45916-014: Industrial Energy Efficiency Opportunities and Challenges in Bangladesh

Technical Assistance Consultant’s Report

This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. (For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project’s design.

Project Number: 45916 May 2014

Bangladesh: Industrial Energy Efficiency Finance Program (Financed by the Technical Assistance Special Funds)

Prepared by:

Tetra Tech ES India Limited Plot No 511 5Th Floor D-Mall Netaji Subhash Place, Pitampura, New Delhi – 110034, Delhi, India

Industrial Energy Efficiency

Opportunities and Challenges

in Bangladesh

Final Report

2014

Prepared by:Tetra Tech ES, Inc.1320 North Courthouse RoadSuite 600, Arlington, VA 22201United States

Web: www.tetratech.com

Confidentiality and Privacy :This document has a restricted distribution and may be used

by recipients only in the performance of their official duties.

Its contents may not otherwise be disclosed without Asian

Development Bank (ADB) authorization.

c o m p l e x w o r l d CLEAR SOLUTIONSTM

i Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program.

Acknowledgement

The Tetra Tech team expresses its sincere appreciation to the Asian Development Bank

(ADB) for initiating the Bangladesh Industrial Energy Efficiency Finance Program and

providing guidance throughout its implementation. The team wishes to convey thanks to the

executing agency, Industrial and Infrastructure Development and Finance Company (IIDFC)

Bangladesh for providing local financial guidance to the project.

This report has been prepared on the basis of 120 energy audits carried out in Bangladeshi

industrial facilities and has benefited from the observations, comments and inputs of a cross

section of knowledgeable industry experts and stakeholders. We are grateful to Mr. Martin

Lemoine (Sr. Investment Specialist, Asian Development Bank) for his expert guidance in

structuring the program. We would like to acknowledge the guidance and support received

from Ms. Juliette Leusink (Investment Specialist, Asian Development Bank), in her

assistance in framing key issues, participating in workshops in Bangladesh and providing

insightful comments on this report. We express our profound thanks to the Bangladesh

Resident Mission Director, Ms. Teresa Kho and Mr. Maruf Hossain (Unit Head – Finance

and Administration, Bangladesh Resident Mission) and his team for extending logistics

support in organizing workshops and visits by international consultants.

We are especially grateful for valuable time and unique insights provided by Mr. Matiul

Islam, Chairman IIDFC. We thankfully acknowledge the cooperation shown by Mr.

Asaduzzaman Khan, Managing Director IIDFC and Mr. Shafiqul Alam, Deputy Manager,

Carbon Finance IIDFC in arranging informational meetings and facilitating the participation of

financial institutions and banks in the program’s workshops. The report benefited greatly

from discussions with a wide range of financial institutions and banks, industry bodies,

factory owners, utilities and manufacturers.

We express our profound thanks to Kazi Akram Uddin Ahmed, President, The Federation of

Bangladesh Chambers of Commerce and Industry and Md. Delwar Hossain, Member,

Bangladesh Electricity Regulatory Commission, who provided their blessing and

encouragement to proceed in this novel program. It was the team’s honor to obtain the

knowledge and guidance of such distinguished experts.

Last but not least, we thankfully acknowledge the many individuals mentioned above, as well

as many more that remain unnamed, for extending the support needed to complete this task

in an orderly fashion.

Table of Contents

Executive Summary .............................................................................................................vii

Introduction ....................................................................................................................... 11.

Energy Efficiency in the Industrial Sectors of Bangladesh - External and Internal Drivers . 32.

The Existing Energy Scenario in Bangladesh.......................................................... 32.1.

Energy Efficiency Challenges and Opportunities in Bangladesh ............................. 52.2.

Key Drivers for Energy Efficiency in Bangladesh .................................................... 82.3.

Sector Outlook ................................................................................................................ 123.

Sector 1: Textiles, Garments, Leather and Related Industries .............................. 153.1.

Sector 2: Iron and Steel Industries ........................................................................ 243.2.

Sector 3: Cement and Clinker Industries............................................................... 323.3.

Sector 4: Ceramics and Glass Industries .............................................................. 403.4.

Sector 5: Chemical, Fertilizer, Pulp and Paper, Plastics Industries ....................... 493.5.

Sector 6: Agro-industries, Including Sugar and Jute Industries ............................. 603.6.

Policy Support................................................................................................................. 704.

India...................................................................................................................... 714.1.

Japan.................................................................................................................... 724.2.

The Netherlands ................................................................................................... 734.3.

United Kingdom .................................................................................................... 744.4.

United States ........................................................................................................ 744.5.

Bangladesh........................................................................................................... 754.6.

Proposed Policy Package for Bangladesh ............................................................ 764.7.

Capacity Building for Promoting Energy Efficiency in Bangladesh................................... 805.

A Need for Capacity Building ................................................................................ 805.1.

Project Findings .................................................................................................... 805.2.

Top-Down Approach ............................................................................................. 815.3.

Industrial Energy Efficiency Finance Program....................................................... 825.4.

Program Findings.................................................................................................. 835.5.

Priorities for Capacity Building .............................................................................. 845.6.

Conclusion ...................................................................................................................... 856.

ii Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program.

Consultant Team

Name Designation

Asian Development Bank (ADB)

Martin Lemoine Sr. Investment Specialist

Juliette Leusink Investment Specialist

Industrial and Infrastructure Development Finance Company Limited ( IIDFC)

Matiul Islam Chairman, IIDFC

Asaduzzaman Khan Managing Director, IIDFC

Shafiqul Alam Deputy Manager, Carbon Credit, IIDFC

Tetra Tech Consultant Team

Rakesh Kumar Goyal Team Leader

Sumedh Agarwal Deputy Team Leader (International)

Md. Allauddin Al Azad Deputy Team Leader (National)

Zafrul Siddique Deputy Team Leader (National)

David Jones Technical Editor and Graphics Expert

T. Shankar Narayanan International Sector Expert – Textile, Garment and Leather

R. Virendra International Sector Expert – Cement and Clinker

Dr. Gurpreet Grewal International Sector Expert – Iron and Steel

Anjan Kumar Sinha International Sector Expert – Agro-Industries

B. P BhandaryInternational Sector Expert – Chemical and Fertilizer, Pulpand Paper

Nagesh Kumar Jayaramulu International Sector Expert – Ceramics and Glass

Hamidul Haq National Sector Expert – Textile, Garment and Leather

Md. Sarwar Jan National Sector Expert – Textile, Garment and Leather

Mafizul Haque National Sector Expert – Cement and Clinker

Md. Asraf Hussain National Sector Expert – Cement and Clinker

Fazlul Haque National Sector Expert – Ceramics and Glass

Mazharul Islam National Sector Expert – Ceramics and Glass

Md. Kaikobad National Sector Expert – Iron and Steel

Md. Zane Alam National Sector Expert – Iron and Steel

M. RahmanNational Sector Expert – Chemical and Fertilizer, Pulp andPaper

Rageb AhsanNational Sector Expert – Chemical and Fertilizer, Pulp andPaper

J Charagee National Sector Expert – Agro-Industries

Md. A Hamid National Sector Expert – Agro-Industries

iii Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program.

iv Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program.

GlossaryAbbreviation Term

3G Global Growth Generator

ADB Asian Development Bank

ASM American Standard Method

BACT Best Available Control Technology

BCIC Bangladesh Chemical Industries Corporation

BCMA Bangladesh Cement Manufacturer’s Association

BCWMA Bangladesh Ceramic Ware Manufacturers Association

BDT Bangladeshi Taka

BEE Bureau of Energy Efficiency

BERC Bangladesh Energy Regulatory Commission

BFA Bangladesh Fertilizer Association

BGMEA Bangladesh Garment Manufacturers and Exporters Association

BIEEFP Bangladesh Industrial Energy Efficiency Finance Program

BIPET Bangladesh Institute of Plastic Engineering and Technology

BITAC Bangladesh Industrial Technical Assistance Centre

BJMA Bangladesh Jute Mills Association

BJMC Bangladesh Jute Mill Corporation

BJSA Bangladesh Jute Spinners Association

BKMEA Bangladesh Knit Manufacturers and Exporters Associations

BMET Bureau of Manpower Employment and Training

BOI Bangladesh Board of Investment

BPDB Bangladesh Power Development Board

BPGMEABangladesh Plastic Goods Manufacturer and ExportersAssociation

BSEC Bangladesh Steel and Engineering Corporation

BSFIC Bangladesh Sugar and Food Industries Corporation

BTMA Bangladesh Textile Mills Association

CAA Clean Air Act

CC Continuously Cast Billets

CCA Climate Change Agreement

CCC Criterion Continuous Concentration

CCL Climate Change Levy

CNG Compressed Natural Gas

CPP Captive Power Plant

Cub. M Cubic Meter

DAP Di-ammonium Phosphate

EAF Electric Arc Furnace

Abbreviation Term

ECA Energy Conservation Act (India)

EE Energy Efficiency

EEA Energy Efficiency Assessment Program

EESL Energy Efficiency Services Limited

EGB Exhaust Gas Boiler

EMB Energy Mass Balance

EPC Energy Performance Contracts

EPB Export Promotion Bureau of Bangladesh,

ESCO Energy Service Company

ESM European Standard Methods

EU ETS European Union Emissions Trading System

FEEED Framework for Energy Efficiency Economic Development

FYP Five Year Plan

GC Galvanized Corrugated Sheets

GDP Gross Domestic Product

GEG Gas Engine Generator

GHG Green House Gas

GI Galvanized Iron

GOB Government of Bangladesh

GP Galvanized Plain Sheets

gpl Grams Per Liter

GSP Generalized System of Preferences

HCl Hydro Chloric Acid

HEM High-Efficiency Motor

HSD High Speed Diesel

ID Induced Draft Fans

IF Induction Furnace

IIDFC Industrial and Infrastructure Development and Finance Company

ILO International Labor Organization

IMM Injection Molding Machine

IREDA India Renewable Energy Development Agency

JVETS Japanese Voluntary Emissions Trading System

KMPL Karnaphuli Paper Mills Limited

KW Kilo Watt

LED Light Emitting Diode

MS Mild Steel

NITTRAD National Institute of Textiles Training, Research and Design

NTL National Tube Limited

OECD Organization of Economic Cooperation and Development

OPC Ordinary Portland Cement

v Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program.

vi Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program.

