments against hydropower development.

In the future, however, it is expected that the selected potential PSPP sites will be developed when the need for PSPP development increases for stability of the power system, and the above mentioned limitations regarding the project implementation are solved.

Figure 1-39 Location Map of Potential PSPP Sites

(b) Ordinary HP/SSHP Potential Sites

The locations of the potential sites for ordinary HP and SSHP in this study are shown in Figure 1-40.

Although the number of site visits was limited the JICA Survey Team came to the assumption that most of the potential sites along the Sangu main river may cause large scale resettlements due to the relatively gentle slope of the river. Though there are some prospective sites in terms of technical and economic viability, those sites may not be suitable sites for development in consideration of the environmental and social impact aspects.

On the other hand, the potential sites on the tributaries of the Sangu River are anticipated to have limited water flow, particularly in the dry season. Thus, those sites do not seem financially viable.

In this regard, these potential sites seem unattractive for development of hydropower projects.

Figure 1-40 Location Map of Potential Sites for Ordinary and Small Scale Hydropower

(2) Targets to Achieve

Targets to be achieved for realization of hydropower development in the Chittagong hilly area are as follows:

l Topographic maps are required for the initial survey and planning for the development of infrastructure including hydropower generation facilities. However, the topographic maps of the Chittagong Hill Tracts that can be used in such a survey and planning are not available.

The government should develop and arrange more detailed (1/25,000 scale) maps required for further planning and conceptual design.

l The implementing agency needs to find a solution to ease the sentiments of local people and to gain understanding as to the necessity of hydropower plants.

l The government should reduce concerns over security in the area.

(3) Roadmap

The road map for development of a PSPP by 2030 is as follows:

l Preparation of maps by 2018.

The topographic maps of the Chittagong Hill Tracts shall have to be made available by 2018.

l Completion of FS and establishment and capacity building of organizations engaged in the pumped-storage power generation (PSPG).by 2020.

It is necessary to conduct a pre-FS or FS for the construction of a pumped-storage power plant (PSPP) at the candidate sites identified in this survey when the topographic maps of the areas concerned have been created and the residents in the areas have given consent to the construction.

Human resource development will also be required for the development of PSPG. An organization engaged in PSPG shall have to acquire the basic knowledge on the functions, roles and economic characteristics of a PSPP. Persons who are to make decision on the feasibility of a project for the construction of a PSPP, in particular, must have sufficient knowledge of PSPG.

Therefore, training on PSPG shall have to be provided to not only the staff of an implementing organization responsible for PSPG but also the decision makers while the above-mentioned pre-FS or FS is being conducted.

l Completion of Detailed Design by 2023.

The training of the power system operators shall also have to be conducted. Stabilization of the power system is a significant function of PSPPs. Therefore, the training of the system operators will be required for the effective use of PSPPs.

It is also necessary to establish ancillary services in the electric power market. When the proportions of coal and renewable energy as the sources of power generation in the power system in Bangladesh increase, the necessity for not only the power load-leveling but also ancillary services will increase and the significance of PSPG will increase. The improvement of the power market including ancillary services will be required for the realization of the optimum power source balance with proper evaluation of PSPG.

l Commencement of Construction of a PSPP by 2024.

A PSPP is a facility contributing to the stabilization of a power system. However, it is not easy to evaluate its value accurately. It is difficult for a private company to construct a PSPP because the profitability of operating such a plant is low unless there exists a special market such as an ancillary service market or a special rate system for PSPG. As the PSPP concerned is the first PSPP to be constructed in Bangladesh, it is expected to be constructed by a parastatal company. Therefore, it is recommended that the PSPP be constructed in accordance with the conclusion of a F/S in an ODA project.

l Commissioning of the first unit of a PSPP by 2030.

1.6.10   Renewable Energy

(1) Current Status and Issues

Regardless of the economic status, developing or developed, it is the international trend to promote renewable energy, as part of energy security as well as greenhouse gas emission reduction. Many countries have adopted renewable energy promotion policies, such as feed-in-tariffs (FIT) and various incentives. India in particular has an aggressive plan, where renewable energy shares half of the new generation capacity to be built by 2040 (while India will also increase coal-fired power plants).

Bangladesh is not an exception to this trend. Its Vision2021 and COP-INDC promise that Bangladesh’s renewable generation capacity share will become 5% by 2015 and 10% by 2021. Bangladesh is currently preparing the competitive bidding by IPPs, drafting FIT and providing other incentives (mainly financial ones) for renewable energy businesses. However, Bangladesh has major constraints for renewable energy expansion – namely land availability and meteorological conditions – and the maximum renewable energy (power generation) potential is up to 3,700MW (see the below Table). Even if the Variable Renewable Energy (VRE), such as solar PV or wind potential, is developed to the maximum potential and connected to the grid, Bangladesh will gain about 4,200GWh per year. This amount is quite limited in comparison with the total grid generation energy (estimated at 82,000GWh in 2020, 307,000GWh in 2040), and the IEA points out that the 5-10% of VRE in the network does not require a major transformation of network development or operation, as such output variation can occur as a result of load change or unplanned power plant outage.¹ Still, as far as Bangladesh increases the grid-connected renewable generation capacity, network and operation capacity needs to be improved. In addition, Bangladesh needs to develop technical rules and regulations for grid-connected renewable energy generation, as they do not exist at this moment.

Table 1-10 Renewable Energy Potential in Bangladesh

* Case 1 (agricultural land excluded) estimate

** Case 1 (flood-prone land excluded) estimate

*** Based on planned projects only, not a theoretical maximum potential, because there is potential overlap with off-grid solar systems. Either could be used to serve off-grid demand.

Source: SREDA-World Bank Scaling Up Renewable Energy in Low Income Countries (SREP)

Investment Plan for Bangladesh, October 2015

Biogas in Bangladesh, while it has limited potential as a power generation source or for meeting major gas  demand,  has  great  potential as  home  cooking fuel. Considering LPG’s expensive  price, biogas

1 According to the IEA, these variable renewable energies would not create a major technical problem if the share of the generated renewable energy (GWh) is 5~10% of the total grid generated energy.

could play an important role especially in rural areas in order to realize SDG 7’s “affordable and clean energy” goal. However, some lead time is required for substantial roll-out of a new type (glass fiber) of biogas digester by removing duties and developing domestic manufacturers, and addressing the biogas issue is a mid-term target.

In addition to the “within-the-boundary” renewable energy potential, Bangladesh is in a good position to exploit the ample regional hydropower potential and import it through the cross-border transmission network. Another JICA Survey shows the cross-border hydropower potential available to Bangladesh is 3,500-8,500MW in 2030, mainly from Nepal and north-west India. Details of the cross border status, issues and countermeasures are discussed in 1.6.11 .

