Solar-Wind- Diesel Hybrid For Power Generation in Small Towns and Villages

Transcription

1 Draft Final Report PROMOTION OF RENEWABLE ENERGY, ENERGY EFFICIENCY AND GREENHOUSE GAS ABATEMENT (PREGA) Bangladesh Solar-Wind- Diesel Hybrid For Power Generation in Small Towns and Villages A Pre-Feasibility Study Report 1 April Prepared by the PREGA National Technical Experts from Bangladesh Centre for Advanced Studies. i

2 TABLE OF CONTENTS Abbreviations Page No. v-vi 1. EXECUTIVE SUMMARY Introduction Energy Situation and Government Policy The Status of PV in Bangladesh Potential of Solar, Wind & Bio-mass Energy for Power Generation in 3 Small Towns & Villages in Bangladesh 1.5 Choice of Technology - a Solar-Wind-Diesel Hybrid System Project Description Project Cost and Emission Reduction 6 2. INTRODUCTION Background of the Project Justification of the Project ENERGY SITUATION & GOVERNMENT POLICY Sector Description Present & Forecasted Energy Situation Constraints and Issues Government Policy & Strategy Government Policy on Renewable Energy Market for Electricity AVAILABILITY OF SOLAR & WIND ENERGY IN BANGLADESH Availability of Solar and Wind Energy for Power Generation in Bangladesh Critical Aspects of Availability of Economic Wind Speeds in Bangladesh Critical Aspects of Availability of Solar Energy in Bangladesh TECHNOLOGY OPTIONS, CHOICE OF TECHNOLOGY FOR POWER SUPPLY TO SMALL TOWNS AND VILLAGES Technology Screening Potential of Solar, Wind & Bio-mass Energy for Power Generation in 20 Small Towns & Villages in Bangladesh 5.3 Choice of Technology - Wind-PV-Diesel Hybrid System The System Reliability of REHPPs PROJECT DESCRIPTION Project Goal Project Objectives Poverty Reduction through the Project 24 ii

3 6.4 Technology Transfer Project Location Project Partners Project Outputs Possible Institutional Ways to Cover Project Risks Likely Fiscal Incentives for the Project Possible Financing Arrangements of the Project Facilitating Agencies of the Project Likely Basis of Tariff Structure Determination Possible Ways to Selection of Firm in the Project EMISSION REDUCTION, MONITORING & VERIFICATION PLAN Baseline of Electricity Generation in Bangladesh Baseline of GHG emission connected with the project The Proposed Project Factors impacting the Baseline Crediting Period Project Boundaries & System Boundaries Project Additionality Indirect Emission Effects Additional Environment & Social Benefits Monitoring & Verification Plan- Monitoring of Project Performance FINANCIAL ANALYSIS OF THE PROJECT Project Cost (Estimated) Financial Analysis ECONOMIC ANALYSIS STAKEHOLDERS MEETING MAJOR FINDINGS AND RECOMMENDATIONS REFERENCES 46 List of Tables Table 1: List of Power Plant installed since Table 2: Gross Peak Growth Forecast 12 Table 3: Installed, Actual Production and Firm Production Capacity, 13 Peak Demand and Shortfall Table 4: System Loss of Electricity Organizations 13 Table 5: Accounts Receivable of BPDB and DESA (in billion Tk) 14 Table 6: Progress of installed capacity of power plant in Bangladesh 28 over the period 1991/ /03 iii

4 Table 7: Projection of total power generation and that based on oil up to Table 8: Yearly and cumulative production of CO 2 in the absence 31 of the project activity Table 9: Cumulative production of CO 2 in the presence of the project activity 32 Table 10: Cumulative reduction of CO 2 in the presence 33 of the project activity Table 11: Project Benefits 37 List of Figures Figure 1: Progress of power plant installation in Bangladesh over 91/ /02 29 and projection up to 2019 Figure 2: Projection of total power generation (series 1) and 30 that based on oil (series 2) Figure 3: Cumulative production of CO 2 in the absence (series 1) and 31 in the presence (series 2) of the project activity Figure 4: Cumulative reduction of CO 2 over the project period in the 33 presence of the project activity List of Flowchart Flowchart 1: Flowchart with Calculation for Yearly GHG (CO 2 ) Release 34 Attendant on Production of 476 MWh of Electricity Based on diesel Oil (without Project Activity) Flowchart 2: Flowchart with Calculation for Yearly GHG (CO 2 ) Release 35 Attendant on Production of 476 MWh with 30% backup from diesel oil (with the Project Activity) List of Drawing Drawing 1: Showing the elevation of the conceptual solar-wind-diesel-hybrid Plant 22 List of Map Map 1: Showing the proposed location of the plant 47 List of Press Cutting Press Cutting 1 48 Press Cutting 2 49 Press Cutting 3 49 Exchange Rate: A CONSTANT EXCHANGE RATE OF 58.5 TAKA = 1US $ (FOR 2004) HAS BEEN USED FOR CORRECT VALUATION AT A LATER DATE. iv

5 Abbreviations ARMCO - Associated Resources Management Co. ADB - Asian Development Bank Bbl - Barrel BAEC - Bangladesh Atomic Energy Commission BCAS - Bangladesh Centre for Advanced Studies BOO - Built-Owned-Operated BOOT - Built-Owned-Operated and Transferred BPDB - Bangladesh Power Development Board BREMADCO Bangladesh Renewable Energy Development & Management Co. CDM - Clean Development Mechanism CF - Conversion Factor DESCO - Dhaka Electric Supply Company DESA - Dhaka Electric Supply Authority DP - Development Partner EPA - Bangladesh Environmental Protection Act of 1995 FBT - Fast Bangladesh Technologies FIRR - Financial Internal Rate of Returns GEF - Global Environment Facility GOB - Government of Bangladesh GS - Grameen Shakti GTZ - German Technical Cooperation GWh - Gigawatt hour IDCOL - Infrastructure Development Co. Ltd. IFI - International Financing Institution IPP - Independent Power Producer kg - Kilogram KVA - Killovolt Amp kwh - Kilowatt Hour LGED - Local Government Engineering Department LRMC - Long Run Marginal Cost m 3 - Cubic Metre MMCFD - Million cubit feet per day MOEF - Ministry of Environment and Forest MPEMR - Ministry of Power, Energy and Mineral Resources MW - Megawatt NEP - National Energy Policy NG - Natural Gas NGO - Non-Government Organization NLDC - National Load Dispatch Centre ODA - Overseas Development Assistance O&M - Operation & Maintenance PBS - Palli Bidyut Samiti PGCB - Power Grid Company of Bangladesh v

6 PPA - Power Purchase Agreement PSC - Production Sharing Contract PSMP - Power System Master Plan PSRB - Power Sector Reforms in Bangladesh RAPS - Remote area power system REB - Rural Electrification Board R&D - Research and Development REHPP - Renewable Energy Hybrid Power Plants RET - Renewable energy technology RFP - Request for Proposal RPC - Rural Power Company SBU - Strategic Business Unit SERF - Shadow Exchange Rate Factor TCF - Trillion cubit feet TJ - Terajoule Tk. - Taka (Bangladesh) TWh - Terawatthour USA - United States of America US$ - United States Dollar VAT - Value Added Tax WB - World Bank WEST - Wind energy study project vi

7 1. Executive Summary 1.1 Introduction The country is blessed with substantial quantities of relatively clean fossil fuel - natural gas (NG) as its primary energy. Its total proven and possible reserves being estimated at about 16.3 trillion cubic feet (TCF) (Country Study Report), although as estimated by the US Geological Survey (USGS), could be much higher (32 TCF and above). With a continuous increase of the demand for NG, which currently stands at about 1.4 billion cubic feet per day, the NG reserves are being consumed fast and unless new gas reserves are discovered through continuous national exploration activities, the currently proven gas reserves of the country may face a total depletion in about next 20 years time. Although close to about 90% of Bangladesh s indigenous NG is used for producing electric power, about 30% of its population has gained access to electricity. Bangladesh, at the same time, is a sun-rich country with long sunshine hours, being situated in the tropics. The estimates are indicative of a total availability of solar energy of about 1 x J per year (Country Study Report). Even a fraction of this energy is more than the total energy currently used in Bangladesh. As regards the availability of wind energy, preliminary wind measurement studies, sponsored by international agencies, like GTZ and ODA have indicated the positive potentiality of setting up wind turbines in the coastal belts and the offshore islands. Unfortunately, except a few low-profile and uncoordinated national efforts by the Rural Electrification Board (REB), Bangladesh Power Development Board (BPDB), NGOs, like Grameen Shakti, BRAC and some risk-taking private companies (Rahimafrooz, Micro Electronics, First Bangladesh Technologies Ltd. and others) the country yet lacks a proactive program with concerted efforts and a high degree of seriousness at Government levels to diversify its sources for clean and sustainable energy sources of tomorrow - the Renewable Energy Technologies (RETs), to produce and supply electricity. Being encouraged by a French Government funded 62 kw Solar PV Pilot project, set up and commissioned in 1995/96, which provided PV electricity service to about 800 consumers in 4 river islands of Narsingdi, the local NGOs and the private sector gained confidence in the technical feasibility and social acceptability of renewable energy projects under the field conditions of Bangladesh. Today, NGOs like Grameen Shakti alone have disseminated about 14,000 Solar Home Systems (SHS), being supported by a capital buy-down support fund, provided by IDA/GEF through Infrastructure Development Company Limited (IDCOL) of Bangladesh, under a 50,000 SHS Programme. The REB is also launching a program to implement a 16,000 SHS Programme, funded by the World Bank. In the wind energy sector and also in the area of combining the advantages of diversified sources, like wind, solar, fossil fuel/bio-mass to make a more reliable and also a cost-effective RE-Hybrid System, almost no work has been done so far in Bangladesh, excepting a few smallscale (non-commercial) trials with a few PV panels and less wind turbine of less than 400 W (Battery charging-type) capacity. 1

8 This pre-feasibility study on Solar-Wind-Diesel Hybrid System for Power Generation for Small Towns and Villages has been conducted, based on a selection out of ten initially identified projects through screening of relevant criteria (Country Study Report) by the Asian Development Bank under its programme for Promotion of Renewable Energy, Energy Efficiency and GHG Abatement Project (PREGA) Operating Procedures. 1.2 Energy Situation and Government Policy Bangladesh had a total power generation capacity of 4005 MW in 200/01. Of this, 3,320 MW was in public and 685 MW was in the private sector. The available capacity, however, was restricted to 2,900 3,100 MW due to lack of adequate maintenance and rehabilitation programme. Routine closedown, reduction of generation capacity due to prolonged use beyond economic life, were the other contributing factors for low levels of capacity. As a result of such shortfall of generating capacity, compared to the demand, load-shedding became inevitable throughout the country during peak hours. The load-shedding problem was somewhat eased during the last few years due to commencement of some new power plants. Country s Power System Master Plan (PSMP) formulated in 1995 estimates the peak power demand for 2005 and 2007 at 5,200 MW and 6,100 MW respectively. Although power generation is being continuously increased every year, it is nevertheless trailed behind the growing demand. Some ramifications of the slow growth in electricity generation and consumption are illustrated by the following hard facts: Only 30% of the population has access to electricity Per capita electricity consumption is only 129 kwh per annum which is one of the lowest in the world System firm capacity was 2,900 3,100 out of an installed capacity of 4005 MW in 2000/01 which constitutes 72 77% Peak demand is expected to increase to 5,200 MW by the year Present generation position indicates a power outage not less than 40% by the year Ministry of Power, Energy and Mineral Resources (MPEMR), Government of Bangladesh (GOB) regulates the tariff, which does not reflect the cost of production. Government Policy on Renewable Energy Bangladesh s fossil energy resources consist primarily of NG and domestic oil supply is considered negligible. Several small deposits of Peat exist in the southwestern region of the country. However Bangladesh is blessed with substantial reserves (a total estimated in-situ reserve of about 3 billion tonnes) of bituminous coal in the northern regions of the country. Mining of these strata of coal lying at great depths is expensive. Coal-burning technology emits high carbon emissions and creates other environmental problems as coal is regarded as dirty fuel. Only around 30% of the total population of Bangladesh, has access to electricity. The vast majority of the rural populations are deprived of the benefits of this modern input of civilization. Larger electricity supplies with greater efficiency of electricity use are thus of paramount importance to meet the basic needs of a growing population. 2