Abbreviation Term

PAT Perform Achieve and Trade

PCC Portland Composite Cement

PPC Pollution Prevention and Control

PPP Public Private Partnership

REDA Renewable Energy Development Agency

RMG Ready Made Garment

SBRI Ship Building and Recycling Industries

SEC Specific Energy Consumption

SREDA Sustainable Renewable Energy Development Authority

SEP Superior Energy Performance Program

SME Small and Medium Enterprises

TA Technical Assistance

TCE Tons of Coal Equivalent

TOE Tons of Oil Equivalent

TSP Triple Super Phosphate

TTC Technical Training Centre

USD United States Dollar

VFD Variable Frequency Drive

VRM Vertical Roller Mills

WHO World Health Organization

WTO World Trade Organization

vii Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program.

EXECUTIVE SUMMARY

Goldman Sachs expects that within the next 50 years, 5 of the G-7 nations will be replaced

by emerging economies. Many of these economies have large populations, cheap labor and

high levels of productivity. The Bangladeshi economy, which has maintained 6% growth over

the last 10 years, possesses these characteristics, leading to the country’s inclusion in

Goldman Sachs’ list of “The Next Eleven (or N-11)” - economies that are expected to have a

high potential for driving global growth in the 21st century. Such growth has historically been

led by the industrial and services sectors. This sustained growth in recent years has

generated higher demand for electricity, transport, and telecommunication services, and has

contributed to widening deficits in the infrastructure and investments needed for future

growth.

As per the projected growth and potential demand, the primary source of energy in

Bangladesh, compressed natural gas (CNG), is expected to last until 20301. The country is

already facing gas shortages however, in the form of low distribution pressure and delays in

new industrial and residential gas connections . Because securing new sources of energy

will take time, Bangladesh is in the process of promoting a more efficient use of existing

resources, both on the supply and demand sides. On the supply side, power plants are

mandated to increase efficiency and new coal reserves are under exploration. On the

demand side, industry has been made a key focus area for energy efficiency initiatives, as

the industrial sector directly and indirectly consumes about 40% of Bangladesh’s energy.

Energy efficiency (EE) does not comprise a single market; it covers measures in a diverse

range of end-user sectors, end-use equipment and technologies and over a very large

number of small, dispersed projects represented by a wide range of decision makers.

Overall, many EE technologies are relatively easy and fast to implement, technically proven

and financially viable: if properly implemented, the investment costs are paid back over short

periods through energy cost savings. Yet projects with compelling economic returns remain

unimplemented. Major causes for this gap are the lack of EE finance and delivery

mechanisms that suit the specifics of the EE projects and a lack, in some markets, of

pipelines of bankable energy efficiency projects.

The financing for energy efficiency projects in Bangladesh is gaining momentum and has

increased with the adoption of improved models from developed countries. Driving this trend

is development assistance from donor-funded agencies that are ready to offer loans to

banks and financial institutions (FI) for on-lending to suitable energy efficiency projects or

conducting demonstration projects based on energy audits. However, to make EE financing

sustainable, FIs and banks need to increase technical know-how regarding the appraisal of

energy efficiency projects, performing evaluations based on energy units rather than

currency (BDT v/s Cubic Meter), and exploration of new financing products.

The Bangladesh Industrial Energy Efficiency Finance Program is one such effort by the

Asian Development Bank (ADB), which has extended a non-sovereign loan facility and

technical assistance to the Industrial and Infrastructure Development Finance Company

(IIDFC) and other financial institutions for on-lending to eligible energy efficiency projects.

1Energy and Power Fortnightly Magazine, 2013

viii Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program.

The ADB has engaged Tetra Tech ES, Inc., United States (‘The consultant’); in association

with Sodev Consult, Bangladesh; the National Productivity Council, India; and the Electrical

Research Development Association, India; to provide technical assistance (TA) on EE to 120

companies, IIDFC, other financial institutions and banks under TA 45916-01 BAN Industrial

Energy Efficiency Finance Program.

This program focuses on six target industrial sectors that show large savings potential in

Bangladesh. These industrial sectors include: Sector 1: Textiles, garments, leather, and

related industries (hereon referred to as textiles); Sector 2: Steel, iron, and related industries

(steel); Sector 3: Cement, clinker, and related industries (cement); Sector 4: Ceramics,

glass, and related industries (ceramics); Sector 5: Chemicals, fertilizers, pulp and paper,

plastic, and related industries (chemicals) and Sector 6: Agro-industries, including food

processing, sugar, pulp and paper, and jute (agro-industries).

The focus under this program is to identify and suggest global best practices in energy

efficiency improvement technologies relevant to these sectors. This includes the selection of

120 target industrial clients, followed by energy audits, an economical and technical

analysis, feasibility studies and recommendation reports prepared for those target clients.

The consultant conducted energy audits of 120 industrial facilities, about 20 in each sector,

and created bankable energy efficiency reports and recommendations that can form the

basis of a business model acceptable to financial institutions, helping to advance client

objectives. In order to increase the knowledge on EE financing within IIDFC and raise the

awareness of other financial institutions and banks, the consultant team conducted three

capacity building workshops throughout the contract period of the program. The first

workshop laid the foundation by creating awareness of drivers, barriers, policy frameworks

and energy audits. As part of this program, a financing manual has been prepared to

specifically address the concerns of bankers who would like to consider extending loans

based on cash-flow analysis, rather than just asset-based analysis. This manual presents

around 12 financial tools based on the high potential opportunities identified for each sector.

The second workshop provided step-by-step walkthroughs on the operation of the financial

tools. We believe these tools will bridge the gap among FIs regarding the analysis of EE

projects based on energy units rather than currency.

The third workshop presented case studies from each of the six sectors, paying specific

attention to key areas of potential savings. The workshop participation was extended to the

120 audited companies, as well as industrial associations, financial institutions and banks in

order to increase the extent of awareness and foster engagement among stakeholders.

A team of 25 consultants, comprising national and international experts, worked from

December 2012 to November 2013 to achieve the objectives of this program. The

culmination of the consultant’s efforts is represented in this sector outlook report which

characterizes each sector by its principal types of industries, their end products, the current

state of processes, technology and equipments in use, sources of energy, specific energy

consumption and opportunities for energy conservation, investment potential and human

resources capacity. It also highlights the opportunities for energy conservation, expected

gains and the investments required in each sector. The results of the 120 companies audited

are summarized in Figure E.1

Figure E.1: Summary of audit findings by sector

SectorCompanies

Audited(No.)

InvestmentOpportunity

(USD million)

AnnualSavings

(USD million)

CarbonEmissionsReduction

(Tons)

EnergySavings

(%)

Avg.Pay Back

(years)

Avg.IRR(%)

Sector 1 – Textiles,Garment & Leather

22 4.45 1.37 19,309 32 3.25 25

Sector 2 – Steel &Iron

20 10.42 5.11 52,605 41 2.04 32

Sector 3 – Cement& Clinker

20 70.9 22.85 28,116 23 3.1 28

Sector 4 –Ceramics & Glass

20 37.3 10.12 28,961 25 3.69 23

Sector 5 –Chemicals,Fertilizer, Paperand Plastic

20 4.25 1.33 16,530 24 3.24 25

Sector 6 – Agro-industries includingFood Processing,Sugar, Pulp, Paperand Jute

18 12.34 4.69 24,921 18 2.63 25

Total 120 139.76 45.5 170,342 30 3.07 25

Although the concept of energy efficiency has been boosted through this program, additional

focus will be required on capacity building and policy approaches. Perhaps the biggest driver

for the Bangladesh Industrial Energy Efficiency Finance Program remains the impact of

anticipated energy shortages on the country’s growth due to loss of production. An

appropriate skill level among the local workforce will be required in order to execute

successful EE projects, which must be accomplished through capacity building and

outreach. Furthermore, it was found that there is a need for a database of EE resource

materials and the development of accreditation systems.

Achieving the economic potential of energy efficiency is complex. Market players have

different approaches and different priorities. Energy efficiency per se is usually not a major

consideration in investment decisions, except during periods of crisis when it is often too

late. In a crisis, demand can quickly be reduced by restricting services. But, improved energy

efficiency at a regional or national level has to occur through a thoughtful, planned approach

over a fairly long period. Policy and supporting measures are necessary to increase

industrial energy efficiency in Bangladesh. Therefore, the consultants have suggested a

policy-based approach which defines policies and supporting measures to be adopted in

near term. The challenges and opportunities regarding drivers of energy efficiency, policy

support and capacity building are also addressed in this report.

Through the analytical evidence gathered during the energy audits, discussions with

stakeholders (factory owners, policy makers, entrepreneurs, financial institutions), and due

attention and planning, this Industrial Energy Efficiency Finance Program has exposed an

untapped potential which can augment Bangladesh’s growth rate over the next three to five

years.

ix Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program.

1 Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program.

INTRODUCTION1.

Increasing industrial energy efficiency is an effective way for Bangladesh and its utilities to

achieve significant cost savings, particularly in regions that have not fully taken advantage of

the simplest and least expensive efficiency measures. Bangladesh consumed an estimated

4,980 MW of electricity in 2012, around 12% more than in 2011. Approximately 40% of the

total electricity consumed in 2012, around 1,990 MW, was used by the industrial sector. This

1,990 MW of energy consumption represents a unique energy-saving opportunity for

Bangladesh, because the industrial sector’s energy consumption is the primary means to

growing the economy country wide2. This energy consumption allows for a much higher

return on investment for energy efficiency improvements when compared to reducing energy

consumption in the commercial and residential sectors, where energy consumption is far

less concentrated. Put another way, the energy that is locked into inefficient systems and

processes is limiting economic growth in Bangladesh.

Due to the relatively low and subsidized energy prices, the commercial use of energy

remains inefficient and wasteful. To reduce energy wastage, proper incentive structures will

have to be designed and regulation made to be far more effective. This is a technological as

well as a regulatory challenge. The potential for cost and energy savings, however, are

huge. Access to finance is still an issue as financial institutions are not familiar with this line

of credit and potential of this low risk business opportunity. For example in India, energy

efficiency financing represents a business case of USD 250 billion to financial institutions

and banks3.

