The Role of Independent Power Plants - Term Paper Example

The Role of Independent Power Plants, Focus on Bangladesh source www.durdesh.net/.../rte/Bangladesh_Map.jpg Bangladesh, a land partitioned from India after the independence in 1947, was recognized as Eastern Pakistan. This country was the part of Pakistan till 1971 when Indian Army achieved the victory over Pakistan and Bangladesh became independent. It was recognized as a parliamentary democratic nation. From 1971, to till now Bangladesh has been one of the poorest and densely populated countries in the world. As far as the energy potentials are concerned, Bangladesh has small reserves of oil and coal, though the potentiality of natural gas resources is remarkably larger. Approximately only 18% of the population in Bangladesh has the electricity access and Bangladesh’s per capita commercial energy consumption is among the lowest in the world. Noncommercial energy sources, such as wood, animal wastes, and crop residues, are estimated to account for over half of the countrys energy consumption. There is a serious problem of deforestation occurring in Bangladesh. According to the estimate produced by The World Bank, Bangladesh loses around $1 billion per year because of the power outrages as well as unreliable energy supplies. The private sector power generation Policy of Bangladesh was issued in 1996 by Bangladesh government. It aimed at soliciting the proposals from Independent Power Producers to facilitate the country’s electricity system. Several IPPs broke ground on new power stations after 1996. And the recent situation is that Bangladesh has attracted many large investment proposals. In May 2005, a memorandum of understanding (MOU) was signed was signed between the Bangladesh government and the US based Vulcan Energy. This MOU was signed for the construction of the $1.6 billion in gas coal and fertilizer project which would add the generation capacity of around 1800 Mega Watt. The Tata group companies of India also mulling $3 billion for the energy sectors in Bangladesh. It includes 500-MW coal-fired power station and a 1000-MW gas-fired generator.But in July 2006 it was declared by the company representative that Tata would no longer proceed with the investment plan. The US Minister Secretary Bill Richardson and Bangladeshi Energy and Mineral Resources Secretary Dr. Tawfiq-e-Elahi Chowdhury B.B. signed an agreement to help support the development of clean energy and contribute to Bangladeshs economic growth in December 1998. According to the agreement both the countries decided to work together to stimulate investment and create market opportunities for clean natural gas and other environmentally responsible energy sources. It aimed at improving the overall energy infrastructure, nurturing market-based policies and strengthening the regional economy. Bangladeshs Ministry of Energy and Mineral Resources (MEMR) has overall responsibility for the countrys energy sector, with policy formulation and investment decisions under its control. Within MEMR, the "Power Cell" acts as a single point of contact to facilitate the electricity reform and restructuring process, such as development of Independent Power Projects (IPPs). The increasing demand and shortage of power: Bangladesh is suffering from acute power problem in the mid 1990s. There was a critical and serious shortage of electricity due to generation incapability. Shortage of finance and the inefficiency of the two major power companies – Bangladesh Power Development Board and Dhaka Electricity Supply Authority decided to introduce the privately financed, independent power producers (IPPs). The demand of Bangladesh for the energy is increasing day by day. It is growing by 10 percent annually. Bangladesh has the lowest per capita consumption of energy in South Asia. Almost all the major cities in Bangladesh including the Capital Dhaka experience the frequent power failure. The country is not able to meet the growing demands of the electricity. Out of 5275 only 4,300 megawatts are available at any given time. So the Bangladesh Government has now permitted private independent power producers to enter in Bangladeshi market since 1996. Through this policy the government is trying to fulfill the growing demand for the energy and aiming to increase energy supply to over 6,400 megawatts by 2007. However yet there is a shortage of 1000 mega watt due to the retreat of the old power stations. The IDA (International Development Association) supported in creating the framework to attract private power generation investments. And the two cost effective IPPs –the 360 MW Haripur and 450 MW Meghnaghat plants, with AES as the original sponsor of both projects were developed. IDA Partial Risk Guarantee (PRG) assisted to build the Haripur project which was the first major private power plant developed in Bangladesh. Meghnaghat received US$80-million debt finance (with a senior loan of US$20 million and subordinate loan of US$60 million) from IDA through the Private Sector Infrastructure Development Fund, out of a total financing of $220-million. Loans were provided for Haripur Power