9 1.3 The Status of PV in Bangladesh The application of RETs has been started in Bangladesh on any mentionable scale only in the recent past. The field take-off of renewable energy begun in 1995/96 with a 62 kw Pilot Photovoltaic Project of REB implemented to provide PV electricity services to 4 isolated river islands at Narsingdi. Funded by the French Government Grant, this project was successfully commissioned and was operated over a period of about 4 years to serve about 800 consumers of the 4 islands, following which the grid power reached in the area. Since then, many of the systems have been relocated by REB to other priority areas of the country, although a number consumers have opted to retain the systems, considering that grid power is quite unreliable due to frequent load-shedding. NGOs and also some innovative and private sector entrepreneurs have been slowly putting up efforts even earlier than the Narsingdi Project. Being a Pilot or a Flagship Project the Narsingdi Solar PV project field-tested a number of systems to choose amongst a number of PV technology options, such as Solar Lanterns, Central Battery Charging and Stand-alone PV Systems, i.e. independent PV Panels at consumers premises. The consumers response and satisfaction were, in general, were quite good, who in a vast majority evaluated the Stand-alone PV Systems as the best choice. This response has later been used all over Bangladesh to design and size all future Solar PV projects by REB, NGOs and the private sectors. This Flagship RE project in Bangladesh has proved the technical feasibility and also the social acceptability for renewable energy in the country. Being inspired by the project, local NGOs, like Grameen Shakti, BRAC, TMSS, Coast and others intensified their micro-credit supported PV dissemination program in remote rural areas of Bangladesh. 1.4 Potential of Solar, Wind & Biomass Energy for Power Generation in Small Towns & Villages of Bangladesh While the potential for solar PV-based electricity has now been established beyond any doubt, a lot still needs to be done in the area of other potential RE-Systems. Other than solar, the two other most appropriate RE-sources for Bangladesh for power generation are wind and biomass / biogas and also to a limited extent, the mini and micro hydropower. In the wind energy sector however, much less work has been done. Following a study by the Bangladesh Atomic Energy Commission (BAEC), other studies were soon initiated by Gesellscahft for Technische Zusammenarbeit (GTZ) and later conducted in much detail by WEST (Wind Energy Study, BCAS), the latter being supported by ODA. Its coastal districts and offshore islands have fairly workable wind energy potentials, which reach peaks during the monsoons (June August). Local Government Engineering Department (LGED), Grameen Shakti and FBT have tested small wind turbines and wind pumps in the coastal belts. Their findings led to partial availability of wind and the necessity of using wind power as a component of a reliable total Hybrid System, such as Wind-PV and/or Wind-PV-Diesel. FBT has reported testing a small (Battery charging type) Wind-PV System in the St. Martin Island. A small (400 W) battery charging type, wind turbine supplied by FBT is operating since last few years in the Chittagong Hill Tracts and is being used by the Bangladesh Army 3

10 1.5 Choice of Technology - a Solar-Wind-Diesel Hybrid System A Solar-Wind-Diesel-Hybrid System combines the inputs of three proven Systems - Solar PV, the Wind Power Generation and also another very proven technology - the diesel (either through a micro-processor operated total electricity Bus-bar or manual) Solar PV Component Bangladesh has by now gained enough field experience in stand-alone solar PV systems, especially in providing rural households with electricity, as already mentioned. Any developing country with a good degree of solar insolation may immediately go for solar home systems (SHS) and other solar technologies. As evident from Bangladesh experience discussed above, the Solar PV as an individual system (i.e. not in Hybrid) is already a quite proven technology. However, the same D.C. PV electricity can be converted into grid-quality Alternating Current (A.C.), using D.C-A.C inverters and supplied to a low tension mini-grid and excess electricity (when available) will be supplied to the national grid available at Charfasson Upazilla HQ. In this Solar-Wind-Diesel Hybrid System, as proven technology, using inverters is proposed to supply 220 V. A.C. (grid-quality) electricity, which can be combined with the wind turbine generated electricity, the wind turbines being designed to directly produce 220 Volt alternating current electricity. Wind Power Component Producing electricity using wind turbines, in fact, has already become one of the most costeffective and proven RETs all over the world, especially in Europe (Germany, the Scandinavian countries), USA and also India, the latter having developed itself as the third largest wind power based market in the world, with its over 2000 MW of Wind Generation Capacity. The first wind speed studies conducted by BAEC, the Study sponsored by GTZ and the more comprehensive ODA funded WEST Study by Bangladesh Centre for Advanced Studies (BCAS) has established the potential of setting up wind turbines in the coastal districts and off-shore islands, with good wind speeds with high probabilities in the range of 4-7 meters and above. The critical months (lower wind velocities), as has been analyzed through these studies are the winter months (November - February). Good wind speeds (4m to 7m/s) are available during the summer and especially the monsoons, when the solar energy insolation remains low. According to the WEST project, a 50 kw wind turbine can provide on the average 143 MWh annually. The Hybrid Power Plant (REHPP) Based on above technical considerations, wind systems ideally should feed electricity to the grid or, in the smaller range of capacities, can be used as battery charging stand-alone systems, which can and should, in areas of good solar insolation like Bangladesh, be combined with Solar PV (+ Charge Controller / Battery Chargers and also Inverters). 4

11 Diesel Engine-Gensets provide a good backup for system reliability. In case of a micro-processor operated Solar-Wind-Diesel Hybrid System, the electricity availability from each source, including the storage battery bank are sensed and controlled/fed to a common busbar, thus providing an optimum mix of electricity from each individual source in the grid, the diesel being given the last priority, for obvious reasons of operating costs and environmental consideration. 1.6 Project Description Project Objectives The project has twin development objectives: (i) generation of electricity from a RE-Hybrid Source for sustainable development in small towns and villages of Bangladesh and (ii) reduction of GHGs Project Location Although Solar PV can be set up anywhere in Bangladesh, given by the availability of global radiation it receives everyday at intensities of about 5 kwh / day, except for a short monsoon period, the wind energy sites need to be well selected, based on proven data measured throughout winter, monsoon and summer months, preferably over a period of 3 years. The proposed REHPP project, in fact, can be set up in any town and village of the coastal belt and offshore islands. Based on available wind data of GTZ and WEST (Wind Energy Studies), Charfasson is proposed as project location. Replication of this plant at other places is expected to take place on successful completion and operation of this plant and also on demand thus created Project Outputs The project is likely to produce 476,000 kwh or GWh (Gross) of Electricity annually. The net reduction of CO 2 is expected to be 404 tonnes (CO 2 Saving) Project Implementation Plan Implementation of the project can begin in July 2006 and be completed within one year Likely Fiscal Incentives for the Project Different fiscal incentives currently permissible to IPPs / Foreign Investors in accordance with the country s industrial policy and also foreign investment policy would be available to the sponsors for the proposed project. The following incentives are generally expected for the project (Country Study Report): Guaranteed rate of return on equity Reduction/waiver of customs duty on import of machinery Tax Holiday Guarantee for payment for power purchased by utility Guarantee of foreign exchange remittance Guarantee of convertibility of foreign exchange 5

12 1.7 Project Cost and Emission Reduction Baseline Scenario The baseline is the most probable future development in absence of the proposed project. Any amount of electricity sold to the grid is equivalent to the same amount of electricity produced. In the absence of the project, therefore, the carbon dioxide emission for generation of 476,000 kwh of electricity has been calculated as 577 tonnes/year. This assumes a 100% diesel generation, without contribution of any renewable energy. The CO 2 Savings The 30% diesel contribution to the REHPP works out to emit a CO 2 equivalent of about 173 tonnes per year. The difference from the baseline, therefore, is found to be 404 tonnes/year Project Cost and Revenue Project Cost (Estimated) A 476 MWh/ year solar-wind-diesel system will be set up at Charfasson, a coastal sub-district where both wind and sunshine are available. During Monsoon when sunshine is less, wind is available in plenty. Two 50 kw wind turbines, 25 kwp PV panels, two 20 kw diesel gensets and the required accessories will be procured. Costs are provided by the suppliers. A. Investment Cost (million Taka) i) Two 25 KVA gensets including 4 times overhaul ii) Two 50 kw wind turbine sets iii) 25 kwp PV panels iv) Land and site development iii) Building iv) Battery, inverter etc including one-time replacement v) Physical contingency (5%) Total investment Cost B. Operation and Maintenance Cost i) Diesel cost for 53,000 litres (@ Tk. 20 /litre) ii) Manpower cost iii) Repair and maintenance Tk 0.25 ml./gwh iv) Lubricants Total operation & maintenance cost C. Revenue i) Gross generation of electricity GWh ii) Electricity sale (95%) GWh ii) Revenue (@ 8.00 million Tk./GWh) million Tk. 6

13 D. Gross profit per year Revenue Total operation and maintenance cost = = million Tk Financial Analysis. In the analysis of costs and benefits, a constant exchange rate of 58.5 Taka = 1 US$ (for 2004) has been used for correct valuation at a later date. A fourteen-year financial life has been used though actual life could be higher than 14 years. The loan term is also assumed 14 years excluding the construction period with 10% nominal rate of interest. Working capital is equity financed. Among the tangible output of the project, electricity is the only saleable product. diesel oil is the major input. Financial results show that the FIRR is 6.47%, NPV is 0.83 million Taka and B/C ratio is 0.82 (Annex 3a) The project is therefore not viable in the base case with Tk.8.00/kWh as tariff. Fuel cost for gas turbine (oil fired) is Tk (BPDB, ). Results of sensitivity tests are: (1) For a decrease in revenue by 15%, FIRR reduces to %, NPV (@ 10% interest) to 4.46 million Taka and B/C to 0.01 (Annex 3b). (2) For an increase in project cost by 15%, FIRR reduces to -3.07%, NPV to 3.87 million Taka and B/C to 0.41 (Annex 3c). Financial analysis was recast incorporating carbon dioxide credit price. With CO 2 credit price of US$ i.e. Tk per tonne of CO 2, IRR, NPV and B/C are as under (Annex 4a): IRR = 12.97% NPV = 0.75 million Taka B/C = 1.17 Break even CO2 credit price = US$ 5.25 Results of sensitivity analysis are shown below: (i) (ii) IRR drops to 4.67%, NPV to 2.89 million Taka and B/C to 0.36 for a 15% fall in revenue (Annex 4b) IRR becomes 4.40, NPV 1.48 million Taka and B/C 0.72 for a 15% increase in investment cost (Annex 4c). The project therefore turns viable if the CO 2 credit price of US$ per tonne is incorporated. But a possible 15% fall in revenue or 15% increase in investment cost makes the project unviable. Economic results show that EIRR is 7.54%, NPV is 0.65 million Tk. and B/C ratio is). 87 (Annex 5a) and as such the economic analysis does not show any significant improvement when 7