To address these concerns, the ADB’s Bangladesh Industrial Energy Efficiency Finance

Program (BIEEFP) focuses on six target industrial sectors that show large savings potential

in Bangladesh: Textiles; Iron and steel; Cement and clinker; Chemicals; Ceramics and glass

and Agro-industries. These sectors are highly energy intensive and have tremendous

opportunity to reengineer technological processes, enhance manpower and improve

management capacity. The focus under this program is to identify and deploy global best

practices in energy efficiency improvement technologies relevant to these private sectors

and establish investment opportunities for interested financial institutions.

Identifying the characteristics of each sector allows energy efficiency program managers and

financial institutions to more easily develop programs based on the unique attributes of their

services. This report attempts to address this objective. More importantly, this

comprehensive compendium will provide a valuable resource for planners and policy makers

across the country to develop programs with a better understanding of industrial energy

conservation measures, appropriate energy saving targets, the role and need for capacity

building and gains to be expected from such programs. Furthermore, this report will allow

technology providers to anticipate the key technologies that will impact the efficiency

potential of the target sectors. In summary, this report begins to outline the savings potential

inherent to each sector by utilizing readily identifiable and available energy efficiency

2Bangladesh consumes 41% of natural gas in the industrial sector.

3 Bureau of Energy Efficiency, India


improvement technologies. The report also presents investment, annual savings, internal

rate of return and carbon savings expected from each sector in the implementation of energy

saving measures. This will help managers at financial institutions and banks to justify their

active participation in energy saving programs.

This report aims to characterize each sector by its principal types of industries, their end

products, the current state of processes, technology and equipment in use, sources of

energy, specific energy consumption and opportunities for energy conservation, investment

potential and human resources capacity. These characteristics will be examined to

determine their influence on investment, savings and expected gains for each sector and on

the success of prospective programs. A variety of companies were visited to conduct energy

audits of their facilities, gain insights into their efficiency programs, understand their present

practices and identify gaps in capacity. The resulting sectoral analyses, included in this

report, helps to form a picture of the best practices in each sector as well as the state of

specific energy consumption with respect to global benchmarks. Companies that are

interested in initiating or expanding their industrial efficiency program will be able to use this

report and the results of BIEEFP in determining which energy conservation measures will

offer the greatest return on investment. For banks and financial institutions, this will in turn

help to identify projects with a high rate of return and low risk. We have also included

chapters on: external and internal drivers for industrial efficiency in Bangladesh, policy

support and capacity building. These chapters will be useful to policymakers in

understanding how the region’s unique characteristics can shape policy and ultimately

influence the drive and commitment of industries towards improving energy efficiency.

ENERGY EFFICIENCY IN THE INDUSTRIAL SECTORS OF2.BANGLADESH - EXTERNAL AND INTERNAL DRIVERS

Developing countries around the world are projected to account for around 87% of the

world’s primary energy demand growth by 2030. Much of this growth in energy demand will

occur in Asia, which is witnessing rising populations, high economic growth and rapid

urbanization. Many countries are averse to the notion of energy conservation and efficiency

and consider it their priority to first ensure economic growth through higher production and

harness new energy sources, dealing with energy savings later.

Refuting this approach, however, is a recent analysis which concludes that economic

productivity is more closely tied to energy efficiency than energy production4. Coupled with

this fact are the key drivers of energy efficiency in developing Asian countries: the

continuous depletion of internal energy sources, rising volatile external energy prices,

budgetary pressures due to energy subsidies and the need to mitigate the impacts of climate

change. Not surprisingly, then, that every segment of the Asian economy is increasingly

aware of the need for energy efficiency.

Bangladesh, with a GDP growth rate of 6%, is conscious of this need and is well aware of

the potential to build a diverse, energy efficient industrial sector. Bangladesh appreciates the

fact that a well-conceived energy efficiency strategy will not only allow it to achieve its goals

with much lower energy consumption but will also enable it to improve the standard of living

and quality of life for its population.

This chapter outlines the potential drivers to energy efficiency in the industrial sectors of

Bangladesh. It considers the existing energy situation in the country, its burgeoning industrial

output, the prevailing supply-demand imbalance and the external and internal drivers that

can help energy efficiency to grow and prosper.

TTHHEE EEXXIISSTTIINNGG EENNEERRGGYY SSCCEENNAARRIIOO IINN BBAANNGGLLAADDEESSHH2.1.

Bangladesh has natural gas, coal and marginal oil reserves. Prior to independence, the

country was touted as floating on natural gas. The availability of gas at low prices has played

a major role in the economic development of the country and in raising the social standards

of the population. It has also allowed the country to use this energy source in electricity

generation, industrial consumption and residential cooking. To date, natural gas generation

constitutes 85% of the total net generation of electricity, and 70% of country’s commercial

energy consumption.

However, after years of rapid industrial and population growth, the increased demand has

strained the available supply. Recently, the country has started to feel the pinch of shortages

in the natural gas that feeds its economic growth. It has been estimated that the current

natural gas supply-demand gap is around 14% but is estimated to go up to 54% by 2030

4American Council for Energy Efficient Economy, Report,2012 – US Energy efficiency industry is bigger than

Energy Supply


(see Figure 15). There is a significant possibility that the available gas reserves are depleted

well before that date.

Figure 1: Natural Gas: Supply-Demand Gap in Bangladesh (2013-2030)

The Government of Bangladesh (GOB) has taken steps to shift electricity generation

resources from gas to coal. The Bangladesh Power Development Board (BPDB) Annual

Report 2012 suggests that in the next five years 6,230 MW of additional power generation

capacity is being planned, of which 3,120 MW, about 50%, will be from coal. Greater use of

renewable energy sources is another step being taken by GOB. In order to have a long term

sustainable energy plan for Bangladesh there is a need to take similar steps on the demand

side of the energy equation.

As a heavy gas user with marginal oil resources, Bangladesh has a structural need for

energy efficiency. Even if the per capita commercial energy consumption is only 8% of the

world average (2% of that of the US, and 3% of that of Europe and Japan)6, 57 million

people currently live without basic electricity services, representing a large, untapped

consumer demand for electricity services on an already stressed power sector (see Box 1).

Aside from growth in energy usage due to population demands, inefficient energy use cuts

across the whole economy. Energy intensity per unit of GDP is 3 times that of Japan and 2

times that of the US in key sectors like steel and ammonia7.

With forecasts of electricity sector growth rates reaching 12%8, driven mainly by the

industrial sector, BPDB is finding it very difficult to maintain an uninterrupted electricity

supply as most of its generating units are old (some are older than 35 years). Moreover, the

5Energy and Power Fortnightly Magzine,2013

6CIA, 2013

7WEA Energy Statistics

8http://www.eia.gov/countries/country-data.cfm?fips=BG

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Cu

b.

M.

Produc�on Demand


generating units have become unreliable due a lack of spare parts and improper

maintenance.

Facing difficulties due to power

shortages, the country’s pace of

industrialization is now being affected.

The Government of Bangladesh

promoted captive generation by supplying

gas for power generation to industries at

a reduced tariff (at present the gas tariff

for power generation is BDT 4.18 per Cub

M. against the gas tariff of BDT 5.96 per

Cub M. for industrial processes). This

has helped in arresting the fall in

industrialization but has resulted in sub-

optimal utilization of natural gas. Many

industries have to plan for captive

generation. These captive generators are

of small capacities and are operated

inefficiently in open cycle mode, putting

tremendous pressure on the gas grid,

especially in some industrial clusters.

EENNEERRGGYY EEFFFFIICCIIEENNCCYY CCHHAALLLLEENNGGEESS AANNDD OOPPPPOORRTTUUNNIITTIIEESS IINN BBAANNGGLLAADDEESSHH2.2.

HURDLES IN THE ROAD2.2.1.

Although efficiency is probably Bangladesh’s cheapest energy source, the opportunity is not

yet fully visible. Technology advances have become more cost-effective, but energy

efficiency investments face economic constraints, political barriers, technical challenges, and

institutional shortcomings. Although savings are quantifiable through lower electricity bills,

efficiency matters most if your bill reflects the true cost of power. For many Bangladeshis this

is not the case – there are high discount rates for energy costs, a barrier to efficiency

investments. Lower greenhouse gas (GHG) emissions, reduced pollution, better quality

power––all are desirable but difficult to pin to energy efficiency. Despite quick payoffs on

many investments (Bangladesh’s industry is a mix of old, sub-standard plants, equipment,

and infrastructure), moving to energy efficient lighting, motors, drives, and boilers will cost

consumers and business, and the incentives are fragmented and asymmetric.

Box 2 presents some of the most significant barriers to realizing energy savings measures.

Despite these hurdles opportunities exist which promise returns from energy efficiency that

are sufficiently high in commercial and industrial sectors to incentivize investing in energy

saving measures.

Box 1 : Power Sector Challenges

Transmission and Distribution losses – 14.7%of the total Generation*

Access to Electricity - 47%

Peak deficit - 25%

High dependence on imported energy - 12%

Gas deficit of 500 million cubic ft. per day

Carbon Emissions – 46,930 kilo tonnes

Electricity sector growth rate - 12% (forecast)

*Technical loss only. The consultant believes commercial

losses to be much higher.


Box 2: Challenges in Realizing Potential Energy Savings

1. Cross subsidized and subsidized energy prices leading to waste.

2. Limited information about the benefits of energy efficiency investments andtechnologies, lack of familiarity with energy efficient products, lack of awareness ofbenefits, and a perceived risk when evaluating potential investments.

3. Lack of enforcement, standards and labeling. Some equipment may not be availableor product distribution networks or local capacity may not exist.

4. Weak contract enforcement, leading to increased perceived risk by financialinstitutions, manufacturers and service providers.

5. Bias against the counterintuitive disposal of existing plant equipment.

6. Competing objectives in planning for new investments and developments.

7. Differential energy (gas and electricity) prices. All industries prefer to use only gasas their primary energy source.

8. Perceived risk of loss of production.

9. Inadequate investments in supporting institutional mechanisms and humanresources.

10. High transaction costs from legal, technical, and transactional complexities, like non-standardized deal structures and the substantial technical needs of projectappraisal, development, and monitoring.

11. Absence of energy measurements and instruments to gauge energy at variousstages of industrial process cycles.

THE PROMISE OF ENERGY EFFICIENCY2.2.2.

