Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh SouthAsia Enterprise Development Facility (SEDF) in partnership with DFID and NORAD Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh IFC Advisory Services in South Asia SouthAsia Enterprise Development Facility (SEDF) About SEDF in partnership with DFID and NORAD SouthAsia Enterprise Development Facility (SEDF) aims to create opportunities and improve lives. SEDF is managed by IFC, in partnership with the UK's Department for International Development and the Norwegian Agency for Development Co-operation. SEDF facilitates the growth of small and medium enterprises by helping improve their access to finance through a supportive financial infrastructure, financial products development and strengthening of financial institutions; providing quality business services towards strengthening value chains; and helps businesses adapt to the impacts of climate change. SEDF operates in Bangladesh, Bhutan, northeast India and Nepal. Industry Specific Study on International Finance Corporation Sustainable Energy Finance Market Potential IFC, a member of the World Bank Group, is the largest global development institution for Financial Institutions in Bangladesh focused exclusively on the private sector. We help developing countries achieve sustainable growth by financing investment, providing advisory services to businesses and governments, and mobilizing capital in the international financial markets. In fiscal 2011, January 2012 amid economic uncertainty across the globe, we helped our clients create jobs, strengthen environmental performance, and contribute to their local communities—all while driving our investments to an all-time high of nearly $19 billion. For more information, visit www.ifc.org. Standard Disclaimer The Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh is produced by Frankfurt School of Finance & Management for International Finance Corporation, a member of the World Bank Group. The judgments and conclusions contained herein should not be attributed to, and do not necessarily reflect the views of IFC or its Board of Directors or the World Bank or its Executive Directors, or the countries they represent. 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Phone: +880 2 88337-52 up to 66 Fax: +880 2 8833495 www.ifc.org/southasia Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh Foreword Content Towards Bangladesh’s sustainable future 1. Introduction 2 The reality and severity of climate change impacts has resulted in new thinking around how business 1.1 Executive Summary 3 should be conducted. Private sector has emerged as an important ally in combating climate change impacts – by taking initiatives to evolve and adapt– and is now seen as the provider of innovative solutions. To fully appreciate the scope of possibilities, a shift in mindsets is needed. To be fully 2 Approach and Methodology 7 competitive, companies must fully integrate climate change related issues into day to day business. Forward looking companies, at the forefront of this ‘green’ revolution, recognize that adoption of 3 Energy Scenario and Policy and Regulatory Environment 15 renewable energy and energy efficiency has great business advantages. This results in a change in the 3.1 Energy Scenario 15 nature of new projects, and the related financing needs are different. 3.2 Overview of Industrial Policy, EE and RE policies 17 Leading financial institutions are equipping themselves to take advantage of this market trend – a 3.2.1 Industrial policy 17 clear direction towards supporting new projects that are climate-friendly or ‘green’. Another term 3.2.2 National Energy Policy (NEP) 18 for this is Sustainable Energy Finance. 3.2.3 Renewable Energy (RE) Policy 18 Global investments in renewable energy jumped 32% in 2010 to a record 211 billion dollars. To 3.2.4 Energy Efficiency (EE) Policy 19 remain competitive, financial Institutions have proactively complemented this transition by offering 3.2.5 Environment Policy 19 cutting-edge Sustainable Energy Finance products to energy intensive industries. The move has 3.3 Brief overview of development programmes and plans 20 resulted in responsible and profitable business opportunities related to sustainability and 3.4 Research Institutions in the EE/RE sector 22 inclusiveness. 3.5 Non-Government Organizations in the EE/RE sector 23 The concept of sustainability is just emerging in Bangladesh, but it is fast becoming a business need. 3.6 Vendors/Manufacturers/Importers 24 Financial institutions in Bangladesh can take advantage of the untapped potential in the drive for renewable energy and energy efficiency. While addressing financing needs of this transfer of 4 Overview of Selected Industry Sectors 26 technology and energy source, they help reduce energy stress and climate change impacts and promote sustainable economic growth. 4.1 Industry Sectors in Bangladesh 28 4.1.1 Food Processing Industries 28 There is a strong demand from financial institutions in Bangladesh for a market study on the energy 4.1.2 Cement 29 efficiency and renewable energy potential of key industries and their corresponding financing needs.. In response to this, SEDF, managed by IFC, in partnership with the Norwegian Agency for 4.1.3 Steel Re-rolling Mills 30 Development Cooperation and the U.K. Department for International Development 4.1.4 Light Engineering 31 commissioned this study. 4.1.5 Sugar 32 This study, focused on ten key industries of Bangladesh, will help financial institutions make 4.1.6 Pulp and Paper 33 strategic decisions on product development, market approaches to be adopted and resource 4.1.7 Poultry 33 allocation to be made. The study will also raise awareness amongst industries covered and as well 4.1.8 Textiles 34 as with key stakeholders. 4.1.9 Readymade Garments (RMG) 36 We trust this contribution will add value to the efforts of those interested in creating an 4.1.10 Chemicals processing 36 environment conducive to promoting sustainable energy in Bangladesh and help private sector take 4.1.11 Plastics Processing Sector 37 the lead towards clean and sustainable economic development. 4.2 Energy Demand and Consumption in Industries 38 Anil Sinha 4.3 Important Stakeholders in the Industry Sector 42 Regional Head of Advisory Services, South Asia International Finance Corporation iii iv Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh Annexes 5 EE/ RE Potential in Selected Industry Sectors 45 Annex 1 List of Meetings conducted during Study 5.1 Energy Consumption Pattern in Selected Industry Sectors 45 5.2 Possible EE and RE options in Selected Industry Sector 48 Annex 2 Industry Manufacturing Processes 5.2.1 Cement 53 Annex 3 Details of EE improvement measures 5.2.2 Steel Re-Rolling 56 5.2.3 Light Engineering 60 Annex 4 Questionnaires 5.2.4 Sugar 65 Annex 5 Cluster Finance 5.2.5 Pulp and paper 66 5.2.6 Poultry 71 Annex 6 Use of Biomass as Sustainable Energy 5.2.7 Textile 74 Annex 7 Bangladesh Bank’s Circular on Solar Energy, Bio-gas and ETP Actor 5.2.8 Readymade Garments (RMG) 77 Refinancing Scheme 5.2.9 Chemicals 82 5.2.10 Plastics Processing 84 Annex 8 Overall Finding of the Survey on Banks and FIs in Financing EE/RE 5.2.11 Food Processing: 87 6 Mapping of Financial Industry 91 6.1 Overview of Financing Sector in Bangladesh 91 6.2 Overview of Present Policies for Industrial Finance 99 7 Investment Potential and Barriers 102 7.1 Investment Potential and Financing Needs 102 7.2 Barriers to Financing EE and RE 105 8 Proposed Financing Mechanisms and Approaches 109 8.1 Existing Financing Products and Mechanisms 109 8.2 Proposed Financing Mechanism 115 8.3 Technical Assistance Needs and Advisory Services 120 9 Recommendations and Conclusion 126 v vi Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh Abbreviations ADB Asian Development Bank IDA International Development Association BB Bangladesh Bank IEE Initial Environmental Examination BCIC Bangladesh Chemical Industries Corporation IFC-SEDF International Finance Corporation-South Asia Enterprise Development Facility BCSIR Bangladesh Council for Scientific & Industrial Research IPO Initial Public Offering BDT Bangladeshi Taka IPP Independent Power Producer BJMC Bangladesh Jute Mills Corporation IT Information Technology BMRE Balancing, Modernization, Replacement and Expansion JICA Japan International Cooperation Agency BPDB Bangladesh Power Development Board KfW Kreditanstalt für Wiederaufbau BSCIC Bangladesh Small and Cottage Industries Corporation kWh Kilo Watt hour BSEC Bangladesh Steel and Engineering Corporation MCF One Thousand Cubic Feet BSFIC Bangladesh Sugar and Food Industries Corporation MDGs Millennial Development Goals BSTI Bangladesh Standard and Testing Institution MFI Microfinance Institution BTMC Bangladesh Textile Mills Corporation MMCFD Million Cubic Feet Per Day BUET Bangladesh University of Engineering and Technology MoEF Ministry of Environment and Forest CDM Clean Development Mechanism MPEMR Ministry of Power, Energy and Mineral Resources CER Certified Emission Reduction MRA Micro-credit Regulatory Authority CFL Compact Fluorescent Lamp MT Metric Ton DoE Department of Environment MTPA Million Tonnes Per Annum ECA Environment Conservation Act MW Megawatt EE Energy Efficiency NBFI Non-bank Financial Institution EEF Equity and Entrepreneurship Fund NEP National Energy Policy EGBMP Enterprises Growth and Bank Modernization Project NGO Non-Government Organization EIA Environmental Impact Assessment NIP National Industry Policy EMP Environmental Management Plan PCB Private Commercial Bank EPZ Export Processing Zone RE Renewable Energy ESCO Energy Services Company RMG Readymade Garment FB Foreign Bank RPP Rental Power Plant FI Financial Institution SB Specialized Bank FS Frankfurt School of Finance & Management SCB State-owned Commercial Bank FY Fiscal Year SEC Securities and Exchange Commission GDP Gross Domestic Product SEDA Sustainable Energy Development Agency GIZ Gesellschaft für Internationale Zusammenarbeit SLR Statutory Liquidity Ratio GoB Government of the People’s Republic of Bangladesh SME Small and Medium Enterprise GRI Global Reporting Initiatives TCF Trillion Cubic Feet GSC Government Savings Certificate UNDP United Nations Development Programme GWh Giga Watt Hour USD US-Dollar ICT Information and Communication Technology WB The World Bank vii viii Introduction Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 1 Introduction 1 1.1 Executive Summary The International Finance Corporation-South Asia Enterprise Development Facility (IFC-SEDF), This study has covered analysis of present government policies related to industries, energy and managed by IFC, is supporting the establishment and growth of private Small and Medium finance through secondary sources of information. The estimation of energy savings possible Enterprises (SMEs) in Bangladesh, Bhutan, Nepal, Northeast India, Sri Lanka and Maldives. through use of EE improvements and use of RE sources has been based on the detailed primary interviews with broad cross section of stakeholder organisations with back up of secondary sources The industry sectors in Bangladesh are one of the major sources of pollution and inefficient energy of information. use. Therefore IFC-SEDF has taken initiative to conduct a concrete Market Study to understand the current Energy Efficiency (EE) and Renewable Energy (RE) potential of Bangladesh where Government of Peoples’ Republic of Bangladesh (GoB) has supportive policy framework for Financial Institutions (FIs) can invest. Bangladesh suffers from inadequate investment in the energy overall industrial growth, better use of energy and natural resources and effective financial system. efficiency improvement and renewable energy in the industrial sector. Literatures suggest that the National Industrial Policy has targets to achieve higher GDP growth e.g. 8% by 2013. Private sector key barriers to the implementation of energy efficiency are lack of awareness, and access to finance. has been considered the main driver to boost industrialisation. The policy has also provided infra- The banks as the financing institutions also have limited knowledge of EE projects and there is a structure development as a significant strategy option to promote industrial growth. National need to improve awareness. Energy Policy (NEP) has provided appropriate thrust to rational use of total energy use. NEP has also underlined the need for energy conservation and Bangladesh Energy Regulatory Commission Hence, the main objective of this study is to estimate the investment potential for EE and RE has been provided specific functions towards this. On the other hand, government has commenced projects as well as energy savings and renewable energy potential in selected sectors. The estimation providing incentives such as waiver of import duty and exemption of value added tax for certain process has two distinct components: items such as solar pv modules and compact fluorescent lamps. More such items need to be included in this list. It is now proposed to form Sustainable Energy Development Agency (SEDA)  The first component is to estimate energy savings and RE potential to promote efficiency and sustainable energy technologies. Research institutions also contribute to  The second component is to estimate investment required to achieve this potential. energy sector through work on policy aspects. The consultant team has reviewed 10 industrial sectors and analysed specific energy consumption Industrial sectors contribute significantly in the economic development of Bangladesh. Textile and and pattern of use. This study report is based on the data collected from the secondary sources of ready made garments (RMG), steel re-rolling, food, cement, pulp and paper are among the major information (such as published reports and data as well as research papers) and visits to industrial contributors to GDP. Textile and RMG sector is the largest contributor to exports from Bangladesh. establishments, in person (primary) interviews with stakeholder organisations. The data gaps, if any, This sector has large base of SME industrial units and majority of these have average age of less were closed by making follow up calls to respondents who were interviewed. The sectors studied than 10 years. Export growth targeted in the coming years is expected to result into significant include food and beverages, cement, steel re-rolling, light engineering, sugar, pulp and paper, capacity addition in this sector. Guidance to such new upcoming units to plan for appropriate size poultry, textile, readymade garments, chemicals and plastics. of equipments and to incorporate EE at the design stage can save energy to the extent of 20% to 30% as compared to units operating today. On the other hand older industrial units such as those This report provides detailed discussion on the approach and methodology in the beginning. This from steel re-rolling mills, cement, sugar and paper will need to renovate and modernise their exist- study report analyses policy and regulatory aspects related to industry and energy sector in ing facilities. Better EE improvement measures and new efficient equipment can save up to 25 -30% Bangladesh. Detailed overview of sectors under study has been elaborated in the section 4. Energy energy as compared to their present consumption. consumption patterns and estimates of the potential to save energy were arrived at with the help of data collected from the industrial units and analysis of the same. The report also provides an Among the industrial sectors Textile sector contributes significantly to the exports and hence to the overview of the financial sector in Bangladesh. Besides, policies and regulations related to financial economy Bangladesh. Energy intensive sectors such as steel, cement, textiles, pulp and paper, and sector have been reviewed. Potential for investment in EE and RE projects related to industrial other were analysed from the perspective of the overall sector characteristics and from the energy sectors under study has also been estimated. consumption. The study observed the following significant findings: The study has recommended appropriate mechanisms for providing financial assistance to EE and 1. Almost all the industrial units have captive generation facilities to support its operations and to RE projects as also recommended certain technical assistance and advisory services that IFC could ensure uninterrupted production. The generation facilities have good quality engines such as provide to stakeholder organisations. The report concludes with broad based recommendations. (GE, Caterpillar, etc.). Units requiring steam and compressed air, have boilers and compressors. Generators and boilers use natural gas as it is available at lower price. However, there is conspicuous absence of co-generation systems, barring a few exceptions. 2 3 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 1 2. Most the equipment are utilised much below their rated capacities as these are over-specified. Hence there could be possibility of achieving energy savings by conducting load profile analysis 1 The study also includes suggestions for technical assistance (TA) and advisory services. The team has suggested loan officers’ training as significant TA measure. The training will primarily focus on and / or energy audits. risk analysis and risk mitigation framework. The training module are expected to be brief and of short duration. Information dissemination to end user industrial units and banks will include general 3. Energy audit services are available sparsely and need to enhance its wide spread availability. This information such as energy saving tips to comprehensive manuals and data books containing EE could be achieved through proper quality training to senior plant personnel and graduate technology options, case studies and vendor data. It is also recommended to have a manual on EE engineers with good experience. and RE which could be used by end user industries with information on relevant equipments and technology description. The study has estimated energy saving potential in each of the industrial sectors under study. Sectors such as cement, steel, pulp and paper, textile and RMG indicate higher potential to save energy. Training in energy audit is an important assistance needed to increase credibility of EE projects in Poultry has relatively lower potential to save energy. Based on these findings, the following three the eyes of entrepreneurs. It is recommended that senior plant level engineers and graduate (degree) broad categories of EE and RE measures / approaches have been recommended: engineers are needed to be trained as audit needs substantial knowledge of operations as well as the auditor needs to project the credibility to owners and entrepreneurs. 1) Renovation of existing industrial units (for relatively old units older than 10 years); Advisory services recommended follow TA recommendations and include energy audit services to 2) Isolated EE and RE measures (for new industrial units as well as on the way to old) and; industrial units. Such services could be provided on fee share basis. Investment grade energy audits are essential to develop and structure EE projects. These energy audits can provide a pipeline of EE 3) EE “ab-initio” (for new units being planned to be set up and are in design stage). and RE projects which could be financed by banks and financial institutions. Project development support needs to be provided to banks in the initial stages after launching of EE financing products. Many banks were aware of environmental projects as well as solar PV projects as renewable energy Appropriate pilot demonstration projects will also help create interest in other industrial units. projects. However, limited banks were aware of energy efficiency projects. On the other hand, mod- ernisation projects are being financed by most of the banks, which improve operating efficiency and hence energy efficiency of the industrial units post implementation. The study found the following principal barriers to investment in EE and RE: 1) Inadequate awareness of EE and RE options applicable to industrial sectors; applicable for the industrial units as well as for banks and institutions. 2) Relatively lower tariff levels resulting into lower energy cost per output. 3) Inadequate availability of quality energy audit services. As there is no apparent need for such services. 4) There are no policies or regulations which need industrial units to conduct energy audit and to improve efficiency. It will be essential to use simple financing products and mechanisms for developing EE financing market. The financing mechanisms suggested include: 1) Term loan with lower interest rate (interest buy down); 2) Support to energy audit along with term loan with lower interest rate; and 3) Vendor financing 4 5 Approach and Methodology Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 2 Approach and Methodology 2 2. Some of the organisations did not provide relevant information or refused to provide details related to energy (electricity and natural gas consumptions). The principal aspect of this assignment is to estimate extent (possibilities) of energy savings using 3. No “walk through energy audit” was envisaged and hence the data on energy consumption is EE improvement measures and use of renewable energy (RE) in the industrial sectors under study. not in the form of energy audit details or process wise details in the case of Bangladesh. In The second aspect is to estimate investment needed to achieve these energy savings possibilities. some cases, the team received broad details of equipment, total electricity requirements, boiler “Energy Saving potential is the extent to which energy (in all forms – electricity, thermal energy capacities, etc. Thus the data is not adequate to prepare any specific case study. derived from natural gas, etc.) can be saved using a) EE improvement measures and b) RE Sources in an industrial sector under review. The team has estimated both “maximum potential” and 4. In some units, it was noted that central generation facility was providing electricity to another “realisable potential”. unit belonging to the group. Hence suitable assumptions have been made to estimate total energy requirement. The team has collected all data on pre-selected industry sectors available through secondary sources 5. It was not possible to get the data in respect of individual sub. of information and the sector specific data comprising, installed capacity, production trends (average capacity utilisation), specific energy consumption etc. The data thus collected was 6. The team did make certain observations on the sites in case of select units, such as number of supplemented by data obtained through primary interviews with industrial units, banks, vendors and generator units in operations, location of compressor units, etc. This information was over and sector experts in respective countries. above the questions from questionnaires. The secondary data, thus collected, has been supplemented by data obtained through primary 7. The team ensured minimum data required for calculation of energy consumption of an interviews with the industrial units, commercial banks and financial institutions, EE equipment industrial unit was obtained and data gaps, if any, were completed / closed by securing details vendors and sector experts in Bangladesh. over telephone. The following are some of the observations related to data collection and methodology adopted 8. Most of the industrial units did not provide data related to total electricity consumption (e.g. for arriving at the estimates of the energy savings and investment needs. based on total electricity bills) per month or per year. Secondary Data Collection: 9. The team observed that the data provided by some industrial units was not comparable with the other parameters provided by the same person. (e.g. total energy requirement data from an 1. Substantial amount of data is available through secondary sources, however, some data was industrial unit did not match their production data). dated and old hence was not used. (e.g. Statistical Handbook published by government – Bureau of Statistics). 10. The data has been corrected appropriately to reflect the relevant energy consumption of a unit co-located with other group units. (e.g. A beverage unit is located along with other units having 2. Only a few industry associations could provide relevant data on number of manufacturing common captive electricity generation unit. The power requirement of this beverage unit was units, total installed capacity of the sector, and average age of plants (e.g. BKMEA had relevant not directly available and hence deduced using suitable assumptions). data). However, most of the associations do not have sector data, needed for calculations. 11. It was not possible to record every detail of the discussions and prepare interview notes for each of the interviews. 3. Data on energy consumption norms are not available with any of the industry associations. The team made following main assumptions in respect of calculations and estimations in 4. The team did not receive data on number units and installed capacity with break up as per large the absence of data from the secondary sources: and SME segments. 1. Wherever total installed capacity of the industry is available from the secondary sources, this 5. Data on age profiles of industrial units from select sectors in SME segment were available data has been obtained from senior experts / knowledgeable persons from the respective through IFC-SEDF report on “Results of the Banking Survey of the SME Market in sectors. Bangladesh”. No data was available on the average of plants in large sector. 2. Suitable assumptions have been made to divide the present installed capacity into two broad Primary Data Collection: segments i.e. Large and SME. 1. The team did receive valuable information and inputs beyond the questions in the 3. Age profiles of the industrial plants in each of the sectors have been estimated based on the questionnaires from most of the officials interviewed. knowledge base of the team (especially for the large scale plants). 7 8 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 2 4. Industrial units were divided into large and SME based on the certain assumptions mentioned in respective sector analysis. This division is made only for the purpose of arriving energy 2 consumption in case of steel, paper and cement was found to be mainly from the electricity grid (this was derived from the total volume of natural gas consumption). consumption norms. 3. Steam consumption: Quantity of steam used for processing in different sectors was estimated Observations on the data collected: based on the size of the boiler and data on working hours the team estimated. In some cases a common boiler was used to supply steam to more than one units belonging to the same owner Data collected from the plant visits is based on the details provided by the contact persons for each group. Often respondent official was not able to provide break up of quantity of steam being of the organisations. The data thus provided was validated to see if the specific energy consumption supplied to different units. This posed some limitations on estimation of energy consumption. (SEC) arrived at was near about the practical norms (in the nearby countries - published in various 4. Natural gas consumption: Almost every industrial unit uses natural gas for captive electricity reports and papers). In some cases it was observed that the data provided was not appropriate or generation and for steam / heat generation. Natural gas driven reciprocating engines are mostly inadequate to arrive at the specific energy consumption. In such cases, follow-up calls were made to used. On the other hand, steam boilers, burners, etc. use natural gas to produce steam or heat. get required details or to get the appropriate balance data. There is differential tariff for natural gas use in boilers and for captive electricity generation. The principal data elements collected include installed capacity of the facility, production per month Natural gas tariff is provided in the Table 5 (Section 4.2). The monthly consumption is or per annum, operating hrs per day, number of shifts per day and working days per year, connected accounted separately in the user statement from the gas company. A few units provided gross load (kW) from grid, captive electricity generation capacity, boiler capacity, compressor details, main natural gas consumption per month by volume. However, many industrial units were reluctant plant and equipments in the plant, age profile of equipments natural gas and water consumption per to share this data. Total natural gas consumption has not been taken into consideration for month or day and any other details. In many cases the team received details of individual equipment calculation of specific energy consumption. Thermal energy per cubic meter of natural gas has capacities. been assumed at 37.32 MJ and that of steam has been assumed at 2,260 MJ per MT. Salient observations on the data collected are as follows: 5. Other fuels: Most industrial units used very small quantity of diesel and furnace oil. It was learned that diesel was used for maintenance purposes where the quantity of use was negligible. 1. Capacity: Data on production or installed capacity was provided in the form weight, volume or Furnace oil was used in some steel re-rolling units. It was observed that some industrial units number of pieces of end products. In cases where the facility had many processes the team were using diesel in large quantities for electricity generation (where natural gas is not readily made suitable assumptions to estimate total production capacity in a single unit. (e.g. yarn available). dyeing, knit material production, dyeing of knit materials, finishing of knit materials and garments production). In case of plastics products the production volume data was provided in 6. Water consumption: Industrial units use ground water and most units have wells within their terms of number of pieces. This data was converted into weight by assuming weight of one establishments and pump water for industrial use. Quantity of water was either provided by piece. Similarly, in a pharmaceutical unit, volume was provided in terms of different end industrial units or was estimated based on data provided on water pumps and their use per day. products. The team converted this data in to weight. In case steel products, the team visited re-rolling units. The data in a few steel re-rolling cases was provided for both smelting and 7. Recovery of resources: The team did not get adequate details on resource recovery in case of re-rolling combined. It was not possible to segregate consumption as per individual processes. pulp and paper units and textile processing (e.g. caustic soda recovery) such as amount of The production data obtained (in terms of per day or per month) has been extrapolated to chemicals recovered per MT of production. However, some companies did mention about the estimate annual production. Seasonal variations and production quantity changes over the year recovery of caustic soda in case of textile processing. Hence it was difficult to estimate quantity as per demand have not been considered. of resource recovery. 2. Electricity use: Almost all industrial units did not provide data related to electricity bills and Sector data (from secondary sources of information): As mentioned in the section 2.1, the team did consumption of electricity per month or year. Secondly, exact break-up of total electricity use not get sufficient data on break up of capacity in to large and SME segments for almost all sectors. from grid and captive generation facility could not be secured. The team has made suitable The team had discussions with select industry representatives and officials of industry associations assumptions to arrive at electricity consumption. While some companies provided details of to get a part of the data. The team has arrived at the estimates of the installed capacities, age profile generating machines and how many of them were used for electricity generation (and how of industrial units and average capacity utilisation. many were used as stand-). However, many other units did not provide this data. Suitable assumptions were made to estimate total electricity generation. 1. Connected load was obtained Estimation of specific energy consumption (SEC) and observations thereon: from the interviews and was estimated on the basis of transformer size in case data was not provided. 2. Captive generation capacity and connected load from grid were added to get total As mentioned earlier, the specific energy consumption (SEC) norms vary from unit to unit within available capacity. 3. Data on the operating hours was provided by industrial units. 300 days and an industrial sector. This variation (or diversity) of norms occurs mainly due to following main appropriate number of shifts were assumed depending upon the sector. Bulk electricity factors: 9 10 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 2 1. Technology used: Processing technology governs the total energy consumption for manufacture of a product. More advanced the technology, lesser the SEC, e.g. readymade 2 as “base line” in case data from multiple units was collected in a sector. As the study did not envisage statistical analysis, the team selected lower values. Besides, lower values also provided conservative garment unit using servo motors based stitching machines consume lesser amount of energy SEC estimates. Secondly, energy saving potential was estimated using lower SEC as base, which also per piece of garment as compared with a unit using clutch type motor for stitching machine. provided conservative results. 2. Age of the Technology: Units adopting the latest technology consume much less energy as The team did envisage that data on the cost-benefit analysis and associated investment for EE compared with those with older technology. An old pulp and paper plant with technology improvement measures would be gathered from industrial units. However, such data could not be developed in the 50s or 60s consumes much higher energy as compare with technology obtained, mainly because majority of the industrial units, contacted did not implement such available at present. A report “Energy Cost Reduction in the Pulp and Paper Industry – An measures or were not aware of. In view of the above, the team has estimated the energy saving Energy Benchmarking Perspective” by D. W. Francis et.al. (Pulp and Paper Research Institute, potential for each of the sectors based on the secondary data on each of the equipment. After Canada) has provided broader / elaborate discussion on energy consumption in existing and considering all the factors, energy savings have been estimated as a percentage of present SEC model plants. derived from the data. Similarly investments needed for EE projects (under all the three options) have been made based on the data gathered from vendors. Investment required for implementing 3. Scale of Production (Economies of scale): Large scale production requires less energy per EE measures has been estimated as a percentage of total plant and machinery cost for the new plant unit of production. A chemical plant using a “batch process” consumes higher level of energy and machinery for respective sector, as explained under each of the sector discussion. as compared with a large scale industrial unit manufacturing the same product using “continuous process”. Light engineering units in SME segment have to use step by step EE financing programme and associated technical assistance: As mentioned earlier, the study manufacture (in stages) using a set of machines. On the other hand, large plants for mass has estimated the achievable potential for energy savings. For this purpose, the team has made an production use jigs and fixtures, which reduce setting up time as well as operation time on assumption that an appropriate EE financing programme (using dedicated line of credit) and machines and hence energy consumed. associated technical assistance (TA) measures (as described later in the Section 8.3) could be undertaken and implemented. Such a programme could be on national level and common for all the 4. Nature of raw materials: Quality of raw materials does have an influence over the energy participating commercial banks. It is also assumed that considerable awareness creation will also be needed for production. Energy required for weaving or knitting cloth depends upon the nature undertaken to support TA measures. All the projections of energy savings and investments needed and type of yarn being used. Cotton yarn, in general, needs higher energy as compared to have been projected for the first three years of the EE financing programme. synthetic yarn. Other assumptions are explained as follows: 5. Age of plant and machinery: The older plants tend to have higher SEC than new ones. New plants often have better technology and higher productivity and better energy efficiency. 1. Average unit size and capacity utilisation: Values of total installed capacity of an industrial sector and total number of units were obtained from the secondary sources of information and 6. Maintenance of machines: Regular upkeep and good practices in maintenance of machines / or from discussion with an industry association / experts. Average size (installed capacity) of often provide good service. Plant and machinery which are not maintained well consume higher a typical unit was derived from data thus obtained. Average percentage capacity utilisation for amounts of energy per unit of production. each sector has primarily been derived from data collected. In addition, data from the secondary sources has been used in select cases. The team has also used its considered judgement. The It may be noted that specific energy consumptions derived from the “data collected”, hence will value of capacity utilisation assumed for calculations of the projected energy savings, has been have certain inherent deviations from the standard SEC norms (established through detailed energy discussed with some of the industry associations / experts to receive their recommended value audits). Secondly, no physical measurement of any energy parameter was undertaken as is done based on their judgement. Data of average age of plants was secured on the similar lines. under an energy audit. The main purpose of the exercise was to estimate present energy consumption level and the energy saving potential. 2. Classification of industrial units: Most SME units do not have financial reports in writing. Broad assumptions: At the same time these units were reluctant to share financial data related to their units. This made it difficult to apply the definition of SME as per banking norms for classification. The This section provides discussion on the broad assumptions made for arriving at estimates of energy classification of the units visited has been made on the basis of the response provided during consumption / unit of production and energy saving potential under the present study. The the field visit and the knowledge of the local consultant team. consultant team derived SECs for different sectors based on the data gathered from the field. As mentioned earlier, conservative assumptions were made (while estimating energy consumption), in 3. Investment for new projects: The consultant team received selective response from industrial the event the required input data was not available. Lowest value of energy consumption was taken units on the investment needed for setting new facilities. At the same time it was observed that 11 12 Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh 2 some responses were not in tune with the reality (this was revealed while validating the data with knowledgeable persons and with banks). Assumptions regarding investment in new projects in respective sectors have been made after due consultations with sector experts and with officials of banks. It may be noted that some of the sectors have higher diversity of investment. Chemicals sector, for example comprises fertiliser, pharmaceuticals, organic / inorganic chemicals, dyes and pigments, perfumes, cosmetics and industrial chemicals. Similarly, plastics and light engineering are also diverse sectors. In such cases it was challenging to make suitable assumption for investment in a new project. 4. Plant and machinery: Plant and machinery cost is approximately 60% of the total cost of the project the balance amount is accounted for land and buildings and working capital gap. This percentage varies from sector to sector, the present study has taken these variations in to considerations to the extent possible. Poultry sector is not machine intensive segment, hence plant and machinery cost has been assumed at 25% of the total investment in the project. On the other hand steel re-rolling, cement sectors require heavy machinery. 5. Investment needs for EE options: Costs associated with EE improvement measures vary widely. EE improvement options can be classified in to three broad categories as a) No and low cost options; b) Medium / intermediate cost options; and c) high cost options. As mentioned earlier, the present study does not envisage estimation of “technical potential”. The alternative approach adopted by the team provides categorizing EE improvement options in the following three areas: a) EE retrofit measures; b) Renovation measures for existing operating units and c) “EE ab-initio” measures for new facilities being planned (this option envisages incorporating EE measures at the design stage of new project. 6. Debt equity: The team has assumed the debt equity ratio as 70% debt for the large scale units in most of the industrial sectors. For SME units 30% debt has been assumed. 7. Percentage units adopting EE measures: Age profile of existing units and discussions with industry experts has been used as the basis for deciding the percentage units that are likely to adopt these measures. Relatively new units within the age group of 5 to 10 years are unlikely to go for renovation measures. On the other hand older (more than 20 years of age) units are likely to select renovation measures and would not be interested in retrofit. 8. EE “ab-initio”: This term is derived from “green buildings” concept. Energy efficiency at “design stage” has been used in select countries for industrial sectors. There is very little published data on the incremental investment required for factories incorporating efficient devices and using appropriate sized equipment. 13 Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Energy Scenario and 3 Energy Scenario and Policy and Policy and Regulatory Regulatory Environment Environment This section provides a brief overview of present energy scenario in Bangladesh and the Government policies and programmes with respect to industrial sectors, EE and RE. 3.1 Energy Scenario Natural gas is the main energy resource of Bangladesh for commercial consumption. According to Petrobangla sources, total proven and recoverable gas reserves from 22 fields (18 public sector and 4 private sector fields) are estimated at 20.4 trillion cubic feet (TCF), of which over 5 TCF has been consumed as of end of 2008. In addition to that 2,514 million tons of coal resources has been discovered in the north-west of the country. However, the coal resources have been meagrely utilized. So far, only one coal based (2 x 125 MW) power plant is in operation. In recent years government has been considering to utilize coal for of electricity generation in order to reduce dependency on natural gas. Besides the government also import oils and petroleum products mainly to meet the energy demand in the transport sector. At present 82% of the power generation capacity in the country is gas based, 9% is imported oil based, 5% coal and 4% from hydro sources. Natural gas supply According to Petrobangla sources, average gas consumption is about 1,646 million cubic feet per day (mmcfd). In 2009-10, total annual gas consumption was 14,962 million cubic meter (MMCM), out of which about 18% is consumed by the industries to produce captive electricity and process natural gas for the industrial applications. The gas consumption has been growing at an average rate of 7% per year for the last 20 years (GoB Reserve and Demand Study, 2003). Three national and four international companies (Cairn, Chevron, tullow & Niko) are involved with the production of natural gas in Bangladesh. GIZ has made a survey under the Sustainable Energy for Development Project (hereinafter referred to as ‘The GIZ study’) regarding productivity improvement in industry through energy efficiency programs. The figure 4.2 shows sector wise gas consumption in Bangladesh: 1 http://www.petrobangla.org.bd 2 Productivity improvement in Industry through energy efficient programs, 2006, by Center for Energy Studies, BUET, working paper published under Sustainable Energy for Development Project, GIZ at Dhaka, Bangladesh. 15 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 3 technical loss; 1% 3 3.2 Overview of Industrial Policy, EE and RE policies non technical loss; 3.2.1 Industrial policy 5% captive power; 8% Ministry of Industries, Government of the People’s Republic of Bangladesh (GoB) is primarily responsible for developing new policies & strategies for promotion, expansion and sustainable industrial; 10% development of industrial sector of the country. With this view the government has formulated the Power ; 43% National Industrial Policy (NIP) in 2005. The NIP aims to achieve the Millennium Development Goals (MDGs) by reducing poverty and hunger less than a half by 2017 through adaptation of short, medium and long term programmes in the industrial sector. The specific target of NIP is to Residential+others; increase the Gross Domestic Product (GDP) to 8% by 2013, further to 10% between 2017 and 13% 2021, to increase the GDB contribution of the industrial sector from present 28% to 40% and increase the proportion of the labour force employed from the present 16% to 25% by 2021. Fertilizer; 20% The main objective of the NIP is to identify needs of the industrial sector and provide business support and policy measures for meeting these needs, to create legal and regulatory framework in Figure 3.1: sector wise natural gas consumption favour of the investors. In the NIP, the private sector has been considered as the main driver to boost up the industrialization of the country and the government’s role will be limited as the Power generation capacity facilitator for creating an investment friendly environment for the private sectors. Participation of the private sector in all infrastructure development endeavours, and the use of public-private Bangladesh Power Development Board (BPDB), Independent Power Producers (IPPs) and Rental partnership are strongly encouraged through various incentives. The NIP also encourages foreign Power Plants (RPPs) are mainly responsible for generation of electricity. BPDB indicates that total direct investment to act as the conduit for skill and technology transfer and market linkage for installed capacity of the power plants is 6,760 MW (as of March 2011) against which maximum exports. 4724 MW of electricity was generated. In the present power generation scenario, day-to-day electricity demand and supply gap is about 300- 1000 MW. Over 20,000 GWh of net energy in The NIP has also identified 32 thrust sectors in the industries that require preferential policy public sector (58.25 percent) and in private sector (41.75) were generated during FY 2009-10. In the support to harness their high growth potentials. Agro-based and agro-processing, ship Building, GTZ study an attempt has been made to identify the sectors that consume the said amount of renewable energy, ICT and ICT based service, readymade garments, textile, Pharmaceuticals, , jute energy. The figure 4.3 shows sector wise consumption of energy in Bangladesh: leather, light engineering, energy efficient appliances, frozen fish etc. are few of them. The NIP has identified the labour-intensive industries i.e. the Small and Medium Enterprises (SMEs) as one of the thrust sectors to sustain the industrial growth. Agriculture; 3% non-technical loss; 11% In line with the national Industrial Policy, industries are defined in two perspectives: Commercial; 6% Industries in the manufacturing sector are defined as below: Technical loss; 11%  “Large Industry” means an industry in which the value/replacement cost of durable resources Others; 1% other than land and factory buildings is above BDT 100 million. Residential; 34%  “Medium Industry” means an industry in which the value/replacement cost of durable resources other than land and factory buildings is between 15 million and 100 million taka.  “Small Industry” means an industry in which the value/replacement cost of durable resources other than land and factory buildings is under 15 million taka. Industrial ; 34%  “Cottage industry” means an industry in which members of a family are engaged part-time or full-time in production and service-oriented activities. Figure 3.2. sector wise energy consumption 16 17 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 3 Industries in the non-manufacturing sector (trading and other services) are defined as below: 3 of renewable energy projects, create market opportunities, develop financing mechanisms and facilities by using grant, subsidy and/or carbon/CDM fund for public and private sectors. However,  “Large Industry” means an industry in which more than 100 workers work SEDA has not been formed yet and due to lack of fund and absence of a focal point agency like  “Medium Industry” means an industry in which 25 to 100 workers work SEDA, the scaling of RE projects are seems to be far behind the target which has been set under  “Small Industry” means an industry in which fewer than 25 workers work (unlike family the RE policy. The RE technology is yet to be integrated with the national electricity grid and members in a cottage industry) dissemination of RE technology is limited to the off-grid areas in a small scale which are implemented by the state owned companies (IDCOL, LGED, REB, PDB), NGOs, private sponsors 3.2.2 National Energy Policy (NEP) with support of international donors. The country has been entitled as an annex-B country under the Kyoto Protocol. A CDM board has been formed under Ministry of Environment and Forest National Energy Policy (NEP) of Bangladesh was formulated in 1996 to ensure proper exploration, (MoEF) to perform all CDM related activities. production, transmission, distribution and rational use of energy sources to meet the growing demand on a sustainable basis. It involves survey, exploration, exploitation and distribution of A brief overview of ongoing RE projects are given in section 3.3. indigenous natural gas; development of coal in the northern part of the country, establishment of power generation plants and networks for transmission and distribution of electricity. The policy 3.2.4 Energy Efficiency (EE) Policy has been updated in 2005 in order to address various issues related to energy development programmes. The policy considers government’s vision is to provide reliable and affordable power EE improvements refer to a reduction in the energy used for a given service (heating, lighting, etc.) to all by 2020. The policy also encourages public and private sector participation in the development or level of activity. The reduction in the energy consumption is usually associated with technological and management of the energy sector. To encourage private sector participation in the energy changes, but it can also result from better organisation and management or improved economic sector, the government has waived import duty from importation of all capital machinery relating conditions in the sector (“non-technical factors”). to energy generation, energy efficiency, energy conservancy and renewable energy. In this regard value added tax (VAT) has been exempted for solar PV, wind turbines and energy efficient lamps like The concept of introducing EE activities for different sectors such as household, industry, compact fluorescent lamps (CFLs). transport, service etc. is comparatively new in Bangladesh and the GoB has taken some positive steps in this regard. Bangladesh Bank (BB) has made an EE policy guidelines in 2011 which is In addition to ensuring rational use of conventional energy sources, the NEP underlines the need referred as ‘Policy Guidelines for Green Banking’ for the banking sectors for reducing in-house of energy conservation, efficient use of energy and use of renewable energy sources to ensure long energy consumption within the banks as well as developing financial products for the industrial term energy security of the country. However, effective and adequate measures have not been sectors to encourage eco friendly business activities. Detail of the said policy guidelines is placed yet to ensure proper use of energy resources. mentioned in section 6. However, a uniform EE policy for different sectors is yet to be adapted. At present overall EE policy is seems to be mainly supplemented by the present RE policy which 3.2.3 Renewable Energy (RE) Policy focuses to increase the contribution of RE in the total energy supply by 10% in 2010. GoB is committed to give support to the on-going EE programmes such as promotion of energy efficient Renewable Energy Policy was first formulated in 2008 by the Power Division, Ministry of Power, lighting system, dissemination of improved cooked stove etc. Detail on-going programmes in the Energy & Mineral Resources, GoB. The policy aims to harness the potential of RE resources and EE sectors are given in section 3.3. dissemination of RE technologies in rural, peri-urban and urban areas; facilitate both public and private sector investment in RE projects; develop sustainable energy supplies to ensure energy 3.2.5 Environment Policy supply security and scale up contributions of RE to overall electricity and heat production. The policy has set the targets for developing RE resources to meet five percent of the total power Department of Environment (DoE) under Ministry of Environment and Forest (MoEF) has demand by 2015 and ten percent by 2020. Some of the technical features of the RE policy are formulated the environment policy in 1992. The objectives of the policy are to maintain ecological electricity generated from RE projects having a capacity of up to 5 MW, can be purchased by power balance and overall development through protection, identify and regulate activities which pollute and utilities or any consumer through mutual agreement with a considerable 10% higher tariff than the degrade the environment, ensure environment friendly development in all sectors; ensure sound use present electricity purchase price. RE project sponsors are also allowed to use existing electricity of all national resources; and actively remain associated with all international environmental initiatives. transmission and distribution systems by paying wheeling charges to the owner of the transmission/distribution facilities. Besides, RE project investors are exempted from corporate The policy covers 15 sectors like Agriculture, Industry, Health & Sanitation, Energy and Fuel, Water income tax for five years, VAT has been removed from RE equipment and related raw materials. Development, Flood Control and Irrigation, Land, Forest, Wildlife and Bio-diversity, Fisheries and Livestock, Food, Coastal and Marine Environment, Transport and Communication, Housing and The RE policy underlines the need of a Sustainable Energy Development Agency (SEDA) which Urbanization, Population, Education and Public Awareness, Science, Technology and Research, will be established to provide coordination of sustainable energy planning, support establishment Legal Framework and Institutional Arrangements. 18 19 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 3 In support of the Environment Policy 1992, a number of supplementary policies, acts, rules have been adopted to address the sector specific environment issues. Environment Conservation Act 3 Renewable Energy Projects (ECA) 1995 was adopted to conserve and improve the environmental standards and The Project title Implementing Funding Project Description agency agency Environmental Conservation Rules, 1997 was promulgated to broadly define management of toxic and hazardous substances and guidelines for disposal of waste from different categories of Sustainable Rural Local Government UNDP - -Year of Installation: From 1998 to 2006 industries. Under the Environmental Conservation Rules 1997, depending on the environmental Energy Engineering Department, -Centralized AC system formarket place, impact of specific industries, the industries are classified into green, orange-A, orange-B, red Ministry of Local coastal communities, biodiversity research Government, Rural laboratory, standalone solar home system for category. Depending on the specific industry category, the industries are required to provide Initial rural clinics, tourist resorts, local govt. office, Environmental Examination (IEE) report, Environmental Impact Assessment (EIA) report, Development & Coop peratives. tribal temple and households, IT facility in Environmental Management Plan (EMP) to get environmental clearance of the industrial unit. remote LGED office, solar PV pumping, solar home lighting system, LED lanterns etc. Total System Capacity: 40.5 kWp 3.3 Brief overview of development programmes and plans t cost (US $):US $1.99 million -Total Project Most of the EE programmes that are taking place in Bangladesh are funded by the international Renewable Energy Bangladesh Power - -Type of Installation: SHS, Solar Vaccination, donors where different public institutions, private institutions, NGOs worked as the project Development & Development Board Solar water pump, Solar Street Energy Efficiency (BPDB) light, Centralized Solar PV Power Plant implementing agency. Apart from promotion of EE lighting system project, some EE projects were Measure of taken which is mainly substitution of fossil fuels by introducing renewable energy sources. -Total System Capacity: 123.55kWp BPDB (1.23 MW) Table 1: Energy Efficiency and Renewable Energy development projects in Bangladesh Diffusion of Rural Electrification World Bank, -Total System Capacity: 233.095 kW (0.233 Renewable Energy Board (REB) GEF, GIZ, MW) by June 2007 Energy Efficiency Projects Technologies/ French Grant Project title Implementing Funding Project Description Rural Key output: Solar PV electricity provided to agency agency Electrification the - remote and isolated areas of the country Through Solar Austogram thana of Kishoreganj district, Efficient Lighting Power Division The World -Free replacement of 10.5 million high Singra thana of Natore district, Kotalipara Energy Initiative for of the Ministry of Bank quality CFLs, with an equivalent thana of Gopalganj district and among the Bangladesh Power Energy number of Incandisent Lights in the islands Moheshkhali, Kutubdia, Sandip, St. (ELIB) and Mineral households of the most densely Martin etc. Resources populated urban and rural areas of (MPEMR), Bangladesh. Deploying 10.5 million Solar Irrigation Grameen Shakti and IDCOL -Project Capacity: 11.2 KW Rural CFLs is expected to reduce peak demand Pump Project Rural Services (Grameen Shakti) Foundation and 8.4 kW (Rural Services Foundation) Electrification by about 360 MW from the national Board, GIZ, grid in 1.5 years starting from year 2010. -Total Project cost: BDT 5.275 million IDCOL -Total Project cost : US$15.0 million Sustainable Energy NGOs GIZ (as of May 2010) Improving Kiln UNDP Global - Project implementation period for Development (SED) Program -Solar Home System: Efficiency in Brick Environmental 2005-2007 Making Industry-y Facility, UNDP Small Solar Home System - Total Project Cost USD 0.55 million PDF B Phase (PURE Program) = 800 Improving Kiln Clean Energy Global - Project implementation period Small Solar Home System (SED) = 1,61,000 Efficiency in the Alternatives v Environmental 2010-2014 -Biogas installation: Brick Making (CEA) and Xian Facility Institute of Wall - Total Project Cost USD 3 million Big size Biogas plant (Big Biogas plant 36 m) Industry Building Materials PURE = 270 ,SED = 1,250 , Pilot Biogas plant = 8 nos Sustainable NGOs GIZ (as of May 2010) Energy for -Improved Cook Stoves (ICS) Installation: National Domestic IDCOL GoB, SNV -Till December 2010, over 15,000 (as of Development Domestic Improved Cook Stoves (ICS) Biogas and Netherlands December 2010) Biogas plants in rural areas (SED) Program Manure and KfW through its Partner Organizations. = 2,50,000 Institutional ICS = 4,000 Programme (NDBMP) -The program aims to install a total of 37,269 biogas plants across Bangladesh by 2012. 3 Sources: National Environment Policy 1992, The Bangladesh Environment Conservation Act, 1995, The Environment Conservation Rules, 1997, Ministry of Environment and Forest, Government of the people’s Republic of Bangladesh. 20 21 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 3 250 kW capacity Private sponsor IDCOL and - -Year of installation: 2008 3 hydro) resources of energy in Bangladesh. It has published relevant research papers on energy sector. rice husk the World gasification based Bank -Total Project cost: US $ 0.36 million power plant 3.4.4 Centre for Energy Research (CER), United International University 400 KW Biomass Private Sponsor IDCOL and - Total Project cost: BDT 64.25 million Based Gasification the World The Centre for Energy Research (CER) has been established in September, 2010 with a view to Plant Bank enhance knowledge in the field of renewable and sustainable energy supply, utilisation, management Biogas Based Private sponsor IDCOL - Total Project capacity: 350 kW through research and development. A state of art research laboratory is being developed under CER Electricity focusing renewable and energy efficiency. CER is involved in designing low cost high efficiency Generation Plants - Total project cost: BDT 149.40 million circuits for LED lamps, micro-controller based charge controller with maximum power point CDM based Waste Concern, UNFCCC - Project implementation period 2007 tracking and designing diffused reflectors for solar PV panels for enhanced power output etc. CER compost project, Bangladesh and is conducting a technical auditing of the SHSs (Solar Home Systems) installed all over Bangladesh Roopganj, Dhaka l Wide World - 480,000 tons of CO2 equivalent emission (700 tons/day) Recycling (WWW), reduction in 8 years under IDCOL program. Recently CER has been has been awarded as the certification authority of Netherlands equipments of IDCOL’s Solar Home System project. CDM Mechanism m IDCOL UNFCCC - Project implementation period 2008-2014 Installations of 3.4.5 Khulna University of Science & Technology (KUET) Solar Home - 34,854 tons/year of CO2 equivalent Systems in emission reduction KUET is an institution providing technical education institute offering degrees on all major Bangladesh (IDCOL) engineering disciplines. The Mechanical Engineering Department has well equipped laboratories and operates an Energy Park, wind field and bio-energy research complex for advanced research in energy technology. The Department is actively involved in research related to briquetting of 3.4 Research Institutions in the EE/RE sector biomass. 3.4.1 Bangladesh Council for Scientific & Industrial Research (BCSIR) 3.5 Non-Government Organizations in the EE/RE sector The government established the Bangladesh Council for Scientific & Industrial Research (BCSIR) 3.5.1 Grameen Shakti for undertaking scientific and industrial research of the country. The activities of the institution include development of improved stoves, biogas technology etc. BCSIR has demonstrated Grameen Shakti (GS), a non-profit organization of Grameen Family of Companies has been improved cook stoves and biogas plants in different parts of the country. working in the renewable energy sector in Bangladesh since 1996.. GS started it operation through the selling and installing solar home systems to remote and rural places where grid based electricity 3.4.2 Renewable Energy Research Center- University of Dhaka, Bangladesh is not available. It operates through a micro-credit based framework for providing SHS to rural non-electrified households. GS is the major implementing partner of IDCOL solar home system The Renewable Energy Research Center (RERC) was set up by the University of Dhaka in 1981 to programme. At present, GS has about 500 engineers and 1,000 field staffs, serving more than organize research activities in the field of solar, wind and other alternative sources of energy. RERC 600,000 beneficiaries through its 280 unit offices, 42 regional offices and 5 division offices. By now, has taken up different research projects in the area of solar radiation, flat thermal collectors, GS installed over 0.5 million solar home systems, about 1600 domestic and commercial biogas concentrating parabolic collector (CPC), water heaters, solar cookers, Fresnel concentrating plants and 2000 domestic improved cook stoves. GS targets install 1 million solar home systems, 1 collectors, solar cell preparation, battery charge controller, PV lantern design and fabrication, PV million biogas plants and 10 million improved cook stoves by the year 2015. water pump, PV refrigerator, PV stand-alone residential system, biogas, fast growing trees for biomass. 3.5.2 Bangladesh Rural Advancement Committee (BRAC) 3.4.3 Center for Energy Studies, BUET BRAC, a national private development organization, is the largest in the world employing 97,192 peoples, with the objectives of poverty alleviation and empowerment of the poor. BRAC initiated The Center for Energy Studies (CES) of Bangladesh University of Engineering and Technology the energy interventions in December 1997 through its Rural Energy Programme (REP) and 6,076 (BUET) was established to promote education and research in the area of identification of the solar PV based lighting systems installed in different rural areas of Bangladesh under the conventional (e.g. gas, coal), non-conventional (e.g. biomass, biogas) and renewable (e.g. solar, wind, programme. However, BRAC’s energy programme has been operated under the support of BRAC 22 23 Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh 3 Foundation from August 2002. BRAC has installed over 60,000 solar home systems IDCOL solar home system programme. In 2005 BRAC took an action oriented research program on rural Overview of Selected electrification though biogas generation. 3.6 Vendors/Manufacturers/Importers Industry Sectors 3.6.1 Energypac Power Generation Ltd. Energypac Power Generation Ltd. (EPGL) is one of the major suppliers of standby and base load generators, low voltage electrical accessories, busbar systems, luminaries and fixtures including energy saving lamps in the country. EPGL supplies about 14% of the total CFL demand in the local market while about 70% of the CFL demand is met from imports. The company aims to provide reliable, safe, and environmental friendly power to the industrial, commercial, and residential facilities of Bangladesh and has indeed, succeeded in significantly contributing to the country’s power engineering, management, generation and distribution system. EPGL has experienced significant growth over the past 12 years. EPGL has several strategic joint ventures/associates with blue chip companies across the globe namely ABB, Rolls-Royce, FG Wilson, Perkins etc. It has now nearly 200 employees involved in supply and production of goods and services. 3.6.2 Rahimafrooz Ltd. Rahimafrooz Batteries Limited is a public limited company of Rahimafrooz Group operating for more than 50 years in Bangladesh. Today, the company’s products and services are used in as many as 19 countries across the world. Rahimafrooz Batteries Limited (RBL) has an IS0 9001 and ISO 14001 certified plant. RBL is one of the leading private sector entities in Bangladesh involved in renewable energy technology assembly, supply and installation. It has installed more than 30,000 home solar systems in the remote rural areas of Bangladesh. RBL has been involved in the business of solar PV and thermal products since the year 1991. It has participated in UNDP, FAO, World Bank/IDCOL and Shell Foundation supported programmes involving the dissemination of solar PV based products as a supplier and/or system installation agency. 24 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 4 Overview of Selected Industry Sectors 4 Table 2: Size and Growth Rate of Manufacturing Sector (At constant prices of 1995-96) (BDT’0 million) Three sectors namely agriculture, industry and service sectors mainly contribute to the economy of 2009-10 Type of 2005-06 2006-07 7 08 2007- 2008- 09 (Provisional) Bangladesh whereas service sector contributes almost half of the Gross Domestic Product (GDP). industry Bangladesh Bureau of Statistics estimates that total GDP size in FY2009-10 as 99.93 billion USD, Small & 13551.5 14865.1 15920.0 9 169691 18144.3 whereas per capita GDP is estimated as 684 USD. The Bangladesh Economic Review 2010 Cottage estimates the contribution of service, agriculture and industry sector to the GDP to be 49.90 (9.2) (9.7) (7.1) (6.9) (6.61) percent, 20.16 percent and 29.95 percent respectively in FY2009-10. The figure 4.1 shows the GDP m Medium 33268.2 36507.1 39157.2 41735.0 44087.3 growth by sector (%) from FY2005-06 to FY2009-10: Large (11.4) (9.7) (7.3) (6.58) (5.64) Total 46819.7 51372.2 55077.2 58753.9 62231.6 GDP (Agriculture) GDP (Industry) GDP (Services) Overall GDB (10.8) (9.7) (7.2) (6.68) (5.92) 12 Source: Bangladesh Bureau of Statistics. 10 Note: Figures in parentheses indicate rate of growth (in Percentage) 8 The above table reveals that products of both ‘Medium-Large Industry’ as well as ‘Small and GDP % Cottage Industry’ are increasing gradually. Cement, iron and steel are the major inputs of the 6 construction sector. The construction sector is projected to grow by 6.81 percent during FY 2009- 4 10 against 5.70 percent in FY 2008-09. The vision of the Industrial Policy 2010 envisages that Bangladesh will have, by 2021, a dominant industrial sector which will account for at least 40 percent 2 of the GDP to absorb 25 percent of the workforce. 0 The selected sectors are among the key industrial sectors in Bangladesh contribute significantly to 2005-06 2006-07 2007-08 2008-09 2009-10 country’s GDP. Size of industrial units in the textile, sugar, paper and pulp, steel and re-rolling and cement sector is mainly large, whereas industrial units in other sectors like food processing, apparels, Figure 4.1: GDP growth rate by sector poultry, light engineering, plastic and chemicals are mainly in SMEs category. Among the large industries, there are public limited companies listed in the stock exchanges, whereas the SMEs are Source: Ministry of Finance. Bangladesh Economic Review 2010 mainly private limited companies. Among the industries surveyed, most of them are locally owned; however, there are a few joint-venture and 100% foreign owned entities. In terms of markets being The contribution of the industry sector to the economy of Bangladesh has been increasing over the served, most of the units are catering to local market as in the case of cement, paper and pulp, steel years. In FY1980-81 the contribution of the broad industry sector to real GDP was 17.31 percent and re-rolling, poultry, sugar and chemicals. However, apparel and textile industries are mainly which has increased to 29.95 percent in FY2009-10. export oriented industries; plastic and light engineering are both local and foreign market based industries. The broad industry sector includes four sub-sectors –mining & quarrying, manufacturing, Table 3: Overview of Selected Industry Sectors construction and electricity, gas & water supply. Among these sub-sectors, the contribution of the manufacturing sector is the highest. According to the provisional estimate of national income, in Sector Category No. of Unit Total No. of Markets FY2009-10, the contribution of the manufacturing sector to GDP is 17.87 percent which is 59.67 Unit percent of the total contribution from the industrial sector (29.95 percent). The growth rate of the Food Processing Large 45 1,277 Local & broad industry sector is provisionally estimated at 6.42 percent for FY 2009-10 compared to 6.46 SME 1,232 Export percent for FY 2008-09. Sugar (1 privately owned) Large 18 18 Local SME - The size and growth performance of the manufacturing sector in the country’s GDP from Textile (composite) Large 1,775 4,945 Export FY2005-06 to FY2009-10 is shown in table 1 below: SME 3,170 26 27 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 4 Readymade Garments Large 1,440 5,850 Export 4 The main stages of few food processing industries are: SME 4,450 Beverage Industry Pulp and Paper Large 10 55 Local SME 45 Chemicals (basic chemicals Large 15 825 Local Resin Bottle Labeling Capping Filling Covering Coding Wrapping & Toiletries, etc.) machine SME 810 Cement (34 active) Large 34 34 Local SME - Bread and Bakery Industry Poultry Large 15 99,015 local SME 99,000 Raw e -rolling Steel re Large 120 300 Local Wedging Mixing Baking Staking Packing Delivery material SME 180 Light Engineering Large 35 7,035 Local & SME 7,000 Export Frozen food industry Plastics Large 50 3,000 Local & SME 2,950 E Export Raw Machine Source: Secretariat of the sector associations and sector corporation office Sealing Freezing Storage Transport material filling 4.1 Industry Sectors in Bangladesh The most common machineries that are used in food processing industries are: 4.1.1 Food Processing Industries  Boiler  Materials handling equipment Bangladesh has a tropical climate, a lot of fresh water, indeed a land interspersed with numerous  Chillers  Generator rivers, fertile soil and possibility to cultivate crops round the year. Agro processing industries has  Air Compressor  Mixers and kneading machines increased significantly in recent years. There are nearly 1,200 processed food manufacturing  Water treatment machine  Oven enterprises, 108 fish and shrimp processing plants in the country. Geographically industrial units in  Printing machine  Blow moulding machine this sector are spread over all 64 districts of the country. Food processing enterprises account for  Water pump  Packaging machine 5% of GDP of Bangladesh (around 4.48 billion USD). Main products include processing of fish, frozen food (white fish, shrimps), bakery products, fruits and vegetables and beverages (carbonated 4.1.2 Cement and non carbonated fruit juices, drinks, etc.) About 22.98 million metric MTs of processed food products worth USD 23.88 million are exported in 2007/08 and over the last few years the food There are about 74 cement units in Bangladesh. However, at present about 34 cement units are in industry has expanded 22% on average. Investment is in this sector is over BDT 10 billion. operation which are located in greater Dhaka, Chittagong, Khulna, Barisal, Sylhet and Rajshahi. Investment in this sector is USD 1,020 million and annual sales is about USD 288,000 million. The food industry (mainly fish and shrimps processing units) exported 32 million kg of shrimps and Annual production capacity of this sector is at present 18.6 millions MTs. The sector is running at 21 million kg of processed white fish and fish products worth USD 353 million and USD 101 about 75% of its installed capacity. Ordinary Portland cement (OPC), Portland composite cement million respectively in 2007/08. Total fish production is about 2.53 million MT, out of which 92% (PCC) are the key products of the sector. is white fish and rest 8% is shrimps. The total production of fish registered a growth of 22% over the last few years. The 145 fish processing plants of the country has an annual installed processing The cement plants in Bangladesh are mainly clinker grinding plants, have a ball mill / roller mill capacity of 0.26 million MT. as principal equipment for cement-making. Main raw materials include clinker, gypsum, sludge, fly-ash, limestone and these are imported. The national demand of cement is fulfilled by the cement The food processing industry is mainly dependent on agricultural production as most of its raw industries of Bangladesh and export is negligible. The sector employs more than 0.1 million people. materials are primarily agro-products. The sector accounts for over 22% of all manufacturing The industry is growing at over 8% on average for last seven years due to steady demand in the real production and employs about 20% of the labour force. estate and infrastructure sector. 28 29 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 4 The cement manufacturing process has following main stages: 4 4.1.4 Light Engineering Light engineering (LE) industry in Bangladesh has grown with modest beginning as informal Raw kiln clinker cement Grinding cottage units and over the years has grown to SME. Currently there are about 40,000 informal LE material 1400 o c formation powder units in Bangladesh and about 93% of the LE units are SMEs. As per industry estimations, there are about 7,035 sizable LE units in the country . The sector contributes about 2% of GDP to the National Economy. Total investment in this sector is BDT 20 billion and total annual production Machinery and equipments that are used in the cement industries are: capacity of this sector is at present over 600 million products and total yearly production volume is about BDT 5000 million. The industry estimates the grossed up value of the gross output from the  Grinding machines (Ball mill / Roller mills) sector is over BDT 35,000 million BDT. There is a potential annual domestic market of about BDT  Air compressors 11 billion for products that can be manufactured by the LE sectors. Metal products, electrical,  Materials handling equipments electronic and electromechanical products are the key products of the sector. LE sector supports  Packing machine industrial, agricultural and other sectors of the economy by producing a wide rage of spare parts,  Kiln casting, moulds and dies, oil & gas pipeline fittings, light machinery, industrial machinery, electrical  Standby power plant goods, agro machinery, pedal powered vehicles and by providing repairing services. In the yearly 4.1.3 Steel Re-rolling Mills production volume, 35% are agricultural machineries, 30% are spare parts for different industries and 35% are other light machineries, tools and services. Besides, LE products are also being There are about 400 steel re-rolling mills in Bangladesh. However, at present about 300 re-rolling exported mainly in Europe and USA which account 2% of the total export earnings. mills are in operation and are located mainly in Dhaka, Chittagong, Narayanganj. GDP valuation of the sector at constant market price is BDT 10,000 million. Total investment in this sector is about Raw materials of these industries mainly come from local ship breaking firms. Some chemicals are BDT 70 billion and total annual production capacity of this sector is at present over 2.5 million MTs imported from abroad. About 2 million persons are associated with this sector as direct employees. which is mainly consumed by the local construction companies. The sector is running at about 80% capacity to meet the local demand and many industries are looking forward to expanding the plant The diversified LE sector has following main stages: production capacity. Mild steel (MS) Rods, MS Bars, corrugated iron (CI), galvanized plain (GP) sheet, angle, Z-Bar, flat bar and other steel products are the key products of the sector. Raw Welding / Cutting Machining Finishing material Fabrication The steel products are mainly produced by using imported and locally available ship scraps. Only a few industries use imported billet to produce MS Rods. More than 1 million persons are associated with this sector as direct employees. The sector has been getting continuous investment due to steady demands. In 2009, about 85,000 MTs of steel products, mainly corrugated iron and Machinery and equipment that are commonly used in the LE industries are: galvanised plain sheets were exported by the industry.  Milling machine The steel re-rolling process has following main stages:  Lathe machine  Shaping machine  Welding equipment Scrap Ingot Melted Re- heating Sizing Finishing  Drill machine Processing Preparation metal rolling  Surface grinding machine  Power Saw / Band saw  Compressor Machinery and equipments that are used in the re-rolling mills are:  Furnace/Oven  Cutting  Re-rolling machine  Lathe machine  Scaling machine  Shedding machine  Crane  Universal testing machine (UTM) 30 31 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 4 4.1.5 Sugar 4 4.1.6 Pulp and Paper At present, there are total 18 sugar mills in operation in Bangladesh and all of them are owned by At present there are about 55 paper mills in operation in Bangladesh out of which 3 mills are owned the Government. Sugar mills of Bangladesh are located in the northern parts of the country mainly by the government. Most of the paper & pulp mills are located in the Chittagong, Khulna, in Rangpur, Thakurgaon, Jaypurhat, Rajshahi, Kushtia, Faridpur, Nator and Pabna. The sector Narayangaj districts. GDP valuation of the sector at constant market price is BDT 25 billion). contributes 0.67% of GDP to the National Economy (GDP valuation at constant market price is Investment in this sector is about BDT 7.5 billion and total annual production capacity of this BDT 6130 million). Investment in this sector is about BDT 5 billion. Total annual production sector is at present about 0.657 million MTs of paper. Newsprint, Facial Tissue, Printing paper, capacity of this sector is at present about 0.21 million MTs of sugar and average effective mill Duplex board, Cigarette tissue, kitchen tissue, accessories and cartons, etc. are the key products of operating days is 120-150 days in a year. Actual yearly production is about 0.079 million MTs which this industry. is about 38% of the annual production capacity. Sugar, molasses, and other bi-products are the key products of the sugar industry. This sector uses imported dry pulp as well as local and imported waste paper as main ingredients to produce different kinds of paper. Overall yearly demand of various types of papers is worth about The sugar units are based on cane processing and hence sugarcane is used as the main raw material BDT 40 billion which means demand beyond the local capacity is met by importing papers from the for sugar production. To produce over 0.21 million MTs of sugar about 2.5 million MTs of overseas market. The sector provides direct employment of around 15,000 people. sugarcane is needed which are procured from local farmers. However, overall yearly demand of sugar is about 0.5 million MTs which means demand beyond the local capacity is met by importing The pulp and paper sector has following main stages: sugar from the overseas market. Total numbers of sugarcane farmers are 0.6 million, number of people depend on sugarcane are 5.0 million and manpower dependent on sugarcane cultivation: Raw Hydro - Re- 66.0 million man-days. Separation Refine Paper Moulding Drying Cutting material -pulper winding machine The Cane processing sugar has following main stages: Machinery and equipments that are used in the pulp and paper mills are: Cane Juice Syrup Crystalli Molasses Drying Packing  Conveyer  Refiner crushing extraction Preparation -zation separation  Hydro-pulper  Centrifugal screen  Beater  Filter  Chest  Boiler(s) Machinery and equipments that are used in the sugar mills are:  Thickener  Air compressor(s)  Bleaching  Water pumps  Cane carrier  Digester  Packing section (Rolls handling system)  Conveyer Belt  Re-winder  cutting machine  Mill house  Turbine  Boiler 4.1.7 Poultry  Vacuum injector pump  Multiple effect evaporators At present, there are total five “Grand Parent Stock” farms, 40-50 Parent Stock farms and  Rotary Vacuum filter hatcheries, over 100,000 poultry farms having about 195 million birds and 15-20 pelleted poultry  Vacuum Pan feed factories in the private sector. Poultry firms are spread over all districts of Bangladesh  Air compressor particularly Dhaka, Gazipur, Chittagong, Khulna, Rajshahi, Barisal, Sylhet, Rangpur. Total  Centrifugal Separator investment in the sector is over USD 2 billion and the sector accounts for 1.6% of GDP. The industry produces 6626 million eggs and 0.54 million MTs of meats annually. The industry is growing over 10% for the last 10 years. There are about 22 million rural households in which an average of 200 eggs are produced per household per year. About 33% of the eggs in Bangladesh come from the commercial poultry industry and 67% from the backyard system. Per capita meat consumption is about 5.9 kg while 66% of it comes from the commercial poultry industry. Eggs, broiler meet are the key products of this industry. 32 33 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 4 Main raw materials of the poultry industry are parent bird stock; doc (day old chick) and hatching eggs. Poultry products are completely sold in the local market. More than 5 million people are 4 The sector depends upon the import of raw cotton. The yearly consumption of raw cotton is about 5.00 million bales. About 40% of total demand of woven fabrics for the RMG sector is supplied by involved in this sector where male and female ratio is equal. the local weaving mills and 90% of the total demand of yarn and fabrics for the knit garments is met by the local textile industries. The sector together with RMG sector contributes 79% to the total The poultry sector has following main stages: Export Earnings. The sector provides Jobs to around 5 million workforces. Bird Egg Egg Final A composite textile mill has following major stages: growing hatching Production stage Stage stage Woven> Woven> Fibres> Fibres> Yarn Yarn > > Finished Finished Yarn Yarn Fabric Fabric fabric fabric (Spinning) (Spinning) (Weaving) (Weaving) Machinery and equipments that are used in the poultry industry are: (Processing) (Processing)  Poultry Feed Making / Handling machines  Conveyor systems (If applicable)  Chilling systems Further break-down of the each of the stages are:  Pumps( water and Fluid)  Packaging Plant  Air handling Or Blowers  Air Compressor Spinning Section  Hatchery units  Transformer  Chicken Processing Plant (dressing, cleaning, etc)  Bio-digester (for Biogas) Raw Speed Winding  Generator Blow Carding Combing Drawing Spinning & Packing material frame room Reeling 4.1.8 Textiles At present, there are total 1,851 textile companies having 350 spinning units, 1,485 weaving units, 2,800 knitting units and 310 dyeing units running in the private sector in Bangladesh. Most of the Weaving section textile mills are located in the Dhaka, Chittagong, Gazipur, Narayanganj, Khulna. The sector along with RMG sector is one of the largest contributors of GDP which is 13%. Total investment in this Cone Grey Warping Sizing Weaving sector including RMG is about USD 3.5 billion. Bangladesh holds 2% market share in the global yarn inspection textile sector. Total installed capacity of spinning units is about 7.2 million spindles, weaving units is about 25,000 Shuttle looms (SL)/Shuttle less looms (SLL) and knitting units is about 12,000 knit/Dy/M. Annual production capacity of spinning units is about 1,800 million kg yarns, weaving Processing section units is about 1700 million meters, knitting units is about 4,100 million meters and dyeing units is about 2,800 million meters. In addition, there are about 1,065 units of textile and power looms and 150,000 units of handlooms having a machine installed capacity of 23,000 SL/SLL and 498,000 Merceri - Singeing Desizing Scouring Bleaching Dyeing Printing Curing Finishing zing handlooms and production capacity of 400 million meters and 837 million meters respectively. Yarn and finished fabrics are the key products of the textile industry. The table below summarizes the capacity of the textile industry: Table 4: Overview of Selected Industry Sectors The most common machineries and equipment that are used in the textile industries are: Textile No. of units Annual Installed Annual Production 1. Boilers 7. Yarn conditioning plant components capacity 2. Compressor 8. Weaving machineries Spinning 350 7.2 million spindles 8 million kg yarns 1,800 3. Water pumps 9. Processing machines (bleaching, finishing, sizing, etc). Weaving 1,485 25,000 shuttle 7 million meters 1,700 4. Humidification plant 10. Dyeing machines looms/Shuttle less ooms ss 5. Blow room machineries 11. Dryer / stenter Knitting 2,800 12,000 knit/Dy/M 4,100 million meters 6. Spinning units 12. Others Dyeing 310 - 0 million meters 2,800 34 35 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 4 4.1.9 Readymade Garments (RMG) 4 Pharmaceutical is one of the fastest growing sectors in Bangladesh. There are about 149 privately owned pharmaceutical companies operating in Bangladesh. The total market size is about BDT At present, there are total 5,850 RMG units in Bangladesh, out of which about 5,050 woven units 30,000 million with an annual growth rate of about 10%. The industry meets 97% of total local and 800 knitwear units are in operation. Most of the RMG units are located in the Dhaka, demand. The industry is also exporting its formulations to 62 countries of the world. The products Chittagong, Gazipur, Narayanganj, Savar. In 2009-10 the export earnings from the RMG sector was of pharmaceutical industry include drugs, inhalers, nasal sprays, suppository, dosage form, soft about USD 12,496 million which is about 79% of total export earnings of Bangladesh. Annual gelatin capsule shells, IV fluids etc. installed capacity of this sector is about 475 million dozens. The growth rate of RMG export is over The chemical sector has following major stages: 20% per over the last two decades. Woven garments, knit garments, sweater and accessories are the key products of the RMG industry. Major exportable items are shirts, t-shirt, sweater, jackets and trousers. Raw Chemical Recrystali - Quality Packing material Process zation Control The main raw material woven and knit fabrics are being imported in addition to the supply by the local textile units. About 60% of total demand of woven fabrics and 10% of the total demand of Machinery and equipments that are commonly used in the chemical industry are: yarn and fabrics are being imported by the for the RMG sector.  Generator  Dryer / Spray dryer  Boiler  Centrifuge The RMG sector has following major stages:  Transformer  Reaction Vessels  Chilling system  Blister packing / Strip packing (in the case of pharmaceuticals)  Compressor Fabrics Cutting Sewing Washing Finishing 4.1.11 Plastics Processing In Bangladesh at present, there are total 3,000 small, medium and large plastic goods manufacturing units in operation. Plastics factories are mostly located in major cities of the country. Small and The most common machineries and equipment that are used in the RMG industries are: medium manufacturing units are situated mainly in highly fragmented clusters around the country. Contribution of plastic goods (only direct export) in GDP is more than 1%. Total investment in this 1. Boilers 7. Dryer sector is about BDT 56 billion. The industry now manufactures BDT 40 billion worth of various 2. Transformer 8. Water pump types of plastic products annually, of which BDT 16 billion worth of high-quality products are 3. Diesel generator 9. Effluent treatment plant exported worldwide Total annual production capacity of this sector is at present about 4.2 million 4. Compressor 10. Washing machine MTs of plastic products. Injection moulding products, garments accessories, household plastic 5. Sewing machine 11. Fire hydrant system products, etc. are key products of this industry. 6. Cutting machine Main raw materials of this sector include different types of polymers. Currently nearly 100% of the required polymers are imported since there is no poly-olefin unit in Bangladesh. The sector provides 4.1.10 Chemicals processing direct or indirect employment to around 1 million workforces. The chemical sector includes a number of sub-sectors like basic chemicals, pharmaceuticals, The plastic industry has following main stages: pesticides, cosmetic and toiletries, organic chemicals, fertiliser, etc. In Bangladesh, about 825 chemical industries are in operation both in government and privately sector. Except the pharmaceuticals industry, other chemical industries are mainly local market based industries. Raw Mixing Hopper Moulding Final material product The chemical fertiliser industry in Bangladesh is operated by state owned 7 urea fertiliser plants, one ammonium sulphate plant and two Di-Ammonium phosphate (DAP) plants. The total annual Machinery and equipments that are used in the plastic industry are: installed capacity of seven urea fertilizer companies is 2.8 million MTs of urea, 1.8 million MTs of ammonia, The annual installed capacity of ammonium sulphate plant is about 0.01 million MTs and  Injection moulding machine  Crusher machine two DAP plants is about 0.48 million MTs. The present production of urea fertilizer companies is  Blow moulding  Screen printing machine about 78% of the rated capacity.  Compressor  UV oven  Mixture machine  Shrink wrapping 36 37 Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh 4 4.2 Energy Demand and Consumption in Industries Manufacturing sectors in Bangladesh mainly consume electricity and natural gas as sources of energy. In addition, a small amount of diesel, furnace oil, coal or firewood is consumed by the industries. The principal source of primary energy in Bangladesh for the Industry sector is the natural gas. The industrial sector receives 18% of the total natural gas produced, out of which, 10% is consumed for manufacturing activities and 8% for captive power generation. As mentioned earlier in section 3.1, 631 MMcfd of natural gas is required to generate total electricity of 20,000 GWh which is about 40% of total gas supply. About 8,000 GWh of the electricity (including non technical losses) is consumed in industrial sectors, which requires gas supply of 250 MMcfd. In addition, natural gas is also used for captive electricity generation and other industrial processes in the industries to the extent of 300 MMcfd. The GIZ study indicated that total captive electricity generation capacity is about 1,100 MW in the manufacturing sector with total generation of about 5,200 GWh which consumes 128 MMcfd gas. On the other hand more than 5,000 industrial boilers use 173 MMcfd of natural gas. Industrial sectors use 13,000 GWh of electricity (both from captive and national grid) and a total of 550 MMcfd of natural gas is used in manufacturing sectors. . The GIZ study attempted to classify the usage of gas as well as electricity according to the types of industries as follows: I. Public sector industries other than urea fertilizer plants II. Large private industries (Having captive generation greater than 2.5 MW) III. Energy intensive industry groups (i.e. paper, steel etc) + Captive Generation (less than 2.5 MW) IV. Significant manufacturing industry groups + Unaccounted large motors and boilers V. Other (industry groups not included in iii and iv) VI. Small and Medium Enterprises (SME) + Unaccounted medium and small motors and boilers Detail industry wise energy consumption is shown in table 5: Table 5: Industrial energy consumption Gas required Gas required Gas required Grid to produce for captive for industrial Catagories electricity processes ( Total grid electricity (million electricity generation (i.e. boiler MMcfd) kWh) operation) (MMcfd) (MMcfd) (MMcfd) Public 70 2 5 11 18 Large Private 100 3 20 10 33 Energy intensive 1150 36 103 23 162 Manufacturing 3700 116 0 85 200 Others 1430 45 0 7 52 SMEs 1550 48 0 37 85 Total 8000 250 128 173 550 Source: Sustainable Energy for Development Project, GIZDhaka, Bangladesh 38 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 4 Figure 4.2 presents the percentage consumption of electricity and natural gas (both expressed as natural gas equivalent consumption) for the different industry types outlined in table 4.3. 4 metal products; 2% Textile-Spinning; 3% plastic products; 2% Textile-Weaving; 5% Public sector industries without urea plant 3% Jute mills; 5% SMEs + small-medium Large Private sector boilers/motors 16% industries 6% Textile-Dyeing; 16% Garments-export; 43% Others 9% Energy intensive groups+captive 29% stic; 24% Garments-domestic; Manufacturing + large boilers/motors 37% Figure 4.4: Energy used in manufacturing industry Figure 4.2: consumption of electricity and natural gas (%) Tobacco; 3% Figure 4.3, 4.4 and 4.5 shows energy used in energy intensive, manufacturing and other industries Shrimp export; 3% vegetable oil refining; 4% respectively. The largest industrial group is envisaged to be the garments industry followed by the textile dyeing industry. In the energy intensive industry include scrap steel processing, pulp and Flour mill; 19% Pha Pharmaceuticals; 4% paper, clinker grinding, glass, brick and steel re-rolling mills etc. Leather tanning; 6% Le Re-rolling mills; 5% Tiles; 5% Cold storage; 7% Glass-large; 13% Ceramic-large; 5% Ice plant; 8% Ic Clinker grinding; 13% Hard/particle board; 7% 0% Rice mills; 30% Glass factory; f 14% Brick-Tunnel kilns; 9% Salt washing ; 2% Pulp and paper; 14% Figure 4.5: Energy used in other industries Brick-Hoffman; 12% Scrap steel meels; 17% As mentioned in the GIZ study, energy prices (gas and electricity) have been low in Bangladesh, which implies that there is no incentive for the industries to become energy efficient from an energy Figure 4.3: Energy used in Energy Intensive industry cost point of view. Due to low energy price the BPDB is finding it difficult to meet up the operating expenses and perform proper maintenance services of the power plants. 39 40 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 4 Present tariff for Electricity and Natural gas is presented below: 4 4.3 Important Stakeholders in the Industry Sector Table 6: Electricity Tariff (As of 01 February 2011) Brief description of the key stakeholders in the industrial sector is given below: Category Sanctioned Load Tarrif a. Ministry of Industries (MOI), Bangladesh Small industry consumer up to 50 KW a. Flat rate: 4.56 BDT/kWh Ministry of Industries is primarily responsible for developing new policies and strategies for b. Off-peak : 3.67 BDT/kWh promotion, expansion and sustainable development of Industrial sector of the country. The c. Peak: 6.24 BDT/kWh ministry supervises and coordinates the activities, policy matters and administrative affairs of these organizations in conformity with the existing laws, rules and regulations. Industry consumer at 11 kV up to 5 MW a. Flat rate: 4.37 BDT/kWh substation b. Off-peak : 3.60 BDT/kWh b. Small and Medium Enterprise (SME) Foundation c. Peak: 7.47 BDT/kWh Through SME Foundation the government believes in spurring efficient and inclusive growth of Industry consumer at 33 kV Up to 15 MW a. Flat rate: 4.11 BDT/kWh SMEs so as to seed new enterprises' formation, accelerate employment growth and reduce poverty. substation b. Off-peak : 3.49 BDT/kWh c. Peak: 7.16 BDT/kWh c. Chambers of Commerce and Industry and Relevant Sector Associations Source: Bangladesh Power Development Board (BPDB) The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) is the apex representative organization safeguarding the interest of the private sector in trade and industry in Table 7: Gas Tariff (As of 01 August 2009) Bangladesh. There are many chambers of commerce and trade bodies and sector associations in Bangladesh. The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) is the Category Tarrif officially recognized apex apparel export trade body of apparel manufacturing units. MCCI, Industry consumer 165.91 BDT/MCF* established in 1904, is the oldest and most representative trade organization of Bangladesh having in its membership roll most leading commercial and industrial organizations including almost all the Power Producer (BPDB,IPP) 79.82 BDT/MCF public sector corporations and all multinational companies. The BGMEA also acts as a pressure group to protect the interests of the RMG sector and acts as a facilitator of trade negotiations with Captive Power Producer 118.26 BDT/MCF global trade bodies such as the WTO, ILO, and UNCTAD. Dhaka Chamber of Commerce and Industry (DCCI) is a multi-sector trade association of business enterprises. These chambers and *MCF = One thousand Cubic Feet sector associations are the major stakeholders from the private sector. The chambers of commerce Source: Titash Gas Transmission and Distribution Company Limited and the sector associations contacted during the study are listed below: Electricity generating units of BPDB have lower availability and inadequate power quality due to Table 8: List of chambers of commerce and the sector associations contacted during the study lack of spare parts, poor distribution and transmission system. As a result, manufacturing sectors do Institutions Sector not receive uninterrupted power supply. Over the years, the industrial sector has moved towards The Federation of Bangladesh Chambers of Commerce and Industry Multi-sector natural gas based captive power generation. Industrial sectors have been suffering from the daily load shedding of 300-1,000 MW because of inadequate power generation capacity. Electricity Dhaka Chamber of Commerce and Industry (DCCI) Multi-sector demand has been rising at the rate of 8% per year leaving a significant gap between demand and Bangladesh Plastics Industries Association Plastics actual supply. The PSMP envisages providing electricity for all by 2020 by taking the country’s total Bangladesh Paper Mills Association Paper power generation capacity to 17,765 MW. However, sourcing of investment of about USD 10 e sh Garment Manufacturers and Exporters Association (BGMEA) Banglade Apparels billion and timely implementation of energy projects are considered to be the major challenges to Bangladesh Textile Mills Association Textile accomplish this major task. Bangladesh Poultry Industries Association Poultry Bangladesh Cement Manufacturers Association Cement Bangladesh Steel Mills Owners Association Steel 41 42 Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh 4 d. Bangladesh Chemical Industries Corporation (BCIC) BCIC fully owned by the Government, was established in July, 1976 by a presidential Order. The Corporation is now managing 13 large and medium size industrial enterprises engaged in producing a wide range of products like Urea, TSP, Paper, Cement, Insulator, Sanitary ware, etc. Besides, BCIC is involved in 10 joint venture enterprises and these are engaged in the manufacture of medicine, insecticides, safety matches, paper, packaging, paper converting, etc. In this aspect it may be noted that BCIC holds on behalf of the Government of Bangladesh the largest chunk of shares in Karnaphuli Fertilizer Co. Ltd. e. Department of Environment (DOE) DOE of Bangladesh has proved itself as an environment friendly one through undertaking various programmes toward upholding and conserving the environment. The use of Catalytic Converter and Diesel Particulate Filter for Petrol and Diesel driven vehicles respectively has been made mandatory. Use of low sulfur content coal as fuel and installing chimney with the height of 120ft in the brick kilns and promoting the manufacture of concrete block brick prove the noble intention of present government. f. Titas Gas Transmission & Distribution Co. Ltd. (TGTDCL) The basic objective of the Company was to construct, own and operate natural gas transmission & distribution facilities. Among the four gas marketing Companies the market share of business of TGTDCL is 70 % of which Power, Fertilizer, Industrial, Commercial, Domestic and Seasonal are 48.20 %, 18.97 %, 20.28 %, 1.04 %, 11.56 % and 0.13 % respectively. g. Bangladesh Power Development Board (BPDB) BPDB, established in 1972, is the authority for planning, construction and operation of power generation and transmission facilities throughout Bangladesh and for distribution in urban areas except metropolitan city of Dhaka and its adjoining area. In the recent past a number of Generation and Distribution companies have been created under the reform programme. Ashuganj Power Station Company Ltd. (APSCL), Electricity Generation Company of Bangladesh (EGCB), North West Power Generation Company Ltd. (NWPGCL) and West Zone Power Distribution Company Ltd. (WZPDCL) have already started functioning as company under BPDB. The BPDB is responsible for major portion of generation and distribution of electricity mainly in urban areas of the country. The Board is now under the power Division of the ministry of power, Energy and Mineral Resources. 