(2) Targets to Achieve

1)  Domestic renewable energy power generation (cumulative): 2,470MW (by 2021), and 3,864MW (by 2041)

2)  Domestic biogas production: 790,000m3/day (including additional 600,000m3/day by 2031, 3 million m3/day by 2041)

3) Cross-border Energy Imports: 3,500~8,500MW (by 2031), 9,000MW (by 2041)

4)  Cross-border energy import rules and regulations’ set-up, associated with capacity building in this area (mid to long term)

(3) Roadmap

1)  Domestic renewable energy power generation (cumulative): 2,470MW (by 2021), and 3,864MW (by 2041)

l  One project utility-scale solar park IPP project on competitive bidding basis, contracted and operation start (short term)

l  Wind Resource Assessment completion (short term)

l  Grid connection technical rules and regulations for renewable energy generation (short term)

l  Grid connection approval process for utility-scale renewable energy generation (short term)

l  Grid enhancement planning and implementation for utility-scale renewable energy generation (short term)

l  FIT and reverse auction setup (short term)

l  Network operation to manage renewable energy’s variable output (short term)

l  FIT revision and application to new projects (mid term)

l  Utility-scale solar project roll out (short to mid term)

2)  Domestic biogas production: 790,000m3/day (including additional 600,000m3/day by 2031, 3 million m3/day by 2041)

l  Import duty/levy on glass-fiber biogas digester/material removal (short term)

l  Glass-fiber biogas digester domestic manufacturer development (mid term)

l  Glass-fiber biogas digester roll-out through IDCOL loan scheme (mid to long term)

3) Cross-border Energy Imports: 3,500~8,500 MW (by 2031), 9,000MW (by 2041) See 1.6.11

4)  Cross-border energy import rules and regulations’ set-up, associated with capacity building in this area (mid to long term)

See 1.6.11 .

1.6.11   Power Imports

(1) Current Status and Issues

Industrial diversification and advancement are essential in order to achieve further economic development in Bangladesh. To this end, improvement of the quality of the power supply, such as stabilization of network voltage and frequency, is a prerequisite. In addition, in anticipation of the growing share of coal-fired thermal power generation in the medium and long term, the exploitation of renewable energy resources with low environmental burden under the climate change perspective is envisaged.

On-grid large-scale hydropower development seems to be an effective measure to overcome the aforementioned issues. However, due to its flat geographical features, Bangladesh lacks prospective hydropower potential over 1 MW apart from the existing Kaptai hydro power plant (230MW). In contrast, there is abundant water power resource potential in the countries surrounding Bangladesh, namely Bhutan, Nepal, Myanmar, and the Indian States of the North East and West Bengal (collectively “neighboring countries”). Thus, it is expected that Bangladesh imports electricity out of such hydropower generation via power interconnections with such neighboring countries for stable base load supply, energy fuel diversification, and climate change mitigation.

The challenges arising from importing power and their countermeasures are as follows.

(i) Energy Security

In the case of importing power from other countries, the risk of supply interruption caused by adverse relationships between the two countries needs to be considered. Electric power, which is different from other types of supply, is technically easy to shut down even in minutes. So it is necessary to avoid excessive reliance on other countries in order not to place oneself in a serious situation. Specifically, the capacity of imported power from one country should be within the limit of generating reserve margin and also 10% of all supply capacity in order to continue the supply in the event of supply interruption. In the case of Bangladesh, imported power from Bhutan and Nepal has to be transmitted through India. Therefore, imported power from Bhutan and Nepal should be within 10% of all supply capacity.

(ii) Compliance with Commissioning Timing of the Transmission Lines in India

The power import plan through India hinges on commercial operation of the Case 2 HVDC (±800kV) interconnection line or the Case 3 HVAC (765kV) interconnection line. These interconnection lines shall be constructed in close cooperation with India after fully understanding and confirming India’s needs.

When hydropower capacity exceeds 3,000MW in Arunachal Pradesh, the ±800kV inter-state transmission line currently under construction reaches its full transmission capacity, giving rise to a need for the construction of the Case 2 interconnection line. On the other hand, there seems to be no reason for India to realize the need for the Case 3 line for the time being. However, need for the Case 3 line’s construction will arise if construction of the Case 2 line is delayed due to a delay in the hydro power development in Arunachal state, or high construction costs etc.

(iii) Massive blackout due to large scale power loss of supply

It is desirable to import as much power as possible through one connecting point from the viewpoint  of economic efficiency. However, if a huge amount of power is transmitted through one connecting point, it can lead to the risk of massive blackout, such as blackout across the entire country during the shutdown of the connecting line. Massive blackout occurred on 1st November 2014, triggered by 500MW power loss of the BTB break down on the inter-connection line from India. In order to avoid

this risk, the limit of the power loss level needs to be worked out, by checking sufficiently continuous power generators’ operation during frequency drop and the load shedding scheme during large scale power supply loss. Based on this result, the maximum level of import capacity in one inter-connection point has to be decided. In concrete terms, it is preferable that the amount of imported power through one connecting point is within 10% of the demand.

(iv) Mutual Interference due to Grid Accidents

Conducting power trading means transmission lines are connected between two neighboring countries, which will lead to the threat of mutual interference due to grid accidents. But it is possible to minimize the influence by connecting DC lines. Current inter-connection lines between India and Bangladesh apply DC lines or non-connected lines by switching the load. There will be a few mutual interferences due to grid accidents in these two cases.

(2) Targets to Achieve

(i) High Case Scenario

The High Case Scenario, in which more electric power can be expected due to operation of the Case 2 line and Case 3 line starting on schedule, is shown below.

Source: JICA Survey Team

Figure 1-41 Future Power Import Volume and its Share (High Case Scenario)

The share of power imports against the total supply capacity will be between 20% and 25% within the permissible range, albeit a little bit large.

(ii) Low Case Scenario

The Low Case Scenario, in which excessive import of electric power from neighboring countries is not expected, is shown below.

Source: JICA Survey Team

Figure 1-42 Future Power Import Volume and its Share (Low Case Scenario)

The share of power imports against the total supply capacity will be approximately 15% within the appropriate range after 2025.

(3) Road Map

Agreement acquisition with India is indispensable in order to achieve the plan for power imports from the neighboring countries that are mentioned above. In particular, it is important to negotiate tenaciously on the following items.

n  Advanced development of the Case 3 line

The Case 3 line is more flexible than the Case 2 line, and more effective for Bangladesh. Because Bangladesh can import electric power from various regions by using the Case 3 line  it is important that it aims to advance development of this line.

n  Securing power transmission capacity in India

Bhutan and Nepal are positively in favor of electric power exports to Bangladesh. However, when Bangladesh imports electric power from the two countries, it must pass through the Indian system. It is especially important to match the system development plan in India and to advance the plan if necessary in order to secure the power transmission capacity in India.

n  Direct connection of PSPP in Meghalaya state to Bangladesh system

The PSPP is a very effective tool for stabilizing the system and improving the power quality. It is necessary to connect the generator directly to the Bangladesh system to enjoy such an effect. As for the PSPP in Meghalaya state, large-scale development of 1,000MW or more is possible at each site. Therefore, it is possible to secure economy even if the system is divided into two parts at the power plant and half of the generators connect with the Bangladesh  system directly.