Bangladesh has maintained 6% plus growth over most of the last 10 years through strong

export and remittance growth. Growth has been led by the industrial and services sectors.

Bangladesh is in the top 10 countries of the world in production of textile, leather and

ceramic tableware’s. These growth developments are inducing additional demand for energy.

Because securing new sources of energy will take time, Bangladesh is in the process of

promoting the more efficient use of existing resources, both on the supply and demand

sides. On the supply side, power plants are mandated to become more efficient and there is

a plan to shift fuel focus from gas to coal. On the demand side, industry has been made a

key focus area for energy efficiency initiatives (industry directly and indirectly consumes


about 40% of Bangladesh’s energy consumption). Figure 2 illustrates the promise of demand

side intervention for reducing the supply-demand gap.9

Figure 2: Effect of DSM on Reducing Maximum Demand (MW) in Bangladesh

*Based on growth projections and potential demand, the Government of Bangladesh has set an electricity

production capacity target of 20,000 megawatts by the year 2020.

Cross-cutting technologies, such as combined heat and power, better separation processes,

advanced materials that resist corrosion, better steam and process heating technologies,

new fabrication processes, high efficiency motors, variable frequency drives and better

sensors could lower energy use in many industries. Table 1 presents the interventions with

the greatest energy saving potential for each of the six sectors based on energy audit of 120

companies carried out by the Consultant. It has been estimated that by 2020 improvements

in energy efficiency could reduce energy use by 10% to 36%, compared to the business-as-

usual projection.

Table 1: Energy Savings Potential of the Audited Companies

SectorTotal EnergySavingsPotential

Major Interventions Required

Sector 1 –Textiles, Garment& Leather

32 % High-efficiency motors, drives, boilers

Sector 2 – Steel &Iron

41%Waste heat recovery, furnace insulation, automationof rods making process

Sector 3 –Cement & Clinker

23%High efficiency motor & Drives, Use of Pre-grinderroller press and VRM, Automatic air flow control

Sector 4 –Ceramics & Glass

25%Waste heat recovery, High efficiency motors anddrives

Sector 5 – 24% Waste heat recovery, Improved Insulation, Efficient

9Source: Presentation by Shafiqul Alam, Deputy Manager IIDFC

0

2,000

4,000

6,000

8,000

10,000

2009 2010 2011 2012 2013 2014

Dependable Capacity* Maximum Demand (MW) Maximum Demand (MW) considering DSM


SectorTotal EnergySavingsPotential

Major Interventions Required

Chemicals,Fertilizer, Paperand Plastic

machines and combustion efficiency

Sector 6 – Agro-industries, FoodProcessing, Sugarand Jute

18%Cogeneration, waste heat recovery, high efficiencymotors and drives

KKEEYY DDRRIIVVEERRSS FFOORR EENNEERRGGYY EEFFFFIICCIIEENNCCYY IINN BBAANNGGLLAADDEESSHH2.3.

One of the hallmarks of modern international trade is significant integration and optimization

of supply chains across the world. Bangladesh’s energy industry is no stranger to this kind of

integration. With increasing economic momentum and industrial growth, energy shortages

and rising production costs, one desirable option, generate savings from decreased energy

consumption, has appeared. It is this need that is driving the current demand for industrial

energy efficiency.

These recent energy efficiency drivers also have bearing on government policies.

Furthermore, increasing competition from Chinese firms has resulted in many Bangladeshi

firms searching for ways to cut costs. If such conditions continue to build up, enterprises that

provide innovative energy technologies and services will not only be poised to capture

enormous economic opportunities but will help to lead Bangladesh into an environmentally-

sustainable reality.

The following key drivers for implementing energy efficiency measures in Bangladesh’s

industrial sector stand out for special attention:

RISING ENERGY SHORTAGES2.3.1.

Power and gas shortages have undermined external competitiveness. According to garment

industry leaders, garment orders cannot be filled because of energy constraints. The

consultant was told by industry experts that about 135,000 residential flats remained

unoccupied in 2012 due to the inability to issue domestic gas connections. Similarly there

was prohibition for about one year in issue of any new electricity or gas connection for

industrial use. Frequent power cuts and low gas pressure add to production time, forcing

exporters to airfreight merchandise at their own cost. Many industrial and commercial

establishments depend on expensive and inefficient captive generation during power

interruptions and use liquid fossil fuels such as high-speed diesel (HSD), liquid natural gas

(LNG), etc. Overall, the energy crisis is said to be responsible for an estimated loss of two

percentage points in GDP growth potential.10

10ADB, Bangladesh Comprehensive Private Sector Assessment Draft. Manila June-2011


ENERGY SUBSIDY IS A SHORT TERM SOLUTION2.3.2.

Adding to the effects of energy shortages is the artificially low price of gas vis-à-vis grid

electricity prices. Current tariffs do not reflect the real cost of energy. Though the

government is trying to keep the prices steady due to inflationary concerns11, the national

budget will not be able to support this deficit on an ongoing basis. Eventually, fuel prices will

need to increase and any slight increase in power prices will have a significant impact on the

profit margins of energy intensive firms, which are in constant and fierce competition to

produce less expensive products.

HIGHER PRODUCTION COSTS2.3.3.

Not only are power prices going up, but other costs are also rising for Bangladeshi firms. For

example, the July 2012 Producer Price Index reported that production costs grew by 21%

from the same month in 2011.12 This production price inflation was driven in part by an

outpour of investment in the iron and steel, textiles and chemical industries, which created

excess demand for raw materials. The increase in the cost of production cuts profit margins

and pushes investors to follow other avenues for savings.

CONDUCIVE GOVERNMENT POLICIES2.3.4.

The Government of Bangladesh recognizes energy efficiency as necessary to the transition

to a low carbon economy. It aggressively fosters the adoption of energy efficient

technologies. The Sustainable Renewable Energy Development Authority (SREDA) Act of 2012 focuses on

cutting the energy consumption of energy-intensive industries, including steel, nonferrous

metals, construction materials, and chemical processing. Such high-level focus has

unleashed a series of government initiatives including energy efficiency and conservation

regulations. International models are arriving via overseas development assistance,

consulting firms, equipment manufacturers and others.

Another necessary focus for government is to build capacity at the local level. Efforts to

develop capacity-building grants for knowledge creation and training resources, both online

and on the ground, are critical to promoting efficiency.

TOUGHER COMPETITIVE LANDSCAPE2.3.5.

What makes this situation particularly tough for Bangladesh’s industrial sector is that they

have not been able to transfer the burden of higher overheads onto consumers because of

the threat from low-cost Chinese manufacturing companies and government export controls.

Thus, industrial profit margins are declining. If energy intensive industries in sectors with

11Total energy subsidies for FY12 are estimated at more than Tk 282 billion (US$3.4 billion), 90

percent of the total amount spent on all subsidies. Nearly 34% of these subsidies are off-budget, such

as government loans for Bangladesh Power Development Board at favorable lending rates. Although

the government periodically adjusts prices to bring them closer to world market levels, subsidies have

remained substantial

12http://www.tradingeconomics.com/bangladesh/indicators


high savings potential start utilizing energy efficient technologies they will be poised to

capture enormous economic opportunities.

AVAILABLE FINANCING VEHICLES2.3.6.

Financing for energy efficiency projects in Bangladesh is available and has been increasing

with the adoption of improved models from developed countries. Commercial banks are

opening doors for access to energy efficiency finance at lower borrowing costs and improved

terms. Government is also considering models such as green banks and green financing

that involve partial risk guarantees to promote investments in this arena. Driving this trend is

development assistance from donor funded agencies that are ready to offer loans to banks

and financial institutions for on-lending to suitable energy efficiency projects. Under the ADB

BIEEFP, USD 30 million is available for financing energy efficiency projects identified from

this energy audit exercise. Similarly, other donor agencies such as USAID, IFC and World

Bank are ready to invest money in energy efficiency projects. It is expected that this

monetary support will further evolve the existing energy efficiency portfolio of financial

institutions.

EXPANSION PLANS2.3.7.

A growing economy and the continued year-on-year growth in manufacturing means that

many companies are ready to double their production and are eager to provide a range of

solutions to meet the demands of local and foreign clients. However, limited energy supplies

are curbing industrial expansion. Progressive industries appreciate the importance of energy

savings and want to purchase energy efficient equipment rather than submit requests for gas

or electricity load increases.

REALIZING QUICK SAVINGS FROM LOW-HANGING FRUIT2.3.8.

Over the next few decades, energy efficiency will be one of the lowest cost options to drive

inclusive growth in Bangladesh. The studies done by the consultant under BIEEFP point to

an annual savings of USD 45.5 million, assuming a 17% discount rate, no price on carbon

and using only “net positive value” investments. This figure is representative of the six

targeted industrial sectors (textiles, steel, cement, ceramics, chemicals, agro-industries)

where 120 companies were audited. Energy conservation measures such as: waste heat

recovery, furnace insulation and general housekeeping measures payback in months.

LOW CARBON ECONOMY – POTENTIAL ECONOMIC GAINS2.3.9.

In line with the urgency of the Kyoto Protocol, there are procedures for reducing carbon

emissions through carbon-trading. Countries that emit more carbon dioxide than permitted

under the treaty have an opportunity to compensate for those extra emissions. This involves

financial transactions between those entities that do not comply with the emissions limits and

those that emit less than the limit. Reports13 suggest that, in 2009, this type of carbon trading

was worth USD 136 billion. Bangladesh’s carbon trading projects may result in an annual

13Energy Global Article, Global carbon market grew by 68% in 2009



reduction of about 170,343 tons of carbon emissions. Therefore, Bangladesh could earn

US$ 0.85 million14.

IDENTIFICATION OF TARGET SECTORS2.3.10.

There is significant energy efficiency potential in Bangladesh’s industrial sector. Industry is a

big energy consumer, and most manufacturing plants are inefficient in their energy

consumption when compared to international benchmarks. Barriers to energy efficiency

adoption are relatively high for industries because a shift to energy efficient technology is

difficult to justify financially when considering energy efficiency alone. However, the

anticipated shortage of energy and loss of production is currently a major driver of industrial

energy efficiency15. Industrial investments are large compared to household projects. A lack

of awareness and access to technical solutions can be addressed through energy audits and

pilot studies.