Project with a minimum interest rate of 2% with a longer tenor of 15years. Meghnaghat Plant: The Meghnaghat plant is one of the major power plants in Bangladesh. It is 450 MW Combined Cycle gas-fired power station. The plan was constructed by Allied Energy Systems (AES) Corporation, The US based producer. British company CDC Globeleq has taken this plant. It is a Power Purchase Agreement of 22years with Bangladesh Power Development Board (BPDB). The BPDB is now thinking over to start the second construction phase which is called Meghnaghat phase – 2. Meghanaghat project was set up by Hyundai Engineering and Construction, using Combined-Cycle Gas Turbines fed by natural gas. In 2005, the Energy Market Initiatives was launched in Dhaka to address the key obstacles in forming the energy market and supporting the energy trade and investment in South Asia. Dominance of the Thermal power Bangladesh had a capacity of 3.6 GW in the year 2002. It increased by 95% and became 4.7gigawatts in 2004. The capacity of this installed generation is divided into two sources. The prominent source is conventional thermal power which is 95% and the remaining 5% is the hydroelectric power. Conventional Thermal includes basically natural gas. The World Bank has presented a report on the accessibility of electricity in Bangladesh and according to that report only 32% of the population has an electricity supply. Here is the graph which shows the installed electricity capacity by the two types, Conventional Thermal power and hydroelectric power. This is the record between 1994 and 2004. Conventional Thermal: As mentioned above Bangladesh has generated maximum percent of electricity from conventional Thermal Sources. Around eighty percent of its commercial electricity comes from the 30 natural gas fired plants. The commercial production of first coal fired power plan started in January 2006 in Parbotipur. Natural Gas Bangladesh is situated at the confluence of three major rivers, Jamuna, Padma and Meghana. The delta formed by these three rivers is one of the largest delta in the world. This is the prime location for the hydrocarbon resources. The natural gas was discovered first at Haripur in 1955. The companies such as BAPEX, BGFCL and Titas Gas, are responsible for the exploration, production, transmission, distribution, and development of oil, gas, and other mineral resources of the country. The government of Bangladesh divided the country into twenty- three exploration blocks and offered them for private investment by international oil companies (IOCs) under Product Sharing Contracts (PSCs). The following five major companies are involved in the process of producing gas: 1.     Bangladesh Gas Fields Company Ltd. (BGFCL) 2.     Sylhet Gas Fields Ltd. (SGFL) 3.     Bangladesh Petroleum Exploration and Production Company Ltd. (BAPEX) 4.     Shell Bangladesh Exploration and Development B.V. (SHELL) 5.     UNOCAL Bangladesh Ltd. (UNOCAL) Source : www. Bangladeshenergy.com The export of the natural gas resources issue is controversial in Bangladesh. According to the opinions of many people in Bangladesh, it should be consumed for fulfilling the domestic need rather than the export of the natural gas. For Bangladesh, stable expanding energy resources are more than a precondition for economic development. The energy resources of Bangladesh constitute a significant engine of growth. The more consumption of energy, the more pollution and emissions of Carbon dioxide. Some factual information about energy in Bangladesh If we compare the power situation of 1971 to the year of 2007, we will find that in 1971 only 3% of the total population of Bangladesh had the electricity access. Today it has increased and now around 33% of the population has the access of electricity. USAID has played a vital role in the energy sector in Bangladesh particularly in Rural Electrification. Joining with the National Rural Electric Cooperative Association (NRECA), USAID has pioneered the Rural Electrification Programme which is now providing the electricity supply to more than 40 million people in rural area. US- Canadian Joint venture – contribution The US-Canadian joint venture has unveiled plans to sink $1.5 billion into gas related projects in Bangladesh. The gas would fuel a 150-megawatt power plant, a 1,750-tonne a day fertilizer plant and a 650,000-tonne a year cement plant. Bangladesh officials said private sector investment in power sector had lagged partly because the government has not yet announced its policy to entice foreign companies. In this context the Director General of the Power Cell at the Ministry of Energy and Mineral Resources, Mr. S.D. Khan stated, “We have developed an independent power generation policy to attract private investment. The policy is expected to be approved by the government soon.” According to the data provided by the Energy Officials Bangladesh now generates about 2000 megawatts which is only half of its requirement. At the time of independence there were only 7 power stations with 11 units. Among them 2 were in Kaptai, 1 in Shahjibazar, 2 in Shiddhirganj, 1 in Khulna, 2 in Thakurgaon, 1 in