The existing communication channel suffices for discussions over bilateral power trades between Bangladesh and India. However, if power trades with Bhutan and Nepal are involved, the use of the Indian network is inevitable. Bilateral discussions between a seller (Bhutan or Nepal) and a buyer (Bangladesh) are not enough to facilitate such power trades. A multilateral framework that includes India is a prerequisite.

To provide a discussions platform of this kind, a group of countries comprising Bangladesh, Bhutan, India and Nepal (BBIN) has been formulated. BBIN holds Joint Working Groups (JWGs) twice a year. Therefore, it seems to be most effective to discuss regional power trades and interconnection in JWGs

for the implementation of specific projects.

1.6.12   Nuclear Power

(1)  Current Status and Issues

PSMP2016 aims to create a well-balanced power generation environment that maximizes the respective advantages of different types of power generation methods, including nuclear power, thermal power, hydropower generation, and power imports from neighboring countries, from the comprehensive perspective of stable supply, or energy security, environmental performance, and economic efficiency.

Daily power demand, or load curve varies according to season, temperature, and time of day. Since electricity cannot be stored, and must be used as it is produced. Gas and oil based thermal power generation, by virtue of its ability to respond quick flexibly to ever-changing power demand, supplies middle and peak load. Nuclear power, power import, hydropower, and coal-based thermal power generations are considered as a base load energy. This combination of different types of power sources is commonly referred to as the best mix of power sources. In this PSMP2016, nuclear power generation plays an important role in providing a stable base load.

The following figure shows the PSMP2016 scenario on nuclear power generation, following discussions with the relevant institutions. It is assumed the first unit 1200MW is to start operations by 2024 and the second 1200MW by 2025 on PSMP2016. These figures are preconditioned in the power development planning without alternative cases, which means nuclear power is assumed as one of the Fixed Factors in terms of generation capacity in the simulation, considering the government’s nuclear power projects planning.

Source: JICA Survey Team

Figure 1-43 Nuclear Power Development on PSMP2016

(2) Targets to Achieve

Realization of development of nuclear generation facilities, many challenges shall be solved.

(i) Meeting IAEA safety standards2

Nuclear safety remains the highest priority for the nuclear sector. Regulators have a major role to play

2 IAEA Safety Standards homepage

to ensure that all operations are carried out with the highest levels of safety. Safety culture must be promoted at all levels in the nuclear sector (operators and industry, including the supply chain, and regulators) and especially in newcomer countries (Nuclear energy roadmap actions and milestones, IEA, 2015) like Bangladesh. Followings are major frameworks to secure the nuclear safety to be followed and utilize for Bangladsh.

Nuclear safety is a global issue. There are many instruments for achieving high level of nuclear safety on a global basis, such as IAEA safety standards, safety review services provided by the IAEA. The IAEA safety standards provide a system of safety fundamentals, Safety Requirements and Safety Guides for ensuring safety. They reflect an international consensus on what constitutes a high level of safety for protecting people and the environment from harmful effects of ionizing radiation. The IAEA safety standards are applicable throughout the entire lifetime of facilities and activities existing and new utilized for peaceful purposes, and to protective actions to reduce existing radiation risks. For proceed nuclear power project, all shall follow the IAEA safety standards.

Source: IAEA Safety Standards homepage

Figure 1-44 Structure of IAEA Safety Standards

IAEA recommends some critical issue for strengthen nuclear safety

n  The regulatory body should be strengthened. The draft Bangladesh Atomic Energy Regulations     Act of 2011 should be promulgated as soon as possible to establish an independent regulatory body.

n  Management of the nuclear infrastructure development  should  be  strengthened.  Bangladesh should commit to ensure appointment of leaders (especially in future owner and regulatory body) with appropriate training and experience for leadership and management of safety. Integrated management systems (including quality management) should be planned and implemented in both BAEC and the regulatory body that define the organizational goals and key processes in sufficient detail.

(ii) Establishment of fuel cycle management³

Based upon the existing nature of the nuclear business worldwide, Bangladesh is considering a long-term contract and transparent suppliers' arrangements with supplier(s) through backing of the

3 IAEA Country Nuclear Power Profiles, 2016 update

respective government in order to ensure availability of fuel for the nuclear power reactor of the country. Examples would be fuel leasing and fuel take-back offers, commercial offers to store and dispose of spent fuel, as well as commercial fuel banks. On the other hand, at present there is no international market for spent fuel disposal services except for the readiness of the Russian Federation to receive Russian supplied fuel. Storage facilities for spent fuel are in operation and are being built in several countries.

Bangladesh is considering accessing detailed technical descriptions of the nuclear fuel assemblies offered from the supplier side, including physical, thermo-hydraulic, thermodynamic and mechanical data as well as calculations for batch planning (short term and long term). The supplier shall provide the QA programme, Handling and inspection methods for new and spent fuel and Tools for fuel and control rod manipulation and the scope of supply and services. The first core as well as the first reload should be included in the scope of supply for the plant. The bidders should include the supply of further reloads as an option.

IEAE points out that the general concerns of Bangladesh about the nuclear fuel cycle are as follows.

n  The owner/operator of the nuclear plant in Bangladesh needs to ensure availability of fuel for the NPP from supplier(s) covering its entire life cycle.

n  The above life cycle supply assurance shall include all services related to the front end of the fuel cycle. “Fuel leasing-fuel take-back” model (full or partial) is conceivable for Bangladesh.

n  Alternate sources of services and supply of the front end of fuel cycle should be identified to accommodate any unforeseen circumstances.

n  Depending on the size of the nuclear power programme, efforts will be made to acquire the technology of fabrication of fuel elements based on imported raw materials and enrichment services in order to ensure security of fuel supply.

n  Pending a final decision on the  back-end  of  the fuel cycle, the NPPs  will have provision for on/ off -site spent fuel storage, the size of which shall be sufficient to store the spent fuel generated over their respective life cycles.

n  Sufficient security and physical protection and safety of the fuel storage on-site will be provided     in accordance with the relevant provisions of the non-proliferation regime, as well as national law and regulations on nuclear safety and radiation control.

Bangladesh will consider any suitable model of nuclear fuel cycle under the responsibility of the IAEA as the guarantor of service and supplies, e.g. as administrator of a fuel bank.

Bangladesh opines that as far as assurances of supply are concerned, the proposed multilateral approaches to nuclear fuel cycle could provide the benefits of cost-effectiveness for developing countries with limited resources. Bangladesh is strongly supporting the Agency’s approach of developing and implementing international supply guarantees with IAEA participation.