For Bangladesh, the process of integrating energy efficiency has only just begun with this

early phase targeted towards ensuring the participation of stakeholders across sectors,

industries, professional services providers, and others. There is no doubt that a long road

lies ahead, but with the emphasis on large scale energy efficiency efforts, enabling

government policies, and appropriate economic signals, the future looks promising.

Several promising industrial sectors have been identified for the Bangladesh Industrial

Energy Efficiency Finance Program. Six sectors in particular show great energy efficiency

potential: textiles, steel, cement, ceramics, chemicals and agro-industries. For all of these

industries the energy savings potential is large and the energy efficiency improvement

technologies are readily identifiable.

The next section provides the outlook for the identified sectors and features insights into the

most commercially attractive energy efficiency measures for each.

14Based on the audit of 120 companies and price per ton carbon emission reduction is taken as USD

5 only.

15The restrictions in the release of new industrial electricity and/or gas connections have led

industries using HSD and CNG from the open market. This is neither financially nor economical

solution.


SECTOR OUTLOOK3.

In this section six Bangladeshi industrial sectors that have shown great potential in energy

efficiency are discussed in detail. These six sectors are highly energy intensive and have

tremendous opportunities to reengineer technological processes, enhance manpower and

improve management capacity. These include:

Sector 1: Textiles, garments, leather, and related industries

Sector 2: Steel, iron, and related industries

Sector 3: Cement, clinker, and related industries

Sector 4: Ceramics, glass, and related industries

Sector 5: Chemicals, fertilizers, pulp and paper, plastic, and related industries

Sector 6: Agro-industries, including food processing, sugar, pulp and paper, and jute

For each sector, the consultant has done a thorough review of the technical potential for

increased energy efficiency, and has estimated the payback periods that decision makers

require in order to commit funds to energy efficiency projects. This exercise was carried out

in 120 industries, approximately 20 from each sector. In the following section, challenges

faced by the Consultants and the solutions developed during the course of this program has

been described. It also describes how the analysis and results for each sector is obtained.

One of the major challenges in this undertaking was the standardization of the analysis and

report framework for the 120 facilities being audited The Consultants felt that the report

should not only demonstrate energy efficiency measures in the context of a specific

company but also highlight opportunities responding to the sector as a whole, and

technologies along the entire value chain. Hence, each report includes information about the

company, its production processes, a description of the energy and utilities system, an

energy use analysis, benchmarks, suggested operational practices, an organization

analysis, energy efficiency options, their financial analysis, and over-arching

recommendations; all supported by energy records obtained after each site visit.

Another challenge that was identified relates to measurement, data collection and validation.

The instrumentation needed to measure energy consumption is almost non-existent in the

audited facilities. Gas utilities supply gas for industrial purposes and/or for power generation.

The gas companies supply separate meters for each. Most facilities do not sub-meter

individual industrial equipment (e.g. boiler, furnace, heating, cooling) to ascertain how the

gas is utilized. Many facilities do not even meter the captive power produced by their gas

generators. Since the load on gas generators varies based on the need for process gas it

becomes very difficult to determine the efficiency of the gas generator. In many boilers there

are no instruments to measure gases in the exhaust of the boiler to ascertain the combustion

efficiency. For many processes, outlet and inlet process parameters are not being measured

to calculate the energy consumption in the process. Consultants addressed this challenge by

utilizing an input/output methodology16 and utilized available sources of existing data, both

internal and external to the organization. These data and information are verified by the

consultant through on-the-spot measurements and observations.

Each sector is discussed independently and characterized by the kind of industries it

comprises, the types of end products, its current energy-intensity status, sources of energy,

and opportunities of energy conservation. The sector reports also contain their technical

potential for energy savings, identifying key technologies and measures to improve energy

efficiency. In the energy audit reports energy saving measures specific for each company

has been identified. The high impact interventions and their potential for each sector have

been provided in the sector summary of this report. In Figure E.1, the energy savings of the

sector based on the energy audit of the companies in that sector have been mentioned.

We undertook detailed surveys and energy audits at target companies and compared them

with operations across the world to ascertain the efficiencies of the best technologies and

practices available now and benchmark them with respect of specific energy consumption.

Since industrial operations in Bangladesh are mostly captive and gas based, the specific

energy consumption was found to be high compared to international benchmarks. Hence

specific energy consumption benchmarks are provided as a range. The financial analysis is

based a minimum acceptable rate of return of 17.2%, assuming project life cycle of 5/10

years.

Specific Energy Consumption (SEC) is an important tool for comparative analysis within an

industry or sector. The value helps in determining the monthly/annual energy usage per unit

of production. It gives an idea of the overall energy usage, energy intensity and helps in

setting achievable benchmarks for the company based on existing equipment and

processes. The consultant calculated the SEC for each of the 120 companies based on data

and records maintained in the facility’s log book. For each company, the observed SEC has

been compared with the international benchmarks to estimate the energy saving potentials

for that company. Based on this analysis of SEC for 20 companies, a sector-wide SEC has

been estimated and included in this report.

We also conducted an extensive literature search to catalogue the current export/import

potential, of industries from databases available on web, and conducted discussions with

factory owners.

For each of the 120 audited facilities, we have also conducted a ‘human resource skill

assessment’ analysis developed by the UK Oxfordshire based Carbon Trust’s Energy

Efficiency – Best Practice Programme (EEBPP) energy management matrix. (see Table 2)

The matrix presented in Table-2 assists to rate an organization in six different areas of

management namely policy, organization, communication, information, marketing and

investment. The Energy Management Matrix rates five levels starting from level 0 (no

provisions for energy management in the organization) to level 4 (the organization is

adhering to the industry best practices). The consultants have carried out this analysis for all

16Input Output Methodology of Energy Audit estimate the loss of energy in the production and

benchmark it with accepted global practices.



120 companies and identified the status of the company in each area. The results are

extrapolated to provide on the status of the sector under consideration. This organizational

analysis was done with the consideration that energy efficiency is not a one-time activity. It

needs to be made sustainable.

Table 2: Energy Management Matrix

Policy Organization Communication Information Marketing Investment

4

Energy policy,action plan andregular reviewhavecommitment oftopmanagementas part of anenvironmentalstrategy.

Energymanagement fullyintegrated intomanagementstructure. Cleardelegation ofresponsibility forenergyconsumption.

Formal and informalchannels ofcommunication regularlyexploited by energymanager and energystaff at all levels.

Comprehensivesystem setstargets, monitorsconsumption,identifies faults,quantifies savingsand providesbudget tracking.

Marketing thevalue of energyefficiency andtheperformance ofenergymanagementboth within theorganizationand outside it.

Positivediscrimination infavour of ‘green’schemes withdetailedinvestmentappraisal of anew-build andrefurbishmentopportunities.

3

Formal energypolicy but noactivecommitmentfrom topmanagement

Energy manageraccountable toenergy committeerepresenting allusers, chaired by amember of themanaging board.

Energy committee usedas main channeltogether with directcontact with major users

M&T reports forindividualpremises basedon sub-metering.But savings notreportedeffectively tousers

Program of staffawareness andregular publicitycampaigns

Same pay backcriteria employedas all otherinvestment

2

Unadoptedenergy policyset by energymanager orseniordepartmentalmanager.

Energy manager inpost, reporting toad-hoc committeebut linemanagement andauthority areunclear

Contact with majorusers through ad-hoccommittee chaired bysenior departmentalmanager.

Monitoring andtargeting reportsbased on supplymeter data.Energy unit hasad-hocinvolvement inbudget setting

Some ad-hocstaff awarenesstraining

Investment usingshort term payback criteria only

1

An unwrittenset ofguidelines

Energymanagement thepart timeresponsibility ofsomeone with onlylimited authority orinfluence

Informal contactsbetween engineer and afew users

Cost reportingbased on invoicedata. Engineercompiles reportsfor internal usewith technicaldepartment

Informalcontacts usedto promoteenergyefficiency

Only low costmeasures taken

0No explicitpolicy

No energymanagement or anyformal delegation ofresponsibility forenergy consumption

No contact with users

No informationsystem. Noaccounting forenergyconsumption

No promotion ofenergyefficiency

No investment inincreasing energyefficiency inpremises


SSEECCTTOORR 11:: TTEEXXTTIILLEESS,, GGAARRMMEENNTTSS,, LLEEAATTHHEERR AANNDD RREELLAATTEEDD IINNDDUUSSTTRRIIEESS3.1.

GENERAL DESCRIPTION3.1.1.

Bangladesh’s textiles and garments industry contributes 13% to the country’s total GDP. As

one of the major sources of export earnings, this sector positions the country as the world’s

second largest apparel exporter of western brands, after China. See Box 3 for more detail

on the textiles industry.

Apart from the liberalization initiated as a policy

measure by the Government, two main reasons

behind the phenomenal growth in this sector are:

availability of cheap labor and low energy costs.

Labor costs are only USD 0.23/hr whereas, in

India, Pakistan and China the labor costs are

USD 0.43/hr, USD 0.41/hr and USD 0.89/hr,

respectively. Natural gas energy costs in

Bangladesh are less than USD 0.02/kWh in

comparison to USD 0.933/kWh, USD 0.672 and

USD 0.784/kWh in India, Pakistan and China,

respectively. Environmental and safety

compliance has just started to gain attention, and

past periods of growth can also be attributed to

the moderate standards set for labor safety and

environmental compliance.

Continued growth in this sector has also been

facilitated by the trade encouragement policies of

the western countries such as the WTO

Agreement on Textiles and Clothing (ATC),

Everything but Arms (EBA), Generalized System

of Privilege (GSP) in the EU countries and The

US 2009 Tariff Relief Assistance. These policies

have provided Bangladesh with huge potential in

the global clothing market, especially in the EU

and America.

TYPES OF INDUSTRIES3.1.2.

The sector is mostly comprised of manufacturing in two major areas:

1. Textile

2. Leather Tanneries

Box 3: Textiles Sector Profile

Sector Export Earnings (FY 2011-12):$24.29 billion

Industry Growth since 1993-94:1. Ready Made Garments – 196%2. Yarn Production – 148%3. Fabric Production – 38 times

Workforce:Currently, this sector has provided jobs toover 5.0 Million people, of which 80% arewomen.

