ADB PREGA Activities and Beyond

(First National Capacity Building Workshop on Clean Development Mechanism (CDM) under CD4CDM Project , LGED Bhaban, Dhaka , 8-9 April 2008)

Prepared by Dr. M. Eusuf, Bangladesh Centre for Advamced Studies (BCAS)

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PREGA (1st Phase)

Asian Development Bank (ADB) has launched a project entitled “Promotion of Renewable Energy, Energy Efficiency and Greenhouse Gas Abatement – PREGA” in 2002 in some countries of South East Asia. The objectives of this project are :

a)         To promote investment in PREGA technologies that will increase
            access to energy services by the poor, reduce GHG emissions
            and realize other strategic development activities.

b)         To generate a pipeline of investment projects for financing
            through commercial, multilateral and bilateral sources including
            specialized treaty-linked mechanisms such as CDM and GEF.

c)         To identify policy and institutional barriers to dissemination of
            PREGA technologies.

d)         To study and develop financing models for PREGA investment
            projects.

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From the energy situation study of the country it has been suggested that the following 17 projects be taken for implementation to achieve the objective of poverty alleviation, reaching energy to the poorer sections of the society, empowering women and reduction of GHG emission:

1)         Waste to electrical energy project

2)         Introduction of co-generation in sugar industries

3)         Solar-wind-diesel hybrid for power generation for small towns and
            villages

4)         Solar electricity in the National Assembly building (Parliament
            Building), President’s House, and Prime Minister’s Office and
            Official Residence

5)         Demonstration of efficient biomass stoves for widespread use

6)         Demonstration of biogas plants for popularization

7)         Demonstration of CFL and other efficient appliances for
            popularization

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Introduction of intelligent motor controllers for efficiency  improvement in electrical sector

9)         Fuel switching from oil to gas for power generation

10)        Energy efficiency studies in industries

11)        Energy efficient devices in industries

12)        Rehabilitation of electricity distribution network

13)        Combined cycle power plant in place of gas-steam power

14)        Conversion of gasoline cars to CNG cars

15)        Replacement of 2-stroke engine with 4-stroke engine for auto-
            rickshaws

16)        Power generation through biomass gasification

17)        Introduction of mini hydro/micro hydro electricity

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Projects undertaken for Pre-feasibility Studies

1.         Pre-feasibility study for Dhaka city solid waste to electric energy project

 2.        Pre-feasibility study for co-generation in sugar industries

 3.        Pre-feasibility study for solar-wind-diesel hybrid for power generation in small towns and villages

 4.        Pre-feasibility study for fuel switching from oil to gas for power generation.

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Technologies available for processing solid wastes 

A number of technologies are now available for processing municipal solid wastes (MSW). Popular among them are : (1) Landfill, (2) Mass Burn Incinerator, (3) Fluidised Bed Incinerator, (4) Gasification, and (5) Plasma Converter.

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GHG (CO2 equivalent) Production without (Series 2) and with (Series 1) the project activity(MSWEE)

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Proposed Project

1)         50 digesters, 8500m3 capacity each, are constructed.

2)         20-MW capacity generator is installed.

3)         Generated electricity is fed into the national grid thus displacing equivalent power generation based on natural gas by BPDB.

4)         Fresh wastes containing all the components including the recyclables such as metals, glasses, etc. will be fed into the digesters, After digestion, when the digested materials will be dug out, scavengers with necessary safety measures will be employed to pick up the recyclable materials. After anaerobic digestion, the residue becomes completely odourless and mostly germ-free. The sorted-out residue will be disposed of for land filling.

5)         Methane produced in otherwise open dumping will be trapped and burnt for power generation

6)         With the project activity, total yearly CO2 production is 153, 670 tonnes

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Cumulative Reduction of CO2 over the Project Period(MSWEE)

 Project benefits(MSWEE)

Financial Aspects(MSWEE)

Base case

Investment cost             :           1573.66 million Taka

Annual operating cost     :           61.8 million Taka

IRR       :           –6%

NPV (at 10%)    :           -77.57 million Taka

B-C Ratio (at 10%)         :           0.81

Financial Analysis with Carbon Benefit (1.13 million tons of CO2 Reduction per annum) -MSWEE

With 5 dollars per ton of CO2

IRR       =          84.02%

NPV (at 10%)    =          2136.99 million Taka

B-C ratio (at 10%)          =          6.2

with 3 dollars per ton of CO2

IRR       =          54.73%

NPV (at 10%)    =          1251.79 million Taka

B-C ratio (at 10%)          =          4.4

(MSWEE)

Other Economic and Social Benefits

• Job creation       :           New jobs will be created through landfill     project.

• Income generation          :           Incremental wage increase at land-fill   energy plant compared to alternative jobs.

• Trade Balance   :           Positive trade balance due to reduction of   fuel import.