(iii) Proper knowledge about nuclear safety and Public Acceptance

Many kinds of programmes, such as meetings and seminaars with journalists, local people, have been arranged till now, and Bangladesh has established Nuclear Industry Information Center in 2013. ⁴ These kind of activities should be continued and enhanced for the public knowledge which will be the basis for public acceptance.

However, BAEC has conducted survey in 2015 on public acceptance / awareness for nuclear power project and it is found that still concrete public opinion for nuclear power generation has not yet formed in Bangladesh since accurate information of nuclear generation technology has not became widely and correctly known.

Therefore, the government has to do more supporting enlightenment activities to enhance accurate technical knowledge on nuclear generation with good point and bad point as well as safety issue.

4 Presentation by MoST, “NATIONAL NUCLEAR POWER PROGRAMME OF BANGLADESH”, https://www.iaea.org/NuclearPower/Downloadable/Meetings/2014/2015-02-03-02-06/D1_S2_Bangladesh_Akbar.pdf

It is also recommended to review other countries’ experience of interactive communication with  public (citizen society) on nuclear technology and its safety, and ask for necessary cooperations.

As for emergency preparedness, several committees have been formed involving relevant stakeholders to formulate the emergency management system during the operation of Nuclear Power Plant in the territory of Bangladesh. These committees have already held several meeting with national and international experts. The Government is also very much eager to develop a standard emergency preparedness system for the densely populated country.

Source: Ministry of Science and Technology, 2015

Figure 1-45 Nuclear Industry Information Center

In addition, the government is preparing the Multi purpose information center around Rooppur NPP site to strengthen public communication strategy with public and media. Expected PR-program is as follows;

n  Scientific workshops & round tables, discussion clubs

n  Information center

n  Social networks/ Social activities

n  Expert opinions

n  Televisions (talks shows, documentaries)

n  Book “100” Facts bout Nuclear Energy

n  Communication of press releases & organization of interviews

n  Interaction with neighboring countries…etc

(iv) Participating international framework5

The Asian Nuclear Safety Network (ANSN) was launched in 2002 to pool, analyze and share nuclear safety information, existing and new knowledge and practical experience among the countries. Moreover, the ANSN is expected to be a platform for facilitating sustainable regional cooperation and for creating human networks and cyber communities among the specialists of those countries. Development of a regional capacity building system composed of knowledge network, regional cooperation and human networks will serve for enhancement of nuclear safety infrastructures in the participating countries, and will serve eventually for ensuring and raising the safety levels of nuclear installations in the region. The ANSN has recently expanded to become a forum for broader safety strategy among countries in the region.

The current participating countries are Bangladesh, China, Indonesia, Japan, Kazakhstan, Republic of Korea, Malaysia, the Philippines, Singapore, Thailand and Vietnam. Australia, France, Germany and the USA are ANSN supporting countries. Pakistan is an associate country in activities related to the

5 Asian Nuclear Safety Network homegage

safety of nuclear power plants and/or strengthening their regulatory frameworks. For proceed nuclear power project, all shall work with international framework.

Source: Japan Nuclear Energy Safety Organization

Figure 1-46 Asian Nuclear Safety Network (ANSN)

(v) Ratification to the international laws and standards

Bangladesh has not ratified the following critical international laws:

n  Vienna Convention on Civil Liability for Nuclear Damage

n  Protocol to Amend the Vienna Convention on Civil Liability for Nuclear Damage

n  Joint Protocol Relating to the Application of the Vienna Convention and the Paris Convention

n  Joint Convention on the Safety of Spent Fuel Management and on the Safety of Radioactive Waste Management, etc.⁶

For the implementation of RNPP, these international laws and standards should be followerd.

(vi) Other issues

There are many issues such as;

n  Nuclear power planning integrated into the part of power & energy planning, such as alternative generation capacity in case of outage of nuclear power plant, reliability of the power supply system

n  Development of science technology experience within the country

n  Emergency planning

n  Protection of the power plant from natural disaster (e.g. cyclone, flood, earthquake, etc) or outside human disaster (e.g. terrorist activities, etc)

(3) Road Map

(i) Construction

Consideration of the domestic legal and regulatory conditions to obtain;

n  required licenses for building NPP,

n  industrial base to support NPP construction,

n  availability and competence of human resources for managing the NPP construction project,

n  national resources as well as its social, economic and environmental condition to support NPP build.

6 IAEA factsheet: https://ola.iaea.org/ola/FactSheets/CountryDetails.asp?country=BD

Source: Ministry of Science and Technology, 2015

Figure 1-47 Roadmap for nuclear power development

(ii) Legal and implementation framework

All legal and implementation framework shall be established, and even be in an active before a commissioning of the first nucleare power generation as follows;

n  Meeting IAEA safety standards

n  Establishment of fuel cycle management

n  Propoer knowledge about nuclear safety and public acceptance

n  Participating international framework

n  Ratification of the international law and standards

(iii) Comissioning of generation

n  2024/25: 1^st and 2^nd units

n  2030/31 3^rd and 4^th units

n  2040/41 5^th and 6^th units

1.6.13   Power System Plan

(1) Current Situation and Issues

1) Transmission Plan

The operating voltages of the Bangladesh power network system are below 230kV and 132kV, except for the 500MW HVDC link to India that began to be operated in 2014 at Bheramara. The 400kV transmission lines and substations have just recently started to be constructed. Many existing power stations have only a capacity of below 100MW, using domestic gas. They are currently distributed across the whole of the nation. The following figure shows the current national power network system of Bangladesh, which consists of 230kV and 132kV, without 400kV, and small-scale power stations connected to substations distributed across the whole of the nation.

Figure 1-48 The Existing Bulk Power Network System of Bangladesh (2014)

An efficient power network system, including 765kV and 400kV transmission lines, needs to be studied in consideration with the plan for large scale power stations, the high density of power demand in and around Dhaka and Chittagong and the characteristics of Bangladesh’s power network system as shown below.

l  The rapidly deteriorating and inefficient small-scale power stations with capacity below around 100MW will be phased out in sequence.

l  The future thermal power units will mainly use imported fuel such as coal or LNG. Because the locations where suitable seaports can be constructed to receive large scale ships for imported fuel are limited to south Chittagong and Khulna (Pyra and Patuakhali), the large scale power stations with a capacity of several thousand MW will be unevenly distributed in those areas.

l  A nuclear power station with a total capacity of 4,800MW is planned for Rooppur.

l  In the case of power transmission from hydropower stations located in Bhutan or Nepal through

India, HVDC interconnections with a capacity of around 500–2,000MW will be required in the north western part of Bangladesh.

l  The power demand density in Dhaka and Chittagong will increase further  due  to  their  rapid growth ratios.

l  Although it is required to transmit power of several thousand MW from Chittagong to Dhaka, the number of circuits in the transmission lines is restricted on the route through Comilla because the width of the country is narrow and the population density is large in the Comilla region.

l  The construction of transmission lines crossing between east and west in Bangladesh will incur much cost because Bangladesh has two large rivers, named Jamuna and Padma, flowing in the center of the country, with widths of at least around 4.5km to 6km.

