Affordable energy

Two recent news in the energy sector of Bangladesh were alarming and highlight the current problem faced by the nation. Apparently, the Government gave green signal to the distribution companies for increasing power tariff by 9 to 12%. The applications for such increase are lying with BERC since 2012. All stakeholders understood that being an election year no tariff hike would take place in 2013. The highest loss by BPDB (subsidy) in power sector was also incurred in 2013. No new cheap alternate generation has been added to the system and as a result, extension of oil dependency is inevitable. The government simply cannot continue providing more subsidies with increasing oil dependency. The tariff is bound to increase. This has again brought the affordability issue in the front.
The other news was a writ petition by three local resident of Matarbari against the 1200 MW coal fired power plant that the newly formed Coal Power Generation Company is trying to set up in Maheshkhali. The cause of concern is loss of biodiversity and environmental degradation.  There is absolutely no energy or power operation that does not cause damage to the environment including hydro, solar and wind. It is all matter of different societies' level of acceptance. There are several examples where wind farms were rejected by local neighborhood. The mission for coal in Bangladesh started when supply of its principal primary energy, gas, started dwindling. The present crisis can only be resolved if sustainable primary energy can be supplied to produce affordable electricity.
In the absence of any new gas being discovered, enhanced gas is being produced from the existing reserve. This expedited production is draining the present reserve at a much faster rate. That means a larger gas shortage crisis will hit the economy much sooner than people think. There is no other cheap alternate but finding new field through extensive exploration. In the last seven years of strongly supported BAPEX only policy has shown that it is incapable of solving the gas crisis by itself. The sector requires enormous risk investment to be successful. Along with BAPEX if IOC investment is assured, the possibility of finding new gas will improve considerably. The option for imported gas is very expensive, especially for power sector. Recently a company quoted Tk. 13/kWh using $16/MMbtu LNG in Bangladesh. This is almost comparable to Furnace oil. The only difference is LNG's cleaner operation and less price volatility.
Indian new LNG import is declining due to higher price despite doubling its regasification facilities in recent time. Future contract of LNG for February and March delivery was $18 and $19 respectively. At that price the importers cannot find any market even in India other than CNG vehicles and some other special operations. It will cost Bangladesh about $2.75 billion dollar annually to import 500 MMcf gas everyday at $15/Mcf. When the average selling price by Petrobangla in the local market is about $1.75/Mcf, adjusting $15 LNG without substantial subsidy or price increase will be a major challenge. Imported LNG based power solution will not resolve the affordability issue. There is no commercial wind source in the country and the heavily land intensive solar system will cost about Tk. 25/kWh (provided abundant cheap land is available). Nuclear is expensive, risky and most importantly very time consuming. After financial closure ($ 3-4 billion for the first 1000 MW) and overcoming all safety issues imposed by IAEA, it will take at least seven years to complete the project from ground breaking.
That leaves the country with only one option – coal. It meets the three core requirement of energy security – affordability, availability and accessibility. Despite environmental concern, all major economies are using it extensively because there is simply no other alternate at this point. The Government rightfully decided to produce 50% of electricity by 2030 from coal. Different kind of figures is being floated from different papers that vary from 15000 MW to 20000 MW. About 10000 MW refers to local coal source. The plan has not changed much since 2010. The present government position in terms of developing local coal has also not changed. It defies all logic when official government planning of using it by 2030 is open and public; it keeps declaring that the coal will be kept for the future generation. The present focus and all activities are dedicated for import based coal fired power plants.
The only tangible progress in coal power that can be seen on the ground is the ground preparing work at Rampal. The rest of it is all talk. The idea of small and big coal fired power plants dotting the entire coastal (Anowara to Rampal) and also some riverside area (Mawa) is a disaster in the making. Coal is not gas which can be hooked up to the end of a pipeline in any free land anywhere without worrying about either transportation or environment. Finding Rampal site was a very difficult task. Bringing 10000 ton/day coal from a mother vessel through lighterage is a planning on the paper only. Even the planners are not sure how it is going to work. Financing the $2 billion project is still in the probing stage and there is no long or short term coal purchase agreement in place. If Rampal, the signature project of import based coal fired power plant by the government is in such a dire state, one can easily imagine the challenge of others. Matarbari court case is an indication of the future. If Rampal can be commissioned in the present tenure of the government, it will be a major success. Financing, infrastructure (coal import, power evacuation, transport etc), environmental mitigation, steady uninterrupted supply of coal, land acquisition – the challenges are multi faceted and very difficult. Spreading that all over the country doesn't make any sense.