Consumer Market:50% of the export contracts are withEuropean buyers and about 35% withAmerican buyers. Others include Canadaand Japan. Bangladesh holds 9.02% and3.57% of the share of exports to the USand EU markets, respectively.

Trade Associations:Bangladesh Garment Manufacturersand Exporters Association (BGMEA).Bangladesh Knit Manufacturers &Exporters Association (BKMEA).Bangladesh Textile Mills Association(BTMA)

TEXTILE3.1.2.1

In the textile sector, the major industry is readymade garments (RMG). As of 2012 there

were 5400 garment factories in Bangladesh (see Figure 317 for past growth). The country

has projected that the sector’s contribution will grow to USD 34.5 billion by 2015, adding

20.5% to the total GDP. Bangladesh is the second largest garment exporter in the world and

the industry plays a significant role in the country’s total exports.

Figure 3: RMG Industry Exports

LEATHER INDUSTRY3.1.2.2

The leather sector is the 4th largest export sector by earnings, after ready made garments,

jute and frozen food, contributing 1.54% of total exports. The skin and hides of the country’s

vast domestic livestock population, which are used as raw materials, and the low cost of

available skilled labor are the two natural competitive advantages that the leather industry of

Bangladesh has as compared to other countries. The annual supply of hides and skins in the

country is about 300 million square feet consisting of 63.98% cow hides, 2.19% buffalo

hides, 32.74% goat skins and 1.09% sheep skins18.

END PRODUCTS3.1.3.

TEXTILES3.1.3.1

As per BTMA data of registered firms, the textiles industry in Bangladesh produces:

1. Yarn: There are a total of 373 different yarn manufacturing unit’s – 97 ring spinning

units, 195 ring spinning with open-end capacity, about 51 rotor/open-end, and around

30 synthetic yarn mills. These units amount to a total production capacity of 17 billion

tons of yarn.

17Bangladesh Garment Manufacturers and Export Association, Trade information

18Business Promotion Council, Ministry of Commerce, Bangladesh

75.83%79.32% 77.12%

78.15%78.60%

14,11115,566 16,205

22,92424,288

0

5,000

10,000

15,000

20,000

25,000

30,000

2007-08 2008-09 2009-10 2010-11 2011-12

Mil

lio

nU

S$

RMG Export ( Million $) Total Export ( Million $)



2. Fabric: There are total of 743 fabric manufacturing units producing woven, denim,

home textiles and knit fabrics. Total production capacity is around 2 billion meters of

fabric.

3. Dyeing/Printing/Finishing: There are around 238 dyeing/printing/finishing mills.

LEATHER3.1.3.2

The leather industry constitutes two major end products apart from tanning industries:

1. Footwear Industry: There are about 40 mechanized footwear industries and about

4,500 small and cottage units producing various types of footwear with a production

capacity of about 178.74 million pairs.

2. Leather Goods Industry: There are 5 large and 15 medium and small mechanized

and semi-mechanized units and more than 1,500 cottage level leather goods

manufacturing units in the country.

PROCESS, TECHNOLOGY AND EQUIPEMENT (PRESENT STATUS)3.1.4.

Table 3 and Table 4 represents the process, technology and equipment currently used in

Bangladesh’s textiles and leather industries:

Table 3: Bangladesh Textile Industry – Technology and Equipment

Process, Technology andEquipment

Present Practice

Production Equipment inDyeing/Washing andProcessing

Most units rely on imported equipment.

StentersSome units have direct gas fired stenters. Others utilize hotoil based stenters.

Steam Boilers and ThermicFluid Heaters

Most units use two-pass steam boilers while some units havethree-pass steam boilers.

Air Compressors

Most units utilize air compressors purchased from scrappedships or reconditioned air compressors to reduce the initialcost.

Large units utilize the latest screw compressors.

Water PumpsMost units use locally available submersible/centrifugal waterpumps.

Stand-by Power Generators

Most units have generators purchased from scrapped shipsor reconditioned high capacity power generators to reducethe initial investment.

Large units utilize high efficiency generators, operating asbase load power sources.

Plant LightingAll of the major textile processing units utilize a large number

T8 type lights with electromagnetic ballasts.

Source: Tetra Tech analysis

Table 4: Bangladesh Leather Industry – Process, Technology and Equipment

Process, Technologyand Equipment

Present Practice

Washing DrumsLocally manufactured drums are used in small units. Largeproduction units have imported drums.

Tunnel and ToggleDryers

Units have locally fabricated (brick work) gas fired tunnel dryerswith separately installed burner arrangements.

Spray DryersUnits use semi-automated spray dryer or steam as heating mediawith all control systems.

Vacuum DryersSmall units have single plate hot water vacuum dryers. Largeproduction units have imported vacuum dryers with control systemsusing hot water for heating.

Hydraulic Heat Press Most production units use an imported hydraulic heat press.

Hot Water BoilersUnits utilize separate hot water boilers for drum hot water andvacuum dryers. Some units have a single steam boiler with hotwater generated in a separate tank.

Electric DrivesMost units utilize motors purchased from scrapped ships or oldimported motors.

Air CompressorsMost units have air compressors purchased from scrapped ships orreconditioned air compressors to reduce the initial cost.

Source: Tetra Tech analysis

SOURCES OF ENERGY3.1.5.

The industries in this sector require both thermal and electrical energy in their operation.

Electrical energy is available from:

1. State Electricity Grid/State Utility: Almost every unit is connected to the national

grid (through different grid service providers) at different voltage levels i.e.

33KV/11KV/0.4KV.

2. Captive Power Generation Utilizing Natural Gas: Common practice is to generate

electricity through on-site generators and use it for continuous factory production.

80% of the units have their own captive power plant. The textile sector alone has a

captive generation capacity of 1,100 MW, while the country as a whole has a total

generation capacity of about 8,525 MW as of December 2012.

3. Diesel Generators: As a source of back up supply.



Figure 4: Electrical Energy Usage Pattern in

the Textiles Industry, Bangladesh

Spinning,

38%

Weaving,

12%

Ligh�ng,

15%

Wet

Processing,

10%

Humidifi

ca�on,

19%

Others,

6%

Figure 5: Thermal Energy Usage Pattern in the

Textiles Industry, Bangladesh i

Sream

Distribu�on

losses, 10%

Bleaching

and

Finishing,

35%

Dyeing and

prin�ng,

15%

Humidificat

ion, Sizing

and Others,

15%

Boiler Plant

Losses, 25%

4. Thermal energy: Used for steam generation and hot water. Since the most common

steam generators are gas powered, there is frequent interruption in the production of

steam whenever gas pressure reduces. Currently, new gas connections to industrial

facilities have been halted due to the demand-supply gap. New facilities are

therefore utilizing diesel-fired boilers, furnace oil boilers, compressed natural gas

(CNG) boilers, etc. Some factories have started to use exhaust gas boilers (EGB) to

get steam from generator, boiler and furnace exhaust; based on our audit

experience, however, utilization of such technology is less than 50%.

Interestingly, in Bangladesh, electricity from the grid is often used as stand by supply while

most companies rely on captive generation from gas. This is due to an imbalance in the gas

and electricity tariffs i.e. electricity is being supplied to the industries at a rate of about BDT

6.95/kWh by distribution companies while the cost of electricity generation from self-supply,

without any waste heat recovery, is about BDT 3/kWh. To reduce costs, most industrial

facilities have captive generation.

OPPORTUNITIES FOR ENERGY CONSERVATION3.1.6.

The main focus of technology must be the efficient use of electricity, fuel and steam for

enhancing overall process efficiency. Source: Tetra Tech Analysis

Following are the energy conservation measures identified by the Consultants for the most

of the companies in this sector.

Figure 4 shows the breakdown of electricity end-users in the textiles industry, while Figure 5

presents thermal energy end-users.

Source: Tetra Tech Analysis


Following are the energy conservation measures identified by the Consultants for the most

of the companies in this sector.

1. Motor Efficiency: About 80% of electrical energy is consumed by the motors used in

manufacturing equipment and utilities. These motors are operated for 6,000 to 7,000

hours a year. Currently, high-efficiency motors (HEMs) are not installed in factories.

HEMs have 10%-20% greater efficiency as compared to motors used in Bangladesh.

The payback for replacing the existing motors with HEMs is only 12-18 months.

2. Boiler Efficiency: In textiles facilities boilers are used for steam generation and hot

water. The current stock of boilers in Bangladesh is old. There is no measurement of

air to the boiler, which plays a crucial role in the efficiency of the boiler. Generally, air

dampers are found to be set at one position and not adjusted even when load

fluctuates. By adjusting air dampers based on the continuous measurement of

oxygen in the flue gases, boiler efficiency can be improved by 6-8%. In several of the

facilities audited, the boiler insulation is not sufficient.

In some facilities it was found that single pass boilers are in used. Replacing these

boilers with three pass boilers will increase the boiler efficiency by 15-20%.

3. Variable Frequency Drives: Adding a variable frequency drive (VFD) to a motor-

driven system can offer potential energy savings when system loads vary over time.

For example, in the stitching of garments VFDs are used to reduce the speed of

sewing machines during unload conditions.

In general, controlling the speed of a pump rather than controlling flow through the

use of throttling valves or nozzles, can yield energy savings of 50% for a reduction in

speed of 20%19. VFDs can be installed on washer pump motors, fan motors to

control flow, in humidification plants, and in air compressors.

4. Lighting: Lighting accounts for about 15-20% of total electricity use in a textile plant.

The ready-made garments and footwear industries require adequate lighting during

stitching, sewing and finishing processes. Only a few factories have progressed

towards energy efficient lighting systems by replacing T-8 tubes with T-5 tubes.

Furthermore, in Bangladesh, high-intensity discharge lamps with metal halide or high

pressure sodium are not common; these can yield 50-60% energy savings over

fluorescent alternatives. Replacing magnetic ballasts with electronic ballasts

fluorescent lighting can save 25%. Industry should move toward Light Emitting Diode

(LED) lighting rather than T-5 or T8, which saves roughly 25% and 35%, respectively,

has a longer life and is more environmentally friendly.