2) Rural Electrification

While the government has established “Electricity for all” by 2021⁷, in its Vision  Statement, there is no single internationally-established definition for electricity access.

As of December 2015, the Power Division recognizes the electrification rate of Bangladesh as 77%. In government policy statements such as the 7th Five Year Plan, the Power Division’s figure is adopted.

Table 1-11 Electrification Rate Calculation Details by Power Division

Source: Power Cell, Power Division

The Electrification rate adopted by BPDB is the ratio of number of access and the whole population. Access to Electricity is calculated by the below equation.

Access to Electricit y

(%)=

Numberof

Electrified Customer ´ 7*1 + NumberofTotalPopulation

SHS ´ 4 *2

Source: BPDB System Planning Division

*1      It assumes that the number of people per grid connection (per household) is 7.

Household: Husband, wife, children x 2, father, mother + 1. There are big customers such as hospitals, so 1 is added.

*2    It assumes that the number of people per off-grid connection (renewable) is 4 (-2014) or 5 (2013-). This is based on the assumption that a household using SHS has fewer family members than a grid-connected household.

This BPDB definition indicates that the electrification rate improvement has two paths: one is on-grid connection, the other is off-grid connection (e.g. SHS).

7 In the 7^th Five Year Plan adopted in December 2015, the target by 2020 is set as “electricity coverage to be increased to 96 percent with uninterrupted supply to industries”.

The following figure shows the Access to Electricity provided by BPDB. According to this figure, 60% of the population was electrified by grid connection; 8% was electrified by SHS installation. In total, 68% of Bangladesh was electrified in 2014.

80%

70%

60%

50%

40%

0%           0%

0%

0%

0%

2%           3%

8%

7%           7%

30% 0%          0%

20%

30%         32%

35%         38%         42%         43%

44%         47%         48%         49%         53%

55%         60%

10%

0%

2002        2003        2004        2005        2006        2007        2008        2009        2010        2011        2012        2013        2014

Electlified Rate by On-Grid                    Electlified Rate by Off-Grid

Source: JICA Survey Team, based on the data provided by BPDB

Figure 1-49 Development of Access to Electricity (BPDB definition)

The below Figure shows the BREB’s grid extension projections by 2021, compared with the actual trend in the past up to 2015. The solid black line shows the actual implementation, and the red solid line indicates the sum of the individual grid extension projects (as of February 2016).

It should be noted that BREB made a great improvement in grid extension implementation between 2014 and 2015, when it substantially increased the grid extension speed compared with the past (between 2003 and 2013). The dotted blue line (Projection 1 in the Figure) means that if BREB keeps the implementation speed as fast as that between 2014 and 2015, it will in theory reach 100% on-grid extension (in other words, 440,000km distribution line development) by 2021 (it should also be noted, however, that there is a technical issue with on-grid extension, as described later). On the other hand, if BREB lowers its grid extension implementation speed to as slow as that between 2003 and 2013, it would end up far below its target (green dotted line, projection 2 in the Figure).

Source: JICA Survey Team

Figure 1-50 BREB On-grid Extension Plan Comparison

The SHS installment has been implemented by IDCOL and the progress is at a world-renowned pace (as seen in the below figure).

Source: JICA Survey Team

Figure 1-51 Number of SHS under IDCOL Program

(2) Target of the study

1) Transmission Plan

The power network system is examined by categorizing the study phase into mid-term (2025) and long-term (2035) through reviews of PSMP2010 in consideration of the application of 400kV and 765kV. The transmission lines and substations are planned in order to fulfill the criteria that are set as the rules for power network system planning and analysis.

An efficient bulk power transmission network is planned reflecting the results of the power demand forecast and power generation plan in this MP by recognizing the abovementioned current situation and issues.

Source: JICA Survey Team

Figure 1-52 Conceptual Map of Locations of Large Scale Power Stations Planned Up to 2035

2) Rural Electrification

l Only one definition of electrification rate should be selected. Also, the national census states that the average family member size is 4.6, while 7 is adopted by BPDB.

l Grid extension in the next 5 years requires the same implementation speed as that seen between 2014 and 2015, or twice as fast as the historical pace (average between 2003 and 2015).

l BREB and IDCOL coordination and communication should be improved for efficient planning and implementation. BPDB’s current role as “coordinator” could be reconsidered.

l SHS waste recycling needs will drastically increase after the early 2020s. It should be confirmed whether the current scheme has proven effective and scalable.

1.6.14   Improvement of Power Quality

(1) Current Situation and Issues

1) Necessity of Power Frequency Quality Improvement

In general, the following objectives to improve frequency quality can be mentioned:

l  To improve the quality of industrial products.

l  To increase the allowable capacity of PV and wind power sources.

l  To secure the stable operation of large capacity generation plants (especially, nuclear power plants).

All of the objectives may have high potential needs, but the methodology for determining the target value for improvement has not been established yet. And it becomes more difficult than before to determine the target value because the number of inverter circuits, which are inserted between the power grid and consumer’s facilities or distributed power sources, is gradually increasing, though, qualitatively, it can be determined depending on the trade-off relationship between cost and benefit for consumers.

On the other hand, for stable operation of synchronous machines, such as large capacity generating units, there is a quantitative requirement that the frequency quality shall be raised to within ±1.0% of the standard value (50±0.5Hz).

In particular, the equivalent frequency quality is required in order to connect and operate stably the nuclear power plant planned to be commissioned in 2024. Therefore, ±1.0% can be set as a short-term target value.

Consequently, we set, in this Study, “±0.5Hz by 2024” as an essential target value, and “±0.2Hz by 2041 at latest” as a tentative value.

2) Current Situation

(a) Current conditions of generating facilities and significant deficiency of power sources

As seen in the results of the survey about the situation of supply-demand balance on days of maximum peak demand from 2013 to 2015, the load shedding operation is frequently performed, even though the installed capacity rate has been adequately secured at more than 130% every year.

The major factors involved in this situation are as follows:

l The available capacity is chronically insufficient due to decreases in the  output  and  thermal efficiency and failures of power generators mainly due to the insufficient periodic maintenance, which results in a decrease of around 30% of installed capacity.

l    Normally,  full authority for preparing, approving and implementing the supply-demand balance    plan should be given to NLDC in order to carry out the balancing operation properly. However, NLDC has no authority to coordinate the generating plans prepared by BPDB and other generation companies.

(b) The actual conditions of power frequency control

At present, adjustment of the output of generators is instructed by phone (online instructions from SCADA are not issued). System frequency deviation from 50 Hz often exceeds ±1.0 Hz even in the normal operating condition (Grid Code stipulates that the system frequency shall be controlled within

50Hz±1.0Hz under normal conditions.)

