Energy management issues

M. Tamim

Amirul Rajiv

THE typical or standard meaning of energy management involves the savings of energy in commercial, industrial and residential operations. It mostly deals with saving energy in all buildings and factories. Effective energy management includes energy auditing, economic analysis, boilers, steam systems, cogeneration, waste-heat recovery, building envelope, HVAC systems, electric energy management, control systems, lighting, energy systems maintenance and industrial insulation on one level. And on the other, it also embraces alternative energy, indoor air quality, utility rates, thermal energy storage, codes standards, natural gas purchasing, energy security, utility deregulation, financing, commissioning, as well as measurement and verification of energy savings.

As much as the above issues are important for Bangladesh, energy resource management is equally vital for the scarce supply situation. Any resource management has two sides the supply and the demand. The objective of such management is to ensure uninterrupted and sustainable supply with a little bit of surplus in hand (at least 5%). At present, availability and affordability are competing with each other quite vigorously. As a result, for a country like Bangladesh, the issue of securing energy resources both domestic and international is turning into the classical tussle between social welfare and market economy. Under the present critical energy situation, an all prong attack on both side of the equation is essential to wipe out the deficit.

The primary energy supply of Bangladesh is limited to gas with only a very minor contribution from coal. Unfortunately, the country has not done any exploration on land for more than a decade and some limited activity offshore. It is no wonder that now there is severe gas shortage in the country which was supposed to be floating in gas. Unfortunately, gas is not found by dreaming or talking about it even with the best of potentials. It can only be found by drilling that requires high risk large investment. Some general perception must be cleared before this sector can be invigorated. The first myth is PSC has been bad for the country. This observation has been propagated with lot of political rhetoric with no substance/data to support. The fact remains that in the last ten years, Bangladesh has bought gas from IOCS at an average price (including the free gas) between $0.8/thousand cubic feet (Mcf) and $1.7/Mcf (data from Petrobangla is readily available). The variation was dependent on investment to discovered reserve size ratio. The cost of finding new gas (green field) by BAPEX will not be less than $0.85/Mcf according to their own projection (seven year vision statement). The alternate to finding this so called expensive gas (either by IOC or BAPEX) is to import LNG or pipeline gas at the present international price of $5-7/Mcf. In fact, Qatar recently signed a 20 year flat rate LNG contract with Japan for 4 tcf at $10.75/mBtu (roughly equivalent to a Mcf). The country needs gas yesterday. Can we afford to pay that kind of price at this moment? Moreover, any gas import contract will take at least three to five years to materialize if the ground were broken today. Parallel exploration by IOCs and BAPEX must start right away.

The author believes that the existing Petrobangla fields hold much more gas than the published estimated reserves of the country. From the beginning, standard reservoir management practices common in all companies and other national oil companies have been completely absent in Petrtobangla. The reservoir management (engineering) cell is limping like an orphan without any direction from the very beginning and top leadership is not even aware that something called reservoir management exists. As a result, the most important assets of the company, the reservoirs, have been totally neglected. Proper delineation, planning and implementation of development schemes have the potential to produce at least additional 500 mmcfd gas within next three years.

Putting aside the opposition from the resource nationalists, the biggest deterrent for gas sector investment is the price structure and the commercial framework. The present PSCs were signed in 1997 when the oil price was in the 20$ a barrel range. The oil and gas industry in its entire value chain is heavily steel/metal dependent. The investment indices for upstream to downstream has doubled today compared to 2000. The oil price is hovering around $75/bbl today that will very likely reach $100 by the end of the year. With a weighted average selling price of $1.60/Mcf by Petrobangla, even BAPEX cannot invest without heavy subsidy let alone the IOCs. Gas price must be increased to the cost plus level and new contracts must be negotiated to attract the IOCs remembering the present energy price reality. Energy in any form is not a local product anymore. Bangladesh cannot be isolated in its thinking. The issue of export is now a no starter if a local market is assured with proper tariff structure.