Rajshahi, and 2 in Bogra. At present the per capita electricity generation is 128 kilowatt per annum which is one of the lowest generations. The electricity accessibility is not even a half percent. Only 30 % of 130 million people can get the electricity supply. The government formulated the Private Sector Power Generation Policy and thus opened the power sector of the country for private investments. Independent Power Producers (IPP) began to sell their production to Private Development Board (PDB) to increase the total installed generation capacity. This capacity is now 4,005 MW. 3320 mega watt is produced by PDB and the rest 685 mega watt is produced by IPPs. The generation of total electricity in Bangladesh was 14,450 million kilowatt-hours. The total production consists of 87.97% gas based generation, 5.76% hydro based generation, 4.99% furnace oil based generation, and 4.28% was diesel oil based generation. In June 2001 the total number of electricity consumers was 5.2 million. Among these consumptions 42.7% are domestic, 8.17% are commercial, and 41.02% industrial and 5.61% was agricultural consumption while 2.5% are others. The target of meeting the demands of electricity in 2007 was to develop different programmes to raise the generation capacity by 7,266 mega watt. The gas resource of Bangladesh is one of the most efficient as well as cleanest fuels for power generation. It is providing a very good opportunity to the private investors and BPDB. PDP has now adopted some programmes to attain management efficiency for generation, distribution, and transmission of power in entire Bangladesh. Under the ownership of PDP many companies have been formed who aim at improving performance. First is Bangladesh Power Engineering Company who performs the work of maintenance of power stations. Second is Bangladesh Renewable Energy Company which does the work of developing the solar energy. Third is Bangladesh Power Service Company which provides support service and the forth is Bangladesh P C Pole Company. Two large projects are being launched by PDB in Bangladesh, the Haripur 109 MW Combined Cycle Power Plant. This power plant is aided by Japan. The second plant is System Loss Reduction Pilot Scheme. The country’s largest hydroelectric station at Kaptai is also being extended. Japan is the single largest nation who has contributed to implement 12 development projects in power sector with an investment of 69.42 billion yens. The Power Development Board is the sole government authority for electricity generation. In Bangladesh there are two major agencies of electricity supplies. First is BPDB and the Rural Electrification Board (REB). Other power supplies agencies are Dhaka Electric Supply Authority (DESA), Dhaka Electric Supply Company (DESCO). Two of these are for Dhaka while Khulna Electric Supply Company (KESCO) for Khulna. The responsibility of power generation, and electricity distribution and transmission is performed by the power division of the Ministry of Energy and Mineral Resources. The Bangladesh Government is encouraging the industries to install their own small power plant so that the industries would not be affected in the load shedding period and their production would continue without interruption of the power failure. The private power companies have also been given permission to produce and supply power to the national grid under agreed terms. And thus the private power sectors have now started producing the electricity. Among them are Baghabari (110 mw), Haripur (110 mw and 360 mw), Khulna (110 mw), Mymensingh (60 mw) and Meghnaghat (450 mw), all under the IPP. The government has also planned to build a 600 mega watt nuclear power plant at Rooppur. The New National Policy was formed in 1993. In it Bangladesh Government divided its territories into 23 blocks and opened them for foreign biddings to explore the gas and oil. In 1993, during the first bidding round eight blocks were awarded to four companies through Production Sharing Contracts (PSC). While, three PSCs were awarded in 1997, during the second bidding. In 2006 the Bangladesh government focused on the offshore Bay of Bengal region. But it delayed and now the government has taken the decision to arrange a complete survey to explore the potential petroleum sites and then open the new biddings. The Summit Group in Bangladesh Summit Group is the first indigenous company in Bangladesh who first set up the infrastructure industries in Bangladesh. This company has set up its energy plants at different places in Bangladesh. Among them are as follows. 1. Power plant at Savar (44MW), 2.Narsigndi (35MW), 3.Power plant at Comilla (25MW), 4. Khulana power company Ltd. This is a110MW barge mounted Power plant. There are some plants of Summit Group which are under construction. Among them are Summit Uttaranchal power co. Ltd. Which include 1. The power of Sirajgonj (11Mega watt) 1. Power Plant at Gazipur (33mega watt). Under the section of Summit Purbancho power co, Ltd, two plants are under construction. First is power plant at Narayanganj which is 33 megawatt. Second is the power plant at Comilla which is 25 megawatt. The company is also expected to set up another three 11 M.W. power projects at Mymensingh, Tangail and Narsingdi. The National Petroleum policy came into force from July 1993. It has attracted the foreign investment in oil and gas exploration and development. The five companies have invested in exploring and developing the hydrocarbon. These are as follows. 