19Why Use Variable Frequency Drive? written by Filtrex, Inc. distributed by Paddock Pool Equipment

Company, Inc. & Filtrex, Inc. www.paddockindustries.com


5. Replace Diesel/Furnace Oil Water Boilers with Solar Water Boilers: The long-

term average solar irradiation data indicates that the period of high-intensity (i.e.,

more than 200 W/m2) sun-hours in Bangladesh varies from 3 to 11 hours daily and

that the global radiation varies from 3.8 to 6.4 kWh/m2/day

20. These data indicate

that there are good prospects for solar, thermal and photovoltaic, applications in

Bangladesh such as solar heating. Furthermore, as the cost of solar generators

has been decreasing while the cost of diesel has been increasing, they are now in a

position to replace diesel generators.

Table 5 briefly illustrates the project findings regarding the potential percentage of energy

savings achieved if the key measures described above are implemented.

Table 5: Energy Savings Potential

Intervention Potential Energy Savings

High Efficiency Motors, Drives etc. 10-20%

Energy Efficient Boilers 15-20%

Variable Frequency Drives 15%

Lighting 20%

Source: Project Findings based on Energy Audit Report under ADB Bangladesh Industry Energy

Efficiency Finance Program

GLOBAL BENCHMARKS FOR SPECIFIC ENERGY CONSUMPTION (SEC)3.1.7.

International benchmarks for specific energy consumption for the textiles and leather

industries are illustrated in Table 6 below.

Table 6: Specific Energy Consumption (SEC) – International Benchmark Values:Textiles and Leather Industries

Type ofIndustry

UnitInternationalBestPractice

InternationalRange

InBangladesh21

SavingPotential(%)22

TextileIndustry

toe/millionunitsproduced

250 250-300 333 25

LeatherIndustry

toe/millionsq. ft.

50 50-60 76 34

20Research Article, Potential of Wind and Solar Electricity Generation in Bangladesh, Sanjoy Kumar

Nandi, Mohammad Nasirul Hoque, Himangshu Ranjan Ghosh, and Swapan Kumar Roy, Received

29 October 2011; Accepted 11 December 201121

Values are determined on the basis of the energy audit conducted by the consultant.22

Expected energy saving potential, if industries in Bangladesh achieve the international best practiceSEC.


In Bangladesh, the mean specific energy consumption of the audited textile industry is 333

toe/million units produced and 76 toe/million sq. ft. for the leather industry showing that it

takes more energy to get a piece of textile produced in Bangladesh than elsewhere.

INVESTMENT, SAVINGS AND EXPECTED GAINS3.1.8.

The consultant has identified energy savings opportunities in the audited textiles industries

(inclusive of leather and readymade garments). It was found that for the 22 target facilities

audited, if the suggested conservation measures implemented, they would lead to USD 1.37

million in annual savings23 for a one time investment of USD 4.45 million. The measures can

also contribute towards a CO2 emissions reduction of 19,309 tons every year. The payback

for this investment was found to be around 3.2 years, with an IRR of 25%24.

HUMAN RESOURCE SKILL ASSESSMENT3.1.9.

In 2012, textiles and related industries accounted for 45% of all industrial employment in

Bangladesh, yet only contributed to 5% of the total national income. This is because the

insufficient size of the skilled workforce impedes an increase in productivity and a shift

towards more sophisticated products. It is estimated that currently, there is a 25% shortage

of skilled workers in Bangladesh’s textiles and related industries25. Along with high labor

turnover, the future growth of this sector will require up to 6 million workers by 2020.

It has been observed that small manufacturers are dependent on very few technicians for

the entire plant’s operation. Also, existing challenges have multiplied as suppliers aren’t able

to find higher-skill, middle management positions. Moreover, the factory owners are not

convinced that skilled management can improve productivity or quality enough to justify its

cost. They are still running the factories in the traditional manner, employing semi-skilled and

unskilled workers.

Other key factors limiting efficiency improvements are:

Educational institutions for technical skills are few or non-existent

The RMG industry’s image is not attractive enough to interest young graduates.

‘Importing’ middle management creates several problems, such as increased

costs and cultural issues.

Understanding the importance of this sector, the Government of Bangladesh has prioritized

investment in education as one of its broad initiatives. An institution such as the National

Institute of Textiles Training, Research and Design (NITTRAD) was established to provide a

degree in textiles. The Government is also planning to establish skill management training

institutes via public-private partnerships.

23The savings do not include gains obtained from carbon emission reductions.

24Assumed a project life of 5 years

25Mckinsey, Report on Bangladesh RMG landscape


An analysis of the current state of energy management at the sector level was done by the

consultant using the Energy Management Matrix analysis (Ref Table-2) for all the 22

companies audited in this sector. The ratings of the companies in each area were averaged

and a summary representing sector-wide findings was established. A summary of the ratings

of the sector is shown in Table 7.

Table 7: Energy Management Score Summary – Textiles and Leather Sector

Area Of ManagementMatrixReading

Matrix Reading Interpretation

Policy 0 No explicit policy

Organization 0No energy management or anyformal delegation of responsibilityfor energy consumption

Communication 1Informal contacts betweenengineer and few users

Information 1

Cost reporting based on invoicedata, Engineers compile report forinternal use with technicaldepartment

Marketing 1Informal contacts used to promoteenergy efficiency

Investment 0No investments in increasingenergy efficiency in premises


SSEECCTTOORR 22:: IIRROONN AANNDD SSTTEEEELL IINNDDUUSSTTRRIIEESS3.2.


The production output of mild steel (MS) structural products in Bangladesh was about 0.29

million tons in FY 2008-09, about 0.17 million tons in FY 2009-10, and about 0.23 million

tons in FY 2010-11. The per capita consumption and/or production of steel are often taken

as an indicator of the state of development of a nation. The per capita consumption of mild

steel in Bangladesh in 2012 was 1.43 kg/person. This is far below the world average steel

use per capita of 216.7 kg/person26. Recent estimates show that the demand for steel in

Bangladesh is growing at a rate of about 10% annually. See Box 4 for more iron and steel

sector data.

The world-wide steel industry can be divided into

two types of producers: those who convert iron

ore into steel (known as integrated producers),

and mini steel plants, which make steel by melting

scrap, sponge iron or a mixture of the two (known

as secondary producers). The steel products that

are currently manufactured locally in Bangladesh

are made by secondary producers.

The only integrated steel mill ever set up in the

country was Chittagong Steel Mills Limited (CSM),

an enterprise of Bangladesh Steel and

Engineering Corporation (BSEC), at Chittagong. It

was closed in 1996 due to its adoption of a rather

obsolete method of steel production and logistical

constraints. Since then, no major private

integrated steel production facilities have been

developed in Bangladesh. Therefore, the country

still relies on import-based steel processing

facilities run by private enterprises and the Ship Building and Recycling Industries (SBRI),

which account for 50% of the nation’s steel supply. The majority of steel units in the country

are only engaged in re-rolling of steel scrap and solids obtained predominantly from “ship

breaking” operations which are a major business activity in Bangladesh.


The present structure of the Bangladesh iron and steel industry is composed of the following

types of units:

ELECTRIC ARC FURNACE AND INDUCTION FURNACE UNITS3.2.2.1

There are a number of electric arc furnace and induction furnace (EAF/IF) units making

billets, pencil ingots and channel cast billets. These units cater to the level of quality

26World Steel Association, 2012

Box 4: Iron and Steel Sector Profile

As per International Trade Centre:Sector Export in Value (FY 2011):US$ 40.35 million; 0.15 % of total exports.

Sector Import in Value (FY 2011):US$ 1.48 billion; 4.78% of total imports.

Industry Annual Import Growth (FY2007-11):13.85%

Trade Associations:Bangladesh Steel and EngineeringCorporation (BSEC)Bangladesh Steel Mills AssociationBangladesh Foundry OwnersAssociation.Ship breaking and recycling industry(SBRI)


demanded locally. The billets produced are used in on-site and off-site re-rolling mills

belonging to the same, or a different, producer.

ROLLING MILL UNITS3.2.2.2

The re-rolling units essentially reheat ship yard scrap and re-roll it into rods and bars.

Existing re-rolling mills are meeting the entire domestic demand of the Bangladesh, except

for imports of a small quantity of high quality steel products. There is still unutilized capacity

in the re-rolling sector, which is likely to meet increasing demand of the steel products in

future years. The raw material for the re-rolling mills is ferrous scrap which comes mainly

from the ship breaking industry. At present ship breaking industry provide about 1 million

tons ferrous scrap per year. Bangladesh has re-rolling units with an installed capacity of

around 1.5 million tons per year. Some of the steel products produced in Bangladesh are not

of standard specification and quality, and as such for important engineering applications or

quality construction sectors like high rise buildings, bridges, etc. steel products are imported.

Cold Rolling Mill Units

There are 6 steel cold rolling mills in Bangladesh which use imported hot rolled coil for

production of cold rolled coil. Their installed capacity is presented in Table 8.27

Table 8: Cold Rolling Mills in Bangladesh

Name Capacity (M Ton/yr.)

Alam Cold Rolled Steels Ltd. 120,000

PHP Cold Rolls Mills 240,000

Abul Khair Steel Products Ltd. 250,000

K1Y. Cold Rolled Mills Ltd. 300,000

Karnaphulli Steels Ltd. 80,000

Appollo Cold Rolled Mills Ltd. 200,000

Total 1,380,000

Source: Tetra Tech- Field Survey

STEEL PIPE AND TUBE MANUFACTURING UNITS:3.2.2.3

Bangladesh has steel pipe and tube manufacturing units but their capacity utilization is very

low, resulting in an import of about 58,000 tons per year at present. The shortage was

10,000 tons in 2009-10, which increased to 20,000 tons in 2011-12.

27The blue color indicated for the mills in the Table 8 have been part of audit in this industrial energy efficiency

finance program


GALVANIZED PLAIN AND CORRUGATED SHEETS AND GALVANIZED PIPES3.2.2.4MANUFACTURING UNITS

There are a number of units producing galvanized plain (GP) and galvanized corrugated

(GC) sheets in Bangladesh. Overall, the installed capacity of galvanized sheet

manufacturing in Bangladesh is reported to be about 700,000 tons per year. More than 80%

of that production is of corrugated sheets, meeting demand from the construction industry for

roofing and side sheeting.