43 Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh EE/ RE Potential in 5 EE/ RE Potential in Selected Industry Sectors Selected Industry Three sectors namely agriculture, industry and service sectors mainly contribute to the economy of Bangladesh whereas service sector contributes almost half of the Gross Domestic Product (GDP). Bangladesh Bureau of Statistics estimates that total GDP size in FY2009-10 as 99.93 billion USD, Sectors whereas per capita GDP is estimated as 684 USD. The Bangladesh Economic Review 2010 estimates the contribution of service, agriculture and industry sector to the GDP to be 49.90 percent, 20.16 percent and 29.95 percent respectively in FY2009-10. The figure 4.1 shows the GDP growth by sector (%) from FY2005-06 to FY2009-10: 5.1 Energy Consumption Pattern in Selected Industry Sectors Sources of Energy As mentioned earlier in section 3, industrial sectors in Bangladesh primarily use natural gas and electricity from grid as principal sources of energy. Majority of the industrial units have captive electricity generation facilities, based on natural gas. Secondly, natural gas is also widely used as fuel in boilers to produce steam and in furnaces to produce heat. The only exception is sugar mills which use bagasse as a primary source of energy. Table 9: Energy sources of the selected sector Energyg Sources Sectors Electricity Natural Gas Diesel / Bagasse Furnace oil Food and Beverages • • ln i ker grinding) Cement (Cli g • • • e rolling Steel Re- • • • g t Engi Ligh g neering • • Sugar • • • Pulp and Paper • • • Poultry • • t le Texti • • Ready Made Garments • • Chemicals • • t cs Plasti • • A small percentage of diesel is consumed in areas where there is no natural gas availability or absence of supply / distribution. Diesel and oil is often used in very small quantities in different sectors mainly for maintenance purpose. Electrical energy is used primarily for motor drives (mainly 3 phase induction motors), electrically operated systems and for lighting. Motor drives, in general, consume about 60% of the electrical energy in most industrial establishments (This percentage varies from sector to sector). On the 45 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 5 other hand, heat energy is used for drying, melting and heating (processes). Most processing needs heat in the form of steam. Heat is used in the form of steam because of large energy capacity and 5 Specific Energy Consumption: convenience of transport through pipes. Energy efficiency can be indicated in the form of Energy consumption pattern and quantity in each of the sectors under study depends upon factors  Energy intensity (EI) mainly from economic point of view; and / or such as technology / process of manufacture, age of plant and machinery, quality of raw materials  Specific energy consumption (SEC) – physical energy intensity. used (especially for cement, steel and pulp and paper) volume of production (economies of scale), etc. Energy intensity is broadly used for industry plants, industrial sectors and national economy. On the The following table provides indicative composition of electricity from different sources (grid and other hand specific energy consumption is used for individual industrial plants or industrial sectors. captive) in different industrial sectors analysed. Table 10: composition of electricity sources in the selected sector Energy Consumption Specific Energy Consumption (e.g. kWh/MT) = ---------------------------------------- Composition of Captivand Grid Connected Electricitye Physical production Sectors Grid Captive Total Food and Beverages Energy efficiency improvements help save some portion of energy used for production. The issue is to estimate how much energy can be the best practically saved in a certain industrial unit. Energy Bakery Products 55% 45% 100% baseline is the minimum energy consumption required per Metric Tonne (MT) in a sector or a 'best Beverages 30% 70% 0% 100 practice' energy consumption of the sector. The base energy consumption depends on calculation Frozen Foods (Fish and Shrimps) 40% 60% 100% methods, measured data and number of other variables. (It is a difficult task to obtain base energy Shrimps (Only freezing section) 40% 60% 100% consumption i.e. energy baseline for a country because it is necessary to analyze statistical data with Cement different sectors and industries from many countries). However, it is generally possible to obtain Cement ClCinker Grinding 95% 5% 100% some of 'best practice' energy consumption for some sectors of industry. e -rolling Steel Re The present study has limitations on adopting the abovementioned approach, as systematic data on Smelting 95% 5% 100% “best practices” energy consumption for the sectors under consideration was not available through e Rolling Re- 95% 5% 100% published literature searched for Bangladesh. (The consultant team could obtain some data on Smelting and Re rolling e 95% 5% 100% energy consumption for some sectors through secondary research from different countries. However, this data is indicative energy consumption and not the norms or “best practice” energy Light Engineering 70% 30% 100% consumption.) Therefore, the team used these energy consumption indications only to evaluate Sugar 20% 80% 100% whether the data collected was “in order” or not. This cross checking helped the team to validate the Pulp and Paper 60% 40% 100% data provided by companies. Quantum of possible energy saving has been estimated based on simple assumptions in terms of percentage of present energy consumption obtained from the Poultry (SME) survey (explained later in the section). SME 90% 0 10% 100% Large 5% 95% 100% Energy efficiency improvements and savings potential: Textiles Spinning 20% 80% 100% EE improvements possibilities depend upon, among the other factors, the nature of economy / Weaving 30% 70% 100% market, technology adopted in the existing plants and age of plants. The EE improvement Processing 30% 70% 100% interventions, therefore, depend upon these factors. Often, modernisation (or renovation) of existing plants and production facilities provide large efficiency improvements / gains . However, in Ready Made Garments (RMG) such cases, energy efficiency is one of many factors involved in the selection of technologies. Knitwear 30% 70% 100% Secondly, policy and regulatory tools are primary are used to influence these selections. Retrofit EE Woven 30% 70% 100% measures (replacing existing inefficient ones by efficient equipment e.g. use of waste heat recovery Chemicals 20% 80% 100% Plastics 90% 10% 100% 4 Estimation of Energy Saving Potential (ESP) and Carbon Emissions Reduction of Industrial Plant, by Park Hyung Joon, et. al. (2008) Source: from the field data 5 Financing Energy Efficiency – Lessons from China Brazil and India, by Robert P. Taylor, et.al. 46 47 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 5 equipment, replacement of an old burner with a regenerative burner, replace old conventional boiler with fluidised bed combustion boiler, installation of VSD) offers another alternative for efficiency 5 Approaches improvements. It is essential to develop and structure specific EE improvement projects in such Having considered the above commonly applicable EE and RE measures, we shall provide three cases often commencing with an investment grade energy audit. Banks and FIs find it challenging broad categories of approaches / broad options for different segments of companies both the to develop and finance EE improvement projects. The project development process (for EE existing as well as new / upcoming. The team recommends that new upcoming units, if plan EE at projects) often takes longer time than conventional projects. the design stage and also specify optimum sizes of equipments such as boilers, compressors and generators then substantial energy savings can be gained as compared with the equivalent units Energy Saving Potential: Energy saving potential can vary as per the assumptions made for operating in the same sector at present. The three broad categories of approaches are as follows: calculations of the same. These variations are explained in the following paragraphs: (a) Renovation of existing manufacturing establishment (high cost measures); Technical Potential : The total maximum feasible energy saving potential using all EE options and technology practices with no constraints on expenses as well as without taking in to account the (b) Retrofit / Isolated EE measures (medium cost measures); and cost-benefit analysis. Thus it shows the possibility of using all technically feasible options to save. This is not practical to implement. The present study has not estimated this potential. (c) “EE ab initio” new manufacturing establishment with EE plant and machinery. Economic Potential: The total possible energy savings using cost-effective EE options / measures Total estimated cost (excluding land & building) for establishing a completely new factory of a but not considering any budget constraints. This potential has not been estimated as there is no large present size was obtained from responses to questionnaires. However, these amounts were on the scale / nation-wide programme has been envisaged at this point of time. Secondly, the study is higher side and as such 60% of this cost was considered for calculation purpose. It is assumed that aimed at estimating potential for banks to lend to EE improvement projects in the select industrial a new EE manufacturing establishment would cost approx. 130%, renovation 40% and retrofit 15% sectors. These estimates have been arrived at using the most conservative bases as explained further. of the above mentioned project cost. When investment is made in specified categories it is assumed that EE renovation work of an existing factory could save up to 30%, retrofit may save 15% and EE Achievable Potential: The maximum achievable energy savings potential taking into account realistic new factory may save up to 40% of the energy presently consumed by a typical factory in barriers to implement the project (and to convince end user to implement. The achievable potential Bangladesh. also considers ramp-up of programme steadily over the years. The study has estimated achievable potential by considering the increase in number of projects in each of the sectors (it is envisaged that large scale information dissemination and awareness creation programmes could result in to increased interest in implementing EE improvement projects). 5.2 Possible EE and RE options in Selected Industry Sector Common measures: The following list provides the most common EE and RE measures applicable to industry sectors: 1. Energy Efficient Motors; 2. Variable Speed Drives for motors; 3. Waste Heat Recovery and co-generation; 4. Efficient compressors and compressed air management; 5. Efficient lighting systems; 6. Biogas generation from poultry waste (Applicable to poultry sector) 7. Use of biomass for energy generation 8. Efficient distribution transformers; 9. Vapour absorption system; Details of select measures are provided in the Annex-3 6 Review and Update of Energy Efficiency Market Assessment For the State of New Jersey, Rutgers University (2008) 48 49 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 5 5 Renewable Energy Applications in Industrial Sector Management fficient Steam Industrial sectors in Bangladesh primarily use electricity from gird as primary source of energy. • • • • • Over the years electricity shortage has led to government allowing industries to generate its own Eff electricity. Industrial units have now natural gas based captive electricity generation. Natural gas is the most convenient fuel for captive generation with good availability and lower tariff levels. The Vapour Condensate Recovery effective cost of electricity generation works out to BDT 4 to 5 per kWh. Some of the companies r Steam have been using diesel and fuel oil for generation which increases the cost of generation to almost • • • • • BDT 10 to 12 per kWh. Primary renewable energy (RE) sources in Bangladesh include solar, biomass and biogas. These Absorption System resources provide following RE options: • • • • •  Solar thermal applications: (Water heating, solar drying) A  Solar PV electricity generation f rmers System Management Recovery  Biomass gasification (using rice husk, sugarcane bagasse, other available biomass) r fficient Compressed Waste Heat  Use of Biogas (from poultry waste, other wastes) to generate heat (hot water or steam). • • • • • fferent sectors. Solar water heating (SWH) (preheating water before it goes to boiler) is an effective way to save natural gas which is used for generate steam. Boiler feed water at ambient temperature is heated to in boiler to generate steam. Boiler feed water can be heated using solar thermal water heating system Ar Ai • • • • • • • then this water can be heated from the ambient temperature to about 70 oC. The boiler only needs t ons possible in diff energy to heat water further to 100 oC and to heat further to generate steam. However, high initial cost of the solar water heating system will be a major deterrent for industrial end users to acquire fficiency Speed Distribution Lighting SWH. Most of the industrial users were aware of solar PV but were not familiar with SWH systems. • • • Eff Solar assisted drying: Solar drying can be used effectively using specialized equipment. However, almost all the sectors under study do not require such drying. t ve standard EE opti fferent sectors fficient Solar PV electricity generation: Solar PV has wider acceptance in rural areas of Bangladesh. Most Drives Transfo • • • • • • • • • • of the industrial users are aware of solar PV applications. As the initial cost of the solar PV is very Eff high (USD 3 to 5 per Wp), it is not suitable for electricity generation in industrial sectors. Table 11: Standard EE options in diff High Variable Biomass gasification could provide an alternative option for power (or heat) generation in industrial • • • • • • • • • • sectors (especially for large scale units). Rice husk and sugarcane bagasse can be used depending v des representati upon the availability. Sugar mills do use bagasse in boiler (and eventually for power generation). Some of the government owned sugar units are considering implementing co-generation system Motors which will use high pressure boiler for producing steam which will be used in steam turbine to • • • • • • • • • • generate electricity. Balance steam can be used for processing. Eff The table 11 provi Biogas (methane) can be generated using animal or human waste in appropriate biogas digesters. Pulp and Paper Steel Re-rolling Cement (Cliker Poultry industry has a good potential to generate biogas from poultry waste. However, proper care Ready Made g neering Chemicals must be taken to treat the biogas prior to using it in engine. Amount of biogas that can be generated Beverages Garments Food and grinding) g Sectors t cs Poultry will depend upon the poultry size (Detailed discussion is provided in the Poultry sector. t le Sugar Plasti g t Texti Engi Ligh 50 51 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 5 Case study: 5 The following paragraphs provide discussion on energy consumption aspects in each of the sectors. Cogeneration in industries with Captive gas generators 5.2.1 Cement Source: The World Bank In Banglg adesh, there are more than 1,200 MW of gas engi g ne based capti t ve generators used in the Most of the cement plants in Bangladesh are based on clinkers as a raw material. These plants grind industries rangi g ng frf om 0.5 MW to 5 MW. Overall thermal eff fficiencies of these gas engi g nes are about clinkers along with other additives such as gypsum to get cement. Energy in cement plant is hence 30%. The additi t on of a simple waste heat boiler can recover almost 70% of thermal content that are needed for grinding (which is carried out in stages) and these machines (e.g. ball mills, grinders) f ue gas gi currently lost in fl v ng an overall eff g vi fficiency of 79%. This recovered heat could produce hot require large motor drives (40 HP and above). Energy is also required for materials handling and water or low pressure steam which could be used fo f r commercial or industrial purposes. Conversely, packing. Average age of these plants ranges from 10 year to 15 years. industries which hav g steam demand can use a generator-waste heat boiler combinati a e high t on to t sfy sati f their steam demand and export excess electricity t . Cogenerati l y practi t on is universall t sed and The team visited 3 large cement plants with average capacity utilisation varying from 65% to 95%. one of the major energy fficiency measures in the U.S. and many European countries. g eff All the three plants visited have captive electricity generation facility as well as supply of electricity y ical project cost Estimated Typ from the grid. The production and specific energy consumption (SEC) is presented as follows: f r 100 cogenerati Investment fo f ciliti t on fa aving at least 1 MW gas-fi t es hav t mated as f red generator is esti fo f llows: Table 12: Production and specific energy consumption of the surveyed cement plants Serial Component Investment Installed Capacity Total Electricity 1. Waste heat boiler USD 0.2 million Capacity Utilisation Production Consumption 2. Housing for boiler USD 0.05 million 3. Accessories USD 0.05 million (MT/Year) (%) (MT/Year) (kWh / MT) 4. Steam piping and installation USD 0.05 million Company 1 840,000 75% 630,000 78.86 Investment for one cogeneration plant USD 0.35 million Investment for 100 cogeneration plants USD 35 million Company 2 1,020,000 65% 663,000 205.54 Company 3 340,000 95% 323,000 341.05 ffectiveness (NPV and IRR) Cost-eff R The cost eff ffecti t veness of cogeneratit on fa f cility is determined based on the esti t mated gas sav avings in a 1 Source: Data obtained during the visits to plants MW gas generator. The sav a ed gas is priced at the industrial rate of USD 2.37/MCF. Annual gas avings in 100 cogenerati sav f ciliti t on fa w ll be 103 million cubic meter or 3.6 BCF worth nearly USD t es wi 8.6 million. The cogeneratit on fa f cility can potenti t ally tap carbon reverences if these can be developed Company 1 has lowest specific energy consumption (SEC). Cement companies have been using grid as CDM projects. Annual emission reducti t on of 100 cogenerati t on plants has been assumed to be electricity supply as primary source and use natural gas as back up or to meet only a part of the 200,000 tons of GHG. For life f : 20 years, cost eff ffecti f r 100 such cogenerati t veness fo t on fa t es is f ciliti energy requirement. Considering lower SEC as norm (being on conservative side) the total energy presented below: consumption of the sector has been estimated at 1,102 GWh per year. Clinker grinding does not require water or steam, hence water consumption is not significant. Parameter Without CDM With CDM* Applicable EE measures: IRR 16.3% 21.9% 1. Retrofit: Installation of variable frequency drives (VFDs) (also called variable speed drives NPV [i = 10%] USD 14.5 million USD 29.1 million (VSDs). *assuming only USD 10 CER price 2. Retrofit: Upgrading grinding machines and grinding circuit. (E.g. High Pressure Grinding Rolls Esti t mated market potenti t al fo f r cogenerati t on technology g (HPGR) in close circuit with High Efficiency Separator (HES) offer potential for saving electrical energy in cement grinding. Tests conducted in some of the industrial installations have t mated that cogenerati The study esti t on can be implemented in approximately 50% of the industries shown 20 to 50% saving in electrical energy in case of cement grinding using HPGR in close where there is capti t on hav t ve generati aving 1 MW capacity gas generators. There are more than 600 circuit with HES compared to that in a close circuit ball mill system.) f om which more than 12 BCF gas could be sav such industries exists fr a ed annually. 8 High efficiency separator estimated at BDT 49 million has not been considered as retrofit measure. 52 53 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 5 3. Apart from the retrofit EE measures, the older plants can be renovated or modernised to upgrade production facilities. 5 Estimates: Based on the assumptions made as above, the total energy saving potential in cement sector by Assumptions made for estimating energy saving potential and investment: implementing different EE measures is estimated as follows: 1. Total cost of setting up a new plant (called “project cost”) was obtained from survey and from Table 13: Estimated energy saving potential in cement sector knowledgeable persons in the sector. After providing for cost of land and buildings and Energy Saving towards the working capital, the cost of the “plant and machinery” was assumed at 60% of the Year 1 Year 2 Year 3 Potential (in MWh) project cost. Retrofit 0.00 9,723.97 97,23.97 2. Retrofit EE measures considered for cement plants include installation of VFD and change of motor for milling unit. Cost of retrofit EE measures for cement plants was assumed at 10% of Renovation 22,689 34,034 79,412 the total cost of plant and machinery. (Cost of - VSDs needed are estimated at BDT 5.6 million EE ab-initio - 16,207 24,310 and b- high Efficiency crusher estimated at BDT 48.0 million together costing BDT 53.6 million). The total cost of renovation of existing plant has been assumed at 40% of the total Source: Estimates of FS Team cost of plant & machinery. The renovation would include replacing major equipment. The estimate has considered on the basis of general trend in the sector. These energy savings are primarily in the form of electrical energy. Amount of the natural gas that 3. The total incremental cost of plant and machinery in the case of “ee ab-initio” has been can be saved will depend upon the ratio of captive electricity generation and grid electricity use. It estimated at 15% of the cost of the total plant and machinery. The estimate is in line with may be observed that cement sector has maximum potential for saving energy by implementing general trend in high efficiency equipment cost as compared with cost of equivalent machines renovation of older cement plants. The estimates are based on the assumption that all the cement with conventional efficiency level. plant use clinker grinding as the main operation. 4. Estimates of percentage savings: Energy savings in EE retrofit measures can vary from 20% to Total energy saving potential considering all the measures is estimated at 196 GWh. The total CO2 50% of the present level of energy consumption. However, energy savings have been assumed reduction at the end of year 3 is estimated at 111,777 MT as a result of implementing all the at 15% of the existing consumption level. Estimated energy savings in case of renovation measures. Similarly total investment potential in respect of individual measures has been estimated measures have been assumed at 35% of the existing energy consumption. For “ee ab-initio” as follows: energy savings have been assumed at 25% of the present energy consumption level. The principal reason for assuming the lower levels of savings is the absence of accurate data related Table 14: Estimated investment potential of energy efficiency measures in cement sector to plant conditions and other factors such as quality of raw materials and level of technology in Investment Needs use at present in cements plants in Bangladesh. Year 1 Year 2 Year 3 (in Million BDT) 5. Considering the age profile of cement plants in Bangladesh (which is around 10 -15 years) and number of operating plants, the team has assumed that only 5% of the existing operating plants Retrofit 0.00 109.92 109.92 could select to implement EE retrofit measures per year (in the second and third year). This can Renovation 439.68 659.52 1538.88 go up on the higher percentage if an adequate information dissemination and an appropriate policy support is extended to industry sectors (especially for cement sector). As most of the EE ab-initio 0.00 164.88 247.32 plants are more than 10 years old it has been assumed that about 5% of the total operating plants would implement renovation projects in the year one which would rise to 20% in the year Total Investment Potential 439.68 934.32 1896.12 3. As regards “ee ab-initio” the team has assumed that some ground work will be required for Total loan required 308 654 1327 companies to go for efficient equipment at the design stage. The team has assumed that no new cement plant would select this option in the first year. It has been assumed that at least 2 to 3 Source: Estimates of FS Team plants will go for “ee ab-initio” within two to three years. It may be observed that the total loan requirement for the first three years is estimated at 6. Debt equity ratio has been assumed at 70:30 (0.7) for large scale companies, as followed in most BDT 2,289 million. of the banks in Bangladesh. 54 55 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 5 5.2.2 Steel Re-Rolling 5 Applicable EE measures: Bangladesh has about 300 operating steel re-rolling mills and some large scale units have set up for Most of the steel re-rolling mills are relatively older in age. While large scale units are about 25 years both steel smelting and rolling (hot and cold rolling). Steel re-rolling uses a simple manufacturing old SME units are of about 10 years old. Large scale units ideally should select renovation as process. Steel ingots are heated in a furnace and after achieving pre-determined temperature these measure to improve efficiency. Investment needs in steel units are capital intensive and need large are passed through a series of rollers to achieve specific size and shape to form bars, angles, plates volume of funds. In such an event, a few units may select following retrofit EE measures: or other products. Many of the mills have scrap smelting facilities. The energy is consumed both in the form of electricity and thermal energy is needed to heat ingots. Considerable amount of energy 1. Installation of variable frequency drives (VFDs). is needed for materials handling. Electricity is a raw material for this sector and most companies use 2. Appropriate sizing of motors and replacing standard motors with high efficiency motors. grid electricity. Most mills have standby electricity generation capacity. Re-heating furnaces use 3. Improve air to fuel ratio to improve efficiency of furnace natural gas as resource whereas arc furnaces use electricity. Smelting needs higher energy input to 4. Other furnace efficiency related measures such as improving insulation etc. melt the metal and to process it. 5. Installing recuperators 6. Preheating ingot / scrap using waste heat from exhaust. The team visited 6 steel re-rolling units (comprising two in large and four in SME segment) with Bangladesh has been witnessing considerable interest in setting up new mills in the steel re-rolling average capacity utilisation varying from 60% to 100%. Units visited use electricity from grid as well sector. There is a steady demand, which propels investment in the sector. On the other hand, SME as have captive electricity generation facilities. Production and specific energy consumption is units are expected to adopt better technology to compete on price. New steel re-rolling (including presented as follows: cold rolling) mills could be encouraged to adopt better and efficient technology and equipment. Table 15: Production and specific energy consumption of the surveyed steel re-rolling plants However, appropriate programme needs to be developed to convince entrepreneurs to adopt efficient technology. Total Capacity Total Electricity Production Utilisation Production Consumption Assumptions made for estimating energy saving potential and investment: (MT/Year) (%) MT/Year (kWh / MT) 1. Meetings with steel re-rolling mills indicated wide variation in total cost of the new project. Company 1 18,000 70% 12,600 884 Total cost of setting up a new mill was obtained from the meetings / visits to steel re-rolling mills. It was found that these amounts varied from 20,000 to 80,000 BDT / MT of steel. These Company 2 12,000 80% 9,600 750 were compared with the investment figures from other reports and websites (12,000 BDT /MT to 48,000 BDT/MT). Besides there is trend to set up automated mills in the recent years. Company 3 36,000 50% 18,000 1,027 Company 4 32,000 80% 25,600 2,550 2. Retrofit EE measures considered for steel re-rolling mills include installation of recuperators, furnace control system, VFD and change of conventional motors to EE motors. Cost of Company 5 96,000 100% 96,000 5,520 retrofit EE measures for steel re-rolling mills was assumed at 10% of the total cost of plant and machinery. (Main components include Recuperators, EE motors (costing more than 25,000 Company 6 86,250 60% 51,750 704 BDT per motor, Furnace Control system 60,000 BDT, VFD for blowers estimated at BDT 6 million, Materials handling cranes, High frequency smelting furnace 60 million BDT). Source: Data from the field visits to individual steel re-rolling mills 3. The total cost of renovation of an existing re-rolling mill has been assumed at 40% of the total Company 5 has the maximum electricity consumption, as this company has smelting facilities with cost of plant & machinery. The renovation would include replacing major equipment and arc furnaces as well as induction furnaces. Secondly, this company has surplus captive electricity upgrade of technology which includes automation. In addition to replacing equipment there generation capacity and the company has option to sale. The team could not secure amount of will be addition of some of the items such as recuperators, materials handling cranes (including electricity exclusively being supplied to re-rolling units, reheating furnaces. Similarly, electricity overhead ones), furnace control system, variable frequency drives, etc. The total incremental supplied to electric arc furnace and / or to induction furnace in case of associated smelting facilities cost of plant and machinery in the case of “ee ab-initio” has been estimated at 15% of the cost could not be obtained. On the other hand, no details were provided on break up of use of natural of the total plant and machinery. The estimate is based on the assumption that efficient gas towards electricity and other uses (e.g. heating in furnaces). A few steel mills produce steel from equipments cost higher (ranging from 20% to 50%) than conventional o scrap iron sourced from ship-breaking industry. Specific energy consumption towards smelting is only 75 to 90 cubic meters of natural gas per MT of steel in classical mills. Estimated total electric- 9 Bangladesh Roadmap for Energy Efficiency improvements and Demand Side Management – ity consumption per year in steel re-rolling sector at present is 1,040 GWh. The World Bank and GIZ report September 2009 56 57 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 5 4. Estimated percentage savings: Energy savings in EE retrofit measures can vary from 10% to 40% of the present level of energy consumption. However, energy savings have been assumed 5 Estimates: Based on the assumptions made as above, the total electricity saving potential in steel re-rolling at 10% of the existing consumption level. Estimated energy savings in case of renovation sector by implementing different EE measures is estimated as follows: measures have been assumed at 25% of the existing energy consumption. For “ee ab-initio” energy savings have been assumed at 20% of the present energy consumption level. The Table 17: Estimated energy saving potential in re-rolling sector principal reason for assuming the lower levels of savings is absence of accurate data on the mill conditions and other factors such as quality of raw materials and level of technology in use at v ng Potential (in MWh) Electricity Savi Year 1 Year 2 Year 3 present in steel re-rolling mills in Bangladesh. ft Retrofi 267 6,267 6,533 5. Considering the age profile of steel re-rolling mills in Bangladesh (which is around 25 years and 10 years in large and SME sectors respectively), the team has assumed that only up to 5% of the t on Renovati 9,334 28,001 56,801 existing operating mills could select to implement EE retrofit measures per year. This can go up to EE ab-initi 0 3,733 7,734 to 10% in three years provided adequate information dissemination and appropriate policy support is extended to industry sectors (especially for steel re-rolling sector). As most of the t mates based on the assumpti Source: Esti v sits to fa t ons and data collected during the vi f ctories. mills are more than 20 years old (in large scale sector) it has been assumed that about 10% of the total operating mills would implement renovation projects. Whereas this percentage for the Total energy saving in three years (cumulative) have been estimated at 119 GWh and CO2 savings SME units has been assumed at 5% as the mills are relatively new (10 years and more). As have been estimated at 67,642 MT at the end of year 3 as a result of implementing all the regards “ee ab-initio” the team has assumed that some ground work will be required to measures. convince the companies to go for efficient equipment at the design stage. The team has assumed that no new steel re-rolling mill would select this option in the first year except one or Table 18: Estimated saving potential by energy efficiency measures in re-rolling sector two in the SME segment. Many of the larger steel mills are already going in for better technology and higher level of automation. It has been assumed that at least 2 to 3 steel l ion) Estimated saving potential in all plants (BDT mill re-rolling mills will go for “ee ab-initio” within two to three years. y ical Plant Typ Savings ft Retrofi Renovation EE ab-initio 6. Debt equity ratio has been assumed at 70:30 as followed in most of the banks in Bangladesh. Large aving in million BDT Sav 56 436 37 Some of the equipment and their energy saving potentials are provided below: SME aving in million BDT Sav 5 4 16 avings (B Sav n ( DT million) 61 440 54 Table 16: EE equipment and saving potential for re-rolling sector Total Savings (BDT million) 555 EE Equipment Energy Saving Potential1 Pusher Type Reheating Furnace with Suspended Roof, Multi 20% As most of the steel re-rolling mills (especially from large scale segment) are relatively older, energy Fuel Capacity and Automated Temperature Controls saving potential appears higher on the case of renovation. Energy savings have been expressed in Provision of IR Sensors for Material Movement 3% electricity and include savings in rolling mills and in reheating furnaces. Estimates of the savings for AC and DC Drives for Control of Fuel and Air 10% the sector are based on the assumption of total number of present units and mills likely to be set up Liquid and Gaseous 5% in the next 3 years. Fuel Ratio Controllers Heating and Pumping Units 5% Based on the assumption of cost of plant and machinery for a typical size plants in large and SME segments, the team has estimated potential for investments in possible EE measures as follows: High Efficiency Burners 5% Semi Automatic High Speed Rolling Stands with DC Drives 20% Energy Efficient Motors with Variable Frequency Drive 10% Dry Type Starter for Slip Ring Motor 4% 5Hi re-rolling machine 35% Rolling mill stand 20% 10 Source: Energy Saving Equipment List prepared by Winrock India for SIDBI under JICA Support 58 59 Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh 5 Table 19: Estimated investment potential of energy efficiency measures in re-rolling sector EE Measures Segment Year 1 Year 2 Year 3 ft Retrofi Large 0 120 120 SME 5 5 10 Renovati t on Large 320 960 1,920 SME 0 0 35 EE ab-initito Large 0 60 120 SME 0 30 68 Total Investment Large 320 1,140 2,160 f r all Potential (fo l plants) SME 5 35 113 Debt Fund Required (mill l ion BDT) 226 809 1,546 f nd required (million BDT) Total debt fu 2,580 t mates based on the assumpti Source: Esti v sits to fa t ons and data collected during the vi f ctories Total loan requirements towards implementati t ve EE measures in the t on of each of the alternati fi t three years hav f rst t mated at BDT 2,580 milli a e been esti l on. 5.2.3 Light Engineering This industrial sector has broad range of sub-segments. Most common type of light engineering industrial unit is a fabrication shop in SME segments. Besides, domestic good, pumps, engine components, and other items are also end products. Many units also produce semi finished components and sub-assemblies, which are sent to other factories for final assembly. Most commonly used processes include cutting, welding, sheet metal work, electroplating, etc. The metal fabrication units need basic machinery such as lathes, milling, shaping and finishing (grinding) machines, drilling equipment, welding machines and heat treatment ovens. Often compressed air is also required to use certain equipment. Electricity is the most prominent form of energy used in this sector. The study has not included foundries in this group. Most of the units belong to private sector in terms of ownership and hence better awareness in needed in this segment. The team visited 6 units in light engineering sector comprising 5 from SME and 1 from large sectors. The products these units manufactured mainly components for automobiles, spinning (spindles), hospital equipment, machinery, etc. These industrial units were not able to provide output in terms of weight of each part produced. Hence it is difficult to arrive at specific energy consumption for this segment. The specific energy consumption (SEC) has been expressed in kWh per piece. SEC has wide variation among the units ranging from 14 to 325 kWh per piece. Average SEC for large and SME has been taken at 30 kWh and 35 kWh per piece respectively. The total yearly electricity consumption for the light engineering sector has been estimated at 250 GWh. The literature study indicates that energy costs in the engineering sector vary from 3% to 7% of the total manufacturing cost. 60 Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh 5 Table 20: EE equipment and saving potential for light engineering sector g Eff Energy fficient Equipment g Saving Energy Potential1 g Eff Energy fficient Air Compressors 30% f r Screw Compressors Variable Frequency Drive fo 25% Compression Air Dryers (Replacing Desiccant Air Dryer) r 40% f r Oil Pimp in Hydraulic Power Packs Variable Frequency Drive fo 25% g Eff Energy fficient Exhaust Fans 25% f r Hot Air Circulati Variable Frequency Drive fo f r Preheati t on Fan fo t ng 25% Furnace f r Furnace Flue Gas Waste Heat Recovery Air Preheater (fo ry) 5% CNC Machines 45% Vacuum Holding fo f r Non-Ferrous Components fo g speed milling f r High 25% Turning Machine wi w th Regenerati w th Variable Frequency Drive wi t ve 30% k ng System Braki r o Electric Turret Punch Machine Serv 10% Abrasive Assisted High t ng g Pressure Water Jet Cutti 20% Inverter Based Welding Machine 60% CNC Plasma Cutti t ng machine 40% Semi Automati y e Hydraulic Hot Moulding Press (w t c Pillar Typ (with 30% PLC Control)l Applicable EE measures: SME Segment: Most of the industrial units in this sector belong to SME segment and there are very few large scale units. Good house keeping normally can save at least 5% of electricity consumption in SME units, which is recommended. Secondly most the machines used in this sector (like most sectors) are original equipment (OE) hence there is inadequate scope for reducing energy consumption in such machines. However, old motors can be replaced by EE motors as applicable and installation of VFD. Most of the SME units are more than 15 years in age. Such units could select renovation of their units. Replacing old machinery is better option. Large scale segment: Retrofit EE measures: 1. Effective utilisation of compressed air with the help of compressed air management systems, reducing air leakages. 11 Investors’ Manual for Energy Efficiency – Published by Indian Renewable Energy Development Agency Limited (IREDA) in association with CII 12 Source: Energy Saving Equipment List prepared by Winrock India for SIDBI under JICA Support 61 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 5 2. Furnaces: Installation of control system to optimise air fuel ratio to reduce natural gas waste, Better insulation, pre-heating of air with the help of recuperators (waste heat recovery). 5 4. Estimated percentage savings: As mentioned earlier, scope of reduction of energy consumption in light engineering sector is relatively less. Energy savings in EE retrofit measures can vary from 5% to 40% of the present level of energy consumption (in different segments 3. Fans: Install VFDs SME and large). Potential to save energy has been assumed at 5% (for SME) and 10% (for large segment) of the existing consumption level. Estimated energy savings in case of renovation 4. Lighting: Efficient Lighting system by (a) replace incandescent lamps by compact fluorescent measures have been assumed at 35% of the existing energy consumption for SME and for large lamps (CFLs), (b) Use efficient ballasts in fluorescent tube lights (FTLs). (c) replace old T12 scale units. For “ee ab-initio” energy savings have been assumed at 15% of the present energy FTLs with T5 FTLs. consumption level for SME and for large scale segments. The principal reason for assuming the lower levels of savings is absence of accurate data on the mill conditions and other factors such Renovation Measures: Average age group of units in this segment is 10 years. Considering the nature as quality of raw materials and level of technology in use at present in light engineering sector of operations, it is recommended that such units consider upgrading technology / machines. in Bangladesh. Estimated saving potential is summarised as follows: EE ab-initio: It is essential that new units plan their facilities and use most modern and efficient Table 21: Estimated energy saving potential in light engineering sector equipment. Proposed new units need to analyse requirement of electricity, compressed air and heating requirements (ovens / furnaces for heat treatment) and air cooling (in offices). Integrating g Saving Potential Energy Large SME heating and cooling with the help of vapour absorption chilling system can save up to 20% of ft Retrofi 10% 5% energy requirement for these purposes. Appropriate sizing of electricity generation unit can also t on Renovati 35% 35% help using the system at optimum load. to EE ab-initi 15% 15% Assumptions made for estimating energy saving potential and investment in light engineering sector: Considering the age profile of light engineering units in Bangladesh (which is around 10 years and 15 years in large and SME sectors respectively), the team has assumed that at least one or two units 1. As mentioned earlier, there is wide variation in type of units in light engineering sector and from light engineering sector would choose to implement EE retrofit measures per year. It is hence variation in the total cost of plant and machinery required for each type of unit. Typical expected that at least 2% units in SME and 10% units in large segment would adopt EE retrofit unit in large scale segment has been assumed with an installed capacity of 30,000 pieces per measures 3 years after initiating nationwide programme to promote EE in the sector. As most of annum and that for SME has been assumed at 1,000 pieces per annum. Total cost of the plant the units in the SME segment are about 15 years old (and about 10 years in large scale sector) it has and machinery for large scale unit has been assumed at BDT14 million and that for SME been assumed that at least 0.5% of the total operating SME units would implement renovation segment at BDT 0.8 million for typical capacity mentioned. projects. Whereas at least two units are expected to adopt renovation measures in the large scale segment. As regards “ee ab-initio” the team has assumed that considerable ground work will be 2. Retrofit EE measures considered for light engineering units in the large scale segment include required for convincing the companies to go for efficient equipment at the design stage. The team installation of recuperators, furnace control system, VFD and change of conventional motors has assumed that no new light engineering unit would select this option in the first year except about to EE motors. In case of SME units retrofit measures are limited to installation of VFD and two in the SME segment. At least 1 % of SME segment units are expected to adopt EE ab-initio replacement of old motors with EE motors. Total cost of retrofit measures has been assumed measure by the third year of efforts. at 10% of total plant & machinery in case of large scale and SME units. Retrofit measures for large scale units will also include installation of efficient compressor and other measures Table 22: Percentage of SME segment units expected to adopt EE associated with compressed air system management and furnaces. Large SME 3. The total cost of renovation of an existing light engineering unit (for both SME and large) has Percentage of units Year 1 Year 2 Year 3 Year 1 Year 2 Year 3 that would select been assumed at 40% of the total cost of plant & machinery. The renovation would include replacing machine tools and upgrading heat treatment furnaces and lighting system. In addition ft Retrofi 0% 5% 10% 0.5% 1% 2% to replacing equipment, there will be addition of some of the items such as recuperators, t on Renovati 5% 10% 20% 0.5% 1% 2% furnace control system, VFDs etc. On the other hand, the total incremental cost of plant and machinery in the case of “ee ab-initio” has been estimated at 15% of the cost of the total plant to EE ab-initi 0% 5% 10% 0% 0.5% 1% and machinery. The estimate is based on the assumption that efficient equipments cost higher (ranging from 20% to 30%) than conventional ones. 5. Debt equity ratio has been assumed at 70:30 as followed in most of the banks in Bangladesh. That for SME units has been assumed at 0.3. 