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Coal vision

For import based coal power plants to be successful, the government will have to develop the import facilities. The investment risk in such a project is directly related to the electricity market, which is unpredictable and not properly regulated. As a result, exclusive private investment is very unlikely to come for developing port facilities.

M. Tamim
The vision of future energy mix for electricity generation in Bangladesh is heavily biased towards coal (BPDB plan). Despite their drawbacks, Bangladesh will perhaps have no other choice but develop coal-based power plants to meet the ever increasing demand for electricity. Presently, the existing gas fields are producing about 2,200 MMcfd. In the last five years 700 MMcfd gas was added from new production wells from the existing reserve but at the same time production of 200 MMcfd was closed due to non-deliverability of the fields. As more gas is being produced from the same reserve, the fields are going to dry up at a much faster rate, reducing the effective production. Unfortunately, no new significant gas field has been discovered since 1999. Despite enhancing production from existing fields, the country suffers a daily shortage of600 MMcf.
Since gas shortage remained at the same level since 2007, governments had no choice but to depend on liquid fuel based power plants that increased the oil import by 2 million tons per year at a cost of more than $2 billion. This additional import bill had an adverse effect on our economy and development work. Despite the inflation and high cost of electricity, it did help to sustain a reasonable GDP growth of more than 5.5%, but it exposed our financial limitation. It clearly showed that further liquid-based growth of power generation is not sustainable.
The average production cost of electricity grew from Tk. 2.5/kWh in 2009 to Tk. 6.5/kWh in 2013. Although this has brought some parity in electricity tariff (through several hikes) compared to the regional market, it was done through a wrong approach. This tariff hike was required long time back by realising the proper economic price of our natural gas that is still being sold at a throwaway price. If proper
economic rent (average of $5/Mcf instead of the current $1.8/Mcf) was realised from the gas sale, the average electricity production cost would hitTk. 10/kWh.
Importing LNG will not solve the power sector problem. At $ 15/Mcf, the electricity production cost will be no less than furnace oil. LNG at best can be a cleaner replacement with lower price volatility. Importing 500 MMcfd LNG at $15/Mcf will also require $2.75 billion annually. Whatever maybe the local electricity price, high priced energy import will create a huge balance of payment challenge.
Sustainable power production (affordable and available for long term) requires steady, reliable supply of primary energy. The world is dominated by fossil fuel when it comes to power production and there is no other alternate in the near horizon. There is no additional gas in the country and oil is too expensive with volatile price fluctuation. That leaves us with coal - the fossil fuel dominating electricity production worldwide. The current government's plan to develop 15,000 MW coal-based power plants by 2030 is a pragmatic decision in terms of fuel choice, but betting on import is a long shot in resolving the problem. The numerous tax benefits and other concessions spelled out in the declared policy will not attract a single private sector investor for these projects. It will simply fail like the PDB offer of uninterrupted electricity supply at Tk.l5/kWh to the industry through dedicated lines. There was no taker of such impractical and unrealistic offer.
Any project that is not viable commercially in the publie sector will obviously be not viable in the private sector. Another example of such unrealistic offer to the private sector was the 700-l,000MW capacity LNG-based electricity generation. Who in the private sector will import just 100 MMcfd LNG to run such a power plant and bear the extensive investment and power generation cost? Of course, if high electricity price is given and huge foreign exchange is allowed to be repatriated, there may be a few takers. Importing coal is not an easy task anywhere, and even more difficult in Bangladesh. Being an alluvial delta, our coast-1 ines are relatively shallow and the drafts in all our ports are low, which restricts large coal-bearing mother vessels from anchoring at the port. The technology to unload the coal at the port is relatively easy, safe and environment friendly. Using a vacuum system and closed conveyor belts/pipes, coal can easily be transported to yards/storages.
In Bangladesh's case, the large vessels need to be secured at the outer anchorage and smaller vessels will have to lighterage them. The Rampal case shows that the carrying-cost component (including lighterage) is about $36/ton of $145/ton coal at the plant. The infrastructure development is also extremely challenging. Bringing that coal inland will add another $3-5/ton, depending on the distance. The future of all these coal-based plants solely depends on the success of the Rampal project.
Apart from the environmental issue, Rampal will also have to solve the financial challenge. With dredging and location development, a conservative project cost is said to be about $1.5 billion. This excludes the $600 million required for distributing the power through new transmission lines in a difficult terrain. After 15% equity share each from BPDB and NTPC, more than $1 billion has to be borrowed from banks. It will be a daunting task. The electricity production cost will vary between Tk. 6 and Tk. 8 per KWh, depending on bank interest and coal price. Another challenge will be to secure long term coal supply for the project. The other coal
import based projects that have signed MOUs for Tk. 3.8-5/kWh are either wishful thinking or intentionally misleading. None of the known approved projects could get the required financing, and at these tariffs it will never happen.
For import based coal power plants to be successful, the government will have to develop the import facilities. The investment risk in such a project is directly related to the electricity market, which is unpredictable and not properly regulated. As a result, exclusive private investment is very unlikely to come for developing port facilities. The government may try the PPP model in this case.
The imported coal based projects are long term in nature (2030). A large number of those are in the planning stage only. In the meantime, our power situation is not going to improve dramatically. Rather, the danger of expensive so-called short term, oil-based solution hanging over our head is very real. The only solution that can give us relief within the midterm is developing our own coal. If Dighipara is developed as underground mining and Phulbari/Barapukuria is explored for possible surface mining, we may realistically expect 2,000 to 3,000 MW power generation at the mine mouth within five years of decision. There will be no financing shortage for these commercially viable projects (including power plants) and coal handling /supply problem will not exist. All we need is pragmatic leadership with strong political will.
The writer is Professor and Head of Department of Petroleum and Mineral Resources Engineering, BUET.