• Efficient use of land        :           Density of waste in land fill project is higher    than present dump-site. The higher the density, the better is the land use.

• Renewable Energy         :      It is renewable.

• The project will lead to technology transfer and which can be  replicated.

Co-generation in Sugar Industries

• To produce both electricity and process heat using the same         fuel, bagasse

• Now a days, trigeneration, by which electricity, heating and           cooling are achieved through burring the same amount of fuel

• At present 15 sugar mills are in operation processing annually       about 2.5 million tonnes of sugarcanes and producing about    0.9 million tonnes of bagasse. Location and production     capacities of these sugar mills are given below :

Current Practices in Sugar Mills

• Major portion of the bagasse is burnt in the boiler to produce electricity and the waste steam is used as process heat. Depending on the capacity of the sugar mills 0.2 – 2.0 MW is produced. Working period of the sugar mills is 120 – 150 days (sugarcane cultivation season).

• Calorific value of bagasse containing about 50% moisture is 2300 kcal/kg.

• At present 35 – 40 kgs steam is needed to produce 1 kWh of electricity where with efficient co-generation, steam needed per kWh is only 5–6 kgs.

• In this pre-feasibility-study, a 2000-tonne per day (TCD) plant has been chosen. According to the results of the study, 11 MW of electricity can be generated in place of current 2.0 MW. 2MW will be supplied to the mill and the remaining 9 MW to the Grid.

• Total investment cost is 384 million Taka. Environment additionality of the project is 22,850 tonnes of CO2 per year.

• Financial and economic analyses will be presorted by Mr. Khandaker Mainuddin, Team Member.

(Co-generation)

CO2 production without (series 1) and with (series 2) the project activity over the project period.

(Co-generation)

Yearly abatement of CO2 due to the project activities.

Financial Aspect

Base case

Investment cost             :           378 million Taka

Annual operating Maintenance cost         :           30.61 million Taka

Annual Gross revenue    :           75.24 million Taka

(37.62 GWh @ Tk. 2 per kWh)

Analysis period  :           14 years

FIRR     :           5.59%

NPV (at 10%)    :           – 22.5 million Taka

B-C Ratio (at 10%)         :           0.77

The project in the base case is not financially viable. 

Financial Analysis with CO2 Benefit (22,850 tons of CO2 reduction per year) with 10 dollar per ton of CO2

FIRR     =          18.66%

NPV (at 10%)    =          50.75 million Taka

B-C Ratio (at 10%)         =          1.51

with 5 dollars per ton of CO2

IRR       =          12.54%

NPV (at 10%)    =          14.12 million Taka

B-C ratio (at 10%)          =          1.14

The Project becomes financially viable with CO2 Valued at 5 dollar/ton

Solar-Wind-Diesel Hybrid for Power Generation  in Small Towns and villages

• Bangladesh has good potential of solar energy, energy falling on    1m2 per year is 1.73 MWh per year on the average.

• According to an estimate (Country Study Report), using the          currently available technology some 54000 MW of solar PV can     be installed.

• In the coastal belt and off-shore islands wind speeds are good       enough for 2000 MW of wind turbine.

(Hybrid)

Cumulative production of CO2 in the absence (series 1) and in the presence of the project activity

Financial Aspect

Base case

Investment cost             :           12.35 million Taka

Annual operating Maintenance cost         :           1.53 million Taka

Annual Gross revenue    :           3.120 million Taka

(0.624 kWh @ Tk. 5 per kWh)

Analysis period  :           14 years

FIRR     :           11.13%

NPV (at 10%)    :           0.19 million Taka

B-C Ratio (at 10%)         :           1.06

Financial Analysis with CO2 Benefit (637 tons CO2 reduction per year) with 10 dollar per ton of CO2

FIRR     =          29.03%

NPV (at 10%)    =          2.67 million Taka

B-C Ratio (at 10%)         =          1.86

with 5 dollars per ton of CO2

FIRR     =          17.86%

NPV (at 10%)    =          1.43 million Taka

B-C ratio (at 10%)          =          1.46

Fuel Switching from Oil to Gas for Power Generation

• In 2001-02, BPDB and IPP together had a total installed capacity of 4230 MW out of which 494 MW was oil-based.

• In that year, oil-based captive generation in the public and             private sectors was 2480 MVA.