62 63 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 5 Estimates: 5 5.2.4 Sugar Based on the assumptions made as above, the cumulative electricity saving potential in light Most of the units in this segment are government owned and on the other hand are also old (40 -50 engineering sector by implementing different EE measures over three years is estimated at 8 GWh. years). This will call for different approach. There are 15 sugar mills in operation in Bangladesh. Estimated CO2 reduction will be 4,836 MT at the end of year 3. Total cumulative investment needed over three years to achieve this energy saving potential is estimated at BDT 204 million and Process: Cane processing sugar has following main stages crushing of cane to extract juice. This total loan requirement estimated at BDT 100 million. Payback periods for this sector are extremely juice is filtered and processed to clarify. Then the syrup is prepared which is concentrated and long and hence not favourable. Details of the energy savings and investment needed are provided refined. The crystallisation process follows and molasses is separated in centrifuge to dry and pack in the tables below: the sugar. Sugar making needs energy in the form of thermal energy (including in the form of steam) as well g savings (MWh) in all plants Estimated annual energy as in electrical form for materials handling, processing. Boiler is used to generate steam for EE measures Segment Year 1 Year 2 Year 3 processing as well as for electricity generation. However, sugar factories run only during limited Retrofi ft Large 0 162 324 period of time in a year (about 150 to 170 days per year). This factor is important while SME 55 110 221 recommending EE measures. Total 55 272 545 The team visited one sugarcane based unit and one sugar refining unit during the study. The sugar Renovatit on Large 567 1,134 1,985 mill uses bagasse as well as furnace oil to generate a part of the electricity needed and uses electricity SME 386 772 1,544 from the grid. The data provided by the sugar mill during the visit appeared inadequate to estimate Total 953 1,906 3,528 SEC. Appropriate assumption has been made to arrive at total energy consumption by the sugar EE ab-initito Large 0 243 486 sector. Total electricity consumption by sugar mills has been conservatively estimated at 85 GWh per year. The sugar refining unit imports raw sugar and converts in to refined sugar. SME 0 165 331 Total 0 408 817 Secondary research indicated that ADB did conduct a detailed study on sugar cogeneration under Total Estimated annual energyg savings 8 PREGA in April 2005. The study observed that the sugar mills use low-pressure boilers whose (GWh) in all l plants pressures range is from 10.54 kg/cm2 to 29.38 kg/cm2. The present turbines are fed with this Savings on GHG (0,57 tons CO2 4,836 low-pressure steam and hence the generation of power is less. The study recommended installing eqv./MWh) (Tons/year) two high pressure boilers (55 MT/hr, high-pressure steam conditions being at least 45 kg/cm2 and Source: Estit mates 400°C with accessories) and one controlled – extraction/ condensing steam turbine generator rated at 11-MW for cogeneration system. The proposed project envisages reduction of GHG emission Table 24: Estimated investment potential of energy efficiency measures in light engineering and use renewable resource (bagasse) to generate energy. The ADB study has estimated total investment of BDT 378 million towards a cogeneration system with 11 MW generation (from 700 Investment cost fo f r EE measures in all plants (in million BDT) MR of bagasse per day) for a sugar mill of 2,000 TCD capacity. This system will provide electricity EE Measures Segment Year 1 Year 2 Year 3 generation of 39.6 GWh and can feed 9 MW of power to the national grid with 18,696 tonnes of Retrofift Large 0 3 6 CO2 abatement per year. SME 3 6 11 Renovatit on Large 11 22 39 Applicable EE measures: SME 11 22 45 As most of the sugar mills are old (more than 40 years) it is recommended to adopt renovation EE ab-initito Large 0 4 8 option as also install cogeneration system. Co-generation is the process of co-production of steam SME 0 4 8 and electricity. This is most suitable for sugar units as bagasse generated after extracting juice from Total Investment Potential Large 11 29 53 sugarcane is readily available as fuel. High pressure boiler with a steam turbine is generally used as a (fo f r all plants) SME 14 32 64 basic configuration. Debt Fund Required (mill l ion BDT) 12 30 57 Cogeneration is an efficient way to generate steam and electricity, whereas excess electricity can be Total debt fu f nd required (million BDT) 100 exported to grid. Thus there is equivalent reduction in electricity generation from fossil fuel. t mates Source: Esti 64 65 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 5 EE retrofit measures can also be suitably explored after careful evaluation and energy audit. There are several options to improve energy efficiency in each of the unit processes. Principal processes 5 f c Energy Table 25: International trend in Specifi g Consumption include (a.) cane preparation; (b) Milling operation: Milling prime mover can be steam turbine or Parameter Unit International electric DC motors or hydraulic drives; (c) juice preparation; (d) juice heater; (e) evaporator, Av A erage Best crystalliser and pans. Some of the EE retrofit measures include: installation of VFDs for different large pumps (e.g. juice pumps), utilisation of exhaust steam for sugar drier and sugar melter, Electricity kW M k h / MT 1,150 – 1,250 900 -1,000 replacement of steam driven mills with electric DC motor (BDT 50 million), installation of thermo-compressor for use of low pressure steam (This list is an indicative and not an exhaustive). Steam MT of steam / MT 6.5 – 6.8 6.0 The team has not specifically analysed total energy saving potential as the cogeneration option has Water M Cubic M/MT 50 25 already been studied. f r Energy Source: Investors’ Manual fo g Eff g fficiency – Published by Indian Renewable Energy Retrofit measures can save about 5% to 10% of the total electrical energy which is of the order of Development Agency Limited (IREDA) t on wi A in associati w th CII 5 GWh. On the other hand, renovation measures can save almost up to 15% to 20% of energy consumption within the sector which amounts to 17 GWh. Paper mills also require large quantity of water and effluent treatment assumes significance (as black liquor disposal poses problems). A few small paper units process paper rolls by cutting and making Case study: final products. The paper making process has already been described in detail in previous section Boiler Eff fficiency Improvement at North Bengal Sugar Mills Limited (Section 4). Bangladesh has both publicly owned as well as private sector paper mills. The team visited 1 mill each in large and SME segments. Specific energy consumption observed are as follows: A dit Cell, July 2010, ‘Report on Energy Management Study by Energy Au d ’ The North Bengal Sugar Mill l s Limited (N( BSML) L is a state-owned enterprise located at Natore Table 26: Production and specific energy consumption of the surveyed plants was established in 1933. Annual av a erage sugar productit on was 15,740 metric tons during the f ve years. The main source of energy last fi w ich is a by-product. In the year 2009- g is bagasse wh Installed Capacity Total Electricity Steam 2010 the fa f ctory consumed about 36,140 metric tons of bagasse and electricity of 2,295,841 Capacityt uti t lisati t on t on Producti Consumpti t on t on Consumpti kW k h (p ( urchased electricity-950,164 kW f om REB and self- k h fr f generated electricity-1,345,676 kW k h)h . In order to improve eff fficient usage of energy g , several energy fficiency measures hav g eff a e (M (MT/Year) r (%) (MT/Year) (M r (kW k h / MT MT) (M MT) (MJ/MT been taken and these include Stream Trapping, Condensate Recovery system, Boiler Eff fficiency Improvement and Capacity Uti t on of Boilers etc. Amongst them the Boiler Eff t lizati fficiency Improvement raised the eff fficiency of Boilers frf om 57% to 63%. E Company 1 (SME) 6,000 70% 4,200 1,620 15,497 Under the UNDP project fo g eff f r energy g Pressure Super fficiency, NBSML plans to install High Company 2 18,000 95% 17,054 1,223 4,453 Heated Boilers and Turbo-Generators which can generate 6 MW electricity by using same ( arge) (L e t ty of bagasse and replacing low pressure boilers and turbo-generators. The excess 4 MW quanti power can be sold to the nati t onal grid or to the nearby consumers during crashing seasons f om site vi Source: Data collected fr v sits to companies (120 days) worth BDT 240 million. Electricity consumption for both the units visited is more than 1,000 kWh per MT of paper produced, whereas steam consumption derived from the data from the large scale company is very 5.2.5 Pulp and paper low. Both these companies have captive electricity generation based on natural gas. The steam consumption amount has been taken on the basis of the SME mill data (and lowered by about 20%). Pulp and paper is an energy intensive sector. Energy cost can vary from 15% to 25% of the total Both the plants use waste paper and dry pulp sheets as raw materials which are processed in manufacturing cost (depending upon the energy price). Energy is required in the form of electricity, hydro-pulper. Since these plants do not prepare pulp by cooking and bleaching from wood, black steam, heat and compressed air. In some parts of the world large paper plants generate electricity liquor is not generated. Almost 50 to 60% of the water is recycled. While SME plant visited is 8 through co-generation. Major factors that effect energy consumption include: level of production years old, the large mill is 13 years old. Total annual estimated energy consumption by the sector is (% capacity utilisation), quality and type of paper, number of machines, number of paper breaks, 672 GWh. boiler type and pressure level, presence of cogeneration, type and quality of raw materials, etc. 13 Cogeneration in Sugar Industries – A pre-feasibility study report (April 2005) – ADB (Promotion of 14 Investors’ Manual for Energy Efficiency – Published by Indian Renewable Energ Renewable Energy, Energy Efficiency and Greenhouse Gas Abatement (PREGA) Development Agency Limited (IREDA) in association with CII 66 67 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 5 Applicable EE measures: 5 Older plants (especially from large segment) are recommended to adopt renovation of existing facilities. Often companies implement capacity expansion projects prior to modernising their Most of the plants in Bangladesh use imported pulp and waste paper as main raw materials. Some manufacturing establishments. This helps companies to continue with revenue generation with plants use wood chips as raw material and make their own pulp. Average age profile of pulp and expanded capacity and then take up renovation of older plants. paper plants in Bangladesh ranges 15 to 20 years. As mentioned earlier, there is considerable gap between demand and supply of paper and boards in Bangladesh. Many of the paper plants are in Assumptions made for estimating energy saving potential and potential for investment in EE expansion drive. This could follow on with modernisation of existing plants. Secondly, new plants projects: are also being set up. The EE improvement measures in retrofit and renovation categories are applicable to existing plants. 1. It has been assumed that the new paper mills will also be based on imported pulp and waste Following is the list of the EE retrofit measures: paper as raw materials. Cost of new project for typical 18,000 MT per annum capacity has been assumed at about BDT 1,000 million. After providing for cost of land and buildings and for the 1. Installation of VFDs for fan pumps, water and waste water handling pumps working capital the cost of the plant and machinery for pulp and paper plant was assumed at 2. Installation of flash steam recovery system for paper machines 60% of the project cost. 3. Installation of high efficiency fans, pumps (along with motors) 4. Introduce double dilution system 2. Retrofit EE measures for pulp and paper plants have been indicated above. (Estimated costs – 5. Boiler related efficiency improvement measures (installation of economisers / air pre-heaters VFDs for pumps and fans BDT 0.7 million to BDT 1 million; for at least 6 numbers total about for boiler), reduce steam losses, improve insulation, BDT5.5 million, steam condensate recovery system – BDT 8.22 million, High Efficiency 6. Install condensate recovery system for digesters (if applicable), paper machine, evaporators, pumps and fans BDT 4 million, Cogeneration system would cost at least BDT 70 million) Cost 7. Install compressed air management system and optimise compressor use. Separate high of retrofit EE measures for pulp and paper plants work out to BDT 88 million. Whereas 10% pressure and low pressure users of total plant & machinery works out to BDT 60 million which is lower than the cost of retrofit 8. Install cogeneration system along with vapour absorption cooling (as applicable). estimated. (These are indicative measures and not exhaustive ones) 3. The total cost of renovation of an existing pulp and paper plant has been assumed at 40% of Some of the EE equipments with energy saving potential are indicated below: the total cost of plant & machinery. The renovation would include replacing major equipment and addition of cogeneration plant. The total incremental cost of plant and machinery in the Table 27: EE equipment and saving potential for Pulp and Paper sector case of “ee ab-initio” has been estimated at 15% of the cost of the total plant and machinery. The estimate is based on the assumption that efficient equipments cost higher (ranging from EE Equipment g Saving Potential Energy 20% to 50%) than conventional ones. Variable Frequency Drives 30 - 40% Multi t ple Eff ffect (Seven Eff ffect) f ee fl t fr f ow fa f lm evaporator f lling fi 50% 4. Estimated percentage savings: Energy savings for individual EE retrofit measures can vary from 10% to 30% (or higher) of the present level of energy consumption of respective equipment. f r spent liquor Chemical Recovery unit fo 30% However, energy savings for the total plant have been assumed at 15% of the existing High g Eff fficiency Turbine pump fo f r water intake 80- 85% consumption level of the plant. Estimated energy savings in case of renovation measures have been assumed at 35% of the existing energy consumption. For “ee ab-initio” energy savings Waste Heat Recovery Boilers 20-30% have been assumed at 20% of the present energy consumption level. The principal reason for g concentrati High t on size press 50% assuming the lower levels of savings is absence of accurate data on the plant conditions and High g concentratit on pulper 23% other factors such as quality of raw materials and level of technology in use at present in pulp Dryer wi w th dryer bars installed inside paper-maki k ng machine 15-20% and paper plants in Bangladesh. t on of punched metal screen, slit screen and macerati Integrati t on 26-31% 5. Considering the age profile of pulp and paper plants in Bangladesh (which is around 20 years machine fof r processing waste paper and 15 years in large and SME sectors respectively), it has assumed that only up 1 or 2 large Crown controlling roll 42% plants and about 8 SME units would select to implement EE retrofit measures in the third year High g -temperature softf 40% of EE programme. As most of the plant are more than 15 years old it has been assumed that calendar fo f r paper makik ng about 1 plant from SME segment would implement renovation project initially. This number is expected to reach 2 each from large and SME segments. As regards “ee ab-initio” the team has Source: Energy Saving Equipment List prepared by Winrock India for SIDBI under JICA Support assumed that some ground work will be required to convince the companies to go for efficient 68 69 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 5 equipment at the design stage. The team has assumed that no new large pulp and paper plants would select this option in the first year. Actual estimated units that would select different 5 t mated investment requirements in order to achieve these sav Total esti a e been indicated in avings hav the table below: measures are provided in the following table: Table 30: Estimated investment potential of energy efficiency measures in Pulp and Table 28: Number of surveyed units expected to adopt EE Paper sector ctual No. of Plants expected to go fo f r EE measures Segment Year 1 Year 2 Year 3 Total Investment cost fo f r EE measures in all plants (in million BDT) Retrofi ft Large 0 0 1 1 EE Measures Segment Year 1 Year 2 Year 3 SME 3 5 8 16 Retrofi ft Large 0 0 50 t on Renovati Large 1 1 2 4 SME 45 75 120 SME 0 1 2 3 Renovati t on Large 200 200 400 to EE ab-initi Large 0 0 1 1 SME 0 60 120 SME 1 2 4 7 to EE ab-initi Large 0 0 75 6. Debt equity ratio has been assumed at 70:30 as followed in most of the banks in Bangladesh and SME 23 45 90 that for SME units has been taken at 0.3 (30%) Total Investment Potential Large 200 200 525 f r all plants) (fo Estimates: SME 68 180 330 l ion BDT) Debt Fund Required (mill 160 194 467 Based on the assumptions made as above, the cumulative electricity saving potential in pulp and paper sector by implementing different EE measures over three years is estimated at 89 GWh and f nd required (million BDT) Total debt fu 821 CO2 savings have been estimated at 50,479 MT at the end of year 3 as a result of implementing all t mates Source: Esti the measures. Details of the energy savings (including equivalent steam savings in kWh) and investment needed are provided in the tables below: r ed that the cumulati It may be observ t mated at BDT 821 million. t ve loan required is esti Table 29: Estimated energy saving potential in Pulp and Paper sector 5.2.6 Poultry g savings (MWh) in all plants Estimated annual energy EE measures Segment Year 1 Year 2 Year 3 Poultry industry in Bangladesh has a large number of units which predominantly belong to micro Retrofi ft Large 0 0 3,600 and SME segment. There are a few (less than 20) large poultry units. Most the SME units are rearing SME 4,320 7,200 11,520 types units or hatcheries. Often these units have poultry-feed units as a part of the overall set up. Poultry unit does not have much energy need and is many required in the form of electricity for Total 4,320 7,200 15,120 lighting and air circulation. In a relatively larger units energy is also required for water pumping, feed Renovatit on Large 8,400 8,400 16,800 mixing and incubators / hatching units. SME 0 3,360 6,720 Total 8,400 11,760 23,520 The team visited three poultry farms comprising one large and two SME segment units. SME units EE ab-initito Large 0 0 4,800 were small and had poultry feed making facilities. Poultry units are specified as per the number of SME 1,920 3,840 7,680 birds that a unit can hold. Electricity requirement was 1.75 and 1.5 kWh per bird for large and SME units respectively. The team has found secondary data on the energy consumption in the poultry Total 1,920 3,840 12,480 sector which provides 1.9 and 2.2 kWh per bird for large and SME segment per year as SEC. g savings (GWh) in Total Estimated annual energy 89 Poultry units in the SME segment are very large in numbers (more than 100,000) and are widely all plants dispersed over the country (besides there are large numbers of units in cottage / micro segment). Savings on GHG (0,57 tons CO2 eqv./MWh) (Tons) 50,479 Total electricity requirement of poultry sector has been estimated at 370 GWh per year. However, this quantity can be on the lower side considering lower SEC in smaller units. t mates Source: Esti 70 71 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 5 5 Table 31: Assumptions made to estimate bio-gas production Applicable EE measures: A erage daily litter fr Av f om one bird k litter/day* 0.1 kg Efficient lighting systems: Poultry farms need lighting in the bird areas. Fluorescent Tube Lights A erage daily biogas producti Av f om per kg t on fr k of litter k litter* 0.063 m3/day/kg (FTLs) and incandescent lamps are used in poultry farms in large numbers. Options for improving t ng value of 1 m3 biogas Heati M /m3 or 6 kW 22 MJ k hth t / m3* efficiency of lighting system include: k h of electricity Biogas required to generate 1 kW 0.75 m3**  Replacing incandescent lamps with Compact Fluorescent Lamps (CFLs): Conventional avings on per MWh of electricity (considering CO2 sav 0.57 tons/MWh** incandescent lamp of 60 or 100 Watts can be replaced with 15 and 20 W CFLs respectively. f om natural gas fi emission fr t f red power plant) Thus electricity load reduces more than 60 % (taking into account losses in ballasts) and annual electricity consumption also reduces. CFLs often prove economic when compared using life t on; **Grameen Shakti Source: *SNV Netherlands Development Organizati g adesh t , Bangl cycle costing approach. Life of CFLs is also higher (multiples of 3 to 5) than that of Based on these assumptions it has been estimated that 71 million layer birds would potentially incandescent lamps. generate 0.45 million m3 of biogas daily, out of which 598 MWh/day of electricity could be generated if full volume of biogas is utilized for generation of electricity. Similarly yearly biogas  Replacing T12 FTLs with T5: T5 FTLs offer better option to conventional FTLs which use production has been estimated at 164 million m3 out of which 218 GWh of electricity could be magnetic ballasts requiring at least 12 to 16 W of power. T5 lamps have built-in ballast and lamp generated. Yearly CO2 savings from the biogas plants has been estimated at 124,416 tons. itself consumes less power 17 to 21 W (as compared to 40 W in T12 FTLs. Case study:  Replacing conventional ballasts with high efficiency ballasts (in case of FTLs): As mentioned Biogas uti ilizati ion at MAK Hatch hery ited r Limi d earlier, conventional magnetic ballasts has a power rating of 12 to 16 Watts. High efficiency By Young Consul ltants ballasts both electronic (1 to 3 W) as well as high efficiency magnetic ballasts (3 to 7 W) are now available. Replacing existing ballasts with high efficiency ballast also reduces electricity use. MAK Hatchery Limited, a private poultry fi f rm, was established in 2000. The fi f rm produces about 166,400 pieces of Day Old Chicks (D ( OC) annually g source of the fi l . The main energy f rm is electricity which is supplied by both grid electricity and natural gas which is used fo t ve f r capti Efficient motor drives (only in the case of large scale units): Large scale poultry units need to power generatit on. In order to ensure proper uti t on of poultry wastage, the fi t lizati f rm installed a evaluate motors being used for poultry feed machine, fans for air circulation, etc. Conventional g Rural Serv biogas plant in 2009 through rvices Foundati ( SF) t on (R F. motors can be replaced by EE motors to reduce energy consumption. However, detailed cost-benefit is recommended. t to produce 10 cubic meter of biogas. The fi The plant has a daily capacity f rm has invested about BDT 166,000 fo t on of the biogas plant. From the producti f r the constructi f rm t on of biogas, the fi aving about BDT 12,600/month. The payback period of the biogas plant has been has been sav  Poultry feed is often prepared at the site. This requires mixers with use motor drives. Hence all assumed to be less than 2 years. the moor related efficiency improvement measures are applicable (especially for medium and large sector units. Energy Saving Potential: Poultry units have relatively lower potential to save electricity and hence detailed calculations of estimates and investment have not been carried out. About 5 to 10 % of the  Large poultries often use circulating fans. Old fan motors can be replaced with efficient ones. total energy in a unit can be saved. Thus total electricity saving potential can be of the order of 2.9 GWh (This does not include potential to generate electricity from biogas). Estimated CO2 reduction Biogas potential from poultry waste: will be 1,676 MT at the end of year 3. Cumulative loan required is estimated at BDT 36 million. There are about 195 million birds in over 100,000 poultry firms in the country. There are mainly two It is recommended that separate programme for installation of biogas units need to be implemented types of poultry firms exist in the country: broiler firm and layer firm. The droppings from broiler for SME units. This requires efforts on three levels: farms are not used for biogas generation in the country due to the nature of rearing the broiler 1. Awareness creation (Education): It is essential to create awareness of potential to generate birds, which produces droppings in batch (not continuous). So only layer firms having over 1,000 biogas in poultry units. Most of the poultry unit owners belonging to SME category have basic poultry birds are considered for biogas production which have been assumed to be 36% of the total education (class 1-12, diploma, SSC / HSC and none of them have post graduate degree). poultry birds. Therefore only 71 million birds in the layer firms are considered from which biogas These owners need to be educated on the benefits of biogas plants and on how to use. could be generated. Following assumptions were made to estimate biogas production potential of 2. Training of Technicians: Most of the biogas plants are dome shaped and are constructed by the country: masons. These masons need to be trained to build appropriate biogas digesters. 3. Availability of finance: Banks need to develop appropriate loan products for providing small size oans to SME poultry units. 72 73 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 5 5.2.7 Textile 5 speed drives (VSDs) for pumps and fans in select areas. Water circulating pumps in dyeing section are ideal candidates to install VSDs. In spinning units also conventional motors can be Textile sector is among the significant sectors under study. Textile sector mainly comprises spinning, replaced with EE motors in ring frames. Similarly VSDs can be installed for humidification weaving and composite (spinning, weaving and dyeing). Detailed description of the sector is fans. These are only indicative instances of application of VSDs. provided earlier in section 4. 3. Steam condensate recovery: The steam used in the textile processing units (after providing The team visited 4 spinning units and 5 composite textile plants. Each of the composite textile units heat for the process) gets converted in to condensate which is at a higher pressure. When the was found to be varying in terms of set up. One unit had yarn dyeing, knitted fabric dyeing, finishing condensate is collected in a tank open to atmosphere, it results into flash steam generation. This section, while the other had fabric weaving and processing sections. Also two different finishing flash steam can be effectively used for pre-heating of water. Quantity of this condensate lines were using different technologies (e.g. infra-red and hot air drying). These differences show up recovery depends upon the boiler capacity, production set up and installed capacity of the as wide variation in the SECs for these plants. All the production has been converted into weights processing unit. after making suitable assumptions on weight of cotton yarn and fabric. Electricity required for 4. Caustic soda recovery: A few processing units in Bangladesh have installed caustic soda spinning units (on the lower side) has been estimated at 900 kWh/MT. Steam required in spinning recovery systems. Textile processing plants can install this system for resource recovery. units were found to be 1.53 times MT of yarn produced. Weaving and processing units require higher energy. Composite units require 4,700 kWh/MT of energy comprising electricity and steam 5. Cogeneration / Tri-generation: Most of the textile units need electricity and steam. New for processing each MT of material produced. Steam required for composite units was around 18.6 units being set up can evaluate option of using cogeneration to produce electricity and steam in times (unit with lower steam consumption) the weight of fabric produced. most efficient manner. Besides tri-generation system can generate cold effect in addition to steam and electricity. Total energy consumption in the spinning sector is estimated at 1,300 GWh per year and that for the composite (weaving and processing) is estimated at 4,425 GWh per year. Both amounts include Renovation and new facilities: steam equivalents. Textile units (especially spinning and weaving units) in the large segment are about 15 years old and Applicable EE measures: those in SME are relatively older at 20 years. As these units are not directly associated with exports, overall upkeep of these units has been relatively lower as compared with ready made garment units. A large cross-section of EE retrofit measures is applicable in textile units. These measures can be Many of these units can go for renovation of their existing facilities. One of the barriers to categorised in to following broad areas: undertaking such projects is stoppage of production. New facilities being established should evaluate energy requirements and then design utilities to use 1. Waste Heat recovery: (applicable most for composite units with processing) There are several them optimally. At the same time, select process equipments with high efficiency. New facilities possibilities to extract heat from various sources. Principal sources include- waste heat from a) should also install VSDs for water pumps and fans. Exhaust flue gases from generator engine and jacket cooling water: Most of the natural gas based engines (reciprocating) need cooling for which water is circulated in jackets. This water is The team has considered factors such as age of units in the sector, composition of energy cooled in cooling towers at present. Similarly, exhaust flue gases contain substantial amount of requirements (electricity and steam) while making assumptions for estimating energy saving heat which can be used for heating boiler feed water or even producing low pressure steam. potential. Assumptions made for estimating energy saving potential and potential for investment in Waste heat can also be used in vapour absorption chilling system to generate cold effect for EE projects for textile sector are as follows: ultimate use for cooling office area. b) Stenter: Stenters are used for drying, stretching and finishing. Fabric enters in to stenter with 60 to 65% moisture. Exhaust blower vent hot air fferent EE opti Percentage of plants that would select diff f llows: t ons are as fo continuously (at temperature around 100 deg. C. On the other hand dyeing section needs water at 60 to 80 deg. C. Steam is used to supply this heat. There is good potential to install a waste Table 32: Percentage of poultry units expected to adopt EE heat recovery system to use exhaust heat from stenters for water heating. c) Bleaching and other Large SME processing sections. Percentage of units Year 1 Year 2 Year 3 Year 1 Year 2 Year 3 2. Electrical measures: (applicable to all textile units – spinning, weaving and processing) that would select Electrical motors are used in large numbers which are mostly integrated with the processing ft Retrofi 0% 2% 3% 3% 5% 8% equipment and pumps. Motors attached to original equipment (OE) are not replaced (unless a Renovatit on 2% 5% 10% 0% 2% 3% motor fails). In the event of an equipment is being overhauled, there are opportunities to EE ab-initito 0% 2% 3% 0% 5% 10% replace old conventional motors with EE motors. Other opportunities exist to install variable 74 75 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 5 Energy g sav aving potenti t al has been esti w ng assumpti t mated based on the fo f llowi t ons: 5 t mated payback periods are provi Some of the cases of EE measures and esti f ll v ded as fol ows: Table 33: Assumption of estimation of energy saving potential Table 37: Cases of EE measures and estimated payback period g Saving Potential Energy Large SME ft Retrofi 15% 15% Equipment Investment Savings Payback Renovatit on 35% 35% Textile Million Mn. BDT/ Years EE ab-initito 25% 25% BDT Year g Eff High fficiency atomizers 0.70 0.62 1.13 f r implementi Investment needed fo t mated using fo t ng these measures are esti w ng assumpti f llowi t ons: Table 34: Percentage of investment need f r humidifi VFD fo f cati f ns (Spinning) t on fa g 1.40 0.52 2.70 Investment Needed (% of plant and machinery r costs) Large SME f r auto-core sucti VFD fo t on motor 4.00 1.84 2.17 ft Retrofi 10% 10% VFD fo f r water circulati t ng pumps (i ( n Jet dyeing) g 1.60 0.46 3.47 Renovatit on 40% 40% Waste heat recovery fo f r Stenter 3.00 1.22 2.45 EE ab-initito 20% 20% t ons are assumed In the case of composite units the percentage of units that would select EE opti 5.2.8 Readymade Garments (RMG) a e the fo to hav w ng pattern. f llowi Table 35: Percentage of composite units that would select EE RMG is again important sector form the economic point of view. There are two broad segments Large SME under this sector woven and knitwear. Production process has already been explained. This sector Percentage of units uses human skills as well as use machines to stitch. Energy primarily required in the form of Year 1 Year 2 Year 3 Year 1 Year 2 Year 3 that would select to go fo f r electricity and some units need steam for limited use. Electrical energy is needed for lighting large Retrofi ft 0% 2% 4% 3% 5% 10% areas, driving stitching machines and for air circulation fans. Many recent units are most modern in Renovatit on 1% 3% 8% 0% 2% 3% terms of planning and modern equipments. The scope for efficiency improvement in new units is relatively less. EE ab-initito 0% 2% 3% 0% 3% 5% In the case of composite units, the team has assumed 15% of the cost of machinery wi w ll be Applicable EE measures: f r “ee ab initi needed fo t ons are same as spinning. t o” measures. Remaining assumpti Estimates:  Efficient lighting systems  Servo motors in place of clutch type motor drives Based on the assumpti g sav t ons made as above, the details of energy t al avings and investment potenti  Waste heat recovery t mated as fo are esti f llows:  Compressed air management measures Table 36: Estimated saving potential and investment potential  Insulation of roof (to reduce heat incoming to factory area) Weaving & Parameters Units Spinning Total The details of these broad measures are provided in the Annex - 3 Processing no of units No. 350 4,595 4,945 RMG sector units primarily export their products and hence need to take higher responsibility f c Energy Total Specifi t on g Consumpti (kW k h/MT) 900 4,700 5,600 towards energy consumption. Efficient and better lighting systems tend to increase productivity and l Total installed capacity (annual) MT 1,800,000 1,290,000 3,090,000 also contribute to the lower energy cost. Most RMG units require lighting and use conventional Total Estit mated Energyg GWh 1,299 4,426 5,726 fluorescent tube lights (FTLs) Simple measures such as replacement of conventional magnetic Consumpti Wh) t on per year (GWh ballast can save around 30% of the lighting energy. t mated annual energy Total Esti g GWh 103 269 372 avings (GWh) sav h in all plants avings on GHG (0,57 tons CO2 eqv Sav h q ./MWh) tons 19,640 51,089 212,188 f nd required in all plants Total debt fu million BDT 10,914 46,193 57,107 avings fr Total Sav f om EE measures million 755 1,869 2,623 76 77 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 5 Table 38: Energy saving from change of Ballast in RMG 5 Findings hange of Ballast Overall sav avings in energy g consumpti t on frf om replacement of magneti t c ballasts wiw th Conventional Unit fficient Eff Unit electronic ballasts has been observ r ed to range frf om 23.74% to 28.54% in the selected lines Tube Ligh g t W 40 Tube Lighg t W 36 of the sample fa f ctories. The overall impact on total energy g sav aving can be potenti t ally f cant because of large number of FTLs used in each of these fa signifi f ctories. Financial benefift Ballast W 16 Ballast W 3 g cost sav through avings can be directly attributed to energy aving fr g sav f om replacement. Assuming Total W 56 Total 39 an av a erage energyg savaving of 25%, there is a potenti aving BDT 12.81 per tube light t al of sav A erage daily usage Av hrs/day 8 Av A erage daily hrs/day 8 f xture per month. This sav fi avings can be even high f is higher than g er if the actual rate of tariff usage the generic value of BDT 5.50/ KW K h used in this analysis. Factories based on capti t ve power Worki k ng days per year days 300 k ng days Worki days 300 generatit on, or those using Diesel backup power during temporary power outage are known per year a e high to hav g er rates fo f r unit power generati f re, improved energy t on. Therefo fficiency fr g eff f om t on Annual consumpti kW k h 134.4 93.6 replacement of magneti w th electronic ballasts in the FTLs wi t c ballasts wi w ll hav a e high g er impact on such cases. Analysis shows that the payback period of such investment is only around 12 Number of FTLs Number 400 Number of FTLs Number 400 months. t on kW Total Annual Consumpti k h 53,760 Total kW k h 37,440 Consumpti t on g Consumption (MWh) and Power (MW) National Impacts on Energy Power fa f ctor has not been taken into considerati f ctor and ballast fa t on y ical garments fa Typ g ts on a daily basis depending on the f ctories use 400 to 6,000 tube ligh avings Sav k h kW 16,320 amount of work load av f re annual sav a ailable. Therefo avings in operati t ng cost due to Applicable tariff f BDT/ kWk h 4.50 replacement wiw th improved ballast can range fr f om BDT 58,000 to 7,26,000. This is a f cant part of the overall operati signifi f ctories. Assuming on av t ng cost of the fa a erage 2000 Electricity expenses wiw th BDT/ 241,920 avings Sav % 30.36 FTLs are used in approximately 3,000 operati t ng garments fa avings in energy f ctories, total sav g Conventi t onal Ligh g ti t ng annum consumpti t on per month can reach 14 MWh. In terms of power capacity, this sav avings can Electricity expenses wiw th BDT/ 168480 translate into 45 to 60 MW through g the replacement of the ballasts only, keeping all other Eff f ligh g tit ng annum f cant nati accessories unchanged. This implies that a very signifi avings can be potenti t onal sav t ally Sav avings BDT/ 73,440 achieved in the long term. annum Ballast cost / unit BDT 220 Total cost BDT 88,000 Payback period 1.20 Ventilation: RMG units require good light as well good ventilation to have optimum level of worker effectiveness. Good ventilation improves the air circulation. Inadequate ventilation can lead to lower productivity due to discomfort. Many units have air extraction fans which are placed at the w ng is the case based on a research paper prepared on the use of ballast in RM Followi R G work level and have diameter ranging from 4 to 8 feet. On the other hand, air is also blown-in to sector. achieve balance of pressure. Evaporative cooling, which is also used helps reducing temperature and increases humidity. Often RMG units are located in multi-storied buildings which require ventilation Case study: through windows and with the help of air extraction fans. Fire safety of RMG units is an important Energy g Saving with Electronic Ballasts in Readymade Garments (RMG) Factories aspect that can not be ignored. Appropriate ventilation can help effective circulation of air. It is recommended to install adequate number of air extraction fans and blowers to improve ventilation. by Asma Huque The main objecti t ve of this study was to demonstrate the potenti t al technical, economic and The total energy consumption in RMG sector is estimated at 3,627 GWh per year including steam enviv ronmental benefi f ts to be derived fr f om replacement of magneti ( B) wi t c ballasts (M w th consumption. electronic ballasts (EB) of the Fluorescent Tube Lights (FTLs), in fi f ve selected garments f ctories and quanti fa f the energy t fy g sav avings throughg such interv r entit on. The net eff ffect of Assumptions made for estimating energy saving potential and investment: reduced operati t ng costs and fef wer replacements could result in 30% cost sav l fe aving in li f cycle cost (L( CC). Other technical benefi (i) the ballasts are designed to hav f ts are (i a e a longer usefu f l 1. Total cost of setting up a new plant was obtained from survey and / or from knowledgeable f of 30,000 hours in comparison to the magneti life w th 10,000 hours, (i t c ballasts wi i usually ( i) hav a e wiw der voltage range fof r operati t on fr f om 70V to 250V (i ( ii) i no need fo f r using a starter, person in the sector. After providing for cost of land and buildings and for the working capital ( v) (i v lesser lumen depreciati t on, etc. the cost of the plant and machinery was assumed at 50% of the project cost. 78 79 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 5 2. Retrofit EE measures considered for RMG include installation of efficient lighting and change of clutch motors to servo motors. Cost of retrofit EE measures for RMG units was assumed 5 6. Debt equity ratio has been assumed at 70:30 (0.7) for large scale companies, as followed in most of the banks in Bangladesh and 0.3 for SME units. at 15% of the total cost of plant and machinery. The following table provides assumption made for investment needed in different measures: Estimates: Table 39: Investment needed in different measures t ons made above the esti Based on the assumpti g sav t mates energy f llows: avings are as fo Investment Needed (% of plant and machinery costs) Large SME Table 42: Estimated energy saving potential in RMG ft Retrofi 10% 5% Renovatit on 40% 35% g savings (MWh) in all plants Estimated annual energy EE ab-initito 15% 15% EE measures Segment Year 1 Year 2 Year 3 3. The total incremental cost of plant and machinery in the case of “ee ab-initio” has been ft Retrofi Large 0 7,227 18,068 estimated at 15% of the cost of the total plant and machinery as mentioned above. The SME 3,669 6,105 12,183 estimate is in line with general trend in high efficiency equipment cost as compared with cost Total 3,669 13,332 30,250 of equivalent machines with conventional efficiency level. Renovatit on Large 8,432 42,158 84,315 4. Estimates of percentage savings: Energy savings in EE retrofit measures can vary from 20% to SME 0 2,108 4,312 50% of the present level of energy consumption. However, energy savings have been assumed Total 8,432 44,266 88,627 at 15% of the existing consumption level. Estimated energy savings in case of renovation EE ab-initito Large 4,818 24,090 48,180 measures have been assumed at 35% of the existing energy consumption. For “ee ab-initio” SME 1,205 4,873 12,210 energy savings have been assumed at 20% of the present energy consumption level. The Total 6,023 28,963 60,390 principal reason for assuming the lower levels of savings is absence of accurate data on the plant conditions and other factors such as quality of raw materials and level of technology in Total Estimated annual energyg 284 use at present in RMG units in Bangladesh. savings (GWh) in all plants Savings on GHG (0,57 tons CO2 161,853 Table 40: Estimated energy saving potential in RMG eqv./MWh) (Tons) g Saving Potential Energy Large SME ft Retrofi 15% 10% t al is provi Investments needed to achieve this potenti f llows: v ded as fo Renovatit on 35% 35% Table 43: Investment potential in different energy efficiency measures EE ab-initito 20% 20% EE Measures Segment Year 1 Year 2 Year 3 5. Considering the age profile of RMG units in Bangladesh (which is around 10 -15 years) and ft Retrofi Large 0 913 2,282 number of operating plants, the team has assumed that only 5% of the existing operating plants SME 188 312 623 could select to implement EE retrofit measures per year (in the third year). The other t on Renovati Large 1,826 9,128 18,256 assumptions as regards percentage units selecting different EE measures are as follows: SME 0 216 441 Table 41: Percentage of RMG units adopting EE to EE ab-initi Large 685 3,423 6,846 Large SME SME 92 374 937 Percentage of units that Total Investment Large 2,510 13,464 27,384 Year 1 Year 2 Year 3 Year 1 Year 2 Year 3 f r all Potential (fo l f r would select to go fo SME 280 902 2,001 plants) ft Retrofi 0% 2% 5% 3.0% 5.0% 10.0% Debt Fund Required (mill l ion BDT) 1,841 9,695 19,769 Renovatit on 1% 5% 10% 0.0% 0.5% 1.0% f nd required (million BDT) Total debt fu 31,305 EE ab-initito 1% 5% 10% 0.5% 2.0% 5.0% 80 81 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 5 5.2.9 Chemicals 5 plant conditions and other factors such as quality of raw materials and level of technology in use at present in the chemical units in Bangla Chemicals industrial sector has wide cross section of sub-sectors such as organic chemicals, pharmaceuticals, pesticides, etc. At the same time units are distributed widely as per size from micro Table 45: Estimated percentage energy saving potential in Chemical sector to large scale units. Small manufacturing facilities have “unit processes” whereas large scale g Saving Potential Energy Large SME companies have continuous process plants. Energy and environmental aspect assume greater importance to this sector. Energy required in variety of forms, electrical, thermal and in compressed ft Retrofi 15% 10% air. Thermal energy is often needed in terms of heat, steam and even cold. Many chemical processes t on Renovati 35% 30% are sensitive to temperature and hence energy consumption often assumes secondary importance to EE ab-initi 20% 15% (especially in the cases of high value chemicals). Efficiency improvements are possible in wide areas and include process improvements as well as improvements at machinery level. Total annual energy 5. Considering the age profile of chemicals units in Bangladesh (which is around 25 years of Large consumption of this sector has been estimated at 755 Gwh. and 10-15 years for SME) and number of operating plants, the team has assumed that only 5% Applicable EE measures: of the existing operating plants could select to implement EE retrofit measures per year (in the third year). The other assumptions as regards percentage units selecting different EE measures 1. Waste heat recovery are as follows: 2. Steam condensate recovery Table 46: Percentage of chemical units adopting EE 3. Efficient motor drives (including VSDs and VFDs) Large SME Assumptions made for estimating energy saving potential and investment: Percentage of units that would select to go for Year 1 Year 2 Year 3 Year 1 Year 2 Year 3 1. Total cost of setting up a new plant was obtained from survey and from knowledgeable persons in the sector. After providing for cost of land and buildings and for the working capital the cost ft Retrofi 0% 5% 5% 3.0% 5.0% 10.0% of the plant and machinery was assumed at 25% of the project cost. Renovatit on 5% 10% 20% 0.0% 1.0% 2.0% 2. Retrofit EE measures considered for Chemicals include waste heat recovery, steam condensate EE ab-initito 0% 5% 5% 0.0% 2.0% 5.0% recovery efficient compressor, effective compressed air management and efficient motor drives 6. Debt equity ratio has been assumed at 70:30 (0.7) for large scale companies, as followed in most along with VFDs. Cost of retrofit EE measures for chemicals units was assumed at 10% of the of the banks in Bangladesh and 0.3 for SME units. total cost of plant and machinery. The following table provides assumption made for investment needed in different measures: Estimates: t ons made above the esti Based on the assumpti g sav t mates energy f llows: avings are as fo Table 44: Investment needed in different measures in Chemical sector Table 47: Estimated energy saving potential in Chemical sector r costs) Investment Needed (% of plant and machinery Large SME Estimated annual energyg savings (MWh) in all plants ft Retrofi 10% 10% EE measures Segment Year 1 Year 2 Year 3 t on Renovati 40% 40% Retrofi ft Large 0 1,415 1,415 to EE ab-initi 20% 20% SME 1,714 2,999 5,569 Total 1,714 4,414 6,984 3. The total incremental cost of plant and machinery in the case of “ee ab-initio” has been Renovatit on Large 3,302 6,604 13,209 estimated at 20% of the cost of the total plant and machinery as mentioned above. The estimate is in line with general trend in high efficiency equipment cost as compared with cost SME 0 1,285 3,856 of equivalent machines with conventional efficiency level. Total 3,302 7,890 17,064 EE ab-initito Large 0 1,887 1,887 4. Estimates of percentage savings: Energy savings in EE retrofit measures can vary from 20% to 40% of the present level of energy consumption. However, energy savings have been assumed SME 0 1,928 4,498 at 10% of the existing consumption level. Estimated energy savings in case of renovation Total 0 3,815 6,385 measures have been assumed at 40% of the existing energy consumption. For “ee ab-initio” Total Estimated annual energy savings (GWh) in all plants 52 energy savings have been assumed at 20% of the present energy consumption level. The Savings on GHG (0,57 tons CO2 eqv./MWh) (Tons) 29,394 principal reason for assuming the lower levels of savings is absence of accurate data on the 82 83 Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh 5 t al Details of the investment needed to achieve this potenti v ded as fo a are provi f llows: Table 48: Investment needed in different measures EE Measures Segment Year 1 Year 2 Year 3 ft Retrofi Large 0 25 25 SME 15 26 49 t on Renovati Large 100 200 400 SME 0 15 45 to EE ab-initi Large 0 50 50 SME 0 23 53 Total Investment Large 100 275 475 Potential (for all plants) SME 15 64 146 Debt Fund Required (mill l ion BDT) 1,841 75 212 f nd required (million BDT) Total debt fu 663 5.2.10 Plastics Processing Plastics processing sector has large SME segment as these manufacturing units can be set up with the help of one or more simple machines (e.g. injection moulding machines or blow moulding machines). Over the years machines have become highly automated, more complex, and have higher productivity. Large scale units have larger machines and mould sizes are larger and often complex processing. Apart from injection moulding and blow moulding extrusion process is also used in plastics processing. The energy is required mainly in the form of electrical energy, compressed air and heat. Associated processes also consume energy as also energy is needed for materials handling. Total annual energy consumption of this sector is estimated as 776 GWh. Applicable EE measures: 1. Better utilisation of compressed air 2. Replacement of old machines with new high productivity machines. Assumptions made for estimating energy saving potential and investment: 1. Total cost of setting up a new plant was obtained from survey and from knowledgeable persons in the sector. After providing for cost of land and buildings and for the working capital the cost of the plant and machinery was assumed at 25% of the project cost. 2. Retrofit EE measures considered for Plastics include installation of high efficiency motors and variable frequency drives (High efficiency compressor in the case of large scale units). Cost of retrofit EE measures for plastics units was assumed at 10% of the total cost of plant and machinery. The following table provides assumption made for investment needed in different measures: 84 Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh 5 Table 49: Investment needed in different measures in Plastic Processing r costs) Investment Needed (% of plant and machinery Large SME ft Retrofi 10% 10% Renovatit on 40% 40% EE ab-initito 15% 15% 3. The total incremental cost of plant and machinery in the case of “ee ab-initio” has been estimated at 15% of the cost of the total plant and machinery as mentioned above. The estimate is in line with general trend in high efficiency equipment cost as compared with cost of equivalent machines with conventional efficiency level. 4. Estimates of percentage savings: Energy savings in EE retrofit measures can vary from 20% to 30% of the present level of energy consumption. However, energy savings have been assumed at 15% of the existing consumption level. Estimated energy savings in case of renovation measures have been assumed at 35% of the existing energy consumption. For “ee ab-initio” energy savings have been assumed at 20% of the present energy consumption level. The principal reason for assuming the lower levels of savings is absence of accurate data on the plant conditions and other factors such as quality of raw materials and level of technology in use at present in the plastics units in Bangladesh. Table 50: Estimated percentage energy saving potential in Plastic Processing g Saving Potential Energy Large SME ft Retrofi 15% 15% t on Renovati 35% 35% to EE ab-initi 20% 20% 5. Considering the age profile of plastics units in Bangladesh (which is around 15-20 years of Large and 10-15 years for SME) and number of operating plants, the team has assumed that only 5% of the existing operating plants could select to implement EE retrofit measures per year (in the third year). The other assumptions as regards percentage units selecting different EE measures are as follows: Table 51: Percentage of Plastic Processing units adopting EE Large SME Percentage of units that Year 1 Year 2 Year 3 Year 1 Year 2 Year 3 f r would select to go fo ft Retrofi 0% 5% 5% 1.0% 1.0% 2.0% Renovatit on 5% 10% 20% 0.0% 0.0% 0.5% EE ab-initito 0% 5% 5% 0.0% 0.5% 1.0% 6. Debt equity ratio has been assumed at 70:30 (0.7) for large scale companies, as followed in most of the banks in Bangladesh and 0.3 for SME units. 85 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 5 Estimates: 5 5.2.11 Food Processing: t ons made above the esti Based on the assumpti g sav t mates energy f llows: avings are as fo Food processing is a diversified segment and comprises sub-segments such as beverages, processed Table 52: Estimated energy saving potential in Plastic Processing food (baked products such as biscuits and bread) shrimps and fish processing and frozen foods. Food processing sector has units across all sizes ranging from micro business which cater to local g savings (MWh) in all plants Estimated annual energy markets, small and medium to large scale units. These major sub-sectors have diverse nature of EE measures Segment Year 1 Year 2 Year 3 processing needs and hence energy requirements differ widely.. Beverages units need energy for water purification, processing (mixing) and packaging (filling up and packing). Materials handling ft Retrofi Large 0.00 2633.28 2633.28 needs substantial amount of energy as large amount of liquids are handled. Pumps of various sizes SME 737.02 737.02 1449.48 and in large number are required for this. Bottling or tetra-packing machines also need electricity. Total 737.02 3370.30 4082.76 Energy is consumed in the form of electricity and steam. Water filtration and treatment also consumes substantial amount of energy (950 kWh per million litres and reverse osmosis can require t on Renovati Large 6144.32 10240.53 20481.07 up to 1,590 kWh per million litres of water processed). Beverage sub-sector units need large SME 0.00 0.00 859.86 quantity of water (a minimum of 1.15 lit per every litre of beverage produced excluding fruit juice) which is an important natural resource. Frozen food units on the other hand need lot of energy in Total 6144.32 10240.53 21340.93 the form of cold for freezing. Electricity is used to generate cold and for packaging. Frozen fish and to EE ab-initi Large 0.00 3511.04 3511.04 shrimp units also need water for washing and cleaning. Food processing units such as baked SME 0.00 491.35 982.70 products need energy for ovens which mainly use natural gas as fuel. Biscuits and bread manufacturing require energy in baking ovens, materials handling, mixing and kneading machines. Total 0.00 4002.39 4493.74 Total Estimated annual energy g savings 54 The field visits were made to 4 beverages units and one food processing unit. Electricity (GWh) in all l plants requirement per 1,000 litres of beverages produced was observed to be 35 kWh. Estimates of Savings on GHG (0,57 tons CO2 31,015 energy consumption as industry sector are as follows: eqv./MWh) (Tons) Table 54: Specific energy consumption of the surveyed plants Investments needed to achieve this potenti t al is provi v ded as fo f llows: Production Installed Capacity Total Equivalent t Electricity Table 53: Investment needed in different measures Capacity Uti t lisati t on t on Producti Consumptit on EE Measures Segment Year 1 Year 2 Year 3 Name of the Company (L ( itres/Year) r (%) ( itres/Year) (L r MT/Year k h / MT (kW MT) ft Retrofi Large 0.00 15.00 15.00 Unit 1 233,280 70% 163,296 163,296 45.75 SME 60.00 60.00 118.00 Unit 2 300,000 50% 150,000 150,000 35.00 t on Renovati Large 60.00 100.00 200.00 Unit 3 296,800 60% 178,080 178,080 89.81 Unit 4 2,269,856 80% 1,815,885 1,815,885 32.94 SME 0.00 0.00 120.00 to EE ab-initi Large 0.00 22.50 22.50 EE / RE measures applicable for this sector include: SME 0.00 45.00 90.00 Total Investment Large 60.00 137.50 237.50  Replacing standard motors with high efficiency motors along with variable frequency drives Potential (fo f r all l (VFDs); SME 60.00 105.00 328.00 plants)  Use of waste heat to generate hot water (water preheating) for supply to boiler or pre-heat the Debt Fund Required (mill l ion BDT) 1,841 60.00 127.75 air going inside oven.;  Combustion process control and optimise air/fuel ratio for furnace f nd required (million BDT) Total debt fu 452  Install efficient burners 86 87 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 5  Use of vapour absorption chillers (VACs) to generate cold effect (can be used for air cooling or 5 Table 55: Summary of Estimated Yearly Energy Consumption and Energy Saving Potential chill water needs); Shrimp and fish processing units have greater potential in using VACs.  