Government should focus on couple of venues to create the centre of coal power hub. The most prospective import based option is Maheshkhali. The BPDB plan to eventually produce 5000 MW power in that hub should be seriously pursued. All mitigation measures, compensation issues, infrastructure planning and resource management should be focused around that venue.
The own coal decision is rather simple. It has to be located at the mine mouth. Any kind of mining will require land acquisition and imposition of strict environmental mitigation measures. Adding a coal power hub close to the mine is the most logical and rational choice. Once the mining is in place, financing will flow due to assured supply of cheap primary energy. Local coal will also produce cheaper electricity (Tk. 5/kWh against Tk. 7-8/kWh). Coal mining has several challenges. Apart from engineering, environmental degradation and its mitigation is the biggest challenge in most of the cases. In a highly populated country like Bangladesh where land is scarce – along with rehabilitation loss of agriculture land is also a genuine concern. Recently, the honorable Prime Minister raised the issue of farmland. This needs to be looked into seriously from the cost benefit perspective as many opponents of coal mining use it as a strong argument.
UNDP reported in 2003 that 1% of all agriculture land is being converted to non-agriculture use every year in Bangladesh. At this rate we would have lost more than 30% of our agriculture land since independence and that seems unrealistic. Other studies put this number at 0.14% to 0.42%. Interestingly, the country also gained farmland through new char reclamation and adding more wasteland/forest to agriculture. Between 1948 and 2006, the land gain is estimated at 4% overall. The average land loss has been more likely to be 0.1% annually although the rate has significantly increased since 2000 that may reach 1% now (Planning commission, 2009). Every year, Bangladesh loses about 150000 hectare land to the erosion of the major river system and roughly one third of that is merged back.
Various figures are found regarding the total cultivated land in the country. According to Global Agriculture Information Network (GAIN) report of 2013, Bangladesh food grain production is forecast at 35.4 million tons in 2013-14 (34.2 million tons of rice and 1.2 million tons of wheat) from 11.7 million hectare land. The average yearly yield from these numbers comes to be 3 tons/hectare. Other independent studies showed the yield variation between 2 and 4 tons/hectare depending on the land, seed etc. The mining area for surface mining is only known for Phulbari. The total project area for this particular mine is 6000 hectare and about 5000 hectare is agriculture land. Taking the higher yield and the entire project area, the annual crop loss is 24000 ton (6000x4). At the current average international rice price of $375/ton, it would cost the country just 9 million dollars a year.
On the other hand, Phulbari coal mine has the potential of producing 4000 MW electricity for 30 years. Industry and domestic sectors are the major consumers of electricity. A recent study by the author with BRAC-EPL found that GDP generation by industry sector in 2011-12 was $0.792 million/GWh. A simple calculation assuming 1000 MW running 350 days a year on an average of 75% plant factor shows that it would generate 6300 GWh (1000x0.75x350x24/1000). Depending on one's numbers, 1000 MW would roughly generate 5 billion dollar in GDP contribution every year from the industry sector. The estimated yearly incremental rice requirement of the country is 300000 tons due to population growth. The land constraint leaves the country no other option but to shift the economy from agriculture base to industry base.
Coming back to the problem of supplying affordable primary energy, it is quite clear that developing our own coal is the best economic option we have. It is not only most economic but logistically also it has the least barriers. Of the three major concerns for coal mining – rehabilitation, agriculture and water management, the first two are very much manageable. The most difficult is the technical challenge of water management. A proposed solution to the problem is lying with the government that can be evaluated by a competent third party. There is always an element of risk in any major engineering venture. If the government is serious in resolving the power crisis of the country for the long run, the decision on local coal development cannot be deferred indefinitely. It is obvious that economic and technical aspect is not being considered but the social and political aspect of the decision making process is dominating for the last ten years. There is no new technology even in the distant horizon for coal mining either. All the methods are matured as coal mining is one of the oldest innovations of human quest for energy. People who talk about underground gasification have no clue about the technology and its application. Coal Bed Methane (CBM) is not even coal mining. For sustainable and affordable energy that can take the economy to a level when the country can afford expensive energy, there is no other alternate to developing local coal.

The author is a professor, BUET.