The major factors contributing to this situation are as follows:

l There is almost no remaining power which can be offered for frequency control due to  asignificant deficiency in power sources. That is, all generators have no other choice except to keep their outputs at the maximum of available capacity.

l         Grid Code in Bangladesh seems to have most of the necessary and minimum provisions related to frequency regulation and authority of NLDC. However, unfortunately, these provisions still  seem to have poor effectiveness.

l         There is no compensation system for the opportunity loss of power selling due to the  contribution to frequency control.

l There is a strong desire to obtain detailed information about a power system  among  the stakeholders, because supply-demand control and frequency regulation should be performed under fair and transparent circumstances.

3) Issues regarding power quality

(a) Regulatory framework Regulation by the Electricity Acts

A rough comparative study between the provisions of Electricity Acts in Japan and Bangladesh is performed.

As shown in the following table, there is only one obligatory provision (④) without penalty in relation to stable demand/supply operation and frequency control in Bangladesh, while there are five provisions with penalties in Japan:

Amendment is urgently required regarding several kinds of obligation rules and their penal provisions in order to enhance effectiveness.

Regulation by independent regulatory organization

The JICA survey team performed a comparative study of provisions between the two Grid Codes established by the regulatory commission of each country, BERC (Bangladesh) and OCCTO (Japan), in relation to the work process for supply-demand operation and frequency control, as shown in the following table:

From the results of this comparative study, it was found that the necessary minimum provisions for the supply-demand control process are appropriately stipulated in BERC’s Grid Code. However, there seem to be no provisions for securing reserves (operating reserves, spinning reserves and so on).

(b) Prospect of frequency quality improvement and challenges in the future

Frequency regulation control is usually realized by a combination of FGMO (Free-governor mode operation) and LFC (Load frequency control).

In this study, the JICA survey team conducted a trial calculation for future frequency improvement when the regulation control is performed by FGMO only, because:

l LFC function in SCADA/EMS is not prepared for use at present.

l LFC cannot follow the sudden change in supply-demand balance caused by the trip of a generating unit or load shedding.

Power frequency quality improvement in the N-0 Case (Normal Conditions)

Unfortunately, there is no globally standardized method to evaluate the frequency improvement. Therefore, in this study, the JICA survey team calculates the available spinning reserves provided by generators and the necessary amount of reserves to improve the frequency fluctuation per 0.1Hz, under certain conditions and assumptions. The trend of future frequency quality can be estimated by finding the balance point of available reserves and necessary reserves. For details, refer to the full final report.

The following graph shows the available spinning reserves and necessary amount of reserves each year:

2500

2000

1

1

Source: JICA Survey Team

Figure 1-53 Comparison between the Necessary Reserves and the Available Reserves

Solid line in red + Range in green = Available spinning reserves

= [Hydro (100%) + Oil (100%) + Gas (100%) + Coal (50%)] newly installed after June 2015

×  80%   (assumption of planned and unplanned outage rate)

×  3 - 7% (assumption of the effective range of adjustment by FGMO)

Dashed lines : ΔP = 0.263 *√P (MW/0.1Hz)

ΔP : Necessary amount of reserves to improve frequency per 0.1Hz P  : Total power demand

(Frequency fluctuation, at present, is assumed to be ±1.5Hz)

The following graph shows the trend of frequency quality improvement from the viewpoint of fluctuation range. Fluctuation range under normal conditions, at present, is set to ±1.5Hz according  to the chart provided by NLDC.

1.70

1.60

1.50

1.40

1.30

1.20

1.10

1.00

0.90

0.80

0.70

0.60

0.50

0.40

0.30

0.20

0.10

0.00

Source: JICA Survey Team

Figure 1-54 Trend of Power Frequency Quality Improvement

From the results of these analyses, there will be huge potential for appropriate frequency regulation under normal conditions, if sufficient reserves for FGMO can be prepared in a carefully planned way.

l  By 2024, when a Rooppur nuclear power generating unit commences to be operated, sufficient reserves can be prepared so that the frequency fluctuation can be reduced to ±0.5Hz or so, if effectiveness of FGMO is expected to be 5% of total demand (average level)

l  By 2041, sufficient reserves can be prepared so that the frequency fluctuation can be improved to

±0.2Hz or lower.

Power frequency quality improvement in the N-1 Case (Emergency Conditions)

Even when a significant frequency deviation occurs due to a sudden trip of large capacity generators, lowering of frequency should be limited to within a certain level and promptly recovered via sufficient reserves.

Source: JICA Survey Team

Figure 1-55 Schematic Diagram of the Frequency Deviation Immediately after the Generation Trip

Overshoot of frequency immediately after the generation trip can be regulated only by FGMO and the inherent characteristics of the flywheel effect in load. Therefore, urgent preparation for FGMO is required in Bangladesh. The large capacity generator (power source) trip events which should be taken into consideration in Bangladesh are as follows:

Table 1-12 Supply Trip Amount and Factors Which Should Be Considered in Each Year

Source: JICA Survey Team

The following graph shows the assumption for frequency deviation (Δf) using the standard value in TEPCO, when a sudden trip of a Rooppur nuclear power unit (1180MW) occurs under the minimum demand conditions each year after 2024.

Source: JICA Survey Team

Figure 1-56 Trend of minimum values of frequency immediately after a sudden trip of a Rooppur unit

As shown in the graph above, frequency overshoots below the UFR settings, 48.9Hz, due to the trip of the Rooppur unit in a low demand season or time zone, which leads to load shedding until 2028. However, it should be allowed in order to avoid a cascading outage and blackout.

(2) Targets to Achieve

1) Improvement of Electricity Act and Grid Code Framework

(a) The Electricity Act 1910

Amendment to add provisions for various obligations and penalties for improvement of power quality is urgently required.

(b) The Grid Code 2012

Grid Code in Bangladesh has necessary provisions to a certain extent, but provisions in relation to preparation of reserves should be enhanced.

2) Improvement of Frequency Quality

Adequate reserves for FGMO should be prepared in a planned way, enough to improve frequency fluctuation within ± 0.5 [Hz] (1/3 of fluctuation at present) as recommended in IAEA guidelines until the operation of Rooppur nuclear power plants start in 2024 and 2025.

Adequate reserves for load shedding by UFR should be set in order to prevent a blackout as a tentative measure.

(3) Roadmap

1.6.15   O&M Legal Framework

(1) Current Status and Issues

It has not been possible to suspend the operation of power generation facilities and inspect them regularly because of the permanent shortage of the power supply in Bangladesh. The legal framework for the preventive maintenance and O&M of these facilities is insufficient. BPDB is financially unsound because of the low power purchase price. Because of these reasons, the power generation facilities  are  not operating at their design performance level (in terms of power output, thermal efficiency, etc.). Therefore, the establishment of an integrated system for the stable power supply is required.

The analysis conducted on solving the problems concerning the preventive maintenance and O&M of the thermal power plants with the development of a system, or the establishment of a legal framework, is described in this subsection. In addition, the analysis conducted on solving the same problems with measures to be taken in the plants is described in the next subsection.