Improve air to fuel ratio to improve efficiency of gas fired ovens; A Annual Energyg / Retrofi f t Renovation EE ab Total Energy g l Yearly l Yearly  Use of light weight oven chain-belt, CO2 Saving (MWh) (MWh) initio saving Energyg CO2  Use of sludge / waste to generate methane and manure (Renewable Energy measure) potential (MWh) Potential Consumption Savings (GWh) (GWh) (MT) Beverage plants: Cement Large 19,448 136,136 40,517 196 1,102 111,777 SME - - - Beverage plants have original equipment and process needs accurate control in terms of achieving Steel Re- Large 12,000 93,335 8,000 119 1,040 67,642 correct parameters of the fluid. Purification, mixing and filling / packaging are the prominent rolling sections. Steam is needed in the case of pasteurisation process. Most of the equipments need motor SME 1,067 800 3,467 drives. Hence retrofit measures include replacing old standard motors with efficient motors and r Poultry Large 72 358 143 2.9 371 1,676 installation of VFDs for select motor drives such as large fluid handling pumps. Old chilling system SME 364 1,821 182 should be replaced with efficient vapour absorption type of chilling, which can use waste heat for Light Large 486 3,686 729 8 249 4,836 variety of sources (e.g. exhaust from captive natural gas engines and waste heat from boiler exhaust). Engineering SME 386 2,701 496 Energy consumption pattern was analysed based on the filed visits and interviews with the industrial l and Pulp Large 3,600 33,600 4,800 89 672 50,479 units (mainly production and utilities personnel). The data provided by the organisations was Paper SME 23,040 10,080 13,440 validated and gaps in data if any were closed by talking to the contacted officials over phone of Chemicals Large 2,830 23,115 3,774 52 755 29,394 follow up visits. Almost all companied did not provide data on electricity consumption whereas, SME 10,282 5,141 6,426 data on natural gas consumption was forthcoming and easy to obtain. Most of the industrial units Plastics Large 5,267 36,866 7,022 54 776 31,015 have original equipment (OE) for manufacturing hence EE improvement measures recommended does not related to modification or changes of any of the components. Secondly, most SME 2,924 860 1,474 organisations did not provide details of OE during the interviews. The energy consumption analysis Textile Large 32,350 183,042 41,240 372 5,726 212,188 thus had to be estimated based on the electrical and thermal energy consumption from generator(s), SME 51,306 33,237 31,084 compressor(s) and boiler(s). It was difficult to get exact connected load of companies. On the other RMG Large 25,295 134,905 77,088 284 3,627 161,853 hand, data related to equipment for energy efficiency improvement was not adequate to conclude SME 21,956 6,420 18,288 investment needs in this sector. Besides, most units in the bakery sector belong to micro and small segments and owners in this segment did not have sufficient information on investments (and were Total 1,177 14,318 670,860 not willing to share the information). Total present estimated energy consumption in beverages sector is about 30GWh per year. Whereas, total energy consumption in bakery and other food processing segment is around 212 GWh per year. The consultant team also conducted literature research on frozen food (fish processing) sector. Total estimated energy consumption in this sector is around 286 GWh. Total estimated saving potential in the food processing segment including all the above sub-segments is estimated at 49 GWh. Summary of all sectors The following tables provide summary of sector wise yearly energy consumption and energy saving potential for EE measures for the sectors which have been estimated: 88 89 Mapping of Financial Industry Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 6 Mapping of Financial Industry 6 1.1.1 Central Bank Bangladesh Bank (BB), as the central bank, has legal authority to supervise and regulate all banks 6.1 Overview of Financing Sector in Bangladesh and non-bank financial institutions. It performs the traditional central banking roles of note issuance and of being the banker to the government and banks. Given some broad policy goals and The financial system of Bangladesh consists of central bank i.e. Bangladesh Bank, 4 state owned objectives, it formulates and implements monetary policy manages foreign exchange reserves and Commercial Banks (SCBs), 5 government owned Specialized Banks (SB), 30 domestic Private lays down prudential regulations and conduct monitoring thereof as they apply to the entire banking Commercial Banks (PCB), 9 Foreign Banks (FB) and 29 Non-bank Financial Institutions (NBFI) system. Its regulations include, among others: minimum capital requirements, limits on loan and the Micro Credit Regulatory Authority (MRA) under which 298 Micro Finance Institutions concentration and insider borrowing and guidelines for asset classification and income recognition. (MFIs) are operating across the country. The financial system also comprises of insurance Recently Bangladesh Bank has formulated green banking policy guidelines for the banks and companies, stock exchanges, and co-operative banks. financial institutions of Bangladesh which has been separately discussed in section 6.2.2.  Central Bank The central bank has power to impose penalties for non-compliance and also to intervene in the  Bank and Financial Institutions management of a bank if serious problem arise and also has delegated authority of issuing policy  Capital Market directives regarding foreign exchange. BB has refinancing facilities for banks and NBFIs to  Insurance companies accelerate credit flows to the SME sector under the refinancing scheme conducted from the  Microfinance Institutions proceeds of BB’s own fund and funds from IDA (under the Enterprise Growth and Bank Modernization Program), and ADB (under the Small and Medium Enterprise Sector Development The following figure gives an overview of broad segments of financing sector in Bangladesh: Program). For broadening the base of longer-term funds for small and medium scale industrial lending, some Financial Sector in Bangladesh special schemes and programs taken by Bangladesh Bank in FY10 were:  Starting from FY01, BB has disbursed BDT 1.3 billion out of his own fund as term loans for Money market Capital market Microfinance agro-processing industries in rural areas till June 2010 under a 100 percent refinance scheme.  Under the Small Enterprise Fund (SEF) BB has provided BDT 10.4 billion refinance facilities out of its own fund to 40 banks and FIs against 10988 enterprises for supporting the Securities Market Insurance and Pension and development of small enterprises of the country. Provident funds  Under the Enterprises Growth and Bank Modernisation Programme (EGBMP), till 2010, BB, with support from IDA, the World Bank, has provided a total of BDT 2.7 billion refinance facilities to 30 banks and FIs as term loan against 2773 small and medium scale enterprises. 1. Bangladesh 1. Securities and 1. Controller of 1. Nongovernment Bank Exchange Insurance Organizations  Under a refinancing project of Asian Development Bank, till 2010, BB has provided a total of 2. A ll banks Commission 2. General and Affairs Bureau 3. NBFIs 2. Stock life insurance 2. Palli Karma BDT 3.3 billion refinance facilities to 16 banks and FIs against 3264 small and medium scale 4.Moneychange exchanges: companies Shahayak enterprises. rs Dhaka Stock 3. Government Foundation 5. Credit Rating Exchange and pension scheme 3. Grameen Bank It is mentionable that, all the recovery amount of the loan of the above schemes will be used as a Agencies Chittagong 4. Central 4. Bangla desh Rural revolving fund to refinance the SME sectors. Up to June 2010, a total of BDT 16.48 billion Stock Exchange Provident Fund Development Board 3. Investment 5. Private sector and other refinance facilities have been provided to different banks and FIs against 17025 small and medium Corporation of pension funds nongovernment scale enterprises from aforesaid funds. Bangladesh (typically small) organizations, 4. Merchant microfinance Besides, GoB has formed Equity and Entrepreneurship Fund (EEF) in FY01 through budgetary Banks institutions allocation of BDT 18.0 billion in different fiscal years to encourage investments in agro-based/food Figure 6.1 Overview of broad segments of financing sector in Bangladesh processing and IT sector projects. So far a total of 347 projects (including 299 agro-based/food 91 92 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 6 processing projects, and 48 IT projects) got EEF sanction from Bangladesh Bank at different stages of disbursement. Cumulative equity disbursement stood at Taka 5.3 billion at the end of FY10 6 6.1.3 Specialized Banks against total fund disbursement of BDT 9.3 billion from the GoB. Out of the 5 specialized banks, 2 (Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank) were created to meet the credit need of the agricultural sector while another bank i.e. Employment Bank 1.1.2 Commercial Banks that has been created to support self-employed young people, other two financial institutions (Bangladesh Shilpa Bank and Bangladesh Shilpa Rin Sangtha) have been merged into one called The commercial banking system dominates the financial sector with limited role of Non-Bank ‘Bangladesh Development Bank Limited (BDBL)’ are for extending term loans to the industrial Financial Institutions and the capital market. The Banking sector alone accounts for a substantial sector of Bangladesh. share of assets of the financial system. The banking system is dominated by the 4 State Owned Commercial Banks, which together control more than 30% of deposits and operates 3,383 branches 6.1.4 Non-Bank Financial Institutions (NBFIs) (50% of the total) as of June 30, 2008. Up to June 2009, 48 Scheduled Banks were operating with a network of 6,936 branches. Table 8 summarizes the structure of the banking system in In the financial sector, the non-bank financial institutions (NBFIs) are also making significant Bangladesh according to their categories; percentile share can also be seen in the figure 2 below: contribution towards financing various sectors like industry, commerce, house-building, ICT and others. Currently, 29 (twenty-nine) NBFIs are operating in Bangladesh. Of these institutions, 1 (one) Table 56: Structure of the Banking System in Bangladesh is government. Owned; 15 (fifteen) are local (privately owned) and the other 13 (thirteen) are established under joint venture with foreign participation. The paid-up capital and reserve of these Banks No. No. of % of total % of total SBs; 10% NBFIs as of December 2008, totaled up-to Tk. 22.53 billion. The total investment of these Branches asset deposit institutions in different sectors of the economy amounted to Tk.113.15 billion. Lending and leases SCBs; 8% extended by the NBFIs, like other scheduled banks, are subject to the classification and provisioning SCBs 4 3,387 30.66 26.84 SBs 5 1,364 6.08 4.66 regulations. Up to March 2009, the ratio of classified loan of financial institutions stood at 8.63 FCBs; 19% percent. PCBs 30 2,127 53.71 60.96 FCBs 09 58 9.55 7.55 PCBs; 63% The Bangladesh Bank exercises powers under the Financial Institutions Act 1993 and regulates Total 48 6,936 100% 100% institutions engaged in financing activities including leasing companies and venture capital Figure 6.2 Composition of banks companies. Although foreign banks and private banks show better performance according to different criteria 6.1.5 Micro Finance Institutions (MFIs) such as capital adequacy, quality of assets and expenditure-income ratio, the common people throughout the country have easy access to SCBs and SBs because of their locations. Foreign banks The microfinance institutions (MFIs) constitute a rapidly growing segment of the Rural Financial do not have a single branch in any rural area of Bangladesh. Besides, though PCBs have branches Market (RFM) in Bangladesh. Microcredit programs (MCP) in Bangladesh are implemented by beyond the urban areas, it is only 30.47% of their total number of branches. On the contrary, 63.39 formal financial institutions (both SCBs and SBs), specialized government organizations and percent and 88.49 percent of the total branches of SCBs and SBs are located in different sub-urban Non-Government Organizations (NGOs). The growth in the MFI sector, in terms of number of and rural areas of Bangladesh respectively. Table 9 summarizes the region-wise distribution of bank MFI as well as total membership, was phenomenal during the 1990s and continues to grow till today. branches in Bangladesh. Microcredit programs of NGOs (known as NGO-Microfinance Institutions or NGO-MFIs) and Grameen Bank play a dominant role in this financial market where NGOs serve 61% and Grameen able 57: Branch distribution of the Banks in Bangladesh Bank serve 24% of the total borrowers. Service charge normally varies between 10- 20%. y e Typ of No. of No. of Branches As % of total Branches Microfinance has a nationwide activity as it the major provider of credit services to the poor outside Banks Banks Total Urban Rural Total Urban Rural formal banking system. Government enacted Micro Credit Regulatory Authority Act 2006 to have a regulatory framework for ensuring transparency and accountability of MFIs. SCBs 4 1,240 2,147 3,387 36.61 63.39 100 SBs 5 157 1,207 1,364 11.51 88.49 100 6.1.6 Capital Market PCBs 30 1,479 648 2,127 69.53 30.47 100 FCBs 9 58 -- 58 100.00 -- 100 The capital market, an important ingredient of the financial system of Bangladesh, plays a Total 48 2,934 4,002 6,936 42.30 57.70 100 significant role in the economy of the country as a source of long-term financing. Due to 93 94 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 6 comprehensive policy support and time-bound implementation combined with satisfactory level of investors’ confidence, country’s capital market observed expected level of progress. The Securities 6 6.1.8 Industrial finance sector in Bangladesh and Exchange Commission (SEC), the main regulatory body, exercises powers under the Securities In Bangladesh, banks and financial institutions are involved in industrial financing both in short and and Exchange Commission Act 1993. It regulates institutions engaged in capital market activities. longer terms to provide services like project loans, term loans, leasing, working capital loans, SME There are two stock exchanges; the Dhaka Stock Exchange (DSE) and the Chittagong Stock finance, etc. Several Banks also join together for arranging larger fund under syndicated term loan Exchange (CSE) which deal in the secondary capital market. As of March 2011 the total number of concept. The amount of industrial term loans disbursed by the banks and financial institutions enlisted securities with DSE and CSE are 239 and 169 respectively. stood at BDT 258.7 billion, increased by 29% than that of FY09. This indicates the overwhelming preference of bank finance in industrial investment financing. The recoveries also increased by 16.5 In market capitalisation excluding treasury bonds, the financial sector dominated with 46.6 percent percent to BDT 189.8 billion in FY10. The outstanding balance showed a positive growth of 18.3 share, followed by services and miscellaneous (32.2 percent), manufacturing (21.1 percent), and percent as of end June 2010. The four SCBs and five state-owned specialised banks together had corporate bonds (0.2 percent) at the end of June 2010. Market capitalisation inclusive of new issues BDT 137.6 billion (24.3 percent) shares of the total BDT 565.5 billion outstanding loans as of end increased remarkably by 117.6 percent to BDT 2700.7 billion or 39.1 percent of GDP at the end of June 2010, making them major players in industrial term lending (Table 6.12 and Chart 6.5). June 2010 from BDT 1241.3 billion at the end of June 2009 in DSE, while in CSE it was increased However, with very high levels of overdue loans, their actual role in current lending is quite minor, by 129.9 percent to BDT 2241.8 billion or 32.5 percent of GDP in FY10. In FY10, the amount of they disbursed only BDT 19.3 billion (7.5 percent) out of BDT Taka 258.7 billion in FY10. Of the turnovers in the secondary market also increased by 186.8 percent and 73.4 percent respectively at total disbursement, private commercial banks were the major share holders (BDT 203.9 billion) in DSE and CSE. In FY10, all-share price index in DSE increased by 102.8 percent while in CSE FY10, followed by financial institutions (BDT 28.6 billion), SCBs (BDT13.4 billion), foreign banks increased by 72.9 percent. The figure 6.3 shows the trends in market behaviour of DSE: (BDT 6.9 billion) and state-owned specialised banks (BDT 5.9 billion). The table 10 and figure 6.4 shows the disbursement of industrial loans by the banks and financial institutions in the FY09 and FY10: Trends in market behaviour of DSE 3000 6000 f r banks and fi Table 58: Industrial term loans fo f gures in billion BDT) f nancial institutions(fi 2500 5000 Lender Disbursement r Recovery Outstanding Overdue Price index billion BDT 2000 4000 FY09 FY10 FY09 FY10 FY09 FY10 FY09 FY10 1500 3000 SCBs 11.1 13.4 12.5 10.9 100.1 111.1 30.1 30.9 1000 2000 PCBs 132 203.9 92.7 135.5 268.8 331.5 23.9 21.4 Foreign Banks 29.6 6.9 29.3 7.4 17.3 19.1 0.6 0.4 500 1000 Specialized 4.0 5.9 4.3 6.7 24.7 26.5 7.1 6.5 0 0 Banks FY08 FY09 FY10 FIs 23.1 28.6 24.1 29.3 67.2 77.3 4.6 5.0 market capitalisation Turnover All Share price index Total 199.8 258.7 162.9 189.8 478.1 565.5 66.3 64.2 g adesh Bank. Source: Agricultural and Special Studies Department, Bangl Figure 6.3: Trends in market behaviour of DSE 6.1.7 Insurance Companies The insurance sector in Bangladesh is regulated by the Insurance Act, 1938 with regulatory oversight provided by the Controller of Insurance on authority under the Ministry of Commerce. General insurance is provided by 44 companies and life insurance is provided by 22 companies. The industry is dominated by the two large, state-owned companies, Sadharan Bima Corporation (SBC) for general insurance and Jiban Bima Corporation (JBC) for life insurance, which together command most of the total assets of the insurance sector. 95 96 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 6 Figure 6.4: Industrial term loans for banks and FIs, FY10 6 Salient features of Industrial Finance 1. Period of loan Industrial term loans of banks and FIs,FY10 Normally, for the industrial projects the banks and FIs commonly provide term loans/lease finance 250 for tenure up to 4-5 with/without grace period facility ranging 6-12 months. 200 2. Rate of Interest 150 Interest Rate (%) in Banks and FIs billion BDT Interest rates (%) on loans SCBs (in %) PCBs and FIs 100 Agriculture 2.0 - 12.5 All PCBs and FIs fo f llow indiviv dual Large and medium industries 11.0- 13.0 interest rates. However, the rate never Worki k ng capital 12.0- 14.0 comes below the SCB. At ti t mes, rate is 50 Export 7.0 t onship determined on bank- client relati Other commercial loans 12.0- 14.5 also and track record of the 0 Small industries 8.0-12.5 entrepreneur. SCBs PCBs FBs SBs FIs Others 5.0 -17.0 Disbursement Recovery Overdue 3. Debt-Equity Ratio From the table 10 it appears that the demand for total loan is on the rise. Financial Institutions are Normally, local banks and FIs encourage debt-equity ratio at 60:40, though 70:30 debt-equity is the found to be more interested in short-term financing rather than long term because of liquidity risk standard practice by the banks and FIs. However, in case of large scale project with new technology arising funding of these long-term loans with typically shorter-term deposits. and adequate market prospects, banks and FIs sometimes relax this ratio, considering other aspects of the business. In the case of lease financing for industrial project, such concept of debt-equity Total advances of scheduled banks by economic purposes stood at BDT 2574.4 billion at the end ratio is not widely applied. On the other hand, IFC study on SME finance (“The banking survey of of June 2010 which is 23.1 percent higher than the total advances of BDT 2090.5 billion at the end the SME market in Bangladesh”) has indicated that debt-equity ratio for SME has been varying of June 2009. Of the total advances, trade sector recorded the significant improvement by 31.2 from 0.18 to 0.33. percent followed by construction sector 26.3 percent, industry sector 20.3 percent. The following figure shows sectoral share of total advances by the scheduled banks: 4. Security of Loan Figure 6.5: Sectoral share of total advances by the scheduled banks In case of industrial project financing, the entire project is offered as primary security. In addition to this project, the banks and FIs also require additional security which may be fixed deposit receipt, Others 12% Agriculture, forestry, fishing 6% bank and insurance guarantee, landed property, corporate guarantee etc. Industry 21% 6.1.9 Industrial finance portfolio of different banks and financial institutions Investment portfolio of five leading financial institutions (three commercial banks and two NBFIs) has been analyzed to understand the sector exposures. It shows that IDLC, leading NBFIs of Bangladesh has got more diversified sector exposure. Another important fact of the analysis is that Trade 38% Apparel and Accessories, highest export earners for the country is the most favorite choice among Working capital financing 15% all banks and financial institutions. It ranges from 10% to 20% of total Portfolio of financial institutions. Other dominant sectors are power and energy, Housing and Real Estate, Food and Construction 7% Beverage and Pharmaceuticals. Figure 6.6 shows industrial finance portfolio of few banks and FIs Transport 1% in the country: 97 98 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 6 6 In the SME policy, an indicative target for SME loan disbursement has been set for 2010 by the banks and financial institutions Each bank/financial institution shall follow a separate business strategy in financing SME loan. Priority shall be given to small, medium and women entrepreneurs and a loan amount up to BDT 25, 00,000 to women entrepreneurs against personal guarantee can be sanctioned against personal guarantee. For small entrepreneurs credit limit will be ranged from BDT 50,000 to BDT 50,00,000. Bangladesh Bank has refinancing facilities for banks and FIs to accelerate credit flows to the SME sector and banks/FIs can provide disbursement of refinanced fund to the clients at Bank rate +5% interest.. Donor financial resources made available in the SME sector. Of the total resources available, up to 20% is earmarked for medium enterprises, while the remainder, 80% is earmarked for small enterprises. Within each division, the resources to be divided up into a public-sector venture-capital fund (10%), and the remainder to be allocated as a credit fund. 6.2.2 Policy Guidelines for Green Banking Recently Bangladesh Bank has formulated policy guidelines for green banking with a view to developing green banking practices in the country. An indicative green banking policy and strategy framework has been developed for the banks which have been segregated into 3 phases (2011-2013) as follows: Phase I: In the first phase (till December 2011) all the scheduled banks are given directives to adopt Figure 6.6: Industrial finance portfolio of few FIs and Banks green baking policy and strategy approved by their board of directors. Banks need to integrate 6.2 Overview of Present Policies for Industrial Finance environmental and climate change risk as a part of the existing credit risk methodology. Banks need to initiate in-house energy efficient activities and reduce energy consumption by using energy Individual banks and financial institutions have developed their industrial finance policies in line efficient technologies within the banks. The banks are asked to introduce green finance under which with the Industrial Policy of Bangladesh which has been mentioned in section 3. According to the eco friendly business activities and energy efficient industries will be given preferences in financing Industrial Policy, industry includes all entities engaged in manufacturing and service activities, by the banks. Banks are also asked to create a climate change risk fund and finance the economic entities engaged in production, processing and assembling, and rehabilitation and fabrication of activities of the flood, cyclone and drought prone areas at the regular interest rate without charging manufactured goods and the services that are received through the use of machinery and durable additional risk premium. resources. Detail financing products offered by the banks to the industries are outlined in section Phase II: In the second phase (till December 2012), banks need to formulate sector specific policies 9.1. In addition to the industrial policy, government has formulated SME policy strategies and green for different environmental sensitive sectors such as agriculture, agri-business (poultry & dairy), banking guidelines for the banks that take into accounts the financial features of the industrial agro farming, leather, fisheries, textile and apparels, renewable energy, pulp and paper, sugar, sectors. engineering and basic metal, chemicals (fertilizers, pesticides and pharmaceuticals), rubber and plastic industry, brick manufacturing, ship breaking etc.. Banks need to determine a set of achievable 6.2.1 SME Policy Strategies 2005 targets and strategies for green financing and publish these in the annual reports and websites. Banks need to develop an environmental risk management manual in their assessment and As mentioned in the Industrial Policy 2005, SMEs are considered as a thrust sector for balanced and monitoring of project and working capital loans. sustainable industrial development in the country. To ensure institutional financial facilities under easy conditions Bangladesh Bank has taken diverse steps; like opening of ‘Dedicated Desk’ for SME Phase III: In the third phase (till December 2013), banks are expected to introduce environment and ‘SME Service Centre’ in the banks and special facilities for the women entrepreneurs. friendly innovative green products to address the environmental challenges of the country. Banks Government has formed a SME Foundation as a pivotal platform for the delivery of all planning, need to publish independent green annual report following internationally accepted format like developmental, financing, awareness-raising, evaluation and advocacy services for SMEs in the Global Reporting Initiatives (GRI) with verification by an independent agency. country. Under the policy, a credit-distribution package shall be worked out by the Ministry of Industries. In the short run, the distribution of the funds will be the task of the BASIC Bank, and Bangladesh Bank will review the overall green banking initiatives (from phase I to phase III) by the BRAC Bank as the lead banks and over the medium term, this responsibility will devolve to the SME banks on quarterly basis. Foundation. 16 Website: www.bangladeshbank.org.bd 99 100 Investment Potential and Barriers Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 7 Investment Potential and Barriers 7 Annual reports of the different banks and FIs indicated a strong portfolio of industrial term loans and lease finance. It means that additional finance or loans to this clientele may not worry them much. However, main concern still remains on how much funds would be required, and when 7.1 Investment Potential and Financing Needs should be disbursed and to whom should they disburse. This means there is a knowledge gap. Estimates of required investment to bring in efficiency in the use of EE and/or application of RE Estimate of potential investment opportunity and financing needs will be a function of several in the production activities of selected industrial sectors have been made with some assumption and other factors which have direct and indirect influence on the investment decisions by the bankers. approach. However, before making such estimate of investment potential, certain pertinent issues Attitude of the entrepreneurs is important who must create a demand for such funding support for should be analyzed from different perspectives. Firstly, any kind of new industrial investment measures which is even unique for every single industry. Finally, all these analysis is again heavily decision of individual industries generally depends on several important economic factors like influenced by the ratio of total production cost per unit to utility cost per unit, where energy price country’s GDP growth rate, trend in national export and domestic markets, availability of skilled plays a major role. For example, the price/cost of electricity to produce one metric ton (MT) of and competitively priced manpower, required energy, government regulatory measures, policy Steel product is only Tk.1,500-2,000 (as informed by the respondents) for which the industry is support and incentives, consumer’s spending and behaviour, etc. Secondly, the source of such new earning a revenue of Tk. 45,000 indicating a negligible percentage of 0.03% as utility cost. Again, investment either local or foreign is also a matter of importance and the financial and other relevant one bag of cement costs Tk.350/ where the cost of electricity to produce one bag of cement is only institutions through which such funds would be channelized needs to be considered. Thirdly, it is Tk.10-12/-. This indicates that utility cost is not playing a vital role in overall production cost and also important to analyze the trend of the selected industrial sectors whether they are on the growth productivity. In such case, measures to bring in efficiency in energy consumption get little or no path or declining or stagnating. importance to the entrepreneurs. It therefore recommended that the energy savings need to be projected as productivity gains. Findings from the field survey provided some indication on these issues and validated the analyses of prospects based on the secondary data. For example, Textile, Apparels, Food Processing, From the analysis of potential and scope of applying energy efficiency measures, three propositions Cement, Plastics, Steel and re-rolling, light engineering, etc are in the high growth path while have been identified in view of present and future competitiveness both in the local and export moderate growth is observed in case of chemicals, poultry and paper and pulp sector as reported by market as well as considering the varying life cycle of different industries and funding requirement. the cross-section respondents. Again, the sugar industry sector mostly remains stagnant due to several reasons like being public owned enterprise they lack aggressive entrepreneurial drive, scarcity From the field survey, the study team came across a number of initiatives in the area of EE/RE. of raw materials to operate at 100% capacity, old machinery and equipment, price volatility due to There are instance of EE/RE plans under active consideration of company’s top management, higher volume of imported sugar, etc., as observed during the field trips. However, interestingly, however information on required actual investment could not be collected for all sectors except one BSFIC has recently undertaken an energy efficiency initiative i.e. cogeneration of power from steel and re-rolling industry that requires Tk. 210 million in order to safe or cogenerate energy worth bagasse, which is considered as a pilot project and will be replicated in other sugar factories once 3.5 MW, as reported during the industry visit. It was also observed that whatever EE initiatives being this pilot project becomes successful. Therefore, while evaluating investment potential, one should taken or under active consideration of the managements are actually belong to the large scale take into consideration a number of aspects that have direct and indirect impact the industry itself. industrial units, only one case was observed in the SME sector. It indicates that entrepreneurs of large scale industries are more serious about this issue rather than SMEs. The trend in local industrial finance had been very positive in Bangladesh, although it showed some decline in the recent past, upward trend would be regained, as desired by the stakeholders. While In the backdrop of the above scenario and taking into account the overall industrial environment considering any financing activities in new area like EE and RE, banks and financial institutions will and current regulatory framework, it is obviously a difficult task to come up with an estimate of obviously follow certain norms (respective lending policies and norms). For example, when a bank required investment opportunity in industries against three options i.e. renovation, retrofit and EE or financial institution extends loan, strategies could be to remain within the existing borrowers or ab-initio measures and replacement of old machinery as explained in the earlier section. Individual extend loans to new borrowers within the existing profitable sectors as they already gained industries of some sectors may demand renovation, while industries in other sectors may have scope experienced. Financing in EE and RE could also follow the same policy to minimize initial cost and of retrofit and EE measures and some may require replacement of old machinery in part of full. to avoid bad investment. This needs to be done in order to minimize lending risk and to ensure From the survey findings, it was observed that sectors namely sugar might need both renovation, timely recovery of such loans. Currently, almost all the private commercial banks and non-banking whereas textile, RMG, steel and re-rolling, chemicals, and food processing might require retrofit and financial institutions extended industrial finance are in their growth path in terms of investment and EE measures. Again, plastics industries need to replace injection moulding machine with EE sectoral exposure. The local banks have already extended significant volume of loans and advances motors. Also, sectors like RMG, Textile, Food Processing, Steel, Cement, plastics, etc. have recently to the industries of the selected industrial sectors, except sugar industry which is owned and experienced expansion and modernization in a larger number as opined by the bankers during the controlled by the Bangladesh Sugar and Food Industries Corporation. It normally does not borrow survey. Therefore, it is assumed that scope of EE measures adaptation in these industrial sectors from the private commercial banks. would be more. Finally, almost all the private and public commercial banks and non-banking 102 103 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 7 financial institutions have extended a significant portion (ranges from 15% to 42%) of their total investment in the industrial sectors among the selected ones either in the form of term loan or 7 It is expected that over the next three years, a total of BDT 100,765 million or USD 1,440 million will be required to bring in energy efficiency within only 7,474 industrial units irrespective of the project finance, lease finance and working capital. It can be assumed that banks and FIs would sector. However, this target number is very insignificant compared to the estimated total number of finance further for EE measures as they have already extended industrial loans and built a industries in the selected sectors i.e. 112,797. Out of a total of 112,797 industrial units only 7,474 lender-borrower relationship and banks earn good returns, as evident from their annual financial units are initially targeted for EE measures, around 44% of them are large scale industries and the reports. rest 56% are falling under SMEs. The estimated number is much less than 7% (6.62%) of the total industries under the selected industrial sectors. From the above table, it is understood that the Apart from these, such EE initiatives would also experience a variable dimension while considering number of industries adopting any of three measures is expected to increase gradually due to the the size of industries with some exception. SMEs are less enthusiastic than the large enterprise demonstration effects of model projects. Several issues are assumed to be in place that would except light engineering sector where they desire to renovate and replace machinery and equipment contribute positively in achieving the target of such investment and these are as pointed out below: in order to reduce energy cost due to strict government rules of installing power factor regulator at factory level. It is worthwhile to mention here that as par government rules each and every light 1. Presence of Model case or Pilot EE project: In absence of strong awareness of benefits of engineering industry has to have power factor improvement (PFI) device/ regulator in their EE measures among the entrepreneurs of different industries, it is imperative to demonstrate factories from July 2011, for which small and medium enterprises need additional funds, as reported at least one “model case” on each industry sector. by the respondents during the field trips. Taking into consideration the above-mentioned issues and given the current regulatory environment and prolonged energy crisis observed that is limiting new 2. Government policy support and incentives: Besides show case of EE adoption, there industrial investment, an investment projection for EE can be made for the next three years as should be adequate regulatory frameworks, policy support and incentive mechanism to attract tabled below, provided the assumptions mentioned below the tables are gradually met: the entrepreneurs for investment in these sectors. Table 59: Projected Financing Needs /Investment Requirements for EE in Selected 3. Financing Scheme: Since the nature of investment is unique and payback period would vary Industrial Sectors from case to case and sector to sector, and the bank officials are not aware about its Investment Potential Retrofit Renovation EE abinitio Total Debt implementation process, it requires an appropriate financing scheme / product. (BDT (BDT (BDT (BDT Requirement million) million) million) million) (BDT million) 4. Availability of Energy Service Consulting Firms/ Consultants: Since this is a new sector, Cement Large 219,84 2,638 412 3,270 2,289 any investment for banks and financial institutions requires a series of analysis where technical SME - - - aspects demands external support from qualified person or firms. Steel Re- Large 240 3,200 180 3,773 2,580 5. Dissemination of EE technology and sourcing: Investment decision always bases each and rolling SME 20 35 98 every part on project. In this case EE equipment and device, retrofit and EE measures and even Poultry Large 2 16 5 91 36 for replacement of machinery, access to reliable information is pre-requisite to estimate of SME 6 58 4 funds. Light Large 8 73 13 204 100 Engineering SME 20 78 13 7.2 Barriers to Financing EE and RE Pulp and Large 50 800 75 1,503 821 Paper As of now, the banks and FIs are not extending any finance separately to the industrial sector for SME 240 180 158 the purpose of installing energy efficient equipment, device or process as well as for introducing the Chemicals Large 50 700 100 1,075 663 concept/ component of Renewable Energy. SME 90 60 75 Plastics Large 30 360 45 928 452 In reply to the questions of barriers they faced, the study gathered mixed reactions, but almost all the respondents were in consensus about the absence of regulatory framework and bindings and SME 238 120 135 incentive for energy efficiency production practices. So far, energy audit at individual industry level Textile Large 6,880 60,180 9,308 88,534 57,107 in Bangladesh is absent due to several reasons like lack of awareness about the benefits, lack of SME 4,300 4,790 3,076 technical personnel. Moreover, the cost of energy for industry in general is very low and RMG Large 3,195 29,210 10,954 46,540 31,305 insignificant compared to the total per unit production in Bangladesh. Given the current energy SME 1,123 657 1,403 price, the entrepreneurs and senior officials presume that the no significant amount of energy 104 105 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 7 saving through bringing EE technology or equipment at factory level could be attained, as observed during the field visits. 7 who directly work with owners / entrepreneurs to decide specifications of main plant and equipment. There are not many engineering consulting firms which provide turn-key services for setting up new units especially to SME segment. The team observed many barriers to implementing and financing EE and RE in Bangladesh. Most of these barriers were noted during the interview process. For example inadequate awareness on EE 4. Policy and regulatory: Bank Bangladesh has provided policy guidelines for “Green Banking” options was apparent from the discussions with wide cross section of stakeholder organizations. in January 2011. However, there are no rules and regulations which require industrial units to Following is the list of principal barriers observed: conduct energy audits. Similarly, there is absence of electricity demand side management measures and policies to reduce electricity consumption in specific segment of end users. 1. Inadequate awareness of EE options: Constraints to energy efficiency in Bangladesh can be explained specifically further as below: a. Industrial units: Most of the technical personnel the team interacted did not have adequate awareness of EE and RE options. Today almost every industrial unit has captive  In Bangladesh, access to finance and relative costs of external financing is an important barrier generator which utilises natural gas. Almost every unit with generator has cooling tower to cool preventing potential investments. Information and transaction costs must also be taken into engine jacket water (required for engine cooling). At the same time, many units need air cooling consideration as these are often important impediments to energy efficiency investments. or steam. Technical personnel were not aware of technologies such as vapour absorption chilling system. As such, banks do not receive requests for financing EE projects. Interview  Implementation of any measure of industrial manufacturing process modification may imply a with a senior office bearer of an industry association indicated inadequate awareness of EE temporary halt to production. Factory managers may prefer to avert such extra costs or options. There were a few exceptions and some industrial units have implemented efficiency complications while installing energy efficient machinery and equipment and process. improvements and resource recovery measures. Such units could be projected as model units to other units in the same sector. A textile processing unit near Dhaka is in the process of  Impact of energy efficiency measures in the industries sometime not widely visible which may developing a co-generation project. There was a marked difference of awareness level of EE discourage the entrepreneurs. In absence of policy and incentive like “Green Factory between exporting units and non-exporting units. The primary interviews indicated that almost Certificate”, industries may not have required motivation. Vendors of energy efficient 45% of the industrial units were aware of what is energy audit and environmental audit, but technologies face the problem that energy savings cannot always be easily measured. The they did not perform energy audits in their facilities. invisibility of the impacts of energy efficiency measures makes it sometimes difficult for vendors to convince their potential clients in the industrial sector. b. Financial institutions: Banks and financial institutions do not have specific financing products for supporting EE projects. While most of the bank officials are familiar with solar  The rate of return on energy efficiency investments is often seen as too low and their influence PV home systems, very few (negligible in numbers) were aware of EE options and possibilities. on product cost or operational expenses may be regarded as marginal. Investors are often Banks and institutions are familiar with modernisation projects and most agreed that such observed to prefer items that increase the quality of the product, increase productivity or projects improve productivity. Most of the banks and institutions do provide finance to contribute to comfort. industrial sectors under this study however; there was inadequate awareness of EE options. Normally banks ensure that the borrower has grid connection for electricity supply and also  Finally, there are also psychological factors affecting investment decisions on energy efficiency. captive generator. IDCOL, on the other hand, was aware of EE projects. These aspects include 'general aversion of perceived risks' involved is unknown', 'new' or 'not yet sufficiently proven' technology. 2. Lower Tariff levels: Electricity tariff applicable for industrial units is relatively low as compared with other neighbouring countries. Similarly, tariff applicable for natural gas use is very low. Thus resultant cost of electricity generated in the captive facilities works to almost BDT 2.5 per kWh. This reflects in the total lower energy cost as percentage of total operating cost. A senior official from a manufacturing unit mentioned that the rise in tariff (even almost double the present level) will not affect profitability much and hence not worried. 3. Inadequate availability of services related to EE: Energy audit and related services are available in Bangladesh at present. However, number of well trained and experienced energy audit consultants is relatively lower (as compared with total number of industrial units in the country). It was learned that many new units are set up with the help of individual consultants 106 107 Proposed Financing Mechanisms and Approaches Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 8 Proposed Financing Mechanisms and Approaches 8 8.1.1 Project Finance (Long term debt) Project Finance is the most common type of financing available in all FIs. Some common facts of 8.1 Existing Financing Products and Mechanisms projects financing are as follows: Financial assistance to industrial units (including SME and large units) in different forms is generally  For setting up of a new unit as addition to the existing product line and capacity, a new concern referred to as industrial finance. Often specialized financial institutions exist for providing financial of an existing group, a new Joint Venture project of an existing company, etc. services covering a wide cross-section of instruments. In Bangladesh, different categories of banks  Required debt-equity ratio is maintained and financial institutions are associated with industrial financing both in short and longer terms in  Financial solution for the entire project may be provided through mix of different financial various forms like equity participation, term loans (debt), leasing, working capital loans, SME finance, tools from wide range of services offered by banks and institutions. etc. There are also loan syndication systems under which large volume of fund is extended as loan  Loan tenure varies as per individual institutional lending policies. For fixed portion loan period under a consortium concept where more than one bank take part with individual share of loans. may be up-to 7 years  Debt-Equity ratio of 70:30 is the norm. Exceptions, however, are made in deserving cases. Financial products and services in Bangladesh can broadly be divided into three categories i.e.  Promoters' integrity and management capability. Equity, Debt and Aid/Subsidy/Grants. Three types of equity are available: Common equity,  Conducive market condition Venture capital and Equity Finance. Financial products among different banks and financial  Assurance of raw material and spare parts supply institutions of Bangladesh are homogenous though there are slight variations among Private  Financial viability including acceptable profitability ratios, turnover ratios, debt service coverage Commercial Banks and Non Banking Financial Institutions. Major financial products of five NBFIs ratio, IRR etc. and six commercial banks surveyed are shown in Table 13 It exhibited that project finance is the most common generic financial product in both Banking and Non Banking financial institutions. 8.1.2 Term Loan Table 60: Types of Available Finance for Industries in Bangladesh FIs provide term loan for the industries. The longer maturity loans can reduce the size of Equity Financial Instruments Institutions installment payments and help improve the cash flow of the enterprises. Some features of the term Common Equity Initial Public Offering s 37 investment banks loan facility are as follows: Venture Capital Venture Capital 2 venture capital firms:  For meeting various regular capital/fixed expenditures like balancing of production line, VIPBL, Brummer & Partners modernization of manufacturing process, expansion of capacity and space, etc. Equity Finance Equity Bgladesh Bank an  Usually for a tenure of 1½ to 5 years IDLC Finance, IPDC, IFC,  Repayment through monthly or quarterly installments DEG  Installments may be equal or structured (step-up, step-down, bullet, etc.) Debt Short term Loan Working Capital Finance, All commercial banks and 8.1.3 Working Capital Finance Factoring, NBFI Long term Loan Project Finance, All commercial Banks and Short Term cash requirement / working capital need of clients are met, in selective cases, by Term Finance, NBFI providing time loan facilities for a short term, generally for a period of one to three years. The loan Lease Finance, is repayable by monthly or quarterly installments based on cash flow of projects. SME Finance, Bridge Finance, Off-shore Finance 8.1.4 Common Equity Club Finan ce/Loan Syndication Bonds & Debenture Commercial Bonds, Government Bonds Bangladesh Bank, Public Common Equity is provided by general and institutional investors through Initial Public Offering Limited Companies (IPO). Merchant Banks, intermediaries for IPOs, arrange the IPOs for the issuers. At present about Aid/Subsidy/Grant 37 investment banks are operating in Bangladesh who are generally known as Merchant Banks in the SME Refinance Scheme SME Credit through Commercial Banks Bangladesh Bank,IDA Capital Market. SME Grant Scheme SME Credit through Commercial Banks Asian Development Bank In the capital market of Bangladesh, two methods are available for fixing offering price: General Method and Book Building method. If the company goes for general method then par value of Brief description on each financial instrument used in Bangladesh is given below. 