• According to National Energy Policy (1996) projection of total        electricity production and that based on oil is shown in the figure           below :

(Oil to gas)

Cumulative production of CO2 without (series 1) and with (series 2) project activity from Monno Ceramics Industries Ltd. over the project period

Yearly abatement of CO2 due to the project activity

Financial Aspect

Base case

Investment cost             :           33.03 million Taka

Annual operating Maintenance cost         :           4.25 million Taka

Annual Gross revenue    :           8.63 million Taka

(3.45 GWh @ Tk. 2.50 per kWh)

Analysis period  :           14 years

FIRR     :           12.71%

NPV (at 10%)    :           1.26 million Taka

B-C Ratio (at 10%)         :           1.15

(Oil to gas)

Financial Analysis with CO2 Benefit (21,98 tons CO2 reduction per year) with 10 dollar per ton of CO2

FIRR     =          28.93%

NPV (at 10%)    =          9.87 million Taka

B-C Ratio (at 10%)         =          2.19

Project Prioritization

Comparison of results of the financial and economic analysis of the 4 pre-feasibility studies is given below :

Comparative Study

i)          It is seen from the above table that MSWEE is the most capital     intensive requiring 1601.16 million Tk. followed by Cogen (384.35   million Tk.), Oil to gas (34.20 million Tk.) and  Hybrid (12.77          million Tk.)

ii)          While making the financial and economic analysis, 70% is            assumed to be obtained on loan and the remaining 30% to be         provided as equity.

iii)         According to financial analysis, based on IRR in the base case,     Oil to gas appears to be the most feasible (IRR, 12.71%) followed            by Hybrid (IRR, 11.13%), MSWEE (IRR, 6.39%) and Cogen          (5.59%). 

Risk analysis with 15% decrease in revenue or 15% increase in     capital investment shows that none of these projects pass these    tests as IRR drops down below 4%, decrease in revenue having     more negative effect than increase in capital investment.

v)          Inclusion of carbon credit makes all the 4 projects financially         viable with IRR values of 54.71% for MSWEE, 28.93% for Oil to            gas, 24.03% for Hybrid and 18.66% for Cogen, CO2 credit price     per tonne being US$ 3.00 for MSWEE and US$ 10.00 for the           remaining 3 projects.

vi)         Based on per MW power generation, environment additionality       per annum is 56,527 tonnes for MSWEE, 8,493 tonnes for Hybrid,           2,539 tonnes for Cogen and 1.374 tonnes for Oil to gas project.

Conclusions and Recommendations

Ranking of the projects are

A.         Based on annual environment      B.         Based on annual additionality per MW of power                 environment additionality

1.         MSWEE                                               1.         MSWEE  

2.         Hybrid                                                   2.         Cogen

3.         Cogen                                                   3.         Oil to gas

4.         Oil to gas                                              4.         Hybrid

A.         Projects Undertaken and Reports (draft) Submitted to ADB

            1.         Quantity and quality assessment of Khulna city solid waste for electricity generation.

            2.         Pre-feasibility study on Khulna city solid waste to electric energy

            3.         Pre-feasibility study on widespread use of efficient stoves

            4.         Pre-feasibility study on popularization of biogas plants

            5.         Feasibility study (bankable standard) of Khulna city solid waste for electricity generation.

            6.         Feasibility study (bankable standard) for co-generation in sugar Industries.

            7.         CDM Project design document (PDD) for Joypurhat bagesse co-generation project

            8.         CDM project design document (PDD) for Khulna city solid waste to electricity generation.

B.         Capacity Building activities (training programmes/ workshops) Completed

            1.         National workshop in Dhaka for REGA and CDM awareness
            building and motivation, LGED Bhaban, 1 – 2 June, 2005.

            2.         National workshop in Chittagong for REGA and CDM awareness
            building and motivation, Saint Martin Hotel, 18-19 June, 2005. 

            3.         National workshop in Khulna for REGA and CDM awareness
            building and motivation, Western Inn International Ltd.  3 – 4 July,
            2005.

            4.         National workshop in Rajshahi for REGA and CDM awareness
            building and motivation, Senate Hall, Rajshahi University, 27 – 28
            July, 2005.

            5.         National workshop in Dhaka on report writing and financial/
            economic analysis of CDM-able projects including CDM modalities,
            procedures and PDD evaluation, Golden Deer Hotel, 4 – 6 February,
            2006.

Physical Composition of the Solid Wastes of KCC

Vegetable matters including food & fruit wastes    :           20.80-85.87%    by wt.

Paper & paper products  :           2.10-13.64%      ,,    

Metals  :           0.0-0.26%         ,,

Glass    :           0.0-0.80%         ,,

Wood    :           0.0-0.0%           ,,

Tree trimming & straw    :           0.9-24.20%        ,,

Clothes :           0.0-4.40%         ,,

Stone, ceramic, sand & debris    :           3.83-19.61%      ,,

Plastic & polythene        :           1.53-14.07%      ,,

Proximate Analysis of the refuse of KCC (as received)

Moisture content            :           63.00 -90.00 %  by wt.

Volatile matter   :           8.20-19.61%      ,,

Fixed carbon     :           0.30-1.91%        ,,

Ash

GHG (CO2 equivalent) Production without (Series 1, upper) and with (Series 2, lower) the project activity