<Issues>

1) Necessity of institutionalization of periodic inspections

Since periodic inspection is not stipulated by law in Bangladesh, periodic inspections tend to be postponed due to reasons such as budget shortages or tight electricity demand, thus resulting in unplanned and undesirable shutdown.

2) Necessity of institutionalization of safety audits

Government agencies, as they do not visit power plants to check the inspection situation, do not know whether the machine conditions allow proper operations or not.

3) Necessity of institutionalization of chief engineer

As the responsibility for technical matters in a power plant is not clear, the organization doesn’t function properly in the case of trouble.

4) Necessity of institutionalization of Safety regulations

Basic concept of security for operations in power plant is not documented.

5) Necessity of institutionalization of technical standards

National technical standards that would reduce the amount of accidental trouble and disasters are not regulated.

These five provisions are essential for stable operation in Bangladesh.

(2) Targets to Achieve

l  Periodic inspections

• Purpose

²  To avoid postponement of inspections due to budget shortages or tight electricity demand, etc. by securing periodic inspections.

²  To prevent serious accidents by conducting periodic inspections.

• Action

²  Authorities decide the intervals and inspection items for periodic inspections.

²  Generators have to conduct the periodic inspections.

l  Safety audits

• Purpose

²  To audit whether periodic inspections are implemented properly or not.

²  If there is a defect in the periodic inspection, auditors instruct on its correction.

• Action

²  Authorities decide items for safety audits

²  Generators undergo periodic safety audits by authorities

l  Chief engineer

• Purpose

²  To clarify the responsibility for technical matters

²  To carry out technical management under the chief engineer

• Action

²  Authorities order generators to stipulate the responsibility of chief engineer

²  Generators select chief engineer from among licensed persons

l  Safety regulations

• Purpose

²  To establish self-management system by making safety regulations

²  To establish PDCA cycle of operation independently

• Action

²  Authorities order generators to set up safety regulations

²  Generators follow their safety regulations

l  Technical standards

• Purpose

²  To prevent accidents and disasters caused by technical issues

²  To reduce the amount of forced maintenance work

• Action

²  Authorities make national technical standards

²  Generators follows the national technical standards

(3) Roadmap

The suggested O&M legal items mentioned above can be divided into three categories as mentioned below, and these measures are recommended to be taken step by step.

l  Strengthening of control by government

• Periodic inspections
• Safety audits

l  Self-management by Generators

• Chief engineer
• Safety regulations

l  Enhancement of technical aspects

• Technical standards

Based on the assumption that the preparation time for regulations is 2 years and the starting time for the respective categories has a 1 year difference, the schedule becomes as follows.

Figure 1-57 Schedule for Legal Reform

1.6.16   Thermal Power Plant O&M

(1) Current Status and Issues

In Bangladesh, some thermal power stations have a capacity problem due to a lack of O&M practice. This leads to the power production shortfall. Higher efficiency can be achieved by applying an appropriate O&M practice with sufficient skills, so that the plant capacity can be recovered. In order to comprehend the O&M situation in Bangladesh as a whole, the JICA study team carried out screening with the following selection criteria, and then, selected some target sites for rehabilitation and conversion to combined cycle as remodeling plans. The screening criteria are shown below.

(a) BPDB owned

Grounds: BPDB is the largest generation public company in Bangladesh

(b)Operation period: more than 10 years, less than 30 years Grounds: 10 years of experience in O&M is preferable.

A unit older than 30 years may have large-scale malfunctions regardless of the application of the remodeling plan, therefore, 10-20 year long stable operation may not be expected after the completion of the remodeling works.

(c) Larger than 100MW

Grounds: There is little to expect from the rehabilitation effect on a small power unit.

(d)Availability higher than 30%

Grounds: This means the plant is very useful, and will continue to be vital in the future.

(e) Lowered output or efficiency

Grounds: A large effect can be expected.

Figure 1-58 Site Selection

Source: JICA Survey Team

Figure 1-59 Target Site List

Source: JICA Survey Team

The study was performed based on interviews with and questionnaires for the representatives of the target power plants. The results are categorized into Human Resources, Facility, Finance, and, Information, which are commonly referred to as organizational resources in management of an enterprise. As shown in the table below, the problems exist across the organizational resources.

Table 1-13 Problems in Organizational Resources

Source: JICA Survey Team

While solutions to each problem are proposed in (2) Targets to Achieve, in accordance with the

analytical method based on the organizational resources, some of the problems still remain unsolved in the tree, which are:

• Lack of standards for replacement
• LTSA does not exist
• Lack of standards for maintenance
• Absence of legal enforcement

These are firmly connected with the legal framework which should be  enacted by  the  government. As the development of the legal framework has been examined in detail in the previous subsection, it is not described in this section. However, it is possible for owners of power generation facilities to conduct regular inspection without a legal regulation. It is necessary to make them aware that regular inspection at short intervals will lead to long-term stability of output and the sustainable profitability of power generators.

(2) Targets to Achieve

As a facility enhancement solution for the capacity problem, this Study proposes rehabilitation and conversion to combined cycle. It also proposes the following plans to facilitate regular maintenance which requires information management and plant crew trainings.

Table 1-14 Solution Proposals

Source: JICA Survey Team The study team proposes the following feasible plans to implement the solutions above, which are considered to be effective in human capital development, facility enhancement and efficiency improvement in financial decisions.

The human capital development proposal includes a new training facility with a practical training system (Training Center). The Training Center is purported to provide trainees with:

• High-tech education for new power facilities.
• Practical training courses and opportunities to experience real operations and maintenance practices.
• Education for certifications in compliance with laws and regulations.

In order to meet the training demand, the study mentions about inviting trainees to Japan during the construction of the training facility.

The facility enhancement proposal is based on a B&S (build and scrap) unit remodeling plan possibly applied to Haripur and Fenchuganj. Compared to the other plans, the B&S plan has smaller impacts on the production level of the power station. The capacity of the combined cycle unit is expected to be 100MW, which is responsive enough to fill the gap in the case where the frequency fluctuation indicates a gap between peak demand and supply.

A 100MW combined cycle unit has the following advantages:

• Quick start, short ramp-up (2 hours to reach the full load capacity).
• High efficiency in the low load range.
• Cost efficiency.

In order for the authority to improve efficiency in financial decisions, creation of mid-to long-term plans for procurement in alignment with facility maintenance plans is strongly recommended. The delays in budget and procurement approval would be reduced or removed, which should encourage plant managers to create feasible maintenance plans.

• Costs for regular maintenance should be allocated over time.
• Contingency reserve must be estimated based on failure/repair history.
• Spare inventory should be maintained at an optimal level.
• The budget process must be integrated across the power plants.

The implementation items of the proposed solutions are shown in the table below.