109 110 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 8 share should be BDT 10. Otherwise, if the company goes for Book Building Method, modern 8 participating banks, a lead bank is selected who does all necessary documentation and execute & administer the syndicated finance. Types of facilities arranged under the syndicated finance are system of selecting offering price, then it should invite institutional investors to bid within the indicative price band (Floor and Ceiling price within which the investors should bid). lease finance, term loan and project finance.. 8.1.5 Venture Capital 8.1.9 Factoring Venture Capital, a very emerging concept in Bangladesh, is getting its momentum slowly. At present, Factoring of accounts receivables is an arrangement where finance is provided against the credit three venture capital firms are working in Bangladesh. Venture capital firms who are quite new in invoices for supply of goods or services. This helps the supplier receive a significant portion of the Bangladesh have just begun its investment. Small Enterprise Assistance Fund (SEAF) who have just invoice amount soon after the delivery of goods or services. However, factoring is available only if began its operation in last year has got grant of USD 12 million from IFC and are supposed to get any seller supplies significant amount of goods/services to business entities on credit. another USD 10 million from other sources. Major policies of venture capitalists of Bangladesh are as follows: 8.1.10 Carbon Finance  Investment range: USD 0.1 million to USD 0.5 million Carbon finance, new concept developed due to adverse effect of climate change, is practiced by few  Venture Capital firms appoint consultancy firm to prepare project proposal for entrepreneurs FIs like IIDFC. IIDFC is acting as the bundling agent of a CDM project titled as ‘’ Improving Kiln  Venture Capital firms take equity participation in venture Efficiency in the Brick Making Industry in Bangladesh’’ under which energy efficient Hybrid  Venture Capital firms provide Business Development Services to the entrepreneurs Hoffman Kiln (HHK) technology is adopted in 20 brick fields. IIDFC has entered into an Emission Reduction Purchase Agreement with the World Bank, trustee of the Community Development 8.1.6 Equity Finance Carbon Fund and the Govt. of Denmark to transfer the Certified Emission Reduction (CER) generated from the HHK brick fields to the owners of the brick fields. Under Carbon Finance Currently, Bangladesh Bank is involved in equity and entrepreneurship funding. General Equity scheme, IIDFC provides following services: Participation Finance, apart from Initial Public Offering, is not very popular in Bangladesh though few financial institutions like IDLC and IPDC are providing the service on a very limited scale.  Project Development (CDM projects)  Carbon Finance and Advisory services 8.1.7 Lease Finance  Carbon Credit Transfer The leasing provides financial flexibility to enterprises for procurement of capital assets without 8.1.11 Bonds and Debentures blocking their own funds. FIs procure the necessary machinery and equipment used by the clients under leasing arrangement. Lease rentals which include both interest and principal payments are tax Bond market in Bangladesh is very small. The dominant player in the bond market is the deductible expenditure. The documentation requirement also is simple, convenient and less time government. At present, the government issues long-term savings certificates at high interest rates consuming. and government bonds, and it only has market oriented rates for Treasury bills (T-bills). The market is small, with outstanding of about USD800 million.  Asset backed financing against industrial machineries, commercial equipments, office equipments, generators, vehicles, vessels, engines, etc. Government bonds, with maturities ranging from 3 to 25 years, are issued when needed; they do not  Financing may be extended upto 100% of the cost create a yield curve as Treasury bonds are nontransferable, mostly because they are issued to  Usually for a tenure of 3 to 5 years recapitalize state-owned banks. Their notable feature is that they are guaranteed by the government  Repayment through monthly or quarterly rentals and are eligible for SLRs.  Rentals may be equal or structured (step-up, step-down, bullet, etc.)  Legal ownership remains in the name of FIs throughout lease period Government savings certificates (GSCs) range in maturity from three to eight years. GSCs are  Ownership is transferred to the client at the end of lease offered to different types of investors in the retail sector (but small corporate are allowed to invest). The types of investors are mostly individuals and families but also include charity and provident 8.1.8 Consortium/Syndicated Financing funds. For relatively larger amount of financing FIs, given its long track record, position and reputation in the financial industry, arranges funds in partnership with other FIs/Banks for the client. Among the 111 112 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 8 8.1.12 SME Finance 8 f w fi Table 62: Financial products of fe f nancial institutions and Banks To ensure institutional financial facilities for the SME sectors, Bangladesh Bank has taken initiatives y es of FIs and Typ r ices Product and Serv like opening of ‘Dedicated Desk’ for SME and ‘SME Service Centre’ in the banks and providing Banks special facilities for the women entrepreneurs. FIs/NBFIs Alongside the disbursement of loans, since FY2004-05, Bangladesh Bank has taken up a scheme of IDLC Lease Finance, Sales & Lease Back, Term Loan, Project Financing, BDT 1000 million for refinancing the scheduled banks and financial institutions as revolving fund. f rred Equity Investments, Bridge Financing, Club Financing, Prefe Recently, the scheme has been widened with an enhanced allocation of BDT 6000 million. Up to f nancing of existi Refi t es, Long Term Finance fo t ng liabiliti f r Real Estate Developers, Common Equity t Investments, Factoring, Distributor June 2009, BDT 7164.4 million has been disbursed among different scheduled banks and financial Financing institutions for refinancing potential entrepreneurs. In addition to this, IDA has provided USD10 NBFI million and the Government of Bangladesh has provided BDT 1123.2 million through ‘Enterprises IPDC Project Finance, Worki k ng Capital Financing, Growth and Bank Modernization Project (EGBMP)’. With the stipulated revolving fund of BDT MIDAS Lease Finance, Term Finance, Housing Finance 2245 million up to June 2009, refinancing facilities have been provided to different scheduled banks IIDFC Lease Finance, Term Loan, Project Finance ,Structured Finance , SME and financial institutions. Moreover, in an attempt to provide incentives to the sector, ADB has been Finance, Home Loan, Factoring, Carbon Finance, Worki k ng Capital providing an additional USD30 million to Bangladesh Bank. These resources would contribute both Finance in employment generation as well as in enhancing the purchasing power of the poor. Up to June IDCOL Project Finance, Term loan 2009, Bangladesh Bank has disbursed BDT 3342.5 million for refinancing of this program. EBL Industrial and Project Financing, Investments/ Capital Market Information on SME refinancing program of Bangladesh Bank extended through various banks rvices, Transacti Serv t on serv rvices and FX, Deposits & rvices, Trade Serv and financial institutions is shown at Table 14 Cash Management Soluti t ons Table 61: Summary f rmation on SME Refi r Info f nancing (up to June 2009) UCBL Import Finance, Export Finance, Worki k ng Capital Finance, Loan Syndicatit on, Underw t ng and Bridge Financing, Trade Finance, rwriti Refi f nancing Amount Refi A f nanced Industrial Finance (in BDT 00,00000) f ciary No. of Benefi r Enterprises Source Trust Bank Agro-Business Loan, Entrepreneurship Development Loan, Loan fo f r PCBs Working Mid Long Total Industrial Commercial Serv g t Engi Ligh g neering, Loan fo f r Poultry Firm, Loan fof r shop keepers, r ice Total Capital term Term Loan Loan Loan Peak season loan, Loan fo f r women Entrepreneur loan Loan Prime Bank Short Term Loan, Mid Term Loan, Long term Loan, Lease Finance, (a) a Bangl g adesh 178.48 336.40 201.56 716.44 1724 4150 1127 7001 SME loan, Bank R C Bank BRA Overdraft f , Short Term Loan, Lease Finance, Loan Against Trust ( ) IDA (b 61.51 96.40 66.59 224.50 899 1220 358 2477 Receipt (L (LATR) R , Work Order Finance, Emergi g ng Business, (c) ADB 138.68 112.82 52.75 304.25 728 1864 331 2923 Syndicatit on, Term Loan, Project Finance, Bill Purchase, Bank Total 378.68 545.62 320.90 1245.20 3351 7234 1816 12401 Guarantees SBs BDBL Project Finance, SME Finance FIs and banks promote small and medium entrepreneurs in manufacturing and service industries BASIC Bank Industrial Project Finance, terms loan, worki f r industries, k ng capital fo through their SME Finance Scheme. Small and Medium Enterprises involved in business with a short term loans under B2B L/Cr proven track record are primarily eligible for the schemes. FIs and banks offer different financial SCBs Sonali Bank Industrial Project Finance, terms loan, agricultural loans, worki k ng products to the potential clients considering the sponsors' credential, management strength, sales f r industries, pledge and hyp capital fo t ons, short term overdraft y othecati f growth, technical soundness, cost efficiency, future prospect and last but not the least their fa f cility against back to back L/C transaction behavior with other lenders and associates. Most common sectors under the SME Agrani Bank Industrial Project Finance, terms loan, agricultural loans, worki k ng financing facilities are Light Engineering, Plastic Manufacturing, Food Processing, Garments and f r industries, pledge and hyp capital fo t ons, short term overdraft y othecati f Textile, Knitting and Embroidery, Garments Accessories, Handicrafts, Printing and Packaging, fa f cility against back to back L/C Poultry / Animal Feed, Clinic and Diagnostic center, Hotel and Restaurants. Typical Financial products of 11 leading financial institutions and banks are described below in table 15. 113 114 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 8 8.2 Proposed Financing Mechanism 8 a cost of a new plant (excluding land cost). Isolated EE measures will require relatively lower expenditure which could be almost 30% of the cost of a new plant (excluding land cost). This This section describes some of the financing mechanism for the financial institutions and banks in indicates that the financing needs of implementing these three approaches will be differ. Applicable Bangladesh. The discussion is based on the approaches recommended to improve efficiency in the financing mechanism in each of the above options will differ. The following paragraphs describe industrial sectors under consideration in Section 5. At the same time these financing mechanism are proposed financing mechanisms. simple to implement and in line with the existing principal financing products by banks. These financing mechanisms / options are not radically different and not complex either. The principal financing mechanisms recommended include: The following table provides a snapshot of different commonly used financing mechanisms for EE 1. Term loan with lower interest rate (interest buy down); and RE projects around the world: 2. Support to energy audit along with term loan with lower interest rate; and 3. Vendor financing Table 63: List of EE Financing Mechanisms 1. Term loan with lower interest rate (at interest rates lower than prevailing commercial rates) (also Sr. Financing Institution / Fund Used Comments known as interest buy-down): EE projects provide attractive financial returns in most countries No. Mechanism f r fo (especially those where electricity tariff levels are on the higher side and energy costs forms 1. Loan / Debt r Volksbank Serbia, Hungary Standard loan at commercial substantial percentage –say 30% to 40% of operating cost). However, EE projects do not (Commercial ( nder Financing agencies (u rate of interest. Usuall ly indicate attractive payback periods of less than 1 year (or even some instances less than 3 years) terms) HEECP), other banks in v ded based on balance provi mainly due to relatively lower tariff levels. Thus entrepreneurs are not attracted to Eastern Europe. sheet strength. implementing EE projects. Most of the entrepreneurs / owners of the existing units have 2. Loan / debt at f Loans KfW t ve provi Incenti v ded to end inadequate knowledge of EE projects and role that such projects can have in respect of reduced interest rate users to take up EE projects increasing productivity and competitiveness. Thus the other reason for recommending lower 3. Credit Guarantee Internati t onal Finance Guarantee cover proviv ded to rates of interest is to attract owners of industrial sectors to avail of finance to implement EE (Parti t al) l Corporatit on (IFC): Hungary r fi f nancing agency towards loan projects under all the options mentioned above. Such financial assistance can be made available EE Co-fi f nancing Program loss. only if Bangladesh is able to receive low cost funds from bilateral or multilateral financing (HEECP) agencies. It may be mentioned here that such loans could be provided to pilot demonstration 4. Grant Asian Development Bank This fi f nancing product can be projects (in the event that low cost funds are not available from international financial ( DB) (A used fo f r project development institutions. In general such a financing mechanism is used for launching new programme to support, conducti t ng energyg promote EE. Once sufficient level of awareness is created need for lower interest rate loan audit and analysis could diminish as the owners realise the importance of adopting EE to increase competitiveness. This financing mechanism, however, has a disadvantage that it distorts the 5. t onal Conditi USAID and the World Bank Can be used fo v ding f r provi Grant Programmes support f r fo conducti t ng market mechanism. This is similar to offering a subsidy. g audit. Only if project energy gets implemented then Table 64: Features of term loan with lower interest rate t onal grant is converted conditi into loan. Term loan with lower interest rate Features Comments As mentioned earlier, the team recommended three broad categories of EE and RE measures. Potential for As the interest rate does not reflf ect true market prices and is at These include: Replication discount, makes borrowers get used to cheaper fi f nance fof r EE. Besides, every bank and insti t on may not hav t tuti a e access to a) Renovation of existing industrial units (for relatively old units older than 10 years); f nds fr lower interest rate fu f om bilateral or multi f nancing t lateral fi b) Isolated EE and RE measures (for relatively new industrial units) and; t tuti insti t ons. Such as scheme is usefu f l to demonstrate the c) EE “ab-initio” (for new units being planned to be set up and are in design stage). ffecti eff t veness of a new technology g or to introduce new EE fi f nancing programme. Bangl g adesh does not hav a e any existi t ng The cost of implementing the first measure is almost 40% of the cost of a new plant (excluding EE fi f nancing programme. Since this wi w ll be new progr g amme land cost). On the other hand, EE “ab-initio” needs additional expenditure to the extent of 30% of such a support is needed. 115 116 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 8 Sustainability of The fi f nancing mechanism is not sustainable, as it is intended 8 instrument / fo f r market development and support in the initi t al phase of Bank mechanism t on of a new programme. introducti Benefi f r fi f ts fo f nancing Primary objecti t ve of such soft f nance is to create aw f fi a areness of institution g eff energy fficiency. It is oft f en used fo f r seeding of market. t cipati Parti f nancing insti t ng fi t on may not receive benefi t tuti f ts or EE Equipment Vendor can not earn high g er profif ts on such instruments, as these are meant fof r demonstrati t on and developmental purposes. S1, S2, S3, …… Small scale industrial units f r success Potential fo Potenti f r success of fi t al fo f nancing instrument can be good as it M1, M2, M3, ….. Medium scale industrial units gains popularity owi w ng to lower interest rate. f ts Benefi Borrower units stand to gain on account of lower interest payment and other associated benefi f ts. f r Recommendations fo A bank or a fi f nancing insti t on needs to carefu t tuti f ne the f lly defi adaptation target market and eligi t criteria. Besides minimal marketi g bility t ng fforts are needed to create aw eff a areness of the scheme. Internal procedures fo v ew of projects need to be prepared upfr f r revi f ont prior to launch. Similarly, trai a ning of operati f has to be t onal staff S1 S2 S3 M1 M2 M3 completed. Monitoring and revi v ew procedures hav a e greater role f nancing mechanism. in this fi f nancing able 65: Features of vendor fi 2. Support to energy audit along with term loan with lower interest rate: This is a variation of the above financing mechanism. In addition to the loan described above, this financing mechanism Vendor Financing envisages financial assistance to conduct “investment grade energy audit” for the industrial unit. Features Comments Purpose behind this support is to encourage industrial units to get energy audit done for their unit and hence to create awareness of efficiency and productivity improvements. The support f r Potential fo v ronment and presence of creditw Business envi t orthy vendors wiw ll could be provided in the form of grant. The other alternative is to provide “conditional loan” Replication govern replicability. There could be opportuniti fc t es in specifi with a condition that the borrower unit must implement recommendations provided by energy segments of EE improvements such as lighti fficiency t ng or eff improvements through f el rati g air fu t o control. audit firm. If the energy audit report does not recommend any medium or high cost options then in that case, the loan provided could be converted in to grant to that unit. Often energy Sustainability of f nancing mechanism wi The fi w th support of well w ll be sustainable wi audit personnel are questioned about their qualifications by owners of industrial units and even mechanism t ork EE vendors and increased aw developed netw a areness. challenge their findings (as it that plant personnel In the case of industrial units older than 10 years, suitable load profiling services could be offered by banks / financial institutions (as a CSR Benefif ts fo f nancing f r fi Financing insti t on gains fr t tuti f om incremental business generated on activity). institution f rmance risk is miti account of vendor based projects. The perfo t gated g the vendor which reduces risk level of an EE project. through 3. Vendor Financing: This financing mechanism is based on the principles of re-financing or f r success Potential fo t al fo Potenti w ll depend upon the wi f r success wi w llingness of vendors to pooled finance. Vendor or supplier of EE equipment plays key role in this financing take up large volume of loan on its balance sheet. Demand fo f r EE mechanism. Financial Institution or bank provides finance to a vendor to supply EE equipment wi w ll also govern the success. equipments to group of end user industrial units (and in many instances implement the f ts Benefi End user units can benefi f om lower cost of equipments and easy f t fr projects). The vendor in-turn develops business and supplies requisite equipments to end user a ailability of fi av f nance. Banks benefi f om increased lending wi f t fr w th units and provides financing package to them. The benefit of the mechanism is that Bank can t on cost. lower transacti reduce its transaction time by providing finance to only one entity and hence avoids dealing with individual end user industrial units. Vendor gets benefited as he is able to develop more Recommendations t tuti Insti w ll need to get conversant wi t on / bank wi w th vendor contracts business by providing finance to end user units and can earn extra revenue. Vendor can offer f r adaptation fo and associated payment mechanism. At the same ti t me products quality and credibility of vendors needs to be assessed prior to discounted price to end user units as there is larger volume of business. Such a financing entering into such a mechanism. mechanism is suitable for SME end user units and is being practiced in many countries. 117 118 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 8 Financing of EE and RE projects is relatively simple and does not necessarily require complex financing mechanisms such as those needed in limited recourse finance and in structured project 8 8.3 Technical Assistance Needs and Advisory Services finance for large infrastructure projects. This section provides discussion on Technical Assistance (TA) and advisory services needs and nature of advisory services that could be provided by IFC. Meetings with the stakeholder Most of the banks and financial institutions are familiar with financing modernisation projects. organisations provided following main findings: Renovation option suggested has nature similar to the modernisation projects. There is specific thrust on improving efficiency by replacing major components of motor drives and parts that have 1. At present there are a few energy audit services experts / companies in Bangladesh. Since there more wear and tear in renovation projects. Modernization projects, on the other hand, often include is no apparent need from the end users under study (which include industrial companies), there complete replacement of all plant and machinery and even change of process technology in some are no services. However, some of the industrial sectors which mainly export to advanced cases. Renovation option result in to saving of energy needed for the manufacturing process. Debt countries have conducted energy audits in their facilities as a part of the requirement from their finance needed for such projects requires longer repayment period of the order of 5 to 7 years. The buyers. On the other hand, GTZ (now called GIZ) has initiated a few energy audits in select team recommends that the first two financing mechanisms described above will be most suitable for sectors. GIZ has also conducted training programme to train energy auditors. Similarly, IFC has renovation options. (i.e. term loan with lower interest rate; and support to energy audit along with recently conducted similar programme for energy auditors. Barring a few equipment term loan with lower interest rate). manufacturers / suppliers (such as Energypac), there are no significant players present in the market. Growth of energy efficiency market needs presence of adequate number of trained The second efficiency improvement option relates to isolated EE and RE measures. These practicing energy auditors. Energy auditors will also be needed for “Measurement and measures include boiler efficiency improvement, replacement of existing standard motors with high Verification” of EE projects. efficiency motors, installation of efficient lighting system to replace old lamps, and utilisation of exhaust heat, etc. Applicability of these measures depend upon the sector characteristics and variety 2. Most of the industrial units have been managing captive electricity generation effectively. of other factors such as age profile of plant, nature of maintenance practices, capacity utilisation, However, technical personnel from most of these units are not aware of EE solutions such as etc. The cost of implementation of such measures is relatively lower as compared with renovation waste heat recovery, vapour absorption chilling units, efficient lighting. The principal reason for expenses. As the tariff levels in Bangladesh are lower, the payback period of some of these this is easy availability of natural gas at relatively low price (BDT 4.5 per cubic meter for boilers measures go beyond 3 years. However, as a general rule, implementation of these measures does not and BDT 6.16 per cubic meter for generators). require funds with longer tenure. In many instances vendors can also manage these projects and hence applicable financing mechanism for such measures could be vendor financing. The end user 3. Over the years, new EE improvement technology options have emerged and are widely used. units will be attracted, in the event a bank or institution can offer loans with lower interest rates for Ease of availability of these technology and equipment facilitates implementation of EE implementation of EE and RE measures. projects. At present some of the technology options such as vapour absorption chillers are not available readily in Bangladesh. Secondly, vendors of EE equipment and machinery need to EE ab-initio is applicable for new industrial units being set up in Bangladesh. It is envisaged to have closer cooperation with banks. identify such units being planned (at planning stage) and encourage these units to include efficiency improvement measures in the design stage. The other area to address at this stage is to help procure 4. Banks have been providing financial assistance to various sectors for new projects, expansion major plants and equipments such a generators, compressors and boilers of appropriate size (and to (capacity expansion), renovation / modernization and equipment finance. Almost all the banks ensure that they are not oversized). The other related option, as mentioned earlier, is to encourage and financial institutions are not aware of “energy efficiency improvement” projects. On the these industrial units to adopt “green building norms”. Thus EE ab-initio measure needs almost other hand, banks do ensure that the borrower has access to electricity (either through its 30% additional funds as compared with conventional project cost. This EE option can be financed captive generation or supply from REB, DESCO or PDB). Banks do know that energy is the out of conventional debt and equity finance as normal industrial project finance. However, principal input for steel industry. At present banks do not have adequate exposure to EE availability of lower cost funds could encourage more units to adopt “Green Factories” concept. projects and EE equipment financing. At the same time, banks do not have ready data on EE Such industrial units will have better competitiveness and will be able capture export market. This equipments and vendors. option is more applicable and suitable for “export oriented units”. 5. While setting up new manufacturing facilities entrepreneurs do select the most modern equipment and process technologies. Thus the gas based generators are of good quality, reliability and efficiency. However, it was observed that almost all the units with captive electricity generators have installed cooling towers for cooling the hot water from engine cooling system. There are opportunities to use this heat especially where there is steam requirement also. 119 120 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 8 6. It was found that Industry associations have mixed response to EE projects opportunities. A few associations of manufacturers felt that it was important to save natural resources, so that 8 Table 66: Indicative risk areas in selected EE improvement measures these could be utilised longer. Even though the tariff levels are low, it is the responsibility of Sr. EE Measure / RE R Risk Factors Key Player R Risk Mitigation and industrial units to save energy. No. Technologyg (Level) Comments 1. Replacing old plant t on risk Constructi Contractor in- w th borrower Contract wi 8.3.1 Technical Assistance Needs and equipment / (m ( oderate to t ng up charge of setti has to cover this area in t on producti gh) high the plant (EPC ( ime suitable clause. (T The team has identified following technical assistance needs after review of data gathered and machinery Contractor or and cost over run has to response received during the discussions with broad cross-section of stakeholder organisations. In Machinery supplier)r be guarded)d this regards, recommendations for efficiency improvement measures also need to be taken in to f rmance risk Perfo Supplier of the f rmance guarantee Perfo account. ( ow to (L equipment / warranty fof r the moderate)e equipment Development of appropriate loan products and financing mechanisms: As mentioned earlier, t on risk Operati Supplier of the f rmance guarantee Perfo the team recommends three broad categories of EE and RE measures. These include: (L ( ow to equipment / warranty fof r the moderate)e equipment a) Renovation of existing industrial units (for relatively old units older than 10 years); 2. Replacement of old f rmance risk Perfo Supplier of motors Contract needs to b) Isolated EE and RE measures (for relatively new industrial units) motors wiw th eff fficient (l ( ow to and associated include perfof rmance c) EE – “ab-initio” (for units that are being planned to be set up and are in design stage). motors / additit on of moderate)e control systems guarantee VSD / VFD These three broad categories will need different set of financing products and mechanisms. These 3. t on of Boiler Installati f rmance risk Perfo Supplier of Contract needs to accessories (L ( ow to equipments such as f rmance include perfo have been already explained in the previous section (Section 5). It will be essential to work with e moderate) economizer, super- guarantee financial institutions and banks interested in developing and implementing new loan products f el rati heater, air-fu to specifically to cater these projects. The team feels that the incremental work associated with new controllers, etc. products development will be minimal and will not have any implications for existing lending 4. fficient Ligh Eff t ng g ti Perfo f rmance g ti Supplier of ligh t ng f rmance guarantee Perfo policies and practices of the institutions. The “differentiated products” will attract attention of System Ri R sk (L ( ow) w system f r the / warranty fo focus industrial sectors (owners) and will provide an additional revenue sources and competitive equipment and edge to banks and FIs. Thus an appropriate programme could be designed to develop new products f cati verifi t on protocols by working with individual banks that are interested in going towards such products. Information dissemination – Data of Vendors + Vendors and industrial units meet: It is Banks- Loan officers’ training including risk analysis and risk mitigation framework: The next logical recommended that an appropriate information dissemination programme / initiative is step will be to provide an overview of these new financing products to loan officers from the banks implemented across the cross-section of stakeholder organisations (primarily for banks, financial and institutions which intend to provide loans to EE and RE projects. The training will be very brief institutions and end user units from the industrial sectors). The programme can have simplest form and will contain overview of salient features of EE and RE projects and associated costs, vendors of providing energy saving tips to detailed database of vendors and list of EE and RE equipments. and other aspects. It will be advisable to provide a brief (condensed) snap-shot for senior officials Energy saving tips could be provided to industrial units who are end users of energy. These tips can from banks followed by training with case studies to loan officers. Banks and institutions undertake be tailored to suit individual sectors and could be provided by associations of industries, chambers evaluation of project associated risks as also sector related risks while preparing project appraisal (or or banks and financial institutions. Secondly, a comprehensive data on vendors of EE and RE due diligence note). Loan officers are familiar with this analysis. It will be essential to provide an idea equipment and list of such equipment (with different manufacturers) could be prepared for use of on additional aspects to be considered for evaluation for EE and RE projects. An appropriate industrial units as well by financing agencies. This database can form a ready guide for procurement discussion on risk analysis and risk mitigation framework can also be included in the training module of appropriate equipment. The next stage could be to get the industrial units (from select sectors) for loan officers. As there has been no technical assistance to any bank or institution in the area of and suppliers / vendors of EE / RE equipments together on a common platform in an exhibition EE financing, much of the time had to be devoted on explaining nature EE and RE projects and cum seminar (or can be termed as “buyers – sellers meet). Such an event can provide an opportunity their benefits to industrial units and hence to banks. for industrial unit owners to understand role of EE / RE equipment to increase efficiency, increase productivity and reduce operating costs. The table 19 provides indicative risk areas in selected EE improvement measures: Manual on EE / RE technologies for financing agencies and industrial end users: Often end user industries and financial institutions / banks find themselves in disadvantage position due to 121 122 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 8 inadequate awareness of EE and RE technology options. This barrier could be addressed through a comprehensive user manual or handbook which can provide information on technology in brief 8 fee. However, a few audits could be performed free of cost to end users in the beginning, depending upon the availability of grant funds. Another aspect of “energy audit services” is linked to the along with case studies and examples from Bangladesh. It is recommended that such a manual is project development support explained in the next paragraph. Findings from an energy audit made available through appropriate medium (printed version or on CD) to end users and banks. can provide leads for possible EE and / or RE measures implementation in that particular unit. Such a manual can also include the database of suppliers and vendors of EE and RE equipments. Thus with interest and support of management / owner of the industrial unit under study, could lead to implementing standard EE improvement measures. Such a project could be Training in “Energy Audit”: (for graduate engineers and senior industry professionals who are financed suitably by banks. There are two broad categories of energy audits: a) walk-around in-charge of utilities / maintenance). The FS team recommends that senior engineers from utility energy audit / initial energy audit; and b) investment grade energy audit. Investment grade supply and maintenance divisions in the industrial units need to be trained in the energy audit energy audits will be of significance to banks and institutions since such an energy audit techniques. These officials can appreciate the need for reducing energy consumption and provides details of measures and associated cost-benefit analysis. possibilities of using alternative options. Secondly, their practical experience provides significant value to the overall knowledge / skill building of all participants. There is need to create a base of  Projects development support (Identification of specific areas of projects, pilot projects and energy audit consultants in Bangladesh. For this purpose, it is recommended that engineering degree cluster development): Project development support could be suitably extended to select holders (graduates) in electrical and mechanical areas need to be trained to become energy auditors. interested banks. Such a support could either be a) selective / isolated projects development in Energy auditing is a relatively new and emerging area in Bangladesh and hence it is essential that the beginning of EE lending practice; or b) comprehensive project development support. qualified graduate and experienced engineers are trained to create greater and positive impact of Selective / isolated projects development could be undertaken for (and on behalf of) a bank by these services. selecting a few units (less than 5) to conduct investment grade energy audits. Depending upon the findings of the audit, EE improvement projects could be structured for suitable financial Product development for Green Banking: Green banking policy will be implemented in phased assistance. Comprehensive project development support could be extended for a bank manner. This could provide an opportunity to help banks develop appropriate financial products. undertaking lending to EE and RE projects. To begin with existing loan portfolio of participant Also there will be associated actions such as project development support, training, etc. bank could be reviewed a) to estimate potential for energy savings; and b) to identify sectors and clients which could be potential borrowers for EE and RE projects. Energy audits (investment Other areas: grade) of select units could be carried out in each of the potential sectors to identify nature of projects and then developing EE projects in respective sectors on the basis of energy audits Energy Efficiency “ab-initio” and Training of Engineering Consultants: It is important to focus on completed. First few projects in each of the target sectors could be developed as “pilot energy efficiency aspects of the new industrial units being set up in Bangladesh. Growth sectors such projects” to demonstrate efficacy of EE improvement measures to other units. The other units as textiles, RMG as well as cement and steel sectors are expected to witness new investments in the from respective sectors could be encouraged suitably to follow the pilot demonstration project. near future. It may be essential to send the message of improving overall energy utilisation and On the other hand, cluster development approach could be effectively used to replicate pilot estimating needs of electricity and other utilities (such as steam, cold and compressed air) for plants EE projects in other units in the sector under consideration. A cluster of units belonging to a so that these are not over designed and used at lower capacities later. The principle of EE ab-initio sector (often located within a town or city) can be approached as a group to encourage them to is to specify for appropriate size of equipments in the planning stages when a new unit is being set implement standard EE improvement measures (which tend to be same for such units in a up. New units could have an option to design its facilities to qualify as “Green Building / Facility”. sector). Such a facility uses natural resources in optimum manner and has higher level of efficiency.  Load profile analysis services: Existing operating units often have generators and boilers which 8.3.2 Advisory Services are oversize. In the event of an industrial unit planning to renovate its facilities, it can avail of load profiling services to find out what is the extent to which equipment are used. The findings  Energy Audit and associated Services (and Measurement and Verification services): Energy of such a study provide appropriate size of equipment with loading around 80% to have audit services could be made available to industrial units on fee share basis. Energy audits in maximum efficiency. select industrial units (in select energy intensive sectors) can help these units to learn possible areas to address to increase energy efficiency and hence reducing operating costs. This can also  Assistance to establish a calculation, monitoring and verification (impact analysis system) / prove the effectiveness of energy audit services to increase productivity. Such audits (in the CO2 Calculator: Monitoring and verification (M&V) forms an important aspect of EE beginning) need to be conducted carefully after taking the management and senior engineers in projects. It is essential to estimate energy savings prior to formulating the projects. Also it is to confidence. Senior energy auditor needs to assure the management that the senior engineers important to provide details to management of a bank on the amount of energy savings and are doing good job of managing utility and that the results of energy audit could provide CO2 saved by the projects assisted by the bank. All these estimations and calculations can be support to existing operations. A fee share ratio could be arrived suitably and 50:50 could be prepared with the help of “calculator tool”. Such a tool and calculator can be developed and considered an option, wherein an industrial unit contributes to 50% of the total energy audit provided to end user and banks. 123 124 Recommendations and Conclusion Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 9 Recommendations and Conclusion 9 appropriate size of plant and equipments especially utility ones (Generators, boilers compressors, etc.). It can be concluded that there is good potential to save energy and resources in the industrial sectors  Development of pilot demonstration projects: Pilot demonstration projects in each of the analysed. Also the following table indicates maximum investment potential and realistic investment target sectors to prove the concept and efficacy of EE improvement projects will help creating potential. awareness and build interest among the industrial units belong to respective sectors. Such pilot projects could be developed and structured after conducting energy audits in selected industrial The above options are mutually exclusive and hence can not be summed up and indicate maximum sectors. These pilot projects could be encouraged through financing on soft terms. possible potential.  Voluntary certification programme: A voluntary certification programme for “Green Industrial  While industrial units are aware of what “energy audit” is, the owners / management do not Units (- Green Factories)” on the lines of green buildings programme can help creating interest undertake unless there is requirement from say buyer as a part its “greening the supply value among the owners and entrepreneurs about better resources management. Such a voluntary chain”. There is no “compelling” reason for end user industries (owners and management) to certification programme could be evolved and implemented with the help of an industry conduct energy audit. association. Such certification can help improving credibility of exporting companies.  Banks and financial institutions are not adequately aware of EE improvement projects.  Financial products: Financial institutions and banks need to be encouraged to develop However, these are familiar with modernisation projects. appropriate financial products to support EE projects to start with as a part of “Green Banking” policy initiated by Bank Bangladesh. Banks can increase value of their services to The FS team provide following set of recommendations: industrial borrowers by offering these products to improve productivity and efficiency. Industry Specific Recommendations:  Tools and calculators: Simple tools and calculators to evaluate EE options and monitoring of projects will help effective implementation of EE projects. There is a need to develop easy to  Awareness building: It will be essential to impress upon the industrial sectors to adopt suitable/ use calculators and tools which could be used by end user industrial units, energy auditors, and appropriate EE measures to improve productivity. Industrial units need to understand the financial institutions / banks. limited availability of natural gas (even though there will not be any issues in the short term) and to use it effectively for the overall wellbeing of the industrial sectors and economy as a whole.  Business Platform for EE: An appropriate platform to bring industrial units, banks / financial Water resources need to be used with care considering the long term impact on availability. institutions and EE equipment vendors needs to be established. An industry association could Simple methods such as “Energy and Resource Saving Tips” could be widely circulated through provide such as platform through formation of steering committee. In addition a dedicated print media (posters, leaflets, etc.). On the other hand, it could help to project EE a productivity website can provide such a virtual platform. This website can provide information on EE improvement tool as tariff levels are relatively lower in Bangladesh. Awareness on the similar equipments, its sources and suppliers. A few case studies can also be placed on the website. lines will also be required for banks and financial institutions.  Manual and Handbook: A reference book containing information on EE and RE projects  Energy audit services: Wider availability of quality energy audit services can help improving possibilities in different industrial sectors can help end user industrial units. Such a manual or potential to develop more EE projects. Besides, the energy audit consultants need to convince handbook can include list of EE equipment vendors and case studies. owner / management of industrial units that EE can help improve productivity. Similarly, there is need to create awareness of “load profile” analysis.  Training in Energy Audit: Cadre of well trained graduate practicing engineers (especially senior in experience from operational levels within industrial units) to undertake investment grade energy audits could create better image of energy audit as a tool to improve productivity.  Training in “EE ab-initio”: Engineering consultant / industry expert who advise entrepreneurs while setting new manufacturing facilities can influence decision making in respect of procurement of plant and machinery. These consultants and entrepreneurs can be made aware of EE and RE applications including EE at design stage. Such a training can help specifying 126 127 Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Annex 1 LIST OF MEETINGS CONDUCTED DURING STUDY 129 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 130 131 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 132 133 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 134 135 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 136 137 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 138 139 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 140 141 Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh 142 Annex 2 INDUSTRY MANUFACTURING PROCESSES Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh Textile manufacturing processes  Sizing Sizing involves applying sizing compounds to warp yarn to bind the surface fiber together and protect the yarn against abrasion during weaving. The primary sizing compounds include starch, Fiber production gelatin, oil, wax, and manufactured polymers (such as polyvinyl alcohol, polystyrene, polyacrylic acid, and polyacetates). The beam-to-beam sizing method transfers a warp from a warp beam to  Melt spinning – a loom beam. The sized warp is dried by hot air or by contact with steam-heated cylinders during This is used for thermoplastic polymers. The polymer granulates are melted, pressed through its transfer to the loom beam. spinning nozzles and wound together after cooling. Fabric Manufacture  Dry-spinning –  Weaving This is used for polyacrylonitrile and elastane. The polymers are dissolved in an appropriate This is done using looms (any set of devices permitting a warp to be tensioned and a shed to be solvent, which is then evaporated by passing hot air over the filaments as they pass the spinning formed with the aid of heddles). nozzles. Wet-spinning is carried out by immersing the filaments in a coagulation bath.  Knitting  Wet-spinning – This is a method of converting yarn into fabric by intermeshing loops, which are formed with the help of needles. This is used for viscose and cupro. The polymers are dissolved in an appropriate solvent, which is then removed. by immersing the filaments in a coagulation bath. This occurs through a  Tufting diffusion-controlled process. This is a process used to make carpets. Fabric Production Spun yarn production  Winding Spun yarn formation is done in spinning plants. Fiber preparation processing takes place followed by opening the fiber bales; mixing the fibers; cleaning, arranging, and paralyzing the fibers; drafting; This involves transferring yarn from one type of package to another to facilitate subsequent and twining of the fibers into a yarn. After this the yarn is spun. processing. Precision winders are used primarily for filament yarn and produce packages with a diamond-patterned wind. Drum winders are used mainly for spun yarns. Wet processing  Warping Wet-processing includes several steps that involve adding colors to fiber, yarn, or fabric or imparting patterns to the fabric, along with a variety of finishing steps that provide certain desired Warping involves winding a portion of the total number of ends of a warp in full width onto a characteristics to the end product. back beam.  Preparation  Section Warping Preparation includes any of several steps that may be taken to clean or prepare the fabric prior to dyeing/printing Section warping is a machine method of preparing a warp on a beam. The process involves  Dyeing winding a warp in sections on a reel and beaming off the complete warp from the reel onto a This is the application of color to the whole body of a textile material with some degree of warp beam. colorfastness  Beaming  Printing Beaming is an activity during warp-making in which ends, withdrawn from a warping creel, are This involves the use of colors, usually in the form of a paste, which are applied to fabrics in wound onto a beam to a length that is a multiple of the loom warp length. Several similar beams patterns. The fabric is treated with steam, heat, or chemicals to fix the color. (known as a set of back beams) provide the total number of ends required in the woven warps.  Finishing Beaming is usually implemented for bulk production of grey warp. Direct beaming is a specific This refers to any operation (other than preparation and coloring) that improves the appearance single-stage method. and/or usefulness of fabric after it has been woven or knitted. 144 145 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh Pulp and Paper Manufacturing processes 2.1 Raw material preparation: Wood is the primary source of fiber in the production of paper products, and is typically delivered The pulp and paper industry converts fibrous raw materials into pulp, paper, and paperboard to the mill in the form of logs or wood chips. Both softwoods and hardwoods are used in the products. Pulp mills manufacture only pulp, which is then sold and transported to paper and production of wood pulp. The primary processes used to convert logs into a size and shape suitable paperboard mills. A paper and paperboard mill may purchase pulp or manufacture its own pulp in for pulping are size reduction, debarking, chipping, and screening. Wood chips are normally free of house; in the latter case, such mills are referred to as integrated mills. bark and are often only subjected to screening. The major processes employed in the pulp and paper industry include raw materials preparation, pulping (chemical, semi-chemical, mechanical, and waste paper), bleaching, chemical recovery, pulp 2.2 Pulping drying, and paper making. The primary goals of pulping are to free fibers in wood from the lignin that binds these fibers Figure below provides a flow diagram of these processes and their use of fuels, steam, and together, and then to suspend the fibers in water into a slurry suitable for paper making. Pulp with electricity. longer fibers and less lignin will generally produce the strongest papers with the greatest resistance to aging. Figure: Schematic of major pulp and paper manufacturing processes The type of pulping process that is employed depends on a number of different factors, including the wood source (hardwood or softwood), the desired pulp properties (e.g., fiber length, strength, and purity), and the paper products to be manufactured (e.g., newsprint, packaging, or writing paper). The three main processes for producing wood pulp are mechanical pulping, chemical pulping, and semi-chemical pulping. Also significant is recycled or secondary fiber pulping, which is primarily a mechanical pulping process with heat and chemicals added for contaminant removal and paper dissolution. Table : Summary of pulping process characteristics Source: Martin et al. (2000) Source: Adapted from U.S. DOE 2005a 146 147 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 2.3 Bleaching Plastics manufacturing processes Raw pulp can range in color from brown to crème due to the remaining lignin that was not removed The processing methods for polymers are many. The main processing methods are explained below. during the pulping process. For paper products for which brightness and resistance to color reversion are important, such as office and printing paper, the pulp must be whitened by a bleaching Extrusion process prior to the paper making phase. This is the process of forming a continuous piece of plastic by forcing it through a shaping orifice The pulping process (i.e., chemical or mechanical) is a major driver of the type of bleaching that is with or without the presence of heat. The opening through which the resins are forced gives the required. Mechanical and semi-chemical pulping process will generate pulps with high lignin product its form, resulting in consistent thickness and gauge control. content, which requires a chemical-intensive bleaching process to decolorize the remaining lignin.  