1) Occidental Exploration of Bangladesh Ltd. 2) Occidental of Bangladesh 3) Cairn Energy PLC and Holland Sea Search Bangladesh 4) Rexwood Oakland 5) United Merridian International Corporation (UMIC) Natural gas is the primary energy source of Bangladesh. The gas demand is increasing within these ten years by 10 percent. It has reached 1.3 billion cubic feet per day in 2004, 2005. The Bibiyana gas field which is the second largest gas field in Bangladesh has located onshore in Block 12, in the district of Habiganj, 180 km. North East of Dhaka. It started its trial production in March 2007. Currently it is operated by a private international oil company under a production sharing contract with the state owned oil and gas company, Petrobangla. The field is currently producing at 300-350 million cubic feet of natural gas per day (mmcfd), and the gas plant’s full capacity of 600 mmcfd is scheduled to be available by late 2007. From the current trend, Petrobangla estimates that a 500-600 production from Bibiyana will be required by 2008. Bangladesh’s target for nuclear power plant: Bangladesh as above mentioned is suffering from acute shortage of the electricity supply and the government has now taken the initiatives to set up the nuclear power plan to meet the need of electricity. If talking about the current situation of the power status in Bangladesh we find that the country is in need of about 5000mega watts of power while out of this requirement around 2000mega watt power is getting so the shortage of 3000 mega watt is there still. The country’s old power plants are frequently having the technical problems. In 2005 the violence was occurred in North Bangladesh on the issue of power cut. It caused the death of around 20 people. Almost all the sectors are getting affected due to the shortage of electricity. The farmers were discontented due to the power failure as electricity is essential for irrigation. The country’s booming textile industry is also suffering due to the massive shortage of the electricity. The political situation in Bangladesh is in some way responsible for this problem. In October 2006 the alliance of four parties ruled over Bangladesh and the government was headed by the Bangladesh Nationalist Party. During this time the situation was not favourable for the energy sector. After the arrival of the caretaker government under the leadership of Fakruddin Ahmed, the government is trying to improve the electricity situation by negotiating with an Indian company and Bharat Heavy Electrical Ltd for the purpose of building a new power plant. The Bangladesh government has been successful in getting permission from International Atomic Energy Agency (IAEA) to set up a nuclear power plant in Pabna. It is the target of the country to build the nuclear power plant with the capacity of 600-1000 megawatt by 2015. The estimated cost for this project is around $ 1 to 1.5 billion. In April 2005, Bangladesh had signed an agreement with China to help them for the nuclear energy purpose. Like China Bangladesh has also approached Russia for the assistance. Actually Bangladesh has enormous reserves for gas and oil. According to the United States Geological survey the potential of gas reserves in Bangladesh is of about 33.5 trillion cubic feet (TCF), while according to the survey of National Energy Policy of Bangladesh the country’s total coal potential is about 2527 million tone. About 7.7 trillion cubic feet of exploitable gas was discovered in Bangladesh. This gas was found in three blocks in the Bay of Bengal. All these resources have not yet been used for generating energy yet in Bangladesh. Dhaka currently has done a mistake by not allowing the gas pipeline between Myanmar and India which if would be implemented would have given a chance to Bangladesh to earn revenue through transit fees and it would have also utilized some of the gas transported through its territory. In reality nuclear power energy is not affordable for such country like Bangladesh. Several international companies have given the proposals to set up gas or coal power plants. In stead of approaching to China or Russia for the nuclear power plant, Bangladesh could have approached to them for assisting the coal or power plant. Thus for Bangladesh it will be beneficial to explore the potential available in the country rather than focusing on the nuclear power which is too expensive. If hundred percent consumption of the potential of the available resources is done then Bangladesh in future will be free from the problem of power shortage. References 1. http://a-bangladesh.com/banglapedia/HT/P_0242.htm 2. http://www.eia.doe.gov/emeu/cabs/Bangladesh/Electricity.html 3. http://www.acdis.uiuc.edu/Research/OPs/Samrina/contents/part2.html 4. www.bangladeshenergy.com Read More