Table 1-15 O&M Solution Proposals and Implementation Plans

Source: JICA Survey Team

If BPDB has managed to establish a system for the centralized management of the data on the operation and the plans and records of repair of all the plants under its control, as a financial measure,

it will be able to estimate the budget for the entire organization and to plan for the suspension of the plant operation and, thus, the delay in the approval of budget and suspension of the plant operation will be reduced. The implementation of measures to solve problems in the information sector is considered to improve the activities in the red rectangles in the figure below. It is considered that the information can be used effectively in facilitating the solution of various problems in the operation of power plants in general including problems concerning human resources, facilities and budget and improving the O&M activities.

Source: JICA Survey Team

Figure 1-60 O&M Efficiency Improvement Supported by Information Management

One of the advantages of information management is that scheduled shut down for maintenance can be aligned with demand and supply trends. This practice mitigates shutdown impacts on the grid.

Figure 1-61 Demand/Supply and Shutdown Planning

Source: JICA Survey Team

(3) Roadmap

In the area of operations and maintenance, the goal is to achieve efficient use of the enterprise

resources. However, the first step towards practices of operations and maintenance needs to be legally obliged, which guarantees implementation of regular maintenance. It also facilitates prompt decision making on shutdown schedules and permissions. In the figure below, an O&M roadmap for implementation of the proposals is shown along with the implementation plans for the legal framework.

Figure 1-62 Thermal Power Plant O&M Roadmap

Source: JICA Survey Team

1.6.17   Tariff Policy

(1) Current Status and Issues

1) Current Status and Issues

(a) Electricity Tariff

Serious Financial Situation of BPDB caused by the difference between electricity tariff and supply cost

The current electricity bulk rate is not set high enough to cover the whole electricity supply cost. Hence, BPDB, as the single buyer, continuously receives a subsidy as a form of long term loan. To improve this situation, the bulk rate should be increased but this means that the electricity tariff for final consumers should also be increased. Electricity tariff increase might have a negative impact on the national economy of Bangladesh.

Electricity tariff menu as measure for supporting low income households

The electricity tariff menu is categorized according to the volume of usage and a lower rate is set for low income households. When Bangladesh increases the electricity tariff, measures for low income households should be considered.

(b) Gas price

Difference between international gas price and domestic gas price

Currently, the domestic gas price is set at a lower level. However, if gas demand increases and Bangladesh starts imports of gas such as LNG, and the gas price is not increased, the gas sector will require subsidies from the government.

2) Results of analysis and challenges

If the electricity tariff and gas price are increased rapidly in a single year, it will effect a huge negative impact on the national economy of Bangladesh. It is desirable to increase the electricity tariff and gas price progressively.

GTAP was used to analyze the impact of electricity tariff increase and gas price increase on the national economy of Bangladesh. The following model was used for the GTAP analysis.

Area category: Bangladesh, Asian countries, other countries in other regions. Sector category: Agriculture, coal*, oil*, gas*, electricity, industry, service.

*only for analysis for gas price increase.

(a) Electricity Tariff

To analyze the economic impact of an electricity tariff increase on the national economy of Bangladesh, impact in the current year only (single-year analysis) was first analyzed. The impact of a price increase in 2014, the year when the latest data set can be obtained, was analyzed.

The following scenarios were set for the electricity price:

Scenario (a): average electricity price increase of 10% in real USD Scenario (b): average electricity price increase of 20% in real USD Scenario (c): average electricity price increase of 30% in real USD

The above-mentioned percentages are increase rates in real USD. If we consider the average inflation ratio from 2010 to 2014, 7.9%⁸, the ratios in nominal BDT become 19% in scenario (a), 29% in scenario (b), and 40% in scenario (c).

In Bangladesh, the electricity price menu for final consumers is different from the size of usage. However, as a methodological limitation of GTAP analysis, one average price increase ratio was set for each scenario in the analysis (for example, one “average” 10% electricity tariff increase was used for scenario (a) instead of different prices for different categories (e.g. 5% electricity increase for low income households and 15% for high income households)).

The results of the analysis are shown in the following table. A 10% electricity tariff increase produces a negative effect on real GDP of 0.72%, a 20% increase produces a negative effect on real GDP of 1.45%, and a 30% increase produces a negative effect on real GDP of 2.17%. If the electricity tariff is increased rapidly, it produces a huge negative effect on real GDP as compared with GDP current growth.

Table 1-16 Impacts of Electricity Tariff Increase on Bangladesh National Economy (single-year analysis)

Source: JICA Survey Team

Next, the impact of a progressive increase of electricity tariff was analyzed. Under the assumption that the cost of the electricity generation supply rises at 1.5% per year in real USD, the following scenarios were set and the impact on the macro economy of Bangladesh was analyzed. Scenario 1 was set as the electricity tariff becoming equal to the supply cost by 2021, scenario 2 was by 2031, and scenario 3 was by 2041.

Table 1-17 Scenarios of Electricity Tariff Increase: Case 1 (cost increase)

8 Source: World Bank data site

Source: JICA Survey Team

Table 1-18 Scenarios of Electricity Tariff Increase: Case 2 (no cost increase)

Source: JICA Survey Team

In comparison with the single-year analysis, the increase per year become small and the annual negative impact will be mitigated. Electricity tariff increase in Case 1 decreases GDP by 0.17%/year in 2014, and 0.26%/year in 2021, in Scenario 1. Electricity tariff increase in Case 1 also decreases GDP by 0.07%/year in 2014, and 0.17%/year in 2031, in Scenario 2. Electricity tariff increase in Case 1 decreases GDP by 0.04%/year in 2014, and 0.15%/year in 2041, in Scenario 3. In Case 2, similar impacts are expected. Furthermore, in the long run, negative impact on GDP is mitigated as compared with a sharp rise in the single-year analysis.

Table 1-19 Impacts of Electricity Tariff Increase on Bangladesh National Economy (Case 1)

Source: JICA Survey Team

Table 1-20 Impacts of Electricity Tariff Increase on Bangladesh National Economy (Case 2)

Source:    JICA Survey Team

(b) Gas Price

To analyze the economic impact of a gas price increase on the national economy of Bangladesh, the impact in the current year only (single-year analysis) was first analyzed. The impact of a price increase in 2014, the year when the latest data set can be obtained, was analyzed.

The following scenarios were set for the gas price:

Scenario (a): average gas price increase of 50% in real USD Scenario (b): average gas price increase of 100% in real USD

The above-mentioned numbers are rates in real USD. If average inflation ratio from 2010 to 2014 is considered, 7.9%, the ratios in nominal BDT become 62% in scenario (a), and 116% in scenario (b).

The results of the analysis are shown in the following table. A 50% increase in the gas price produces a negative effect on real GDP of 1.26%, and a 100% increase produces a negative effect on real GDP of 2.47%. The result shows that the impact of a rapid gas price increase on real GDP is relatively high in comparison with GDP current growth.

Table 1-21 Impacts of Gas Price Increase on Bangladesh National Economy

(Single-year analysis)