14 compared with the financial analysis. Sensitivity analysis has been given in Annex-5b Annex-5c: and (1) EIRR drops to %, NPV to 4.26 million Tk. and B/C to 0.06 for a decline in project revenue by 15% (Annex 5b). (2) EIRR drops to 0.01%, NPV to 2.65 million Tk. and B/C to 0.53 for an increase in project cost by 15% (Annex 5c). In view of the results above, the proposed project could be established if this could be combined with clean development mechanism (CDM) project as per the provisions of the Kyoto Protocol. A Stakeholders meeting was held as 26 July 2004 in Dhaka at the LGED Bhaban. The following recommendations regarding this project were adopted unanimously in the meeting. 1. Because of low insolation and high wind speed in Monsoon, a solar-wind-hybrid backed up by a diesel generator is a necessity for the sake of uninterrupted supply. 2. A solar-wind-diesel hybrid will be installed at Charfasson, a coastal sub-district where wind velocity was found to be reasonably high. 3. A study will be undertaken to find out the present status of SHS. 4. Five Representatives from Charfasson present in the meeting have welcomed the project as the supply of electricity from the project will be uninterrupted Additional Environment and Social Benefits The additional environment and social benefits have been identified as: Improvement of the air quality in the area due to less diesel use; Improvement of the socio-economic condition of the people at project location; Increased capacity building; Transfer of technology; and Indirect employment generation, through enhanced facilitation by electric power. 8

15 2. Introduction 2.1 Background of the Project Bangladesh is a developing country, as in the case of many other developing countries of the world, is relatively rich in a number of resources The country is blessed with substantial quantities of natural gas as its primary energy, the total proven and possible reserves being about 16.3 TCF (Country Study Report), although the total proven, possible and probable gas reserves, as estimated by the US Geological Survey, could be much higher (32 TCF and above). Unfortunately, only less than 2% of Bangladesh s 140 million population has access to natural gas, the only indigenous source of commercial primary energy. In terms of providing electricity access the situation is equally grim. In spite of the Government giving hope to reach Electricity to All by 2020, i.e. in another 15 years time, only about 30% of the population has access to Electricity. The key sources of primary energy in rural areas of Bangladesh are the traditional sources, i.e. rice husk, hulls, jute stick, cow dung, tree residues and fuel wood. The import based petroleum fuel - kerosene is still used for lighting in most of the rural areas where electricity has not reached yet, especially in coastal areas, offshore islands and other remote/isolated locations. Out of over 22 million rural households, only about 4.5 million have been connected with the rural electricity grid of Rural Electrification Board (REB). Although REB, since its founding about three decades back is doing a good job connecting, on the average about 300,000 rural consumers per year, it would take over half a century to reach electricity to all by the conventional method. Natural gas reserves, given by an increasing pace of industrialization and other development activities of the country are, on the other hand, depleting fast. Unless newer reserves of gas are continuously discovered through further exploration works, gas - the only primary hydrocarbon resource may get exhausted in the next 20 years, the present consumption having already reached, on the average about 1,400 million cubic feet per day (MMCFD). Currently close to 90% of Bangladesh s electricity is generated from natural gas as the primary source of energy, the other uses being for producing Urea Fertilizer and as a fuel in the industrial, commercial, household and recently as Compressed Natural Gas (CNG) in the transportation sector. Dissemination of Renewable Energy Technologies Bangladesh yet lacks the vision to make the optimum use of its available energy resources, especially the renewable energy sources like solar, wind, biomass (including new bio-mass technologies), hydro, mini/micro hydro and others, including hybrid power system, which combine the various available renewable energy technologies with each other (Solar-Wind-Fossil-Biomass etc.) in an optimum manner to make a reliable energy/electricity supply system. The take-off in the Renewable Energy sector Bangladesh being a sun-rich country is blessed with long hours of sunshine with good intensities 9

16 - the consideration, which led to a number of programs launched initially by REB and a number of private sector companies and later by NGOs. Following a French Government Grant funded project, set up in 4 river islands at Narsingdi, in which 800 rural consumers were served by solar PV electricity, the confidence of NGOs and private sector grew to a large extent. As of date NGOs like Grameen Shakti, BRAC and others have successfully disseminated the solar PV technology having already marketed over 14,000 SHS. A 50,000 SHS Programme is being supported by IDA/GEF through Infrastructure Development Company Limited (IDCOL). The REB is also proceeding, to launch a 16,000 SHS programme, being funded by the World Bank. All logical estimates, supported by wind speed studies conducted so far indicated that it is worth while to set up wind turbines in the coastal districts and also in the off-shore islands of Bangladesh, where the relative frequencies of availability wind speeds over 4-5 m/s are good. However, like in the solar PV sector power generation efforts on any reasonable scale by using wind turbines have not been attempted as a semi-commercial/commercial project. The relatively less availability (max % of the required energy) of suitable wind velocities has been a major reason for this. However, logical considerations and best engineering judgment, based on wind data available so far, lead to the conclusion that wind turbines in the coastal areas can be operated as a hybrid system with solar PV, which has almost year-round availability at good intensities. 2.2 Justification of the Project The proposed Wind-PV-Diesel Hybrid Power plant (abbreviated as REHPP) would diversify the source of electricity generation and lead to energy security and sustainable energy supply. Although initially designed as a small scale (476 MWh/yr) Flagship Project, its future potential is large. The REHPP is justified on the following grounds: The small towns and villages located in the coastal belts and offshore islands of Bangladesh (a proposed specific site being Charfasson) will be benefited most in terms of having low emission and reliable power supply. Presently mostly diesel generators are used in such areas. The implementation of the project will minimize the GHG Emission, resulting in a net reduction of the GHGs, thus bringing a local as well as a global carbon benefit. The successful implementation and operation of the project will lead to further future dissemination and also scale-up of the project to larger capacities, thus displacing more conventional grid power to increasing number of small towns and villages, where old diesel units are being used presently to produce unreliable and high emission. The project will enhance the quality of life and contribute to socio-economic development of the inhabitants of the project area. It will promote to capacity building and also contribute to the technology transfer in installation and operational know how of Renewable Energy - Fossil Hybrid Power Plants low emission, which are also more cost effective than 100% fossil fuel based plants. 10

17 3. Energy Situation and Government Policy 3.1 Sector Description Bangladesh has a total installed power generation capacity of 4005 MW in 2000/01. Of this, 3,320 MW was in public and 685 MW was in private sector. Available capacity was however, restricted to 2, MW due to lack of adequate maintenance and rehabilitation program. Routine close down, reduction of generation capacity due to prolonged use beyond economic life etc. were other contributing factors for low available capacity. Due to shortfall in generating capacity compared to demand, load shedding became inevitable throughout the country during peak hours. The load shedding problem was somewhat eased during the last few years due to commencement of new power plants as described in Table 1. Plant Public Sector 1. Rauzan Steam Plant (2 nd unit) 2. Ghorasal Steam Plant (6 th unit) 3. Shahjibazar Gas Turbine (1 st unit) 4. Shahjibazar Gas Turbine (sub unit) 5. Baghabari Gas Turbine Table 1: List of Power Plants installed since 1997 Capacity (MW) Commencement of Generation Sub Total 590 Private Sector 6. Haripur Barge Mounted 7. Khulna Barge Mounted 8. Baghabari Barge Mounted 9. AES-Haripur Sub Total 435 Public Private Sector 10. Mymensingh Gas Turbine (1 st phase) Mymensingh Gas Turbine (2 nd phase) 70 Sub Total 140 Source: Ministry of Finance and Planning (2002). September 1997 January 1999 March 2000 October 2000 February 2002 June 1999 October 1998 June 1999 February 2002 November 1999 December Present and Forecasted Energy Situation The gross electricity generation in 2000/01 was 17,023 GWh, out of which gas based generation constituted 87%, hydro generation 6 % and liquid fuel based generation 7%. During 2001/02, a total of 18,656 GWh was consumed under the overall management of Power Development Board, Dhaka Electric Supply Authority, Dhaka Electric Supply Company and Rural Electrification Board. Of the total energy consumption, residential sector, industry, commercial sector, agriculture and others, accounted for 41%, 44%, 8%and 7% respectively % of electricity has been purchased from the private sector. Per capita consumption was 99 kwh in 1996/97 that stood at 106 kwh in 1997/98, 120 kwh in 1999/00 and 129 kwh in 2000/01. 11

18 Country s Power System Master Plan (PSMP, 1995) formulated in 1995 estimates peak power demand for 2005 and 2007 at 5,200 MW and 6,100 MW respectively. Table 2: Gross Peak Growth Forecast Fiscal Year Gross Peak Growth, MW 1995/ / /06 5, /08 6,100 Source: PSMP, 1995 Although power generation is increasing every year, it has nevertheless trailed behind growing demand. Few ramifications of the slow growth in electricity generation and consumption are illustrated by the following hard facts: About 30% of the population has now access to electricity. Per capita consumption of electricity is only 129 kwh per annum, which is one of the lowest in the world. System firm capacity was MW out of an installed capacity of 4005 MW in 2000/01. Forecasted peak demand in FY 2002 was around 4000 MW, showing a power or outages of 25%. Peak demand is expected to increase to 5,200 MW by the year Present generation position indicates a power outage not less than 40% by the year Constraints and Issues Power shortage is the result of accumulated problems of many years. Some of the reasons that are responsible for the present situations are discussed below: Inefficiency of the parastatal management of the sector and a tariff structure unfavorable to efficient usage of power. Economic and Financial Indicators of the electricity utilities are shown in Annex 1 Reserve margin defined as actual production capacity minus maximum demand served has been continuously declining since 1989/90 to reach zero margins in 1993/94. Power generation and power supply became precarious due to lack of reserve margin. Added are the problems of accounts receivables of the electricity utilities (Annex 2). As shown in Table 3, load shedding during the period 1990/ /02 varied from 340 MW to 774 MW. Investment by Government in power generation plants and transmission and distribution has not been sufficient in the past years due to resource constraints 12

19 Table 3: Installed, Actual Production and Firm Production Capacity, Peak Demand and Shortfall Year Installed Capacity (MW) Generation Capacity (MW) Demand Forecast (MW) Demand Served (MW) Load Shedding (MW) Reserve Margin 1990/ / / / / / / / / / / / Source: BPDB (2001/2002) Power sector has always been dependent on foreign aid/loan. However, there has been no foreign lending from donors including World Bank, Asian Development Bank (ADB) in this sector during 1990/ /96. As a result, no major investment work could be undertaken for power generation, transmission and distribution system. BPDB/DESA were unable to meet World Bank and ADB requirements/conditionalities on system loss, accounts receivable etc. Year Table 4: System Loss of Electricity Organizations BPDB (% of Net Generation) DESA (% of Import) REB (% of Import) DESCO (% of import) Combined % 1995/ / / / / / Source: Ministry of Finance and Planning (MOEF, 2002). Power transmission system became inadequate because of lack of investments in construction of transmission network for the last few years. Power generation is far below the installed capacity due to inadequate supply of gas-to- gas based generation plants. Power generation declined due to derating of many power plants 13

20 Table 5: Accounts Receivable of BPDB and DESA (in billion Tk) Fiscal year BPDB DESA 1997/ / / / Source: Ministry of Finance and Planning (MOEF, 2002) 3.4 Government Policy and Strategy In 1994, the GOB adopted Power Sector Reforms in Bangladesh (PSRB), which was formulated in consultation with the major development partners (DPs) in the power sector. The PSRB outlined the reform process proposed to be followed by the GOB to gradually remove the constraints in the sector through improvements in sector and corporate governance, introduction of competition, and public-private partnerships. Reforms of the external environment were to be done through targeted interventions in the power sector. In accordance with the PSRB, the power sector in Bangladesh has gradually been undergoing structural changes through technical assistance for planning and institutional strengthening as well as capital for system expansion, in line with the principle of reforms-linked assistance. ADB has focused on the greater Dhaka area, given its commercial and political importance to Bangladesh. As a direct result of assistance by ADB and KfW, three new companies have been established PGCB, DESCO and Rural Power Company (RPC). While RPC was a new start-up generation company, PGCB took over assets and liabilities of the existing transmission operations of BPDB, and DESCO, the Mirpur (later expanded to cover the erstwhile Gulshan circle also) distribution operations of DESA. Although both companies have improved their operations and have broken even on current operations, their past liabilities create an accumulated problem which prevents their transformation into profitable companies. In line with the reform measures, a number of activities have already been undertaken for the desired development of power sector. GOB has approved, Private Sector Power Generation Policy of Bangladesh in October 1996 to promote private sector investment in power generation. Under this policy, the private power companies (domestic, foreign or joint ventures) would be exempted from corporate income tax for a period of 15 years and will be allowed to import plants and equipment without payment of custom duty and VAT. In the public sector, a wide range of reforms and programs for the generation, transmission and distribution system of the power sectors has been undertaken. In this respect, RPC has set up initially a 60-MW power plant at Mymensingh, which would supply power exclusively to the rural areas. 14