Sheet Extrusion It’s a technique for making flat plastic sheets from a variety of resins. 2.4 Pulp drying  Profile Extrusion In situations where pulping and papermaking operations are not located at the same facility, or when It’s accomplished by forcing uncured rubber through a die, under heat and pressure, to form a a temporary imbalance between pulp production and paper machine requirements exists, pulp is part with a uniform cross section. This uncured rubber is then run through a heating unit to dried to reduce its moisture content. On average, market pulp is dried to around 10% water before initiate the chemical cross linking reaction that causes the rubber to cure. being shipped to a paper mill. The process for re-pulping of dried pulp at a paper mill is similar to that employed for pulping recovered paper. Pulp drying is energy intensive (about 4.2 MMBtu of  Pipe extrusion steam per ton of pulp) (Martin et al. 2000) and is not essential to the papermaking process. Thus, significant energy savings are realized by collocating pulping and paper making operations at one This is a process of forcing the polymer melt through a shaping die (in this case: circular). The facility. extrudate from the die is sized, cooled and the formed pipe is pulled to the winder or a cut off device with the aid of haul off device.  Co-extrusion This is the process of extruding two or more materials through a single die with two or more orifices arranged so that the extrudates merge and weld together into a laminar structure before chilling.  BlownFilm Extrusion A tubular cross-section is extruded through an annular die (usually a spiral die) and is drawn and inflated until the frost line is reached. The extruded tubular profile passes through one or two air rings to cool the material.  CastFilm Extrusion A thin film is extruded through a slit onto a chilled, highly polished turning roll, where it is quenched from one side. The speed of the roller controls the draw ratio and final film thickness. The film is then sent to a second roller for cooling on the other side. Finally it passes through a system of rollers and is wound onto a roll.  Foam Extrusion Plastic resin and chemical foaming agents are mixed and melted. The chemical foaming agent decomposes liberating gas which is dispersed in the polymer melt and expands upon exiting the die. Typically foamed profile extrusions require more intense cooling than solid profiles due to the insulation properties of the foam structure. 148 149 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh  Pultrusion Thermoforming Reinforcing fibres are pulled from the creel: the reinforcements, are guided towards the It’s forming a thermoplastic sheet into a three-dimensional shape by clamping the sheet in a frame, impregnation station passing through a preforming station where rovings and mats are carefully heating it to render it soft and flowable then applying differential pressure to make the sheet guided in successive steps; the impregnation of all filaments of each roving and mat occurs as conform to the shape of a mold or die positioned below the frame. they pass through the bath containing the resin formulation.  Vacuum Forming  Calendering It’s a plastic thermoforming process that involves forming thermoplastic sheets into It’s a process that usually uses four heated rolls rotating at slightly different speeds. Again the three-dimensional shapes through the application of heat and pressure. Plastic material is heated material is fed into the rolls, heated and melted, and then shaped into sheet or film. until it becomes pliable, and then it is placed over a mold and drawn in by a vacuum until it takes on the desired shape. Molding  Plug assist forming This is the method which forms the rubber in the mold by the application of pressure and heat which shapes and cures the parts. This requires the use of a female (cavity) mold. .  Vacuum snapback  Injection Molding Vacuum is used to pre-stretch the hot plastic before the mold makes contact with the sheet. A repetitive process in which plastic is melted and injected into a mold cavity where the article is cooled down. After cooling, the mould opens and the article is ejected.  Billow Forming  Blow Molding A heated sheet is clamped over a billow chamber and air pressure in the chamber is increased Process of inflating a hot, hollow, thermoplastic preform or parison inside a closed mold so its causing the sheet to billow upward against a descending male mold. shape conforms to that of the mold cavity.  Free Forming  Rotational Molding An acrylic sheet is clamped in a frame and either a vacuum or compressed air draws the material to a desired depth. A product is formed from fine powder within a closed mold, which is rotated in a heating chamber and then a cooling chamber. While the mold is slowly turning and tumbling, it is heated  Pressure Forming by forced hot air in an oven. As the mold wall heats, the resin begins to stick to the inside of the mold forming a hollow part. This uses both vacuum and compressed air to force the plastic sheet against the mold  Compression molding  Drape Forming A part is shaped by placing the fiber and resin into an open mold cavity, closing the mold, and A sheet of plastic is heated and stretched down, generally over a male mold. Next, depending on applying heat and pressure until the material has cured or achieved its final form. the shape of the mold, gravity alone will pull the material to the mold or commonly, a vacuum is applied to draw the sheet to the mold which will more detail to the inside of the part.  Insert Molding  Stretch Forming An object, or insert, is placed into the mold between cycles and the plastic is formed around the A heated thermoplastic sheet is stretched over a mold and subsequently cooled. insert.  Matched Die Forming  Dip Molding In this process, both halves of the part are formed by molds with no vacuum or air pressure. The An object, or insert, is placed into the mold between cycles and the plastic is formed around the sheet is heated until it is soft, and then both mold halves clamp together to form the part. insert.  Inline thermoforming  Transfer Molding The plastic film moves from a roll onto the inline equipment and through the heating section. A resin is mixed with a hardener and then injected at low pressure into a mold containing dry The heated material advances into the forming section where pressure and/or vacuum force the fibers. plastic onto a mold. It then proceeds to another station where formed parts are die-cut. 150 151 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh  Twin sheet forming Sugar Manufacturing Processes This-is a process of vacuum or pressure forming two sheets of plastic essentially simultaneously, with a separate mold on the top and bottom platens. Once the plastic has been molded, it Sugar manufacturing facilities process beet and cane into crystalline sugar and other by-products remains in the molds, and while still at its forming temperature the two molds are brought (e.g. ethanol and other organic chemicals). In excess of 70 percent of the world’s sugar production together under high pressures, and the two sheets are welded wherever the molds dictate a weld. is based on sugar cane, with the remainder based on sugar beet. Typical cane processing facilities may process between 500 to 10,000 tons of cane per day. Beet processing facilities may process Coating between 2,000 tons beet/24 hrs to 15,000 tons beet/24 hrs. The modern sugar mill may use bagasse It’s the process of applying a thermoplastic to the surface of metal items to provide long-term (waste fiber) to provide for its own electrical energy needs while supplying excess power to the local corrosion, impact and chemical resistance whilst offering an attractive decorative finish. grid separate facilities process the beet and cane into other sucrose products (e.g. liquid sugar, organic sugar, and organic syrup) for distribution to other industry applications or to consumers.  Plastic powder coating Sugar cane contains 70 percent water, 14 percent fiber, 13.3 percent saccarose (about 10 to 15 percent sucrose), and 2.7 percent soluble impurities. Sugar beet has a water content of 75 percent, This is the process of applying a thermoplastic to the surface of metal items to provide and the saccarose concentration is approximately 17 percent. long-term corrosion, impact and chemical resistance whilst offering an attractive decorative finish. The goal of the production process is to turn sugarcane and beet into granulated crystal. Beet and cane sugar production processes are similar. Both involve reception, cleaning, extraction, juice  Fluidised Bed Coating clarification, evaporation, crystallization centrifugation, drying, storing, and packing stages as This is a method of applying a coating of a thermoplastic resin to an article in which the heated illustrated in figures A-1 and A-2. Beet and cane sugar manufacturing are typically located adjacent article is immersed in a dense-phase fluidized bed of powdered resin and thereafter heated in an to the sources of raw materials to reduce costs and transportation time, and to ensure fresh raw oven to provide a smooth, pin-hole-free coating. material. Reception of Beet and Cane Sugar beet and cane are unloaded from the transportation vehicles after a sample has been taken for assessment of sugar and dirt content.  Electrostatic spraying In this process an electrical charge is applied to the dry powder particles while the component to be painted is electrically grounded. The charged powder and grounded workpiece create an electrostatic field that pulls the paint particles to the workpiece. The coating deposited on the workpiece retains its charge, which holds the powder to the workpiece. The coated workpiece is placed in a curing oven, where the paint particles are melted onto the surface and the charge is dissipated.  Flame Spraying This is a method of applying a plastic coating in which finely powdered fragments of plastic, together with suitable fluxes, are projected through a cone of flame onto a surface.  Extrusion Coating and Laminating This is a mechanical process of building a laminate by bonding repeated laminations, or layers, of material onto one another.  Dip Coating This process consists of applying a coating to a part by simple dipping in a bath.  Curtain Coating This is a method of coating which may be employed with low viscosity resins or solutions, suspensions, or emulsions of resins in which the substrate to be coated is passed through and perpendicular to a freely falling liquid "curtain" (or "waterfall"). Source: Adapted from the Comite Europeen des Fabricants de Sucre (CEFS), 2003 152 153 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 4.1 Cane preparation  Crystallization At the mills trucks, full of sugarcane harvested, empty their load onto a receiving table. It fits a belt Workers put then microscopic sucrose crystal suspended in alcohol into the syrup. The milky conveyor that takes the cane to two separate washes. The cane must be as clean as possible before solution bines to the sugar and helps dried out. Next it all boils in large vacuum pans formatting extracting the juice. sugar crystal. The water boils away. It produces a thick crystallized paste known as massecuite. Then, the cane hard structure is broken down inside a crusher where rotating hammers broke the 4.4 Centrifugal process can into small pieces. The preparatory equipments can include kicker, leveler, cutter, fibrizers and shredders (déchiqueteuse) as well. It then goes into a high speed centrifugal machine to remove the sugar crystal from the uncrystalized syrup. Inside the sugar spins at 1200 revolution per minute. This action draws the 4.2 Milling (Juice extraction) molasses out of the machine when the crystal remains in the inner basket. Sprays of water wash the crystals. Then the water is drown out so that only the crystal remain. This centrifuge works much A conveyor brings it into a milling tandem designed to extract the sweet juice from the cracked cane. the same way as a washing machine. It draws out the moisture out of crystal as it is done for laundry. In this milling tandem, the cane passes through 5 or more consecutive mills. Large cylinders compress the cane fiber. The juice goes out of the milling tandem and divert in a channel away from Next a conveyor belt carries the crystal out of the centrifuges. These processes produces raw sugar the bagasse (dry pulp that remain after extracting the juice). with a high molasses color and is unbleached and white sugar which as less molasse and is cleached a brilliant white. 4.3 Juice preparation 4.5 Drying  Bleaching The sugar on the conveyer now goes on large dryer. Hot air blows into this dryer to bring the sugar The juice from the mills falls then in a high tower where sulfured dioxide vapors rise through it. humidity level down to 0.02%, standard for table sugar. This process known as sulfutation bleaches the juice.  Alcoolisation Then the juice flew through a device that measure the PH level. While in a separate vat, workers add lime powder to water preparing a solution to which they will then add the juice. An agitators mixes the cane juice and lime solution for about six hours to complete a process called alcoholisation. It regulates the juice PH level and helps clarify it. In reaction to the lime, the juice colored changes from brown to yellow. Clarification Next, the juice goes in a clarifier tanks. It takes over two hours for the juice to settle and for the impurities to fall to the bottom of the tank. Clarified juice is then collected at the top. The clarified juice boiled then in a series of evaporators. This brings the concentration of sugar in the sugar up from 15% to 60%. Then the juice is collected in big tank to clarify even more. Any sediment left in the juice flows to the top. A rotating paddle skims this residue of to the side of the tank. This tank produces a kind of syrup that goes on for more processing. The bottom juices none as mud is gathered to be used to fertilise the cane field. 154 155 Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh EE Measures which are Applicable to Industrial Sectors: Annex 3 1. Waste Heat Recovery System Waste heat is that energy which is rejected from a process at a temperature high enough above the ambient temperature to permit the economic recovery of some fraction of that energy for useful DETAILS OF EE purposes. Waste heat that is successfully recovered directly substitutes for purchased energy and therefore reduces the consumption of and the cost of that energy and as well, waste heat substitution results in smaller capacity requirements for energy conversion equipment. IMPROVEMENT For example, waste heat can be recovered from natural gas engines used for captive electricity generation in Bangladesh. Most of the industrial units use reciprocating type engines, which operate under variable load conditions. The waste heat recovery boiler can recover almost 70% of the MEASURES thermal energy lost in the flue gases. In addition, engine jacket cooling water heat can also be recovered. This recovered heat could produce hot water or low pressure steam. A schematic diagram of a typical waste heat recovery system is as follows: Exhaust gas Waste heat Waste recovery boiler/ Reciprocating heat heat exchanger Engine Engine Jacket cooling water Low pressure steam/ hot water for industry process It should be noted that reduction in capital costs cannot be realized in retrofit installations unless the associated primary energy conversion device has reached the end of its useful life and is due for replacement. To make an optimum choice of waste heat recovery devices, the essential parameters to know are: 1. Temperature of waste-heat fluid / gas 2. Flow rate of waste heat fluid / gas 3. Chemical composition of waste-heat fluid / gas 157 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 4. Minimum allowable temperature of waste-heat fluid / gas  Identifying the required amount of air volume and pressure at which compressed air should be 5. Amount and type of contaminants in the waste-heat fluid / gas delivered. 6. Allowable pressure drop for the waste-heat fluid / gas 7. Temperature of heated fluid / gas  Avoiding mixing of high volume low pressure and low volume high pressure loads by 8. Maximum allowable temperature of heated fluid / gas decentralizing low volume high-pressure applications or providing dedicated low-pressure 9. Allowable pressure drop in the heated fluid / gas utilities, for example, by using fans rather than compressed air. 10. Control temperature (if control is required)  Reviewing air reduction opportunities by using air amplifier nozzles rather than simple 2. Optimize Compressed Air open–pipe compressed air jets, using manual or automatically operated valves to isolate air supply to individual machines that are not in continuous use, implementing systems for Air compressor maintains flow of air at certain pressure required by the industry applications. systematic identification and repair of leaks. Compressed air is used mostly for pneumatic control of machines. For example in the textile industries, air compressor is mainly used in the weaving, dyeing, sizing, cleaning sections. Air 3. Efficient Distribution Transformers compressor consumes significant amount of electricity and most of the electrical power is turned into waste heat. It has an efficiency of only 10%. Usually 10 kWh of electricity is required to The distribution transformer supplies power to all the power consuming items and remain generate 1 kWh of compressed air. The loss is because of the inefficient motor that running the energized for 24 hours. Being supply equipment, it does not, by itself, consume any power. But the compressor, friction loss in the piping, air pressure reductions due to air leakage of the device or process of transformation involves certain inherent losses especially in the core of the transformer, process where compressed air is finally applied. The losses of compressed air can be minimized having to run continuously for 24 hours of the day. In Bangladesh, the large and medium industries taking few steps: mainly connect in the 11 kV substation line of the electricity utility by substation equipment i.e. low voltage distribution transformer (400 V), which is owned by the industry owners. Air leakage test: Pressure drop is one of the main reasons of increased energy consumption and underperforming of air compressor. To test it No-load air leakage” test is conducted. Allowable The scope for improving the efficiency of distribution transformers can arise in number of ways. pressure drop between the compressor and the final connection point shall not exceed 0.1 bar. Use of High performance core material like amorphous metal core is 30% more efficient than the Amount of air leakage should not be more than 10%. For a textile industry operating for 364 days conventional steel cores. The size of the transformers being installed in the network and they way in a year, 1% reduction in air leakage would provide 10,415 kWh/year of electricity savings. in which they are loaded, can also save savings. Transformers are at maximum efficiency when Adequately sized distribution pipeline can be used to minimize pressure losses. approximately 50% loaded. The efficiency of energy efficient distribution transformer vary from 97.7% to 98.90% depending on the transformer size (15-1000 kVA) whereas, in the conventional Location of air compressor: The location of the air compressor room is also important as 4ºC lower steel core transformer the energy loss can exceed 3%. inlet air temperature results in 1% increase in efficiency. Lower inlet air temperature can reduce substantial amount of energy use. As such air compressor rooms should not be located near or adjacent to a boiler or generator room since high room temperature increases inlet air temperature 4. Vapor Absorption System of the compressors. The apertures for inlet air should be located in shaded walls and not in direct A vapor absorption chiller produces chilled water using heat source such as steam, hot water, etc. sunlight. Acceptable limit of compressor room is maximum 40ºC. Ventilation system of the room This type of chiller is well suited for the applications that rejects heat from the processes like flue should be such that compressors always get cool inlet air at least lower than 40ºC. gases of furnaces, dryers, kilns, boilers, thereby providing high operating efficiencies by replacing higher-cost electricity in a conventional chiller through use of otherwise wasted energy. Vapor Air demand analysis: An air demand analysis can reduce size of the compressors that are being used absorption chiller can be used in food processing, dairy, spinning etc. to improve air conditioning at the factory. Air demand can be classified as base demand, medium demand and peak demand. and refrigeration. This results in minimal electrical consumption with an absorption chiller. A Base demand is the amount of air constantly needed by the factory and in contrast, peak demand is cogeneration system absorption chiller can save about 25-30% of primary energy in comparison the air demanded at a certain peak times and generally has a short duration. Running oversized air with conventional vapor compression system (e.g. screw chiller). compressor at a base demand is extremely inefficient and costly to operate. A precisely co-coordinated configuration of compressors of different capacities, each loading up to 70-80% has The absorption chiller operates at very low pressures (about l/l00th of normal atmospheric proven to be the best solution for cost reduction and energy saving opportunities. Besides, 94% of pressure) for the water to vaporize at a cold enough temperature to produce 44°F or 6.6oC chilled the heat could be recovered and reused from the compressed air production which will give water that is circulated to air handlers in the distribution system for air conditioning. A schematic additional energy savings. Air demand can be reduced by taking few steps as follows: diagram of a typical vapor absorption system is as follows: 158 159 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 6. Cogeneration and Distributed Generation Boiler Cogeneration is broadly, the coincident or simultaneous generation of combined heat and power. Waste flue gas/ In a cogeneration system, a portion of the generated or recovered heat must be used in a thermal Furnace Waste heat water vaporization/ low pressure steam process as steam, hot air, hot water, etc. Cogenerated power is typically in the form of mechanical absorption chiller or electrical energy. The power can be totally used in the industrial plant that serves as the ‘host’ of the cogeneration system or may be partially/ totally exported to a utility grid. Dryer Kovacik (1982) indicates that although cogeneration should be evaluated as a part of any energy Cooling management plan, the prerequisite is that a plant shows a significant and concurrent demand for heat and power. Once this is identified, cogeneration systems can be explored under the following circumstances: 5. Steam Condensate Recovery System 1. Development of new facilities 2. Major expansions to existing facilities which increase process heat demands and/ or process Steam is produced in a boiler by the process of heating up the water. Steam is used in the industries energy rejection basically for two main purposes: to produce electrical power by moving a steam turbine and to 3. When old process and/or power plant equipment is being replaced, offering the opportunity to supply heat for heating systems or industry processes. After giving up a large proportion of its total upgrade the energy supply system heat to heat the process, steam turns into condensate, which is basically distilled water that contains the remaining heat. Hot condensate at 7 bar g has a heat content of about 721 kJ/kg. The percentage of energy in condensate to that in steam varies from 18% - 30% at 1-14 bar g. 7. Optimisation of Lighting System A steam condensate recovery system collects this condensate and either return it to a boiler feed The three basic steps to improving the efficiency of lighting systems are: tank as make-up water, or use it as hot process water or pass it through a heat exchanger where its heat content can be recovered before discharging the water to drain. And the result is less make-up  Identify necessary light quantity and quality to perform visual task. (This is essential to any water for the boiler, less heat to raise steam resulting in less fuel requirement and less operating illuminated space) costs. Advantages of condensate recovery system can be summarized as follows: Excessively illuminated spaces equal unnecessary energy consumption and energy costs. At the  Water charges are reduced. same time, excess illumination reduces the comfort of the visual environment and decreases worker  Effluent charges are reduced. productivity.  Fuel costs are reduced.  More steam can be produced from the boiler.  Increase light source efficiency if occupancy is frequent (This can be implemented but, it is  Boiler efficiency is increased-less energy is lost from the boiler. economically mutually exclusive to following option below)  Chemical treatment of raw make-up water is reduced. This means replacing or modifying the lamps, ballasts and/ or fixtures to become more efficient. A schematic diagram of a typical steam condensate recovery system is as follows: Increasing the efficiency of a light source is one of the most popular types of lighting retrofits because energy savings can almost be guaranteed if the new system consumes less watts than the Condensate Hot process old system and with reduced lighting load, electrical demand savings are also usually obtained. Feed tank Boiler Boiler steam recovery water  Optimise lighting controls if occupancy is infrequent ((This can be implemented but, it is economically mutually exclusive to the second option above) Industry process 17 Wayne C Turner & Steve Dot. (2006). Energy Management Handbook. In Erica A Woodroof & John Fetters., Lighting (pp 360-368,367-368). Fairmont Press 160 161 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh As seen above, improving the efficiency of a lighting system can save a percentage of the energy  Convection consumed while the system is operating. Heat transfer by convection is a result of hot fluid rising in a system and being replaced by a Controls (switches, time clocks, occupancy sensors and other devices that regulate a lighting system) colder heavier fluid.. This fluid heats, rises and carries more heat away from the heat source. can turn systems off when they are not needed thus allowing energy savings to accumulate quickly. Convective heat transfer is minimised by the creation of small cells within which the The conventional magnetic ballasts (chokes) for fluorescent tube lights (FTLs) have ratings in the temperature gradients are small. Most thermal insulation are porous structures with enough range of 14W to 16W. On the other hand efficient electronic ballasts have ratings in the range of density to block radiation and provide structural integrity. As such,convection is virtually 2W to 4W. High efficiency copper type magnetic ballast are also reduce lighting load and have eliminated within the insulation except for applications where forced convection is being driven ratings in the range of 3W to 7W. The electronic ballasts add harmonics in the circuit, whereas through the insulation structure. efficient magnetic ballasts do not.  Radiation Typical FTL lighting system (per fixture of single FTL) consumes approximately 54 to 56 W electricity (40 W for tube light and 14 to 16 W in ballast). It is recommended to replace existing Electromagnetic radiation is responsible for much of the heat transferred through an insulation conventional ballasts with efficient ones (either electronic ones or magnetic ones). On the other and increases in its significance as temperatures increase. hand existing T12 or T8 FTLs could be replaced with efficient ones such as T5. Luminaries could also be changed to increase lighting efficiency in addition to above measures. A good reflector can Radiation can be controlled by utilising surfaces with low emittance and by inserting absorbers increase lumen output from a FTL. or reflectors within the body of the insulation. As well, radiation can be reduced by increasing the density of the insulation material. Interplay between the various heat transfer mechanisms is 8. Improvement of Insulation very important in insulation design since high density reduces radiation but increases solid conduction and material costs. The basic function of thermal insulation is to retard the flow of unwanted heat energy either to or from a specific location. When designing the proper insulation system, the most appropriate material must be selected from the many products available and the proper thickness of material to use must be By using insulation, the entire energy requirements of a system are reduced. Most insulated systems determined. The link between these two decisions is that, one product with superior thermal reduce the unwanted heat transfer, either loss or gain, by at least 90% as compared to bare surfaces. performance may require less thickness than other material and the thickness reduction may Since the insulation system is so vital to energy efficient operations, the proper selection and reduce the cost. application of the system is very important. Thermal insulation is a valuable tool in achieving energy conservation. However, to strive for Insulation products are designed to minimize heat transfer by the three modes as explained below: maximum energy conservation without regard for economics is not acceptable.  Conduction 9. Reduce Steam/ boiler losses In this heat transfer mode, the heated molecules are excited and this energy is physically Many opportunities for energy savings exist in steam system operations, ranging from simple transferred to cooler molecules by vibration. This occurs in fluids (gases and liquids) and solids, operating procedure modifications to major retrofits requiring significant capital expenditures. with gas conduction and solid conduction being the primary factors in insulation. A checklist of energy conservation opportunities applicable to steam systems should be maintained. Solid conduction can be controlled by utilizing a solid material that is less conductive and by The checklist should be applicable to the situation. The checklist could cover; general operations, utilizing less of the material. steam trapping, condensate recovery, mechanical drive turbines and insulation. Gas conduction can be achieved by either reducing the gas pressure by evacuation or by replacing the air with a heavy density gas. In both cases, the insulation must be adequately sealed The energy consumption of a boiler is a function of load and efficiency. As such, the opportunities to prevent reentry of air into the modified system. for reducing the energy consumption or energy cost can be put into a few categories. In order to reduce boiler energy consumption, one can reduce the load, increase the operating 18 Wayne C Turner & Steve Dot. (2006). Energy Management Handbook. efficiency and reduce the unit fuel energy cost or combinations thereof. In Javier A. Mont & Michael R. Harrison, industrial Insulation (pp 437-438,44 &, 461). Fairmont Press. 162 163 Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh 10. High Efficiency Motors and Variable Frequency Drive (VFD) Many electrical motors are designed to operate at 50% to 100% of their rated load since optimum efficiency is generally 75% of the rated load. An under-loaded motor (one loaded below 50% of rated load) operates inefficiently and exhibits low power factor which increases losses in electrical distribution and utilization equipment. The correct speed of a motor maintains the proper power factor and reduces excessive heating of the motor. The wrong size of a motor and wrong speed specification brings about energy losses which can be eliminated by rectification of the wrongs and as well as installation of energy efficient motors which produce a given amount of work with less energy input than a standard motor. A Variable Frequency Drive (VFD) changes the speed of the motor by changing the voltage and frequency of the electricity supplied to the motor based upon system requirements. VFDs offer many benefits that result in energy savings through efficient and effective use of electric power. The energy savings are achieved by eliminating throtttling, perfomance and friction losses associated with other mechanical or electromechanical adjustable speed technologies. For a successful application of a VFD, a thorough understanding of the load characteristics is necessary. Energy consumption by centrifugal loads is proportional to the cube of rotational speed, so, driving these loads at higher speed of a low-slip, high efficiency motor directly replacing a standard motor, energy consumption can actually increase. This can be resolved by lowering rotational speed with a VSD, gears or pulleys. It should be clearly noted that rewinding a motor cannot and does not improve the motor’s efficiency beyond the nameplate rating. 19 Wayne C Turner & Steve Dot. (2006). Energy Management Handbook. In K. K. Lobodosky, Electric Energy Management (pp281, 300 & 302). Fairmont Press. 164 Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Details of Energy Efficiency Improvement Measures Applicable in each of the Sectors 1. Food and Beverages At the component and equipment level, energy efficiency can be improved through regular preventative maintenance, proper loading and operation, and replacement of older components and equipment with higher efficiency models (e.g., high efficiency motors) whenever feasible. At the process level, process control and optimization can be pursued to ensure that production operations are running at maximum efficiency. At the facility level, the efficiency of space lighting, cooling, and heating can be improved while total facility energy inputs can be minimized through process integration and combined heat and power systems, where feasible. Lastly, at the level of the organization, energy management systems can be implemented to ensure a strong corporate framework exists for energy monitoring, target setting, employee involvement, and continuous improvement. According to energy star guide and the food processing industry can undertake the following energy efficient measures in its various activities/systems to increase the overall efficiency of the system: 1. Steam Systems a. Boiler: i. Boiler process control: Proper boiler process control ensures the optimum flame temperature by proper mixture of fuel and oxygen. ii. Reduction of flue gas quantities: Excessive flue gas reduces the heat transfer to the boiler steam. iii. Reduction of excess air: Too much excess air for burning the fuel reduces the efficiency of the boiler as the excessive heat is transferred to the air. iv. Properly sized boiler system: Designing the boiler system to operate at the proper steam pressure can save energy by reducing stack temperature, reducing piping radiation losses, and reducing leaks in steam traps. v. Improved boiler insulation: Boiler efficiency can be increased upto 6% to 26% by proper and improved insulation of the boiler and the piping’s. vi. Boiler maintenance: A simple maintenance program of boiler components can reduce the cost increase of a steam system upto 30%. vii. Flue gas heat recovery: Heat recovery from flue gas using the economizer to pre heat the boiler feed water is a common practice for large boilers. This can be followed in smaller boilers as well. 20 Eric Masanet, Ernst Worrell, Wina Graus and Christiana Galitsky, An Energy Efficiency Improvement and Cost Saving Opportunities for the Fruit and Vegetable Process Industry, An ENERGY STAR Guide for Energy and Plant Managers, U.S. Environmental Protection Agency, March 2008. 165 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh viii.Condensate return: Reusing hot condensate in boilers saves energy, reduces the need for treated predictive. Preventative measures, the purpose of which is to prevent unexpected downtime of boiler feed water, and reclaims water at up to 100°C (212°F) of sensible heat. motors, include electrical consideration, voltage imbalance minimization, load consideration, ix. Blow down steam recovery: Use of blow down steam can save the fuel consumption up to 1%. and motor ventilation, alignment, and lubrication. The purpose of predictive motor x. Boiler replacement: Substantial efficiency gains can often be realized by replacing old boilers maintenance is to observe ongoing motor temperature, vibration, and other operating data to with new, higher efficiency models. identify when it becomes necessary to overhaul or replace a motor before failure occurs xi. Direct contact water heating: Direct contact water heating system is more efficient than the iv. Properly sized motor: Motors that are sized inappropriately result in unnecessary energy losses. traditional water heating technology. Commercially available direct contact boiler can have water Where peak loads on driven equipment can be reduced, motor size can also be reduced. A study heating efficiency upto 99.7% where as the traditional heaters can have efficiency ranges from shows that replacing oversized motors with properly sized motors saves, on average 1.2% of 60% to 75%. total motor system electricity consumption b. Steam distribution system: b. Pumps i. Improved distribution system insulation: Use of better insulation material can save energy in It is a common phenomenon in the industry to use higher flow rate pumps than the system requires steam system. for a given application and therefore wasting energy. Thus, it is important to not only assess ii. Insulation maintenance: a regular inspection and maintenance system for insulation can also save individual pump efficiencies, but also to assess how well the various end uses in a facility’s pump energy. system are being served by its pumps. iii. Stream trap improvement: Using modern thermostatic element steam traps can reduce energy use while also improving reliability. i. Pump system maintenance: Adequate maintenance can ensure higher pump system efficiency. iv. Steam trap maintenance: A simple program of checking steam traps to ensure that they are Inadequate maintenance can cause pumps to wear out more quickly, and increase pumping operating properly can save significant amounts of energy for very little money. energy costs. v. Leak repair: steam distribution piping networks often have leaks that can go undetected without ii. Pump system monitoring: Monitoring can be used in conjunction with a proper maintenance a program of regular inspection and maintenance. Proper inspection and repair schedules help program to detect pump system problems before they escalate into major performance issues or reduce energy loss. equipment repairs. Monitoring can be done manually on a periodic basis (e.g., performing regular bearing oil analyses to detect bearing wear or using infrared scanning to detect excessive c. Process Integration: Process integration refers to the exploitation of potential synergies that pump heat) or can be performed continuously using sensor networks and data analysis software. might exist in systems that consist of multiple components working simultaneously. Monitoring can help keep pump systems running efficiently by detecting system blockages, impeller damage, inadequate suction, clogged or gas-filled pumps or pipes, pump wear, and if pump clearances need to be adjusted. 2. Motor systems and pumps iii. Pump demand reduction: n important component of the systems approach is to minimize pump demand by better matching pump requirements to end use loads. Motors are used throughout a typical fruit and vegetable processing facility to drive process iv. Controls: Control systems can increase the energy efficiency of a pump system by shutting off equipment (e.g., for mixing, peeling, cutting, pulping, filling, and packaging), conveyors, ventilation pumps automatically when demand is reduced, or, alternatively, by putting pumps on standby at fans, compressors, and pumps. reduced loads until demand increases. a. Motor systems Refrigeration systems: Refrigeration systems are a significant consumer of electrical energy in the food processing industry, particularly in the frozen fruit, juice, and vegetable manufacturing. The i. Motor management plan: A motor management plan is an essential part of a plant’s energy most significant applications of refrigeration systems in the industry are in the generation of chilled management strategy. Having a motor management plan in place can help companies realize water for various process cooling applications (e.g., the cooling stage in the juice pasteurization long-term motor system energy savings and will ensure that motor failures are handled in a quick process) and the in generation of cold air for cold storage and fruit, vegetable, and juice concentrate and cost effective manner. freezing. Four primary components to the typical refrigeration system are to be taken special care ii. Strategic motor selection: Selection of proper motor for a particular system needs special for the proper and efficient operation. These are the compressor, the condenser, the expansion attention (i.e. motor speed, horsepower, enclosure type, temperature rating, efficiency level, and valve and the evaporator. They need routine maintenance check ups for maintaining proper quality of power supply etc). The selection of energy-efficient motors can be an important efficiency. Cooling load reduction is one of the key points to increase the refrigeration efficiency. strategy for reducing motor system life-cycle costs. This can be done by proper insulating the pipes and reduce the pipe length and also by minimizing iii. Maintenance: The purposes of motor maintenance are to prolong motor life and to foresee a the heat sources in the cold storage area. motor failure. Motor maintenance measures can be categorized as either preventative or 166 167 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 3. Baking Oven Cement The following points should be maintained to enhance the energy efficiency of the baking oven: i. switching off unused decks in the oven with the thermostat; Scope of EE & RE: Following are some of the steps that can be taken for the improvement of ii. switching off oven and prover when finished; energy efficiency of the cement industries. (These are applicable integrated Cement plants) iii. not using air conditioning on cool days; iv. thinking about production scheduling so that equipment run time is optimised; and maximum loading of mixers. 1. Raw Materials Preparation v. double glazing on oven doors. (Single glazing leads to excessive heat losses through the front of the oven -10% of the total surface area of the oven); a. Efficient Transport Systems: Mechanical conveyors consume much less power than the vi. single point of control on deck ovens. For long periods of time (six to eight pneumatic conveyors. Since the transportation is required between every two steps, it has been vii. hours/day) the ovens are partly loaded. The oven operator should have the option to switch off seen that this change in the conveyor system saves up to 2.0 kwh/t raw material. unused decks b. Raw Meal Blending (Homogenizing) Systems: Modern plants use gravity type viii.improving thermal insulation on doors and walls of the oven. homogenizing silos that reduce power consumption. Up to 2.5kwh/t raw material may be saved by the introduction of this method. c. Raw Meal Process Control: Automation through a predictive multivariable controller 4. Compressed air systems maximizes the total feed without making the throughput of operation high enough to trip. This reduces the specific energy consumption by around 6%. Compressed air generally represents one of the most inefficient uses of energy in the industry due d. Use of Roller Mills: Replacement of the traditional ball mills by roller mills saves up to to poor system efficiency. Typically, the efficiency of a compressed air system—from compressed 6-7kwh/t raw materials without causing any deterioration to the product quality. air generation to end use—is only around 10% (U.S. DOE and CAC 2003). Because of this e. Slurry Blending and Homogenizing: Rotating stirrers can be used in place of compressed air inefficiency, if compressed air is used, it should be of minimum quantity for the shortest possible since the homogenizing process involving compressed air is less efficient. time; it should also be constantly monitored and weighed against potential alternatives. f. Wash Mills with Closed Circuit Classifier: Inside the wet process kilns, replacement of tube mills by wash mills reduces the power consumption from 13 kWh/t to 5-7 kWh/t of raw 5. Building energy efficiency measures materials. Lighting systems and other building loads are significant consumers of electricity at food processing 2. Fuel preparation facilities, together accounting for anywhere from 10% to 25% of total electricity use. The energy efficiency measures for the food processing facility, including manufacturing areas, offices, Similar to raw material preparation, the coal also has to be ground. The impact mills, in this case, can laboratory spaces, and warehouses can reduce the energy use in the industry. be replaced by roller mills, reducing the power consumption from 45-60 kWh/t to around 25-26 kWh/t (total system requirements). 3. Clinker Making - All Kilns a. Improved Refractory: These are linings of the kilns that provide protection against heat, chemical and mechanical stress. Thus proper choice and replacement have proven to deduce energy consumption by around 14%, along with a speed up in production. b. Kiln shell heat loss reduction: Heat loss grows into a big problem especially in the burning zones. Thus the use of improved refractories such as Lytherm can significantly reduce heat loss and fuel use is reduced by 0.12 to 0.40GJ/t. 21 Energy efficiency opportunities in the bread baking industry, Franchise bakeries, Industry, 22 Ernst Worrell, Christina Galitsky and Lynn Price, Energy Efficiency Improvement Opportunities Science and Resources Energy Efficiency Best Practice Program, June 2000 for the Cement Industry, January 2008 168 169 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh c. Energy Management and Process Control Systems: This includes measures for optimal 7. Plant Wide Measures energy use, recovery, use of fuzzy logic control systems, etc. Combinations of all these measures have shown improvements of energy efficiency by 5-10%. a. Preventive Maintenance: Since most of the processes in a cement plant are automated, d. Adjustable Speed Drive for Kiln Fan: Proper asds have proven to reduce energy consumption personnel responsible may be trained of attentiveness towards energy consumption and of the kiln fans by up to 40%. efficiency. b. High-Efficiency Motors and Drives: 500-700 electric motors may be used in a typical cement 4. Clinker Making – Rotary Kilns plant with power ratings ranging from kW to MW. Thus using the higher efficiency types of motors can increase the overall plant efficiency by 3-8%. a. Installation or Upgrading of a Pre-heater to a Pre-heater/Pre-calciner Kiln: Upgradation of the c. Adjustable or Variable Speed Drives: Being the largest power consumers and with scopes pre-heater Kilns to a multistage pre-heater/pre-calciner and if possible with an extra pre-heater 10-60% efficiency improvement, these should always be employed wherever possible. can increase the productivity by 80-100%, while reducing the specific fuel consumption. d. Reduce Leaks – compressed air systems: A poorly maintained plant can have up to 50% b. Conversion of Long Dry Kilns to Pre-heater/Precalciner Kiln: This process increases the fuel leakage of the total compressed air capacity, whereas simple maintenance practices can reduce efficiency of the kiln by 1.4 GJ/t. these leaks to less than 10%. c. Dry Process Upgrade to Multi-Stage Pre-heater Kiln: Replacement of the old long kilns having e. Reducing the Inlet Air Temperature: Reducing the inlet air temperature significantly reduces up to 2-stage pre-heaters with 4 or 5-stage pre-heaters reduces heat losses and improving energy used by the compressor. As a rule of thumb, each 3oC will save 1% compressor energy pre-calcination up to 40%, and shortening the kiln length by 20-30%. use. d. Conversion to Reciprocating Grate Cooler: This increases the kiln capacity and improves heat f. Compressor Controls: Sophisticated timing controls over the running periods of compressors recovery from the air leaving the kiln by reducing the temperature to as low as 83˚C. can save more than 10% of the annual energy consumptions of compressors. e. Kiln Combustion System Improvements: Improvements of combustion characteristics such as g. Sizing Pipe Diameter Correctly: Improper pipe sizing can result in significant pressure losses, flame shape, adjustable firing, incomplete combustion, and combustion with excess air can easily increase leaks and increase generating costs. Increasing pipe diameter typically reduces annual save another 10% of the kiln efficiency. energy consumption by 3%. 5. Clinker Making – Vertical Shaft Kilns 8. Product and Feedstock Change a. Replace vertical shaft kiln with new suspension pre-heater/pre-calciner kilns: This change is a. Use of Waste-Derived Fuels: A cement factory in Quebec installed an automated system to proving to reduce energy use by up to 45% in many plants in china. feed whole tires into the mid-section of the kiln, which replaced about 20% of the energy. This translates to energy savings of 0.6 GJ/t clinker. b. Limestone Portland Cement: Similar to blended cement, ground limestone is inter ground 6. Finish Grinding with clinker to produce cement, reducing the needs for clinker-making and calcination. A further 5% of energy consumption reduction can be achieved. a. Process Control and Management – Grinding Mills: Systems similar to kiln management are also being deployed to the grinding mills, yielding around 3.5% increase in energy efficiency. Use of Steel Slag in Kiln: The slag from the electric arc furnace of steel plants that contains b. Advanced grinding concepts: Combinations of ball and roller mills instead of only ball mills tricalcium silicate (C3S) can more easil can reduce power consumption from 30-42kWh/t to 20-30kWh/t. c. High Efficiency Classifiers: These prevent the re-grinding of fine ground particles along with Scope of EE & RE: Following are some of the steps that can be taken for the improvement of EE the coarse particles, and have shown an increase in production by up to 25%. in steel re-rolling units. d. Improved Grinding Media: Increases in the ball charge distribution and surface hardness of grinding media and wear resistant mill linings have shown a potential for reducing wear as well as energy consumption, along with a potential to reduce energy use by 5-10%. 