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Although the contribution of coal in Bangladesh primary energy supply is negligible, its potential remains significant. The biggest challenge of coal development is geology. The regional aquifer over all our coal beds poses a tremendous engineering test irrespective to the method of extraction. Political bickering by the so called experts on both side of the debate have confused everyone and delayed the inevitable. Rehabilitation, crop loss compensation or environment protection (except the challenge of the huge aquifer water management that need to be thoroughly examined) are solvable problems at internationally acceptable levels. The time has come for the government with a strong political will to resolve the problem engaging true professionals. Unfortunately, there is none in the country. The goverment can bring NRB or/and non partisan international experts and start a coal mining project immediately. If this is not done from a position of strength now, the country may have to succumb to humiliating conditions in the future. The energy shortage may reach such dismal stage that no amount of protest could stop a bad deal at that point.

While efficiency and conservation are more practised in demand side management, one scope in the supply side has been glaring at us for many years. A total of 1500 MW worth of old gas based power generation has been identified with average efficiency of only 25 percent. A policy already exists that supports the conversion of these old gas guzzlers to more efficient (up to 55 percent) generation through public-private participation. The quickest 1000 MW could be added to the system by spending only 600 to 800 million US dollars.

Unfortunately, almost no new generation from any source can enter the present Bangladesh power market without subsidy. The average selling price of electricity is about Tk. 3/kWh. Whether it is power from India, nuclear, coal or properly priced gas, the average end user price will not be less than Tk. 5/kWh. The tendency of dual fuel (oil/gas) generation option may put the country to severe insecurity if more gas is not found. Srilanka in a hurry opted for liquid fuel based generation and today consumers pay Tk. 10/kWh on average for electricity despite 40% of their power coming from cheap hydro. Recently PDB declared 530 MW liquid based rental power projects that would require an estimated 800 crore taka subsidies per year at the present pricing structure. The cost of not supplying power is much more but correct policy decision and proper commercial framework is essential for any international or national investment in this sector. At the same time, it will protect Bangladesh from future price shocks. The single buyer model in both power (PDB) and gas (Petrobangla) sector will have to change as well. Companies should be given the opportunity to discover the market price and operate on that basis to serve the critical economic sectors. The national companies can focus on the universal service aspect of the state responsibility.

For the immediate relief (partial) from the energy supply shortage, there is not much option left other than demand side management. Buildings of all nature consume 70 percent of US electricity and 40 percent of total energy. In Bangladesh, both residential and industrial sector consume 34 percent electricity each. The summer fan and air-conditioner load is about 1000 MW. Daily peak hour lighting load is estimated at 800 MW. Scope of saving 400 MW power from these two types of loads through demand management is very high. Supplying CFL to every household is a decision in the right direction. Apart from stand alone system, solar energy as supplement to grid power must be encouraged in both cities and villages. Promoting solar water heating will ease the pressure on gas supply during winter.

The average boiler efficiency in Bangladesh is 65 percent which is absolutely regrettable. Internationally acceptable minimum efficiency for boiler is 85 percent. All inefficient gas users including boilers, salt makers, re-rolling mills should be given time-bound notices to clean up their acts. Otherwise the gas connection should be snapped. This may reap a much better result in conservation than the expensive residential prepaid meter attempt. A recent study by the author shows that the cost : benefit ratio is much better through extensive awareness campaign in the residential sector than installing prepaid meter. Rating and labeling of all energy equipment and appliances with proper incentives will encourage energy savings.

Efficiency and conservation can never be accomplished if energy is sold at heavily subsidized price. CNG and household gas are being sold at virtually throw away price compared to the fuels they replaced. Keeping the gas price for power and fertilizer production at about $1/Mcf is a crime that has put this country to the present situation. Compared to the 1970 dollar value, this is being supplied at zero tariff now. It is not understandable why the shops are allowed to stay open after 8 PM defying the labor law long after the Eid shopping season. Although not popular, introduction of the day light saving time was a good decision that actually saved energy. Hard decision has to be taken to fix the commercial framework of energy/power business. Managing energy by popular decisions will only aggravate the present crisis.

The author is Professor, PMRE Dept, BUET.

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