21 Power Grid Company of Bangladesh (PGCB) has been created to separate the distribution system. The company at the initial stage has started implementing its program for construction of transmission lines and national load dispatch center for transmission of power that would be generated from Meghnaghat power plant. PGCB will eventually, acquire the entire power transmission network of the country and be responsible for its management, maintenance and expansion. The area under DESA has been rationalized and re-demarketed in order to increase the efficiency of the management of the power distribution and improve the quality of the services. In order to reduce the system loss and give quality of service, a company named Dhaka Electric Supply Company (DESCO), as stated above, has been created to manage the power distribution system of Mirpur of Dhaka Metropolitan City since September This will eventually take over the entire distribution responsibility of DESA. Captive Power generation is being encouraged through reduction of import duty. As a result, generation capacity has increased significantly. This has contributed to meeting demand during peak period. BPDB has created 8 new distribution zones for bringing about distribution efficiency. In line with modern management concept, distribution areas have been established as Strategic Business Units (SBU) with greater autonomy. Power Cell has been created within Power Division in the MPEMR for purpose of carrying forward various reforms in a coordinated and concerted manner. Among the important activities currently pursued by the Power Cell include formulation of Power Act, establishment of an independent Power Regulatory Authority, Vision and Policy Statement of Government, etc. Ashuganj Power plant has been transformed into a Public Company and Haripur Power plant has been transformed into a cost /profit center. Creation of a West Region Integrated Power Distribution Company is in its final stage. 3.5 Government Policy on Renewable Energy Bangladesh s fossil energy resources consist primarily of natural gas. Domestic oil supply is considered negligible. Several small deposits of peat exist in the southwestern region of the country. However, Bangladesh has substantial bituminous coal deposits in the northwestern region, but mining of all of them is quite expensive because of their depth (see Country Study Report). Around 30% of the total population has access to electricity. Vast majority of the rural population that comprises 76% of the total population is deprived of energy resources. Larger energy supplies and greater efficiency of energy use are thus of paramount importance to meet the basic needs of a growing population It is therefore considered necessary to exploit all sources of renewable energy and to use these in an efficient form for the benefit of the people. Government has accordingly formulated a renewable energy policy for the country. The policy mentions necessity of taking up renewable 15

22 energy development programs in the areas where potential renewable energy resources are available, considering economical and technical performance with minimum environmental effects. Plant site, size and design are to be considered on the basis of available energy resources of the area and efficient conversion of energy will be given preference. Policy envisages accomplishment of its objectives by mobilizing a concerted national effort with the continued cooperation and commitment of GOB, international organizations, bilateral and multilateral funding institutions, non-government organizations, the private sector, research organizations and universities, etc. Policy also realizes that innovative new financing opportunities including micro-financing will be needed to attract private capital to supplement the energy deficiencies in the rural areas and thus to fulfill the aspiration of the poor people. In case of renewable energy, technology is advancing fast and many governments have formulated innovative policy formulations for renewable energy development. 3.6 Market for Electricity Given that about 30 percent of households in Bangladesh are connected to the electricity system, there is a huge potential demand for electricity compared to the current amount that is now being served. Also among the connected consumers, there are unserved demands. The market cannot be served now because of generation and infrastructure constraints. BPDB has limited capacity of financing new generation or transmission lines. Complicating the supply side even further is the availability of foreign exchange to pay for electricity supplied by present and future IPPs, PSCs and other energy related capital investments. Examination of the existing committed and planned generation plants reveals that generation would lag behind potential demand. The United Nations Commissions on Human Settlements forecast that the population of Dhaka would increase by almost 50 percent to become the sixth largest city in the world by With this increase, power generation would be insufficient to meet the demand. 4. Availability of Solar & Wind Energy in Bangladesh 4.1 Availability of Solar and Wind Energy for Power Generation in Bangladesh Bangladesh, being a sun-rich tropical country is quite fortunate to have been blessed with almost year-round strong sunshine, except during about weeks of monsoon period, when overcast and dark skies are faced. In terms of availability of wind energy, on the other hand the country based on wind data measurements and preliminary pilot tests conducted till date (GTZ and ODA funded WEST Study by BCAS 1998), appears to be less fortunate. Of course, a whole range of more long duration (> 5 year) continuous wind data measurements and tests with small to large-sized pilot wind turbines / wind farms need to be conducted before a firm conclusion is reached. Availability of Solar Energy - Macro (National) Scenario Bangladesh being situated between o and o latitude north is in a very favorable position in respect of the availability of solar energy. The total potential is estimated at 20 x

23 kwh per year for the entire country. Only a fraction of this (theoretical) potential is more than the total energy used in Bangladesh at present. Only the monsoon months in Bangladesh (April/May July/August) pose some problems in terms of availability of direct solar irradiation, due to heavily overcast / dark skies during rains and also Cyclones/Hurricanes/Nor wester storms, which frequently occur in Bangladesh over a critical period of about 10 weeks (see Section 4.3 of this Report Critical Aspects of Availability of Solar Energy ). All over Bangladesh, including coastal areas and offshore islands of the country, solar energy is available at good intensities (range 4-6 kwh/m 2 -day, avg. 5 kwh/m 2 -day), the total average sunshine availability being close to about 2000 h per year. Micro (Site specific) Scenario on Availability of Solar Energy This project proposes Charfasson a sub district situated on the coast of the Bay of Bengal as a potential site to implement the Wind-Solar PV-Diesel Hybrid Power Plant. The solar radiation in this area is available year-round and in the same range of intensities as in the rest of Bangladesh, excepting during the Monsoons (June - August), when, due to the rainfall, overcast and dark skies are encountered. Incidentally, it is during these monsoon months when good wind speeds are also available, the latter thus compensating for the less availability of the solar irradiation during this period. Availability of Wind Energy - Macro (National) Scenario As already mentioned, in terms of availability of wind energy, Bangladesh appears to be not as fortunate as in case of solar energy, although much work in terms of long term data collections and tests with pilot turbines, needs to be done in the coastal (southern) districts and off-shore areas. Nationally speaking, the entire southern coastal region of Bangladesh has relatively better Wind speeds. The frequency of wind speed distributions measured at several coastal sites has shown that the percentage of frequency distribution of wind speeds exceeding 4 m per second is 42% at Patenga, 33% for Noakhali, 66% for Kuakata, 45% Charfasson, 39% at Cox s Bazar, 36% at Teknaf and 49% at Kutubdia off-shore island. Availability of Wind Energy - Micro (Site) Scenario When compared to solar energy, the availability of appropriate wind speeds is more site-specific and specific wind data need to be continuously measured at site. In the framework of the WEST Wind speed Study (BCAS, 1998), wind measurements at Charfasson over a 1-year long period has yielded interesting results shown in the table below. 17

24 Monthly Average Wind Speed (m/sec) in the Coastal Region of Bangladesh (July September 1997) Coastal Location Average Wind Speed (m/sec) during April - August September March Patenga Cox s Bazar Kutubdia Teknaf Noakhali Kuakata Charfassion Source: BCAS (1998). It has been shown that the percentage of frequency of wind speeds exceeding 4 m per sec and 5 m/s at Charfasson are 49% and 32% respectively, measured at 25 m height. The findings of the ODA funded WEST Study supports setting up of wind generators for producing electricity at the following locations: (i) Kuakata, (ii) Kutubdia, (iii) Patenga, and (iv) Charfasson. It is estimated from the wind availability data that in terms of continuous days in a year at least full day equivalent of wind speeds (4-5 m/s) will be available at Charfasson for power generation from wind. According WEST Study, one 50 kw wind turbine can produce on the average 143 MWh annually. 4.2 Critical Aspects of the Availability of Economic Wind Speed in Bangladesh As mentioned earlier, wind data measurements at the most potential sites for high wind speeds in Bangladesh, i.e. in the coastal belt and the off-shore islands, as discussed has demonstrated that the following critical aspects: (i) Economic wind speeds are available only at very specific coastal and offshore island sites (e.g. Kuakata, Kutubdia, Hatia, Swandip, Charfasson etc., close to the sea). In other parts of Bangladesh, i.e. Chittagong Hills Tracts, Panchagar etc., however, there may also be pockets of wind speeds, depending on formation of thermals, tunnel-effects. Further work in this direction is being continued. However, the general observation on the critical factor of good wind speed availability is that, the roughage factor in the frontal zone of a wind turbine or wind farm site must be minimum to avoid frictional deceleration of wind speeds. On this consideration, one should go as close to the sea as possible. In fact, this is the reason why even off-shore wind generation is also becoming a popular as a State-of-the-art Technology in the Wind sector (e.g. in North Sea, Europe) (ii) Seasonal availability (minimum wind speeds in the winter months of November - February. 18

25 4.3 Critical Aspects of the Availability of Solar Energy in Bangladesh In respect of the availability of solar energy, the situation is reverse, when compared to wind. The critical periods for availability of solar energy, as already mentioned are the monsoon months, primarily June - August, when one has mostly rains and overcast and dark skies. However, with a bright-diffused sky even 60-65% of the radiation energy is available. Although not sufficient, slow battery charging is effected even under diffused radiation conditions. Interestingly enough in a Wind-PV Hybrid System, it is during the monsoon period, when higher wind speeds (> 5-7 m/sec) are actually available, which compensates for the low solar radiation. It has been now been established through the sufficient operational experience gained from the SHSs, installed by REB, NGOs (Grameen Shakti, BRAC etc)) and also private sector (Rahimafrooz, ARMCO, First Bangladesh Technologies (FBT) and others), that about 2-3 months (June, July August) is the critical period. The wind turbine and the partly also diesel generator proposed in the hybrid will take care during this critical period of relatively low solar insolation, in case of a Hybrid System, 5. Technology Options, Choice of Technology for Power Supply to Small Towns and Villages 5.1 Technology Screening The choice of appropriate technology for generation and supply of electricity for small towns and villages of Bangladesh, based on local needs and operational experience of Rural Electrification Board (REB) and also Bangladesh Power Development Board (BPDB) - the key operators in this sector should consider, in general the following specific country aspects: The technology or a combination of several technologies must be proven in terms of its/their operational functionability. The consumers in these areas in Bangladesh have less than 20% of the electricity demands ( low load - low consumption ) when compared to consumers in large cities and towns (REB experience). The technology/system should be so chosen as to make the electricity tariff (which depends on the cost of generation, transmission and distribution) well be within the reach of the average consumers in small towns and rural areas. It should provide a reliable power supply to gain consumer confidence. Amongst a whole range of RETs, currently, wind and solar photovoltaics (PV) are absolutely proven technologies. No less interesting in the context of Bangladesh are also other renewable energy sources, like biomass, micro and mini-hydro based small (decentralized) power generation. Most of the small townships and remote areas of Bangladesh - the coastal district towns, off-shore Island small towns and homesteads, where natural gas has not yet reached through transmission and distribution pipe lines, are currently being served by petroleum fuel-based power generation. For large grid supplies, which primarily serve large cities and towns, it is based on furnace oil-fired central plants (e.g. Khulna and the neighboring areas including other district towns in the west zone). For small district towns, isolated coastal districts and offshore islands, the power supply is 19