170 171 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh Steel Re-Rolling f re Befo f er Aft Excess air percentage 85 26 Combusti fficiency t on Eff 71 78 Steel Re-Rolling Mills Furnace Oil consumpti t on 247.5 235 Various measures such as cleaning the recuperator, improving combustion efficiency, continuous c. Rolled-in-scales fuel monitoring in billet re-heating furnaces and downsizing motors have contributed significantly to energy conservation in medium and small scale steel re-rolling mills. About 3% of the material was being lost due to scale formation due to oxidation. Controlling excess air also reduced scale losses to about 1.5%. A. Waste Heat Recovery D. Down sizing main mill motor The main advantages of preheating the combustion air using the recuperator are: Underloading of motors, to meet initial torque requirements, is a major factor contributing to 1. Heat abstracted from the flue gases by combustion air is returned to the furnace thus reducing inefficiency of operation. A 1000 hp motor was replaced with a 500 hp motor. The specific energy the furnace oil consumption. consumption came down by 8 kWh per tonne by downsizing the motor. 2. Rise in flame temperature results in increased radiation heat transfer, reducing initial heating time of cold furnace, fuel consumption and increasing furnace availability. 3. Excess air reduction also reduces fuel consumption and scale / burning losses. 4. Overall furnace efficiency is improved The recuperators for waste heat recovery may be parallel, counter or cross flow type. During the furnace study, it was observed that the combustion air temperature was 70°C against the designed temperature of 240°C. The audit team found that the reduction in combustion air temperature was mainly because of the fouled recuperator, which had never been cleaned. Cleaning of the recuperator during furnace down-time at once increased the combustion air temperature to 225 degree Celsius. The fuel consumption rate reduced by 14 litres/h just by cleaning the recuperator. Since then, this cleaning has been made a routine practice at the plant. B. Improving the combustion efficiency by controlling excess air level. In practice, most furnaces operate on high excess air. The higher the excess air, greater is the volume of flue gas, and hence higher the heat loss through the flue gas. Flame temperature and radiation heat transfer across the heating surface is also reduced. These can be optimised by regulating excess air by flue gas analysis to maintain a proper air to fuel ratio. The quantity of excess air in the flue gas can be determined by measuring percentage of either CO2 or O2 in the flue gas. The billet reheating furnace was operating at a high excess air of 85%. There was a visible improvement of 7% in the combustion efficiency and, therefore, furnace oil consumption could reduce by 12.5 litres/hour. 23 Source: http://www.energymanagertraining.com/audit_report/case_study_brochures/rerolling.htm 172 173 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh Light Engineering Scope in EE & RE in Sugar Industries Scope of EE & RE: In the metal parts manufacturing industry, energy is used in the activities such The sugar industry involves energy consumption in the form of steam for many of its processes. as casting, welding, parts assembly and surface finishing. Scope for energy saving can be to use On the other hand, the cane trash, which is a waste product in the sugar industry, can be mobilized higher efficiency equipment and to prevent heat loss and energy loss through inefficiencies. Some for energy production as a source of renewable energy. Hence sugar factories that use bagasse scopes for energy efficiency are as follows: cogeneration technologies are reducing the demand for conventional energy . 1. Using more efficient energy sources, e.g, using natural gas instead of electricity for heating. Other opportunities to optimize energy consumption in sugar industries include: 2. Switch off energy intensive machines when not in use. 1. Insulation and closing of steam leakage 3. Insulate equipment surfaces to prevent heat loss. 2. Using a high automation standard process control system 4. Preheat incoming water or air with exhaust gas from boilers or furnaces. 3. Converting the low grade molasses into ethanol to be used as fuel 5. Use natural lighting, task light and zone lights where appropriate. 4. Extension of the boiler and turbine operations time 6. Use solar heating to pre heat water for hot water applications. 5. Improve boiler performance by installing high pressure boilers. 7. Recycle cooling water using cooling towers instead of refridgeration. 6. Preheat sugar juice using exhaust heat 8. Use oxygen enrichment for combustion processes. 7. Use bagasse as a bio-fuel 9. Saving coke fuel in the furnance by using a divided blast cupola (DBC). This increases 8. Improving efficiency of vaporization station. oxygenation and more efficient burning of the coke fuel. It thus saves energy consumption. 9. Promote complete combustion of fuels by increasing aeration and optimizing fuel mixing. 10. Duplexing a cupola and induction furnace to save energy in the metal melting and superheating process. 10. Recover heat from blow down. 11. Reducing electrical energy in an induction furnace by heating the material only up to the required 11. Reduce moisture content by solar drying of fuels (bagasse) level for moulding. 12. Using online monitoring of the melting temperature to reduce overheating and save energy. 24 Saving Energy in the Metal Manufacturing Industry, http://pdf.aigroup.asn.au/environment/ 07_Metal_Manufacturing_Energy_Saving_Factsheet.pdf, retrieved on March 17, 2011 25 S H Arjunwadhar, Prosanto Pal and Girish Sethi, Energy savings and carbon credits: 26 Surendra Prasad, Energy Aspects of Fiji’s Sugar Industry: A Case for More Efficient Electricity Opportunities and challenges for Indian foundry industry, 68th World Foundry Congress, Generation from Bagasse, Fijian Studies Vol. 1 No. 2 © Fiji Institute of Applied Studies. 7th - 10th February, 2008, pp. 19-22 27 http://www.rdmu.org/docs/CDM_and_Carbon_Report_Final.pdf 174 175 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh Pulp and Paper 4. Chemical Recovery a. Oxygen enrichment: This will reduce the fuel requirements in the lime kilns by improving the efficiency of the combustion system. Scope of EE & RE: The paper and pulp industry can undertake the following energy efficient b. Lime kiln modification: Modifications like water vapor filters to reduce evaporation energy, measures in its various activities. insulation bricks to reduce heat loss, and recapturing exhaust gases to preheat incoming air and lime can all reduce the fuel consumption. 1. Raw Materials Preparation c. Lime kiln electrostatic precipitators: These can be used as a dry alternative to washing the kiln with water, thereby reducing moisture in the kiln, which consumes evaporation energy. This stage involves the preparation of the wood or bamboo raw materials. A study of the US Pulp d. Using black liquor solids concentrator to reduce the amount of fluids to be evaporated with industry showed that this phase of the industry consumes about 10 % of the electricity of the heat. industry. The following measures can be undertaken for energy efficiency: e. Recovery boiler deposition monitoring: This can reduce the amount of deposits on surfaces, reducing shutdowns due to plugging. a. Using belt conveyors instead of chip conveyors to transport wood chips: This can reduce the f. Increased air injections: This can improve combustion, reduce fouling of tubes and reduce the energy consumption by 95%. frequency of boiler washing and reheating. b. Chip handling and thickness screening: This process involves sorting the raw chips into equal sizes so that the digester will use less steam, reducing cooking energy. 5. Mechanical pulping 2. Chemical pulping a. Refiner improvements can improve the consistency and composition of the raw materials, thereby reducing the load on the motors and overall energy consumption. a. Use of pulping aids in chemical pulping: This process increases liquor penetration and promotes b. Reducing water retention in refined pulp to reduce energy consumption through steam use more even cooking, reducing energy consumption. reduction. b. Optimizing the dilution factor in the chemical recovery process: This will reduce dilution of the c. Using pressurized groundwood pulping, where the pulping takes place under higher pressure, liquor, and reduce the amount of heating to increase concentration promotes softening of the lignin, and reduces energy consumption. c. Using continuous digesters instead of batch digesters so that repeated initial heating is d. Using continuous repulping to improve process efficiency and energy reduction. prevented, thus reducing energy consumption. e. Increased use of recycled pulp: Recycled pulp from recycled paper uses less energy than virgin d. Reusing heated pulping liquor in successive pulp cooking batches will reduce steam requirement pulp. for heating digester contents. e. Recovering the heat from the hot pulp and liquor at the end of the cooking process can be used to heat steam, which can be used for preheating the next batch. 6. Papermaking This is the process of creating sheet paper and drying it. This process consumes about half the 3. Bleaching: energy in the entire paper making process, and improving the efficiency of the drying process will reduce costs here. a. Heat recovery from bleach plant effluents: The effluents from the bleach plants can be used for a. Increasing water removal in the forming and pressing stage: The drying stage is the most energy preheating the pulp or steam. intensive, using 25 times as much energy as in the forming section and five times the energy as b. Preheating the Chlorine dioxide using heat exchangers before use in the bleach plant can reduce in the pressing section. Therefore, the removal of more moisture in the early stages can reduce steam demand. energy consumption during drying. b. Reducing air requirements by optimizing the ventilation system will reduce the energy needed to heat air for drying the paper. c. Optimizing the air temperature during drying and ventilation will prevent the unnecessary overheating of air and energy loss. d. Recovering waste heat for reheating or preheating purposes will prevent energy loss. 28 Klaas Jan Kramer, Eric Masanet, Tengfang Xu, and Ernst Worrell, Energy Efficiency Improvement and Cost Saving Opportunities for the Pulp and Paper Industry An ENERGY STAR® Guide for Energy and Plant Managers, October 2009. 176 177 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 7. Emerging energy efficiency technology Poultry a. Black liquor gasification: This emerging technology involves converting the black liquor to a Scope of EE & RE: The main power consumption in poultry industry are for lighting, heating for clean synthesis gas by converting its biomass into a gaceous energy carrier. This system increases hatching and also during cold weather and air circulation system (ventilation systems). The poultry flexibility, reduces air pollution and has a higher electricity to heat ratio. industry can undertake the following energy efficient measures in its various activities according to b. Using magnetically coupled adjustable speed drives: This reduces friction and maintenance the different poultry related industries. problems, with the accompanied energy loss. c. Microwaving logs: This process softens the lignin in wood, reducing energy consumption during 1. Parent bird stock; DOC(day old chick) the cooking process. 2. Hatching eggs d. Gas fired paper driers: This technology increases drum temperatures and drying rates, reducing 3. Broiler DOC energy consumption. 4. Feed e. Advanced fibrous fillers: Using inorganic fillers mixed with the organic pulp will lead to reduced 5. Medicine and vaccination energy consumption in the pulp making process. 6. Cage and equipment f. Bio-treatment: The treatment of the wood with fungus and enzymes will soften the bonds in wood, leading to lower energy consumption in the pulping process.  Use cold-cathodes when low-light intensity and dimming is needed. If cold-cathodes are not able to fulfill the foot-candle requirements during brooding/growout, combine them with spiral CFLs on a different circuit and/or alternating bulbs to replace the need for incandescent bulbs.  In houses where dimming is not required, spiral CFLs should be installed. They offer more uniform light coverage, more energy efficiency and lower costs than incandescent bulbs.  Spiral CFLs should be cleaned by hand, but their long life and energy cost savings will outweigh any additional labor costs.  Considerable savings are possible even for those with smaller farms and minimal lighting needs.  LED could be a possible energy efficient solution for lighting purpose, but some studies shows that LED does not guarantee for the light color and also the frequency dependence of LED lamps effects the poultry yields. However, it is critical to provide birds with the correct light intensity if expected performance levels are to be met. This can now be done with a variety of different lighting methods (incandescent, fluorescent, cold cathode, sodium vapor, etc.). Producers should give serious consideration to lighting alternatives that conserve energy and offer long-term savings. Integration of RE:  As the poultry are situated in suburb and in upazillas (outside the main city/town), the poultry sheds have sufficient roof area to integrate solar PV systems to provide the lighting loads using the PV systems.  Load requirements of a typical broiler poultry is 5 to 6 kW. This can be easily integrated by the Solar PV using the poultry roof top.  Solar energy is converted into electrical energy by PV cells on solar panels. A typical broiler house may need about 8 to 10 kW to meet the electrical energy demand and an array of PV cells may be able to meet a large portion of the demand most of the year. The PV method may cost $45,000 to $60,000 per house with paybacks of 5 to 9 years.  Heating loads in winter season can be reduced using the transpired wall on the sunny side of the poultry house, also solar collector can be used for the hot water demand of the poultry.  Passive solar housing can be incorporated to reduced the cooling loads in the summer. 178 179 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh Textile Chemicals g Eff Scope of EE and RE: Energy g /Process: fficient Technology Scope of EE & RE: The chemicals industry involving the production of pharmaceuticals, toiletries and pesticides is a highly energy intensive industry. The primary energy consumers are the Process/ Technology g Installation f ts Benefi production equipment including centrifuges, incubators, sterilizers, electric mixers, refrigerators, 1. Heat recovery fr f om diesel f uid heat recovery Thermal fl v ng in fu Savi f rnace oil in the assembly lines, packaging machines etc. The next highest energy consumers in the industry are the generator exhaust fo f r process hot system. system boiler heating, ventilation and air conditioning systems. We can summarize the energy efficiency measures water generatit on. in the various industries as follows: t on of heat recovery 2. Installati Plate Type Heat Exchanger Savings in steam consumption system in Merceri r zer machine. (PTHE). a. The heating, ventilation and air conditioning systems can incorporate energy monitoring and 3. Installati t on of varir able speed f tted wi Pumps fi w th Vari r able  Energy v ng g Savi control systems to optimize energy use. There should be duct leakage repair, discharge air r ve fo dri f r weir wash pump of Speed dri r ves (V ( SD).  Matching of fl f ow temperature management, variable air volume systems, adjustable speed drives, heat recovery Mercerir zing machine. requirements systems, chiller efficiency improvement, fan modification, efficient exhaust fans, cooling water  Reducti t on in pump down- recovery, solar air heating, building reflection management, building insulation and low ti t me emittance windows. 4. Replacement of singlg e stage Evaporator replaced by 3-  65% savi v ngs in steam b. Fume hoods can be made more efficient by improved storage, restriction of sash openings, w th 3-stage evaporator wi stage Evaporator. consumptit on using a vortex in the top of the fume hoods, and using variable air volume hoods. t c soda evaporator in causti c. Clean rooms can conserve energy by using reduced recirculation air change rates, improved air recovery plant. filtration quality and efficiency, optimized chilled water systems, cooling towers and reduction of 5. Replacement of electri t ng r cal heati Thermic fl f uid coils  Energy v ng g cost savi exhaust. y eri in Polym r zer to Thermic fl ud f ui installati t on.  Reducti t on of maintenance d. Motor and motor systems can be improved by using more maintenance, proper sizing, higher t ng. heati efficiency and adjustable speed drives. 6. Heat recovery in bleaching range. The mill installed a project to  Reducti t on of steam e. Compressed air systems can be improved using system improvements, maintenance, leak recover heat in drain water. t on consumpti reduction and turning off when necessary. There can be improved load management, pressure t on of TIC control fo 7. Installati f r Temperature Indicatit ng  Reducti t on in steam drop minimization, inlet air temperature reduction, properly sized regulators and pipes, and heat processing machines. ( IC) installati Controller (T t on. t on consumpti recovery for water preheating.  Improved process control f. Pumps can be made more energy efficient through proper maintenance, monitoring, demand 8. Replacement of conventi t onal t on of Energy Installati g  Reducti t on in electri r city t reduction, proper sizing, multiple pumps for variable loads, and impeller trimming. motors wi g eff w th energy fficient Eff fficient (EE) Motors. t on consumpti g. Refrigeration can have more maintenance, systems and charge monitoring, optimization of R ng Frame. motors in Ri condenser and evaporation parameters, monitoring of suction line filters and refrigerator t on of photocells fo 9. Installati f r A photocell detector is  100 % energy v ng by g savi contamination, cooling line and jacket insulation, waste heat recovery, operation at lower system Speed Frame. f ont installed to detect fr t ng eliminati pressure, and using absorption chillers. breakage.  Reducti v ng losses t on in rovi h. Lighting can be made energy efficient by using light controls to switch off when not in use, using t on of soft 10. Installati f Starter-cum- Installed soft f Starter-cum-  Energyg savi v ngs CFL and energy efficient lights, and using natural daylight when possible. g saver fo Energy f ame. f r Speed fr Energy g savers.  Increase in speed frf ame i. Boilers and heaters can be improved by using boiler process control, reduction of flue gas fficiency eff quantities, reduction of excess air, proper sizing, insulation, maintenance, flue gas heat recovery, 11. Installati t ons of FRP R fa f n Blades Installati t on of Fiber gl g ass  Energy v ngs of 10-20% g savi condensate return, blowdown steam recovery, distribution system insulation, steam trap f r Humidifi fo f cati t on fa f n. f rced Plasti Reinfo t c (FRP). improvement, maintenance and monitoring, and flash steam recovery. t lizati 12. Uti t on of fl f ash steam fo f r Installed a system to collect  Savi f rnace oil in v ngs in fu f ed water pre-heati boiler fe t ng f ash stem and uti the fl t lized boilers f r boiler fe fo f ed water. t on of syntheti 13. Installati f at belts t c fl Installed syntheti t c fl f at belt in  Energy v ngs in 5% g savi f r spinning ri fo f ames. r ng fr f ames. spinning fr  Maintenance of belt eliminated 29 http://www.energystar.gov/ia/business/industry/LBNL-57260.pdf 180 181 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh Plastics Processing machines, it is advisable to invest in a hydraulic machine with multiple energy saving pumps. In this case, during off times, the machine will be provided with pressure using the smallest pump. Alternatively, one hydraulic system can supply multiple machines. Scope of EE and RE: This industry can have energy savings measures in the various stages of the Electrical machines use a newer technology, where energy losses are avoided when there is no load manufacturing process. The energy requirements and the energy savings potentials are summarized on the machine. as follows : Hybrid machines use a hydraulic pump as well as motors. They are less expensive but less energy 1. Extrusion: This is a continuous process of converting plastic pellets into semi finished efficient than fully electrical machines. products such as pipes, cable sheaths, plates, films and sheets. Electrically heated thermal oil is used in the moulding process. In this process, the biggest energy consumers are the motors, Compressors 17% heating units, cooling processes and compressors. In this process, energy saving measures can be: Cooling 5% a. Choosing the right extruder b. Optimizing extruder speed Lighting 8% c. Switching off energy consumers when there is no production Machines 60% d. Insulating the housing of the extruder e. Heating pellets only up to the melting point Heating, Ventilation, A/C 10% f. Minimize use of compressed air g. Use gas instead of thermal heating h. Use natural cooling, e.g., if the outside temperature is cool enough to cool water. Air compressors are the second most energy intensive component in a plastics plant. However, 2. Injection moulding: This is a cyclical process used to make identical parts by injecting molten there are several low cost ways to increase the energy usage in the compressor system, as follows: plastic through a nozzle into a mould. In this process, heaters and motors use most of the 1. Removing leaks from the compressed air system energy during the injection of the plastic. A smaller amount of energy is used for cooling the 2. Reducing operating pressure plastic. In this process, energy saving measures can include: 3. Compressing naturally cooled outdoor air during cold seasons 4. Using nozzles engineered to use less compressed air. a. Cleaning the mould periodically b. Minimizing cycle time for the injections Apart from the energy efficiency of the machines, energy consumption is affected by the following c. Power off machines when not in use. factors: 3. Blow moulding: This is a process for making hollow objects, where molten plastic is moulded 1. The melting temperature of the plastic by compressed air into the desired shape. The energy consumers are the same as in extrusion 2. The shape and size of the product and injection moulding. Energy savings measures are also similar. 3. The number of times heating and cooling is required 4. The production quantity resulting in energy economies of scale The moulding machines in a plastics manufacturing plant consume the most energy in the 5. The cycle time of the machine manufacturing process, followed by compressors and peripheral equipment. There are three types 6. Outside temperature of moulding machines- hydraulic, electrical and hybrid. The purchase price of a moulding machine Generic energy reduction practices include reuse of heat form hot exhaust material, insulating is lower than its lifetime consumption of energy. Hence, the major cost consideration in investing equipment and process piping. in a moulding machine is its energy use over its lifetime. New and emerging technologies for energy efficiency in the plastics industry include the following: Among the machines, the hydraulic drive is the oldest technology. In hydraulic machines, continuous 1. Developing new plastic materials that are energy efficient to manufacture. pressure is supplied by a pump, and so it is fully loaded at all times. To avoid energy wastage in such 2. Microwave drying 30 Rob Van Heur, Mark Verheijen, Power Quality and Utilization Guide Plastics Industry, 31 Air compressors are the second most energy intensive component in a plastics plant. However, there January 2009, Leonardo Energy are several low cost ways to increase the energy usage in the compressor system, as follows: 182 183 Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Instrument for the Plant Manager / Technical Director Annex 4 QUESTIONNAIRES 185 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh 186 187 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh Instrument for Finance Manager / Finance Director of the Industry 188 189 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh Instrument for Owner / CEO / Instrument for the Consultant / Managing Director of the Industry Consulting Companies 190 191 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh Instrument for Energy Efficiency / Renewable Energy Equipment Vendors 192 193 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh Instrument for Banks and Financial Institutions 194 195 Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Annex 5 CLUSTER FINANCE 196 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh Brief Note on Cluster Finance Bank can provide cluster finance loan at an attractive rate, as bank can get a group of borrowers at one place effectively reducing transaction cost substantially. Apart from receiving discounted price for bulk procurement, the borrower units could form a group to get their projects qualified as Cluster Finance: It is recommended that cluster finance concept could be used for financing Programme of Activities approach for CDM projects. The group could explore to club Certified energy efficiency projects of a group of MSME units. Often a common efficiency improvement Emission Reductions (CERs) to form a larger volume to receive better price (or Verified Emission solution is applicable to most of the MSME units belong to a cluster or sector. In such a case, every Reductions – VERs). An aggregating agency will play important role in this regard. The aggregator MSME unit is required to procure same or similar EE equipment. It is possible to get discounts on will primarily bring together units from a cluster willing to implement EE project. Also participating bulk purchases of multiple units of EE equipment. Consider an example of ceramic tiles or ceramic units will enter into a suitable contract with aggregator to sell their CERs after implementation of blocks making units situated in the state of Gujarat. High efficiency burners could help reducing project. The aggregator will provide an appropriate price to the CERs resulting from individual fuel oil consumption in these units. Similarly, waste heat recovery units or combustion control projects. systems can help further efficiency gains. Therefore, bank or lead MSME unit can approach reputed EE equipment manufacturers to offer their products to units at a discount. As mentioned above, Role of an Aggregator: As mentioned earlier, an aggregating agency, primarily brings all the bank or an institution with access to TA facility can provide support to conduct energy audits of participating units on a common platform. It offers price for CERs or VERs that is acceptable to all sample / select units. This is a well proven concept in the MSME space. the parties. Banks and financial institutions will have to develop a network of aggregators to implement EE projects of clusters. An aggregator agency could be a vendor or energy consulting Scheme of operation: To start with bank can identify a cluster with potential to improve energy firm (may be a monitoring and verification firm). Role of an aggregator is an important and will help efficiency. After careful study and evaluation, main issues and problems can be identified. A bank to increase potential to provide more clusters loans. Aggregator will be expected to develop progressive and forward looking unit can be convinced to get its facility audited. The bank can assist appropriate project with all the participants. These participating units from MSME segment will this unit with TA to conduct the first energy audit to identify solutions. The selected unit should enter into a contract with aggregator to implement EE project as per the standards. Participating implement efficiency improvement solution at its manufacturing facility and allow other units to see. units will provide necessary data on energy consumption to aggregator and will cooperate with Once this unit successfully completes the project and achieves efficiency improvement, the bank can aggregator and monitoring and verification process as per the design document. invite other units in the cluster for demonstration. It is expected that most of the units in the cluster to adopt the same solutions at their respective facilities. The bank thus can provide loan and TA to conduct a few sample energy audits. Schematic Representation of Cluster Loan Volume Guarantee Bank Contract EE Equipment M&V Vendor Interest and Loan Repayment Agency Cluster Loan U1 U2 U3 U4 M & V Protocol Sale of EE Equipment 198 199 Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Use of Biomass as Sustainable Energy: The use of biomass for green energy has introduced in a number of industrialized countries. This has led to biomass gaining a growing and significant share of the primary energy sector in USA, Sweden and Austria (4%, 16% and 10% of primary energy respectively) (LGED, 2006). But, there is a little use of biomass in the commercial sector of Bangladesh and it is even gradually decreasing day Annex 6 by day. In 1988, biomass provided about 70% (519 PJ) of Bangladesh's energy, 20% of which was used by industry. The remaining 80% of total biomass fuel consumption was for domestic cooking, 45% of which was used in the urban sector and 65% in rural areas. Commercial fuels (mostly diesel and gas) provided about 220 PJ. Currently, most towns have piped gas supplies and many households USE OF are connected, consumption is often overestimated as many households which are connected still use charcoal and agricultural residues due to the cost of the gas and service facilities (Ahsan, 1988). Use of Biomass in Paper Mills of Bangladesh: BIOMASS AS In the industrial sector of Bangladesh, use of biomass found only as a raw material. This type of biomass consumption was introduced in 1953 when Daud Group had established the Karnaphuli SUSTAINABLE Paper Mill (KPM) at Chandragona in Chittagong using local bamboo and hard-wood as raw material (Saha et al., 1997). Later, three more mills were set-up under government initiative to use indigenous raw materials for paper production: ENERGY Khulna Newsprint Mill (KNM) at Khulna to produce newsprint from Gewa; North Bengal Paper Mill (NBPM) at Pakshi to produce writing and printing paper from Bagasse and Sylhet Pulp and Paper Mill (SPPM) at Sylhet to produce pulp from muli bamboo and reed. Among them only KPM is operational and currently producing approximately 30,000 tons of paper per annum (BCIC, 2011) Now a day there are a number of papers and pulp mills in the private sector of the country. But, most of the mills are based on imported pulp and waste paper as raw materials. able: Raw materials used in Bangladeshi Paper Mills a materials Type of raw Source Share Waste paper Local 45% Waste paper Foreign 25% Pulp K M) Local (Only in KP M and imported 30% Source: (Haroon, 2010; Rahman and Kabir, 2010) References: - Ahsan UH (1988) Country Paper of Bangladesh, in Report of the FAO/ESCAF/UNDP Regional Training Workshop, Beijing, 1989. - BCIC, BCIC Enterprises: Karnaphuli Paper Mills Ltd., BCIC: http://www.bcic.gov.bd/kmp.php [cited 22 May, 2011], 2011 - Local Government Engineering Department (LGED), 2006, Reducing Greenhouse Gas Emissions by Promoting Bio-energy Technologies for Heat Applications, Country Report, Report No. EP/RAS/106/GEF - Raman, MM and Kabir, KB, 2010, wastewater treatment options for paper mills using waste Paper/imported pulps as raw materials: Bangladesh perspective, Chemical Engineering Research Bulletin 14(2010) 65-68 - Saha N, Kawata I and Furukawa Y, Alternative fiber resources for pulp and paper industry of Bangladesh: Why and what?, Journal of Forest Research, 1997. 2(3):pp. 165–170. doi:10.1007/BF02348215 201 Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Bangladesh Bank’s Circular No/06 ACSPD dated 03-08-2009 on Solar Energy Bio-gas and ETP Actor Refinancing Scheme To supplement the shortage of electricity and natural gas to maintain a balance in nature and to project public health Bangladesh Bank has created a fund for BDT 2,000 million from its own Annex 7 resource to extend loan on easy terms and interest for setting up of Solar Energy, Bio-gas and Effluent Treatment Plant (ETP), through scheduled commercial banks and non-banking financial institutions. The fund is to being operated on reimbursement basis. Refinancing facilities up-to 100% are to be provided out of the fund for setting up Solar panel, Solar PV Assembly plant, BANGLADESH Bio-Gas plant, and ETP both in rural and urban areas. Sector to be covered and the limit of loan BANKÊS CIRCULAR Sl. No. 1 Sector Solar Panel Description f R ral Areas for Ru Maximum Loan Amount (Tk.) Tk. 70,000/- ON SOLAR ENERGY, 2 V Solar PVA fo f r Urban Areas To set up assembling plant Tk. 175,000/- To be determined on the Plant t basic of assembling capacity BIO-GAS AND 3 Bio-gas plant t ng To install bio-gas plant in the existi animal and poultry fa f rms. Tk. 36,000/per plant f rm To set- up integrated livestock fa Tk.300,000/ per project ETP ACTOR 4 ETP including biogas plants Setti t ng up of Chemical and Biologi g cal ETP (Including local and import cost) t Tk. 10,000,000/- REFINANCING Terms and Conditions: a. For Solar Panel for Urban Area : SCHEME Preference will be given to proprietorship and joint venture firms, households and under developed and off-grid areas both in rural and urban areas. Panel capacity: From 170W to 520W Repayment period: 3 years Mode of Payment: Quarterly (inclusive of principal and interest) Interest rate: 5% + 4% for both new and refinancing. Interest rate (for NGO under credit wholesaling): 5% + 5% for both new and refinancing. For Solar Panel for Rural Area: 10W to 130W Commercial use: 520 watt Loan amount: Tk. 10,000 to 70,000/- Repayment period: 3 years Mode of Payment: Quarterly (inclusive of principal and interest) Interest rate: 5% + 4% for both new and refinancing. Interest rate (for NGO under credit wholesaling): 5% + 5% for both new and refinancing. 203 Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh b. For Setting up Solar PVA Assembling Plant: Repayment period: 5 years Grace period: 6 months from the date of receiving loans Mode of repayment: Quarterly basis (Principal and interest) Interest rate: 5% + 3% both for new and refinancing. c. For Bio-gas plant: For households and commercial use, biogas plant size ranges from 1.2 cubic meter to 4.8 cubic meter. Loan amount: Tk. 18,000 – Tk. 36,000/- Repayment period: 3 years Mode of Payment: Quarterly (inclusive of principal and interest) Interest rate: @ 5% + 4% for both new and refinancing. Integrated Livestock Farm including Biogas plant: For households and commercial use, 4 high breed cows and biogas plant of 4.8 cm size Loan amount: Tk. 300,000 Repayment period: 3 years Mode of Payment: Quarterly (inclusive of principal and interest) Interest rate: @ 5% + 4% for both new and refinancing d. Effluent Treatment Plant (ETP): Applicable for sectors where wet process is in use such as Textile dyeing, Pharmaceuticals, Garment, Washing, Fertilizer, paper, Distillery, Sugar, Chemicals, etc). Factory’s Production capacity: Minimum 5 tons to 20 tons/ per day. ETPs treatment capacity: capacity ranges from 500 to 2,000 cubic meters Debt-Equity Ratio: Bank client relationship (commonly applied ratio is 70:30 for industrial credit) Rate of interest: @ 5% + highest 4% Repayment period: 5 years Mode of repayment: Quarterly for new as well as refinancing loan. Grace period: 6 months Banks and FIs are allowed to determine new rate of interest above @5% on the outstanding loan, if the borrowers fail to repay the loan within stipulated repayment period. Besides, there are other terms and conditions regarding disbursement of loan, use of loan, supply of information, eligibility of refinancing scheme, etc. 204 Annex 8 OVERALL FINDING OF THE SURVEY ON BANKS AND FIS IN FINANCING EE/RE Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh Overall Finding of the Survey on Banks and Also, the bank officials reported that entrepreneurs of large scale industries were more aware about the latest technological developments in their respective industries and as such, they have already FIs in Financing EE/RE adopted EE technology and installed required equipment and system that reduced their energy cost, whereas entrepreneurs in the SME sector are least or not aware about new technological developments. During the discussions held with the bankers, they also recommended setting norms A total of 16 banks and financial institutions were surveyed although 20 contacted, of which 13 on the energy consumption and benchmarking of energy efficiency level in different industries. banks and FIs provided required information and the rest declined despite repeated persuasion. Also, pilot project on EE at factory level should be undertaken in order to demonstrate the actual Summary of the findings are briefly explained below: cost-benefits of energy efficiency measures. a. Attitude and Awareness of Bankers about RE and EE b. Special Financing Scheme/Loan Program of Banks in RE/ Financing EE sector In general, the local bankers are not having mentionable technical knowledge on energy efficiency Among the banks and FIs surveyed, so far, only 2 (two) banks launched financing scheme on and they are not at all aware about possible EE measures except replacement of CFL that can be renewable energy following the recent Bangladesh Bank’s circular on Green Banking Guideline and adopted in the industrial sector, observed during the stakeholders meeting. However, degree of there are other banks intending to enter in this market. No loan scheme in the area of energy their understanding on EE also varies; credit officials of a few banks and FIs are very highly aware efficiency (EE) measures for industrial sector has yet been introduced by any bank or FI. The reason about RE, however, no awareness observed on energy efficiency. Only two respondents mentioned could be the lack of knowledge about the RE/EE sector (Fig-2). that they are highly aware about the scope of modernization through applying EE measures and the rest are not at all (Fig-1). 17% o% 8% Very High 25% Yes High No Medium 8% 83% Low 59% Very Low Figure-2: Financing scheme or program on EE/RE Figure-1 : Awareness of Banks about modernization (EE/RE) in industries However, recently, Prime Bank Limited has been granted a capacity building program titled “Prime More than half of the banks and FIs surveyed are found to be aware only about renewable energy Green Finance Program”, funded by Climate Finance Innovation Facility (CFIF) under United financing while they have no knowledge to assess the potential and scope of applying the concept Nations Environment Program, managed by Frankfurt School of Finance and Management, of EE at industry level and as such, they lack and capability in EE financing. Germany. Under this two-phase program, PBL will identify financial products for EE market and formulate lending policy with the assistance of European EE finance expert team. Upon successful As a whole, the bankers seemed to have heard this issue of EE measures and their possible implementation of phase-1, credit officials of PBL will be trained on EE financing. adaptability for the first time. However, senior officials working in EBL pointed out several critical aspects that might hinder EE practices at factory level that these are lack of adequate knowledge of Following the Green Banking Guideline of BB, a few other banks and FI’s are in the process of small and medium entrepreneurs, lack of willingness of the entrepreneurs to adopt EE measures; launching loan scheme on renewable energy sector, but nothing mentioned in the area of EE low or insignificant cost of energy for production compared to total production cost, absence of finance. The majority of these programs are in collaboration with the government and Bangladesh technical know-how and technicians to implement these measures. The FIs considered Bank and on-going refinance facility. advertisement through mass media is the most effective way to communicate with existing/potential borrowers for promoting EE financing. 206 207 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh Loans extended to the industrial sectors for EE Separate Unit and/or Department to Serve and/or RE project/ equipment procurement EE and RE sectors Only a few (20%) banks have extended loans to the RE project i.e. solar panel assembling plants, It was observed during the study that only 2 FIs surveyed have allocated separate unit/department solar irrigation pump, integrated dairy farm with biogas plants, etc. Repayment period of such loans for extending credit in the area of RE (Fig-5). No separate unit or department exists since any is 10 ten years, rate of interest is 9% without any collateral security, but personal guarantee of specific product for EE financing is yet to be developed. So far, Eastern Bank Limited is the only service providers i.e. Non-government organization mediating between banks and end users. The bank that received technical assistance from the central bank and also collaborated with multilateral rest of the banks did not have extended such loans for these purposes (Fig-3). agencies like IFC-SEDF. One FI participated in donor assistance program on RE/EE project. However, during the field survey, banks and FIs referred officials working the SME banking units, structured finance unit or industrial credit department for the purpose of this study. Figure-5 shows the scenario of banks’ commitment and resources allocation for the RE financing, but nothing relating to EE financing. 20% Yes No 8% 80% 42% Yes No 50% Figure-3: Loans extended to selected industrial sectors for EE and or RE projects/equipment Not Answred Banks and FIs have certain collateral policies for providing loans for modernization projects. About Figure-5: Separate unit/department for extending credit in the area of EE and/or RE? 36% banks and FIs replied for project itself and equipment for providing loans for modernization projects and 28% banks and FIs informed that they have collateral policy of fixed assets for providing loans for this purpose (Fig-4). 28% 36% Project itself Equipment Fixed assets 36% Figure-4: Collateral policies of Banks and FIs for modernization projects 208 209 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh Reluctance of Bankers to promote A few banks (9%) informed that they have received financial assistance from the Bangladesh Bank, central bank of Bangladesh, while the other banks replied negatively on receiving financial EE measures assistance or financial support services from the central bank (Figure-8). Currently, bank and FIs are not extending any special financial assistance to the energy efficiency equipment or devices rather industrial loans extended to procure machinery where there could be 9% some components that are energy efficient. The bankers were also inquired about their future plan to launch financing for RE/EE sector. Only 8% banks informed that they had planned to introduce Yes financing program in the renewable energy sector, but no immediate plan for EE financing. Bankers are not interested to promote the EE concept individually due to the fear of losing their existing No clients, opined by the bank official. Chart shows the results where 58% bankers remained silent in answering this question and this indicates their reluctance that could be due lack of knowledge and 91% absence of technically skilled human resources (Figure-6). Figure-8: Technical assistance or financial support services from central bank and donors 34% Only a few banks and FIs (12%) informed that they were in the processes of accessing specialized Yes fund from bilateral/ multilateral institution while others are not in the processes (Figure-9). 58% No 8% 11% Yes Figure-6: Any forthcoming program on RE/EE? No While requested them to share their data on financing RE/EE field, most of the banks (58%) responded positively, regarding the sharing the data on financing of EE/RE for the industrial sector 89% and others refused to share the data on this issue (Figure-7). Figure-9: In the process of accessing specialized fund from bilateral/ multilateral institution for RE/EE sector? 42% Yes 58% No Figure-7: Williness to share data on financing of EE/RE for the industrial sectors 210 211 Industry Specific Study on Sustainable Energy Finance Market Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh Potential for Financial Institutions in Bangladesh Industrial Sectors having potential to apply Technical Knowledge of Bankers EE measures In general, most of the bankers are generally not aware about the scope of bringing energy efficiency within the selected industrial sectors, except a few who have extended some financial Food and beverage, RMG, textiles, re-rolling, plastics and cement sectors are borrowing more for assistance. They also informed that their credit officers lack adequate skills in appraising loan modernization and expansion of capacity as reported during the survey. Table below presents data applications on EE and RE. Banks lack technically skilled persons which is one of the major on the industrial sectors having more demand for financing for BMRE i.e. Balancing, hindrances in financing in energy efficiency sectors. Modernization, Replacement and Expansion: Sector EBL Sonali MIDAS BDBL UCBL Mercantile IPDC IDCOL IDLC BRAC BASIC IIDFC Total Food & Beverage √ √ √ √ √ √ √ √ √ 9 Rules and regulations for conducting energy audits Re-rolling √ √ √ √ 4 Poultry √ √ √ 3 Bankers recommended introduction of rules and regulations for conducting energy audits at Plastic √ √ √ 3 industrial level. They also opined that due to absence of any energy auditing rules and regulations, Textile √ √ √ √ √ √ √ √ 8 the entrepreneurs in Bangladesh were very reluctant to follow energy efficiency practice and norms at their industries, thus causes wastage of valuable resources which one can utilize in a more RMG √ √ √ √ √ √ √ 7 productive purpose. This tendency is being observed at a higher degree within SMEs sector Cement √ √ √ 3 compared to the entrepreneurs running large scale industries, opined by the bankers. In reply to the questions on the loan for modernizations for EE measures, the bankers replied that they were ready to extend loan to any potential borrower or applicant for EE measures, however, no application so far has been received. Very recently, officials of Mutual Trust Bank met a prospective Barriers in financing EE and RE client who came up with a loan proposal to set-up energy efficient cold storage industry, reported during the meeting. Figure-10 shows percentile figures of the sector which borrows from the banks Although banks and FIs are interested in financing EE/RE equipment for various industries as for BMRE: observed during the meetings with different bankers, a number of challenges or barriers they are currently facing in financing EE and RE, as reported by them, which can be explained as internal and external. The possible barriers in financing EE and RE can be explained below from the perspective of the bankers: 8% Food & Beverage 24% Re-rolling - Bank officials in general lack understanding of the value of energy efficiency projects. Bankers 19% Poultry often lack the technical knowledge necessary to adequately value the contribution that an energy efficiency project can make to the profitability of a prospective borrower. As a result, loan Plastic applications for energy efficiency projects may suffer for weaker review by credit officials. 11% Textile - Lack of policy from the top management on EE/RE scheme and measures RMG - Some banks are also hesitant to approach the prospective borrowers in motivating them to install 22% 8% energy efficient technology at an additional cost, which may ultimately discourage availing loan 8% Cement facility from his/her bank and they lose clients - Commercial banks prefer lending for shorter term not exceeding 4-5 years maximum. Energy efficiency projects may have long payback periods. Figure-10: Sectors have been borrowing more towards modernization - No policy guideline on energy efficiency with the industrial and investment policy except green banking guideline which is mainly focused on renewable energy sector - Lack of adequate number of project proposals from the borrowers seeking bank loans to invest in their existing factories for overall improvement in production and other operations including utility savings. 212 213 Industry Specific Study on Sustainable Energy Finance Market Potential for Financial Institutions in Bangladesh - The entrepreneurs are not at all caring for utility cost which is the lowest in Bangladesh after Nepal, reported by the credit officials interviewed. Utility cost as compared to the total production cost is very insignificant and an assumption of 10-20% cost savings in the energy cost does not provide enough incentive for them. - Energy efficiency projects are often not on asset as they do not involve project land or buildings, which could be taken as collateral by the banks to protect their loans - Local bankers are also reluctant to extend loans for technology that they consider untested or less likely to produce predicted cost savings and associated productivity gains, since this represents a higher risk option to banks than loaning funds for other purposes. - Although there are some projects, in many cases, energy efficiency projects are too small requiring insignificant amount of loans. Moreover, amount of fund required to replace EE motors and installation of inverter, installation of rice par boiling system for rice mills, waste heat recovery system for small power generation unit of an industry does not create enough interest for banks and FIs. Because, transactions costs as a percentage of the loan amount are higher for smaller loans. Recommended Measures - Soft credit line should be available for the commercial banks and FIs with longer pay back period and lower rate of interest. Such loan could be disbursed in the form of term loans with longer tenure. Make adequate provisions for funding at reasonable interest rate (interest subsidies) for investment in power sector including funding for EE and RE. - Training and HR development activities should be undertaken to develop skilled professionals with knowledge on the source of energy including use of EE and RE. - Local bankers should be trained on technical evaluation of credit applications for the EE and RE machinery and equipment - Ensure greater transparency and accountability and avoid cross subsidy and introduce greater financial and non financial incentives for EE and RE initiatives. - Initiative should be made to create local technical human resources who will install such EE measures at factory level. 214