26 still based on diesel (High speed diesel oil or HSD) Engine-Generator Plants and small grids, operated by BPDB, REB and also the private sector. The reliability of power supply also constitutes a key consideration in selection of a complete system, be it a Hybrid or an individually proven technology 5.2 Potential of Solar, Wind, & Bio-mass Energy for Power Generation in Small Towns and Villages in Bangladesh RETs like solar, wind and biomass Energy are ideal candidates for providing power to electricity consumers living in small towns and villages, especially in remote/isolated areas such as the coastal districts and offshore islands. The reasons for their high potential are very simple and may be summarized as follows: High transmission and distribution costs to small towns and villages, especially in remote/isolated areas Relatively low electrical loads of the small clusters of consumers High operating costs (Maintenance and Repairs) of larger fossil fuel based stand alone power (e.g. diesel based) generation plants in these areas The experience of REB has shown that the cost of distribution lines to rural thin-load area consumers presently cost in the range of US$ 10,000 per mile. In areas with an average of 20 consumers this means an investment cost of about US$ 500 per mile, which is more than the present cost of a SHS, which can improve the quality of life of rural people with their low load requirements (e.g. 2-3 lights, a Fan and a TV). The BPDB experience with power supply to Small towns and villages is even worse in coastal areas and offshore islands. With 100% diesel operation a large transportation cost for the diesel is involved, and repair and maintenance cost of the diesel engines is very high. These factors combined together make electricity supply cost much above they can charge from the consumers (in some places over Tk.10-12/- per kwh electricity supplied), apart from the emission aspects and a large unreliability with the already depreciated diesel plants. 5.3 Choice of Technology - Wind PV-Diesel Hybrid System A Wind-PV-Hybrid System combines the inputs of three proven systems - solar PV, the wind power generation and also another very proven technology - the diesel (either through a microprocessor operated total electricity bus-bar or manual) As evident from above, the solar PV as an individual system (i.e. not in Hybrid) is already a quite proven technology. It includes solar PV panels connected to an Electronic Charge Controller, which charges a storage battery bank, from which the steady supply of electricity, is drawn, both during day and night. The design of SHS used in Bangladesh presently stand-alone direct current (D.C.) systems. However, the same D.C. PV electricity can be converted into grid-quality alternating current (A.C.), using D.C-A.C Inverters and supplied to a local low tension Mini-Grid. This system is being very successfully operated in Sagar Islands, India, to supply rural communities with 220 Volt grid-quality electricity, with a diesel backup for system reliability. Starting with an initial capacity of 25 kw, this solar PV-Diesel Mini-Grid has now been expanded to about 125 kw. 20

27 In this Wind-PV-Diesel Hybrid System, as similar proven technology, using inverters is proposed to supply 220 V. A.C. (grid-quality) electricity, which can be combined with the wind turbine generated electricity, the wind turbines being designed to directly produce 220 Volt alternating current electricity. The Renewable Energy (Wind-PV-Diesel) Hybrid Power Plant (REHPP) Wind systems ideally should feed electricity to the grid or, in the smaller range of capacities, can be used as battery charging stand-alone systems, which can and should, in areas of good solar insolation like Bangladesh, be combined with Solar PV (+ charge controller / battery chargers and also inverters). Diesel engine-gensets provide a good backup for system reliability. In case of a micro-processor operated Wind-PV-Diesel Hybrid System, the electricity availability from each source, including the storage battery bank are sensed and controlled/fed to a common Busbar, thus providing an optimum mix of electricity from each individual source in the grid, the diesel, being given the last priority, on obvious reasons of operating costs and environmental consideration. As already mentioned, Wind-PV-Diesel Hybrids, commonly abbreviated as REHPP (Renewable Energy Hybrid Power Plants) are globally quite proven systems. In fact, an initial Flagship Project operation with a diesel Engine in the Hybrid can easily be replaced by a Biomass Gas Engine, through replacement of the diesel Engine. 21

28 WIND TURBINE BATTERY STORAGE, INVERTERS SYNCHRONUS CONDENSER SYSTEM & CONTROLS SOLAR PV PANELS ARRAY ON BOTH SIDES OF ROOF ASIAN DEVELOPMENT BANK PREGA PROJECT CONCEPTUAL LAYOUT PROPOSED WIND-PV-DIESEL HYBRID POWER PLANT (REHPP) DESIGN CONCEPT BY : Dr. Engr. K. Islam, Energy Consultant DIESEL FUELLED ENGINE-GENERATOR DRW. No. DATE : REHPP-01-GEN 22

29 The enclosed Drawing (conceptual Design Lay-out with one wind turbine) shows a typical General Lay-out of the proposed REHPP, showing the 50 kw wind turbine, the solar PV panels on the station roof and the battery banks, controls inverters, bus-bar (common electricity Input Terminal) and electricity metering equipment being housed inside the REHPP Station. 5.4 The System Reliability of REHPPs REHPPs with diesel / bio-mass gas engine-generator sets in the system are very reliable systems in terms of providing the consumers with almost an uninterrupted supply of electricity, which is important, specially in technology-shy developing countries like Bangladesh to give a customer confidence, in rural areas and small towns of the country. The Indian Sagar Islands project (implemented by West Bengal Renewable Energy Development Agency or WBREDA) have proven the above reliability, where eight (8) nos of Mini-Grid Solar PV Stations are in hybrid operation with diesel engine-gensets in the kva range. While providing an optimum mix of power from renewable and fossil sources, obviously most from the RE-source, in case of any emergency, long durations of non-availability of system trouble-shooting, the diesel backup jumps over. 6. Project Description 6.1 Project Goal The Project has the goal of self-sustained development in the electricity sector, improved quality and increased coverage. It is expected that the project would contribute to improvement of the living standard of the people of Bangladesh through provision of a vital energy source at affordable prices. 6.2 Project Objectives Project has twin development objectives of generating electricity from two renewable sources - solar and wind energy, backed up by diesel for reliability and reduction of GHGs. Electricity generation is considered very important in the context of Bangladesh, given the level of energy use and available source of fossil energy. The reduction of GHG will call forth investment benefits under CDM. Saving of the nearest fuel - diesel oil, which is import based will allow savings in foreign exchange, apart from abatement of GHGs from environmental considerations. Although the first Hybrid System proposed is small, its size is typical and ideal for small, decentralized power generation. Hence, the project, once successfully implemented to demonstrate the functionability of a REHPP, has an enormous potential for replication all over Bangladesh for supplying power to coastal and off-shore island areas, where both solar and wind energy are available as renewable sources. Once such a dissemination of similar REHPPs is achieved on a wide scale, the Carbon benefits and the associated socioeconomic and other benefits will multiply many folds. 23

30 6.3 Poverty Reduction through the Project In Bangladesh, poverty is acute and widespread by any indicator of measurement and the role of electricity in addressing the challenge of poverty reduction is crucial. The constitution of Bangladesh stipulates electrification as one of the obligations of the state, to which its citizen has a right. With this constitutional mandate in mind, successive governments with assistance and support from the donors have placed electrification high on the agenda of reforms. 6.4 Technology Transfer Although electricity is being generated in the country since the later half of the nineteenth century, this has always been from the conventional sources, being either from solid, liquid and/or gaseous hydrocarbons. Only since less than a decade (1995/96) electricity production on any mentionable scale was initiated through Solar PV projects of REB, NGOs and the private sector. The total generation of electricity in Bangladesh from Solar PV is, still less than 2 Megawatts. The least has been done in generating and supplying electricity from Wind energy, using turbines, excepting some isolated field research by a handful of NGOs, private sector and in one instance also by a Government department - LGED. Almost no work has yet been done in the area of RE-fossil Hybrid Power Plants. Therefore the proposed project is expected to contribute to technology transfer in this new area. 6.5 Project Location The project has the potential to be located at any one of the following Wind energy rich sites in the coastal belt and the following offshore islands of Bangladesh: (i) Charfasson, (ii) Kutubdia, (iii) Kuakata, (iv) Hatia, and (v) Swandip. Energy generation data (obtained in kwh), using Nordex N29/250 Wind Turbine over a one-year period has indicated that Kuakata and Charfasson have the best Wind energy availability. Recently, Charfasson has been connected to Bhola HSD based power station with an overall efficiency of 22.85%. Supply is intermittent and irregular with frequent fluctuation of voltage. Charfasson is proposed as the site for the REHPP. Replication of this plant at other coastal places is expected to take place on successful completion and operation of this plant and also on demand of similar/higher capacity plants. 6.6 Project Partners The Private Sector Power Generation Policy of Bangladesh allow independent power producers (IPPs) to produce and sell electric power to the grid, although through a transparent competitive bidding procedure. However, as per the Small Power Generation Policy (SPG) of Bangladesh, which a supplementary policy later incorporated to promote generation of small decentralized power to encourage private entrepreneurs set up small scale decentralized power plants, using which they can sell electricity to any consumer excepting to the GOB. Later, the decision to permit the free capacity has been extended to up to 20 MW. However, since the project will use a part of the existing BPDB (Diesel powered) Grid system, after its proper isolation from the existing generation system and the interconnection with the proposed REHPP, BPDB s involvement and a bidding process will be required. Given that this proposed system is first of its kind in Bangladesh and involves an Investment below about Tk. 20 million, the project could be established in BOO or BOOT system as in case of IPPs. Moreover, the combination of CDM in the project is likely to encourage foreign 24

31 investment as per the provisions of the Kyoto Protocol. Financial commitment is likely to be finalized at the time of soliciting the bids from interested parties. The total Investment Cost of the project, including a working capital of Tk 0.42 million is estimated at million Taka. 6.7 Project Outputs The project is likely to produce 476 kwh (Gross) electricity annually. Given by the design of the RE (2 Wind 50 kw + Solar 25 kw), diesel (20 kw) unit plus a Battery Bank (200 kwh capacity) and the microprocessor-operated logical control system to draw optimum power from each source - Wind, PV, diesel and Storage Battery Bank. When max wind is available, the system will draw peak power from the wind turbine, reducing the power draw from SPV. In case of very low wind (below cut-in speed), it will draw more from SPV and the battery and only in case of very low availability of both REs the diesel Engine-Genset will be switched on through a control-operated relay switch. 6.8 Possible Institutional Ways to Cover Project Risks For covering risk, the developer might arrange guarantees from an Export Credit Agency or International Financing Institutions or arrange partial risk guarantee from an international agency. In order to qualify for either export credit financing, or any other form of IFI financing, following conditions would need to be satisfied. Internal rate of return should be at least 14% or greater; Long-term (at least 15 years) diesel supply contract with pricing formulas that guarantee that the spread between electricity and diesel will remain essentially unchanged Long term electricity purchase agreements with settlements in US Dollars or in a currency which is guaranteed convertible at a specified dollar yield; At least 30% of the capital requirement in cash equity Political risk insurance Firm fixed price competitively bid engineering. Procurement and construction contracts. Also risks may be shared as follows: Owner/Operator Construction and operation cost overruns Delay in completion -- and so penalty Performance guarantees -- fuel utilization (efficiency), capacity availability Statutory regulations -- environmental limits Utility Force Majure due to Utility/ Government Inflation Market down trend Foreign exchange risk Government Foreign exchange remittance Convertibility of foreign exchange Utility obligation Tax incentives Damage for non-performance 25

32 6.9 Likely Fiscal Incentives for the Project Different fiscal incentives currently allowable to foreign investors in accordance with the country s industrial policy and foreign investment policy would also be available to the sponsors for the proposed project. The private investors would generally expect the following incentives (see Country Study report): Guaranteed rate of return on equity Reduction/waiver of customs duty on import of machinery Tax holiday Guarantee of payment for power purchased by utility Guarantee of foreign exchange remittance Guarantee of convertibility of foreign exchange 6.10 Possible Financing Arrangements of the Project This hybrid plant, being primarily a renewable project, is likely to receive following assistance: GOB is a signatory to the Climate Change Convention. GOB may establish a Global Environmental Facility (GEF) grant fund to support renewable energy projects in Bangladesh GOB may allocate fund to few local banks for project as well as micro financing part of the capital cost of Renewable Energy Project. GOB may facilitate the creation and encouragement of corporate debt securities market for local financing of renewable energy project development. If CDM-able, funds may be arranged through CERs Facilitating Agencies of the Project Power Cell of the MPEMR is assigned the responsibility of articulating, co-ordination, promoting renewable energy projects. In this connection, the responsibility of the Power Cell include: Financial and technical analysis of Project. Identifying and assessing the potential of establishment of renewable energy projects which could make a significant contribution to Bangladesh s energy needs both in near term and long term. Recommending financing and delivery mechanisms to increase the affordability of renewable energy systems for the rural poor. Promoting NGO and private sectors in development of renewable energy and suggesting strengthening the institutional requirements for successful implementation of projects. Recommending research and development and required training facilities for technology transfer needed to support commercialization of renewable Energy technology. Representing GOB in international institutions and implementing all policy and recommending measures to be adopted. Identifying the type and extent of support needed from international sources. 26

33 Considering existing network and planned infrastructure of different utilities before issuance of consents/licensees for establishment of renewable Energy projects. Resolving issues pertaining to the jurisdiction of geographical area of different utilities should there arise any, upon approval of the MPEMR Likely Basis of Tariff Structure Determination In line with other Private Sector Power Projects (like IPPs), the tariff structure for the Project in line with similar electricity generating units would consist of the following: Debt service, return on equity, fixed and variable operation and maintenance cost, insurance costs, money escalation costs, exchange fluctuations etc. Payment will be linked to a certain level of availability of power which will be made available at the time of PPA signing Tariff payment will be made in local currency, but PPA may be made in US cents/kwh Renewable energy private sponsors will provide year-wise tariff profile over the contract period in a manner that will match their annual debt service requirements Usually, two-part tariff is proposed, comprising of a capacity charge, which is designed to recover the capital or fixed costs of the plant and an energy charge, which would vary with the net amount of energy in kwh actually delivered by the power producer to the purchasing utility. At present, MPEMR, GOB regulates the tariff and it does not reflect the cost of production Possible Ways to Selection of Firm in the Project Current Government policy on selection of firms allows two approaches - Unsolicited Proposals and Solicited Proposals. Under Unsolicited Proposals, Developers approach Government/ Utility with a proposal to build a power plant and proposes the location, size, fuel types etc. Under Solicited Proposals, Government/Utility calls for competitive bid for specific technology, size, location and fuel for plant. Both the options have advantages and disadvantages. The main advantage of the option of unsolicited proposals would typically be quicker bidding process while the disadvantages would be more complicated evaluation process and validity. Also seriousness of bids could be more often difficult to determine. The main advantages of solicited bids would be the possibility of least cost supply which is essential to ensure that scarce and costly capital that are raised through private sources are utilized in an optimal manner. Solicited proposals can be obtained by calling for competitive bids for development of projects for specific and proven technology, size and location. The structured Requests for Proposals (RFPs) should contain the following: Invitations of applicants Information for applicants Instruction to applicants Security/package and financial structure Tariff structure Applicants proposals and supportive data Performance specifications and drawings Draft Implementation Agreement 27

34 Draft Power Purchase Agreement (PPA) Draft Fuel Supply Agreement Draft Land Conveyance Agreement Site soils investigation data Project structures whether BOO or BOOT or its variations would affect Power Purchase Agreement (PPA). PPA would also depend on technical aspects like system load demand pattern, project type, project efficiency, transmission arrangements and environmental aspects. Finally, PPA would depend on financing aspects including type and quantum of financing to be attracted, creditworthiness of the country and the sector. 7. Emission Reduction, Monitoring & Verification Plan 7.1 Baseline of Electricity Generation in Bangladesh The baseline is the most probable future development in the absence of the project activity. Bangladesh consumes considerable amount of oil for power generation. The proposed project comprises replacement of oil-based plants/installation with new plants based on solar-wind- Diesel hybrid system. The progress of power plant installation in Bangladesh by BPDB and IPP from to is given in Table 6 and the trend up to 2019 shown in Figure 1. The average yearly increase over the period is 7.6% (based on 2400 MW in ). This the baseline of electricity generation, Of the projected generation, only 300 MW (Barapukuria) will be based on coal and the rest on natural gas i.e. during the project period only 11.7% will come from non-natural gas and the rest (88.3%) from natural gas. In the year , 84% of generation was based on natural gas. Baseline for power with BPDB and IPP is therefore natural gas with small contribution from coal and oil if proliferation of oil-based power plants can be checked (see Figure 2, Page 29) Table 6: Progress of installed capacity of power plant in Bangladesh over the period 1991/ /02 Year Installed Capacity (MW) Source: PDB Annual Report,

35 Figure 1: Progress of power plant installation in Bangladesh over 91/ /02 and projection up to y = x R 2 = Megawatt Year Series1 Linear (Series1) Linear (Series1) It is to be noted that Table 6 and Figure 1 show the trend of power generation as done by BPDB and IPP. In addition to BPDB and IPP generation, there are captive generators of 2480 MVA capacity in industries, commercial concerns and private sectors which produced 2000 GWh of electricity based on oil in According to T.A. Chowdhury (Chowdhury 2004), since GOB permission for the import of captive generators in 1997, there has been a booming business in the installation of captive generators and consequently, capacity of oilbased generation increased from 500 MW of BPDB in 1996 to 2500 MW in Projection of oil-based generation is shown in Table 7 and Figure 2 (NEP, 1996). Table 7: Projection of total power generation and that based on oil up to 2020 Year Total power generation (TWh) Power generation based on oil (TWh) Source: NEP,

36 Figure 2: Projection of total power generation (series 1) and that based on oil (series 2) Power generation(twh) Series1 Series Year 7.2 Baseline of GHG emission connected with the project The proposed project envisages setting up a renewable energy hybrid power plant (REHPP), comprising of utilization of renewable energy sources - wind and solar PV, with a minimum power input from a standard diesel-based generator set. As detailed under Chapters 5 and 6, the better availability of wind in the coastal districts of Bangladesh, e.g. at Charfasson and in off-shore islands, like Kutubdia, Hatia, Swandip, St. Martins Island, qualify them as most potential sites to set up the proposed REHPP. Presently, these locations, which are off-grid areas, are being powered by isolated diesel (subsidized) Generating sets. As stated before, Charfasson Upazilla HQ has been connected to Bhola HSD based- power station CO 2 Emission from 100% Diesel Based Plant of Proposed ( 476 MWh/yr) Capacity The calculation of the baseline CO 2 Emission has, therefore, been done for a GWh (subsidized diesel fuel based) operation. Solar PV 25 kw, 2000 hrs. = 50 MWh Two 50 kw wind turbine = 286 MWh (@ 143 MWh /turbine) 20 kw diesel genset = 140 MWh (maximum 7000 hrs operation) Total yearly generation = 476 MWh = GWh 476,000 kwh/yr. Or GWh/Yr., which is equal to TJ/Year With 22% efficiency of diesel generators energy consumed with diesel is equal to 1.714/0.22 = 7.79 TJ/yr At tonne CO 2 emission per TJ (for diesel), this equates to a CO 2 Emission of: 7.79 TJ/Yr. x t CO 2 / TJ = tonnes CO 2 /Year Cumulative production of CO 2 over the 14-year period in the absence of the project activity is shown in Table 8 and Figure 3 (upper curve) 30

37 Table 8: Yearly and cumulative production of CO 2 in the absence of the project activity Year Yearly production (tonnes) Cumulative production (tonnes) Figure 3: Cumulative production of CO 2 in the absence (series 1) and in the presence of the project activity CO2(tonnes) Series1 Series Financial year CO 2 Emission in Case of the Project (RE+Diesel) Operation The CO 2 Emission in case of the proposed REHPP project has been calculated on the basis of the average mix of Wind-PV-Diesel operation 60%: 10%: 30%, (see above for details). The REHPP Project operation with the average (30%) input from diesel would mean that only 30% of the above base-line emission would be made in case of the project: GHG Emission in case of REHPP = 0.3 x 577 tonnes of CO 2 = 173 t CO 2 / Year 31

38 Cumulative production of CO 2 over the project period in the presence of the project activity is shown in Table 9 and Figure 3 (lower curve) Table 9: Cumulative production of CO 2 in the presence of the project activity Year Yearly production (tonnes) Cumulative production (tonnes) The Proposed Project As mentioned earlier, in Chapters 5 and 6, the proposed project comprises of a Renewable Energy + diesel Hybrid Power Plant (REHPP), which will derive a total average of about 70% of its energy from the renewable sources. The expected split of the renewable and fossil (Diesel-based) electrical energy generations, on an annual average basis, is expected to be as follows: Wind : average 60% / Year Solar PV : average 10% / Year Diesel : average 30% / Year A Deep Cycle Storage Battery Bank (200 kwh Capacity) will also be a part of the total REHPP system which, along with the wind, PV and diesel generated energy, will ensure a steady and reliable electricity supply to consumers and will cover gaps of availability of wind and solar energies, i.e. even in total absence of wind and PV inputs. A good optimization between availability of wind velocities and availability of solar energy in Bangladesh can be reached, if wind and solar PV Generators are coupled with a diesel Generator to make a RE-Hybrid System. As proposed such hybrid systems, by experience of other countries (e.g. India), have demonstrated a high degree of system reliability and hence better customer satisfaction and confidence on renewable energy technologies. The REHPP has been designed to provide continuous power supply to a Rural Mini-Grid, with a Capacity to deliver a minimum of 20 kwh per hour with no contribution from wind and PV. With an average typical rural load of about 100 W / household, this would mean 200 Nos. of connected rural consumers. 32

39 As presented under Section the proposed REHPP will save about ( ) = 404 t CO 2 per Year, with only 30% diesel input. Cumulative reduction of CO 2 over the project period is shown in Table 10 and Figure 4. Table 10: Cumulative reduction of CO 2 in the presence of the project activity Year Yearly reduction (tonnes) Cumulative reduction (tonnes) Figure 4: Cumulative reduction of CO 2 over the project period in the presence of the project activity CO2(tonnes) Series Financial year 33

40 Flowchart 1 Flowchart with Calculation for Yearly GHG (CO 2 ) Release Attendant on Production of 476 MWh of Electricity Based on diesel Oil (without Project Activity) 476 MWh based on diesel oil Energy consumed for production of 476 MWh by burning diesel oil with conversion efficiency of 22% = Wh 3600 sec/hr. = 7.79 TJ 0.22 CO 2 production attendant on consumption of 7.79 TJ of diesel tonnes of CO 2 / TJ = tonnes/tj 7.79 TJ = 577 tonnes 34

41 Flowchart 2 Flowchart with Calculation for Yearly GHG (CO 2 ) Release Attendant on Production of 476 MWh with 30% backup from diesel oil (with the Project Activity) Electricity from diesel in the hybrid plant = = MWh MWh based on diesel oil Energy consumed for production of MWh by burning diesel oil with conversion efficiency of 22% = Wh 3600 sec/hr.. = 2.33 TJ CO 2 production attendant on consumption of 2.33 TJ of diesel tonnes of CO 2 / TJ = tonnes/tj 2.33 TJ = 173 tonnes 7.4 Factors Impacting the Baseline Factors impacting the baseline emissions are national program of BPDB and also the recent recommendations of the of the Infrastructure Investment Facilitation Centre (IIFC, funded by the World Bank and also by the Economic Relations Divisions, ERD, Government of Bangladesh) to lease-out the Electricity Generation and Distribution operation to the private sector (under Remote Area Power System or RAPS Project). IIFC, BPDB and REB have programs, which are considering bringing small towns and remote areas - both on-grid and off-grid areas, under a RAPS programme, which may gradually be leased out to IPPs. Two on-grid remote area Grids - Hatibanda (Lalmonirhat) and Satkhira-Asasuni (south-west zone) are being seriously considered for privatization. A Pre-qualification of the potential Grid / Power Generation operators in these areas have been made. The next program could be a number of off-grid remote areas. 35

42 The baseline scenario may change if and when these plans are materialized. This prefeasibility, however, will help institutions like IIFC, BPDB, REB and also future IPPs select systems, based on optimum mix of energy sources for RAPS, as eventually the IPPs, after they have been leased out a remote area for electricity supply, will be allowed a free choice by the Government to decide on their electricity generation sources, Tariffs and Investments to improve the RAPS Distribution Systems, which will be leased out to them. 7.5 Crediting Period The project is opting for a crediting period of 14 years (two 7-Year terms), considering the replacement of the wind turbines generator sets, diesel sets and storage batteries. It may be mentioned that in a Wind-PV-Diesel Hybrid System, where the major load is covered by the wind source, PV and also diesel, the life of the Deep Cycle Batteries, which virtually bridge small gaps, is expected to be much higher. However, cost of one-time replacement has been included in the financial and economic analyses. 7.6 Project Boundaries & System Boundaries The project boundaries are limited to the geographic boundaries of the remote locations in coastal and offshore Island small towns and villages (rural homesteads), where the proposed REHPP will be set up. The following project activities and emissions are within the project boundaries: 1. Power generation by wind turbine close to the REHPP Building (Shed) 2. Power generation using solar photovoltaic on the rooftop of the power plant building itself 3. Charging of the storage battery bank inside the REHPP 4. Operation of the diesel engine-genset, as and when necessary System Boundaries include national grid (PDB and/or REB and also IPPs), since emission reduction comes through displacement of grid electricity. 7.7 Project Additionality A project is considered environmentally additional if it reduced emissions against the baseline. Emission additionality is shown in Flowcharts - 1, 2 and Indirect Emission Effects Indirect emissions are those, which are caused by the project outside the baseline and project boundaries. In case of the proposed REHPP system no such leakages are identified. Emissions occurring during construction period are insignificant. The REHPP station s own electricity consumption and the connected emission have been considered within the total CO 2 emission from the project. The station lighting will also take care of the emissions during maintenance works and has been considered in the calculations. 7.9 Additional Environment & Social Benefits As per requirement of the Kyoto Protocol a CDM Project must contribute to the sustainable development of the host country, Necessary arrangements will, therefore, be made to maximize local benefits, based on the general concept of environment projects to think globally and act locally. 36

43 The project will contribute to a sustainable development of Bangladesh through a multitude of socio-economic and institutional improvement benefits as shown in Table 11. Benefit Aspects 01. Local Environmental Benefits Table 11: Project Benefits Details - How achieved - Local Air Quality improvement (larger scale diesel Plant operation will be reduced proportionate to the contribution of renewable energy used. (Wind + Solar + Storage Battery System). A diesel contribution (30%) will reduce the present full-scale diesel operation and related Carbon Emissions. - A number of Households currently meeting their lighting needs with kerosene will switch over to electricity, which will also contribute to air quality improvements and reduce fire-hazards. 02. Socio-economic Benefits - The project will improve the overall quality of life of people living in the project area who will enjoy reliable electricity supply and related other socio-economic benefits, like longer study hours getting connected to TV and other media/communications with the outside areas, including global exposures. - Being Central Small Rural Power Plant, the direct employment generation will be limited only to a few plant operators and maintenance personnel, including a Plant In-Charge. However, due to the enhancement of quality of life and facilitation of economic activities, the indirect employment generation (increase of small rural incomes through Handicrafts, Weaving and other production activities will be much larger) 03. Capacity Building - This will be the first Renewable-Fossil Hybrid Power Plant in Bangladesh (an REHPP Flagship project), which not only qualifies as a CDM Project, but will also help in capacity building related to such projects in future. In fact, the success of this relatively smaller capacity Flag-ship Project in the proposed location - Charfasson will lead to its scale-up with associated design change and further dissemination and will lead to gradual replacement of typical BPDB operated full-scale diesel Power Plants in Small Towns/Rural Areas/Off-shore Islands. 04. Technology Transfer - The REHPP will be a combination of 3 independent and globally proven and also regionally and locally tested Technologies (PV and diesel), combined as a Hybrid to strike a good balance between environmental benefits and also operational costs. Its success, as mentioned, will lead to its scale-up and dissemination and hence effect a transfer of technology on a larger scale in Bangladesh, where decentralized power plants (50 kw - 10 MW range) are considered to be ideal, being Fast Track Plants with a high degree of reliability for continuous electricity supply, minus the current negative experience with huge Grid System Losses and slow implementation of large Central Plants. 05. Host Country Criteria - GoB is still in the process of defining requirements of CDM projects 06. Government Priority - Being an energy and especially renewable energy project this Project is in the priority list of the Government (under MOEF). 07. EIA - EIA for the project will be carried out as per Environmental Legislation of the country. 37

44 7.10 Monitoring & Verification Plan - Monitoring of Project Performance It is a requirement of the CDM Projects that emission reductions are proved through the development and implementation of a monitoring plan that proves the objective evidence that emissions have been avoided. It is equally important that emission reductions are demonstrated in a transparent, complete, consistent, comparable and accurate manner. It is the responsibility of the project participant to maintain appropriate records and documents to generate relevant and sufficient data/information required for calculation of GHG emission reductions. Given the baseline emission, the expected reductions of GHGs through the REHPP will depend on the share (contributions) of renewable energies - wind and solar PV + storage battery bank to the total system generation, with minimum inputs from the diesel generator. The hybrid system will be provided with Electronic (Microprocessor-based) Controls, which will sense, control/optimize and feed the usable alternating current (A.C.) electricity (after D.C - AC Inverters from the battery storage), available from each energy source (i.e. from wind, solar PV, storage battery bank and diesel plant) through individual Energy (Watt)- metering (measurements) of the Inputs from such individual sources, i.e. from wind, solar PV, storage battery. A final Grid Supply (Watt) Meter will be used to measure the Net Generation of Electricity (Gross minus the REHPP Station Use, i.e. for controls, lighting, fans etc.). Monitoring of Project Performance Verification is the periodic review and ex-post determination of the monitored GHG emissions reductions that have occurred as a result of the CDM project. The designated operational entity (DoE) verifies the data collected by the project developer according to the monitoring plan. The verification process confirms the total number of CERs (Certified Emission Reductions) resulting from the project during a specific period of time. The frequency of verification may be every year or every two years as agreed upon by the project participants and the DoE. Based on verification, the DoE will issue CERs that during the specified period the project has achieved the reduction of GHG emissions, in compliance with all relevant criteria. The DoE at the outset of the project will validate the project design document and the key document for the project. The validation process confirms that all the information furnished as assumptions made in the project design document (PDD) are accurate and reasonable. The validation of the project design document would lead to its acceptance by CDM Executive Board, which is a precondition for CERs. Data to be Monitored In order to measure the quantity of GHG reduction through the project and assess the impact in terms of sustainable socio-economic development of the country, a set of variables / indicators will be regularly monitored, recorded and documented by the project participant. The monitored data/information will be verified by DoE, contracted by the project participant. The DoE would issue CERs based on thorough scrutiny of the relevant data/information maintained by the participant. It is suggested that the project operator will collect the following data / indicators for monitoring emission reductions under the project: 38

45 Sl # Data type 01. Wind Velocity Measurement 02. Solar Irrad. Measurement Data Unit 03. Diesel Fuel input litres / day 04. Electricity produced from Solar PV Unit 05. Electricity produced from wind Genset 06. Electricity produced from diesel 07. Diesel Genset Hours of Oper. 08. Battery Bank Electricity Input 09. Gross Electricity produced from total REHPP 10. Net Electricity supplied to Busbar (after Station Use) Measured Or calculated Recording Frequency m/sec. Measured Continuous (Day & Night) W/m 2 Measured Continuous (Day & Night) Measured Only when Genset springs to action KWh Measured Continuous + Cumulative KWh Measured Continuous + Cumulative KWh Measured Continuous + Cumulative Hours Measured Continuous + Cumulative Quality Assurance / Quality Control KWh Measured Continuous + Cumulative KWh Measured Continuous + Cumulative KWh Measured Continuous + Cumulative Proportion of Data to be monitored 100% (Day & N) 100% Summer Monsoon, Winter - all Seasons 100% of all fuel consumption data How Data will be archived Electronic Spreadsheet Electronic Spr. Sheet How long will the arc- chive be kept Two years after project completion Two years after project completion,, Two years after project completion 100% of data,,,, 100% of data,,,, 100% of data,,,, 100% of data,,,, 100% of data,,,, 100% of data,,,, 100% of data,,,, The monitoring system will ensure strict quality standards and quality control of data to be generated and monitored. The measurement equipment to be used like oil, diesel-running timer, electric meters and other apparatus will be regularly calibrated as per international standards. Project Approval by Designated National Authority (DNA) It is a requirement that the relevant authority in the host country approves CDM project document. In Bangladesh, the Designated National Authority (DNA) has been constituted for clearing and endorsement of CDM project. The DNA is a three-tier body comprising National CDM Board, National CDM Committee and CDM Clearing house/ secretariat. The CDM project document is submitted to CDM clearing house/secretariat which scrutinizes and assesses the document and if necessary asks for its revision. If the clearing house/secretariat is satisfied with the content of document, it is forwarded to CDM committee for approval and finally to CDM Board for endorsement. The structure of DNA in Bangladesh is as follows. 39

46 Structure of DNA of Bangladesh National Designated Authority CDM Board For endorsement Project Project Concept Concept paper/ paper Full Project paper Full Document Full Project Project Project Concept submitted For approval National CDM Committee CDM Clearing House/Secretariat Endorsement Letter for Validation Develop Project Developer/Owner Comments and Request for Revision 8. Financial Analysis of the Project Financial analysis was done in accordance with the ADB s guideline for preparation and presentation of Financial Analysis. The financial analysis was carried out to examine the financial viability of the project through calculation of the financial rate of return (FIRR). All constituent costs and benefits of the project are included in the analysis. The FIRR is based on the investment costs and stream of cost and benefits spread over the life of the project (14 years). 8.1 Project Cost (Estimated) A 476 MWh/ year solar-wind-diesel system will be set up at Charfasson, a coastal sub-district where both wind and sunshine are available. During Monsoon when sunshine is less, wind is available in plenty. Two 50 kw wind turbines, 25 kwp PV panels, two 20 kw diesel gensets and the required accessories will be procured. The suppliers provide costs. 40

47 A. Investment Cost (million Taka) i) Two 25 KVA gensets including 4 times overhaul ii) Two 50 kw wind turbine set iii) 25 kwp PV panels iv) Land and site development iii) Building iv) Battery, inverter etc including one-time replacement v) Physical contingency (5%) Total Investment Cost B. Operation and maintenance cost i) Diesel cost for 53,000 litres (@ Tk. 20 /litre) ii) Manpower cost iii) Repair and maintenance Tk 0.25 ml./gwh iv) Lubricants Total operation & maintenance cost C. Revenue i) Gross generation of electricity GWh ii) Electricity sale (95%) GWh ii) Revenue (@ 8.00 million Tk./GWh) million Tk. D. Gross profit per year Revenue Total operation and maintenance cost = = million Tk. 8.2 Financial Analysis. In the analysis of costs and benefits, an exchange rate of 58.5 Taka = 1 US$ (2004) has been used for correct valuation at a later date.. A fourteen-year financial life has been used though actual life could be higher than 14 years. The loan term is also assumed 14 years excluding the construction period with 10% nominal rate of interest. Working capital is equity financed. Among the tangible output of the project, electricity is the only saleable product. Diesel oil is the major input. Financial results show that the FIRR is 6.47%, NPV is 0.83 million Taka and B/C ratio is 0.82 (Annex 3a) The project is therefore not viable in the base case with Tk.8.00/kWh as tariff. Price at the break-even point is Tk. 8.31/kWh; whereas the national grid price is Tk. 2.50/kWh. Subsidy and CDM may help bridge this gap at the beginning. Once the users get accustomed to the comfort of electricity, they are expected to agree to pay the higher price. The tariff should be increased to the production cost gradually. Results of sensitivity tests are: (1) For a decrease in revenue by 15%, FIRR reduces to %, NPV (@ 10% interest) to 4.46 million Taka and B/C to 0.01 (Annex 3b). 41

48 (2) For an increase in project cost by 15%, FIRR reduces to -3.07%, NPV to 3.87 million Taka and B/C to 0.41 (Annex 3c). Financial analysis was recast incorporating carbon dioxide credit price. With CO 2 credit price of US$ i.e. Tk per tonne of CO 2, IRR, NPV and B/C are as under (Annex 4a): IRR = 12.97% NPV = 0.75 million Taka B/C = 1.17 Break even CO 2 credit price = US$ 5.25 Results of sensitivity analysis are shown below: (i) (ii) IRR drops to 4.67%, NPV to 2.89 million Taka and B/C to 0.36 for a 15% fall in revenue (Annex 4b) IRR becomes 4.40, NPV 1.48 million Taka and B/C 0.72 for a 15% increase in investment cost (Annex 4c). The project therefore turns viable if the CO 2 credit price of US$ per tonne is incorporated. But a possible 15% fall in revenue or 15% increase in investment cost makes the project unviable. 9. Economic Analysis Economic analysis was done in accordance with the ADB guidelines for the economic analysis of projects. The economic analysis was carried out to reassess the economic viability of the project through calculation of economic rate of return (EIRR). All constituent costs and benefits of the projects are included in the analysis. The EIRR is based on the investment cost and the stream of costs and benefits spread over the life of the project. The quantifiable benefits of the project are estimated in terms of gross margin e.g. by subtracting variable cost like diesel oil and other materials, salaries and wages cost, other cost etc. from gross revenue. All costs and benefits are expressed at 2003 domestic price numeraire. A shadow exchange rate factor (SERF) of 1.11 has been used to convert nontradable values to this numeraire. A conversion factor (CF) of 0.88 has been used to adjust salaries and wages to economic value. A zero residual value has been assumed for project machinery and equipment. A constant exchange rate of Taka 58.5 = 1 US $ (2004) has been used to convert constant dollar values to their local currency equivalent. A fourteen-year economic life has been used, though actual life could be higher than 14 years. The loan term is assumed 14 years excluding the construction period with 10% nominal rate of interest. Working capital is equity financed. Among the tangible output of the project, electricity is the only saleable product. Oil is the major input. In case of diesel oil and lubricants, as they are imported items, import parity prices are used. Other costs like wages and salaries, etc. are multiplied by the CF. Description of machineries and equipment and basis of cost has been given earlier chapters (Chapters 6, 8). 42

49 Revenue estimates from electricity sales are calculated on the basis of recent figures related to electricity production by diesel genset. Oil price is the current bulk sale price (Tk. 20/litre) Economic results show that EIRR is 7.54%, NPV is 0.65 million Tk. and B/C ratio is 0.87 (Annex 5a) and as such the economic analysis does not show any significant improvement when compared with the financial analysis. Sensitivity analysis has been given in Annex-5b and Annex-5c: (1) EIRR drops to %, NPV to 4.26 million Tk. and B/C to 0.06 for a decline in project revenue by 15% (Annex 5b). (2) EIRR drops to 0.01%, NPV to 2.65 million Tk. and B/C to 0.53 for an increase in project cost by 15% (Annex 5c).. In view of the results above, the proposed project could be established if this could be combined with CDM project as per the provisions of the Kyoto Protocol. 10. Stakeholders Meeting A stakeholders meeting on the three pre-feasibility studies viz. (1) Cogeneration in Sugar Industries, (2) Solar-Wind-Diesel Hybrid for Power Generator in Small Towns and Villages and (3) Fuel Switching from Oil to Gas was held on 26 July 2004 from 10:00 A.M. to 02:00 P.M. in the LGED Bhaban, Dhaka 118Participants connected with renewable energy and energy efficiency representing different Government, NGO and private sectors attended the meeting. The meeting was chaired by Dr. Saleemul Huq, Chairman of BCAS Board and cochaired by Dr. A. Atiq Rahman, Executive Director of BCAS. Dr. M. Eusuf, NTE Team Leader, presented a keynote paper describing the technical aspects of the three projects. Social, financial and economic aspects were jointly prepared by Dr. Saleh Ahmed Chowdhury and Mr. Khandaker Mainuddin and presented by the lather. A panel of three discussants initiated discussion. They were: (1) Mr. B.D. Rahmatullah, Director, Power Cell, (2) Dr. Eng. Khursheedul Islam, President, Bangladesh Renewable Energy Management and Development Co (BREMADCO) and (3) Prof. M. Ibrahim, Executive Director, Centre for Mass Education in Science. Presentations of Dr. Eusuf and Mr. Mainuddin related to this pre-feasibility study cover the salient points in chapters 2 to 9. The panelists emphasized on the necessity of the hybrid system because of the insufficient supply of electricity by PV during Monsoon and seasonal and site-specific velocity of wind in Bangladesh. There was a lively discussion on all the three topics. Discussion on solar-wind-diesel hybrid was centered on the cost of electricity (Taka 5.00 per kwh) and the present status of standalone PV system. The following recommendations were adopted unanimously. 1. Because of low insolation and high wind speed in Monsoon, a solar-wind-hybrid backed up by a diesel generator is a necessity for the sake of uninterrupted supply. 2. A solar-wind-diesel hybrid will be installed at Charfasson, a coastal sub-district where wind velocity was found to be reasonable high. 3. A study will be undertaken to find out the present status of solar home systems (SHS). 4. Five Representatives from Charfasson present in the meeting have welcomed the project, as the supply of electricity from the project will be uninterrupted. 43

50 Rapid Appraisal techniques were used for obtaining information from key informants of the diesel based Power Generation system operating in the coastal areas. The results show that about 31% of 45 workers would be willing to pay Taka 50 per month for access to the better service promised by the Project. On the other extreme 100 percent of the households would use the service at a zero charge. The slope of the demand curve is 50/(100-31) or The demand curve becomes D = a 0.73P. Therefore by extrapolation, all households would cease to use the service at a charge of Taka 137 per month. The Project s health and environment service can then be valued through the average demand price 137/2 or Tk using the domestic price numeraire. Benefit of the health and environment service at the mill premise becomes Taka 0.04 million. 11. Major Findings and Recommendations This pre-feasibility study has attempted to determine reliability and acceptability of standalone solar PV and wind turbine gensets in the country and to suggest a way of providing reliable and uninterrupted supply of electricity to inaccessible areas. The major findings are: Solar home systems (SHS) supplied so far (about 2 MW) cannot meet the demand during Monsoon because of less sunshine. Wind velocity is not high in Bangladesh except in the coastal districts and offshore islands. Wind velocity in the coastal areas is consistently high (4 5 m/sec) during Monsoon thus compensating for low insolation. To make the solar-wind-hybrid 100% reliable and continuous a diesel backup will be provided with the required control system. A 476 MWh/yr solar-wind-diesel hybrid will be set up at Charfasson, a coastal sub-district having good wind speed, average contribution of solar, wind and diesel being 10%, 60% and 30% respectively. With 100% diesel for 476 MWh yearly generation of CO 2 is 577 tonnes in the absence of the project activity, whereas with the project activity yearly production of CO 2 is 173 tonnes. The emission additionally is 404 tonnes of CO 2 per year. The total investment cost is million Taka with an initial working capital of 0.42 million Taka. Results of sensitivity tests are: (1) For a decrease in revenue by 15%, FIRR reduces to %, NPV (@ 10% interest) to 4.46 million Taka and B/C to 0.01 (Annex 3b). (2) For an increase in project cost by 15%, FIRR reduces to -3.07%, NPV to 3.87 million Taka and B/C to 0.41 (Annex 3c). Financial analysis was recast incorporating carbon dioxide credit price. With CO 2 credit price of US$ i.e. Tk per tonne of CO 2, IRR, NPV and B/C are as under (Annex 4a): IRR = 12.97% 44

51 NPV = 0.75 million Taka B/C = 1.17 Break even CO2 credit price = US$ 5.25 Results of sensitivity analysis are shown below: (i) (ii) IRR drops to 4.67%, NPV to 2.89 million Taka and B/C to 0.36 for a 15% fall in revenue (Annex 4b) IRR becomes 4.40, NPV 1.48 million Taka and B/C 0.72 for a 15% increase in investment cost (Annex 4c). The project therefore turns viable if the CO 2 credit price of US$ per tonne is incorporated. But a possible 15% fall in revenue or 15% increase in investment cost makes the project unviable. Economic results show that EIRR is 7.54%, NPV is 0.65 million Tk. and B/C ratio is.87 (Annex 5a) and as such the economic analysis does not show any significant improvement when compared with the financial analysis. Sensitivity analysis has been given in Annex-5b and Annex.-5c.: (1) EIRR drops to %, NPV to 4.26 million Tk. and B/C to 0.06 for a decline in project revenue by 15% (Annex 5b). (2) EIRR drops to 0.01%, NPV to 2.65 million Tk. and B/C to 0.53 for an increase in project cost by 15% (Annex 5c). In view of the results above, the proposed project could be established if this could be combined with CDM project as per the provisions of the Kyoto Protocol. A rapid appraisal was carried out to determine the present situation in Charfasson. * Because of load shedding for long duration, oil-based captive power generator is quite common in Charfasson, especially in the sub-district Headquarter. This is polluting the local atmosphere. * Project would keep the atmosphere clean by reducing smoke and oil smell. * Project would improve working conditions by providing uninterrupted power supply. 45

52 References BCAS, 1998a Wind Energy Study (WEST) Project, Final Report by Bangladesh Centre for Advanced Studies (BCAS) BCAS, 1998b. BCAS Monitoring Report on Narsingdi Solar PV Pilot Project BPDB, Bangladesh Power Development Board, Annual Report. BPDB, Bangladesh Power Development Board, Annual Report. Chowdhury, Private Communication from Prof. T.A. Chowdhury, Professor of Electrical Engineering Dept. of Bangladesh University of Engineering and Technology (BUET), Dhaka. Hossain, Wind Energy Study- Progress and Preliminary Findings First Seminar of Wind Energy Study (WEST) Project 28 October 1996, Prepared by BCAS/LGED/ETSU, coordinated and chaired by Dr. M. Anwar Hossain, Wind Energy Consultant and Ex-Chairman, Bangladesh Atomic Energy Commission (BAEC) Islam, Present Scenario and Future Commercial Potential of Solar Photovoltaic (PV) Electricity in Bangladesh - published under Section Energy & Power in the Journal of Commerce & Industry, Vol. 26, Dr. Engr. K. Islam MOFP (2000). Ministry of Finance & Planning, GOB, Bangladesh Economic Review MOEF, Ministry of Finance and Planning, Bangladesh Economic Review PSMP, Power System Master Plan Raghavan, Wind-Diesel Hybrid System And Its Applications by K. Raghavan, Renewable Energy Consultant, India - Paper presented at Wind Energy Seminar held on 23 November, 1997 at Dhaka, Bangladesh 46

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