National Tube Ltd (NTL) is the major producer of galvanized iron (GI) pipes and tubes with a

capacity of 45,000 tons per year. Other major units are Asia Pipes Ltd and Kusthia Pipes

Ltd. NTL and Asia Pipes Ltd are manufacturing MS non-galvanized pipes also. Overall

capacity is reported to be 80,000 tons per annum whereas existing production is only 20,000

tons per year.

END PRODUCTS3.2.3.

The major end products of the steel and iron industry in Bangladesh are shown in Table 9.

Table 9: End Products in the Steel and Iron Industry

Products Production (in Tons)

Year 2008-09 2009-10 2010-11

Semi-finished products

CC billets 180,000 250,000 320,000

Pencil ingots/channel cast billets 75,000 75,000 75,000

Sub-total 255,000 325,000 395,000

Finished products

Bars & rods and structural 1,200,000 1,270,000 1,300,000

CR coils/sheets 270,000 280,000 300,000

GPI/CGI sheets 595,000 600,000 675,000

Pipes & tubes 30,000 35,000 40,000

Sub-total 2,095,000 2,185,000 2,315,000

Total 2,350,000 2,510,000 2,710,000

Source: Bangladesh Bureau of Statistics


Since Bangladesh is a secondary producer of steel, the main raw material used for

production is steel scraps.

The main steps employed in the secondary steel making process are:

• Melting and refining of steel scrap to produce clean liquid steel (sometimes other

sources of iron are also used)

• Converting liquid steel into intermediate shapes, i.e. ingot or billet.

• Size reduction of billets by rolling into products, e.g. rods, deformed bar, flats, etc.


Table 10 illustrates the present status of process, technology and equipment utilized in the

Bangladesh iron and steel sector.

Table 10: Bangladesh Steel Industry – Process, Technology and Equipment

Process, Technology andEquipment

Present Practice

Furnaces for Melting - InductionFurnaces and Electric Arc Furnaces.

The induction furnaces in use are of relatively olderdesigns and small capacities with hardly anyrefining facilities. Some steel makers do uses ladlefurnaces for refining, but these also have verylimited refining capability. As a result, the chemicalcomposition and metallurgical quality of steel arenot consistent and are mainly a reflection of thecharacteristics of the raw material.

Tatus)Reheating/Heating/ProcessFurnaces

Most of the steel foundries use traditional cupolafurnaces.

Casting Technologies

Some units add value to their scrap product by postmelt refining, and tend to use the continuouscasting technique for making billets. In contrast,units undertaking only melting of scrap without orwith only minor refining, conduct casting operationsinto “channel cast billets” or “pencil ingots”.

Hot Rolling and Cold Rolling MillsThe latest technology, such as 6-High Cold RollingMills is in use. By using this technology, the sheetwidth can be reduced considerably


Electricity, natural gas and HSD are the main sources of energy for the iron and steel

industry in Bangladesh. In fact, this sector is the largest private sector consumer of natural

gas in Bangladesh. Induction furnaces use electricity from grid as their primary energy

source, natural gas use is predominantly in re-rolling mills. Natural gas is provided by the

local gas utility Petro Bangla.

Some iron and steel manufacturers generate electricity through gas based self-generation

and use it for continuous factory production. The captive generation is up to 30% cheaper

than the electricity from the grid. HSD is predominantly used for utility purposes and is kept

as a source of back up supply to utility services.

Most of the iron and steel industries are connected with grid at 33/11 KV voltage level.


When comparing the processes and practices followed in Bangladesh to the international

standard, significant opportunities for energy conservation exist in the iron and steel sector.

Major savings can come through the installation of top pressure recovery systems, exhaust

gas recovery/waste heat utilization, and furnace insulation. The details of the present

practice and scope for improvement are outlined in Table 11.

Table 11: Bangladesh Iron and Steel Industry – Energy Conservation Measures

Energy Conservation Measures Present Practice Proposed Practice

Exhaust Gas Heat Recovery for Heating

Combustion Air: Charge metal is heated by

a natural gas air mixture flow in a re-heating

furnace at 1,000°C to 1,250°C, depending on

the thickness of charge material. As a result,

pressure rises in the re-heated furnace. The

excess pressure is released through the

chimney. The burned gases in the furnace

also flow through the chimney due to the

pressure difference between the furnace and

the atmosphere. The burned gases that flow

through the chimney are known as exhaust

flue gases. The temperature of exhaust flue

gas varies from 600˚C to 800˚C .

Exhaust gas

coming out of the

gas generator/re-

heating furnace is

dissipated into the

atmosphere

resulting in energy

losses and

increases in

carbon emissions.

A portion of the exhaustgas heat can be utilizedto pre-heat the chargedmaterials beforecharging into thefurnace or to pre heatthe combustion air.

Improved Insulation: A hot surface radiates

heat to the environment, thus losing energy,

making the surrounding environment less

comfortable for workers and cooling the

charge.

In most cases

furnaces are old and

not properly

maintained

Regular

maintenance of

furnace insulation

and renew of

insulation every 5

years.

Automation of Re-heating Furnace: Raw

materials are charged by a pusher at one end

of the re-heating furnace and discharged at

the other. The hot metal is carried out either

by conveyors or manually sent to the roll

stand for rolling

Hot metal is retrieved

manually through the

sliding door by tongs.

This method is time

consuming and leads

to heat loss. As a

result, production is

decreased to some

extent.

Replace the present

manual system with

an automatic

retrieval and

transportation

conveyor system

that can take hot

metal to the roll

stand directly.

Facilities utilizing electricity from grid are subjected to peak hour restrictions in Bangladesh.

Such restriction result in the cooling of charged material and significant energy losses. Most

of the iron and steel manufacturers in other countries of South Asia do not encounter such

restrictions and are exempted from peak hour under “continuous process industry category”.

Table 12 briefly illustrates the project findings regarding the potential percentage of energy

savings that can be achieved if the key measures described above are implemented in this

sector.



Table 12: Energy Savings Potential – Iron and Steel Industry


Exhaust Gas Heat Recovery 20%

Improved Insulation 5-10%

Automation of Re-Heating Furnace 20-25%

Source: Project Findings based on Energy Audit Report under ADB Bangladesh

Industry Energy Efficiency Finance Program

GLOBAL BENCHMARKS FOR SPECIFIC ENERGY CONSUMPTION3.2.7.

International benchmarks for specific energy consumption (SEC) in the steel and iron

industries are illustrated in Table 13.

Table 13: Specific Energy Consumption – International Benchmark Values: Iron andSteel Industry

Type ofIndustry

UnitsInternational BestPractice

InternationalRange

InBangladesh21


Cold Rollingand Finishing

Toe/Ton 0.0382 0.0382-0.066 0.159 76

MS Rod Toe/ton 0.046 0.046-0.088 0.091 49

MS Ingot Toe/ton 0.089 0.089 -0.101 0.169 47

As shown in Table 13, the SEC of Bangladesh’s steel sector, on average, is greater than the

international benchmark. One of the reasons for this variation is due to conversion of gas

into electricity and intermittent peak hour restrictions. In Bangladesh, due to shortage of

electricity, during peak hours industries are not permitted to use electricity. As an result

furnace cools down during peak hours and has to be reheated again after peak hours. This

also increases the SEC.


Were the suggested conservation measures implemented in the 20 audited facilities, they

would lead to USD 5.1 million in annual savings for an investment of USD 10.42 million. The

measures can also contribute a CO2 emissions reduction of 52,605 tons every year. The

payback of the investment was found to be around 2.03 years, with an IRR of 32%28.


The managing staff at iron and steel plants comprises professionals, engineers and other

support staff. The number of engineers, professionals and other staff is not well balanced in

small plants. Some firms have very few engineers and are operated solely by technicians. It

has been observed that multiple roles are often assigned to employees. This can reduce

productivity and detracts from process improvements. Figure 6 illustrates the profile of

people employed in the iron and steel industry.

28Assumed Project Life of 5 years

Figure 6: Profile of the Iron and Steel Industry Workforce

Source: Tetra Tech Survey and Analysis

Table 14 represents the education levels of employees across the steel sector in

Bangladesh. Most of those employed are minimally educated, having studied until the 10th

standard or below:

Table 14: Distribution of Human Resource by Education Level

Total EmploymentIndustryAggregate

Employment with Management Education 1-2%

Post Graduates 1%

Graduates 10%

Diploma Holders/Certificate Holders 3%

10th Standard or below (those requiring ‘short-term/modular’capacity building of some form)

80%

Daily Wages/Contractual 5%


There is a dearth of skilled human resources in the manufacturing sector, particularly at mid-

level management. This can mainly be attributed to narrow career opportunities, unattractive

salary packages, and better opportunities in textiles and other sectors. Mills suffer from a

lack of engineers since most prospective engineers are not motivated to join the industry.

More importantly, there is no specialised technical engineering institution in Bangladesh for

the iron and steel sector.




Passed 10th to 12th standard orbelow, with 1-2 years' experience,

ITI's, short-term cer�fica�on courses

12th standard or below, with 1-2years' experience, ITI's, short-term

cer�fica�on courses

University graduates, Diploma holderswith 3-4 years' experience

Engineering graduates, Diplomaholders with 7-8 years' experience

Large Units: MBA/ M. Eng.

Small Units: Engineer, with 10-15years' experience

UnitManager

Procurementand Marke�ng

Head

Produc�onManager

LineSupervisors

MachineOperators

UnskilledLabor

Maintenance/ Tes�ng

Technicians

Administra�ve Staff




of the sector is shown in Table-15.

Table 15: Energy Management Score Summary – Steel and Iron Sector

Area Of ManagementMatrixReading

Matrix Reading Interpretation


Organization 0No energy management or any formaldelegation of responsibility for energyconsumption

Communication 1Informal contacts between engineerand few users

Information 1Cost reporting based on invoice data,Engineers compile report for internaluse with technical department

Marketing 0 No promotion of energy efficiency

Investment 0No investments in increasing energyefficiency in premises


SSEECCTTOORR 33:: CCEEMMEENNTT AANNDD CCLLIINNKKEERR IINNDDUUSSTTRRIIEESS3.3.


With Bangladesh’s growth economy, the real estate sector is leaping to prominence in the

major cities. It has been estimated that the overall GDP contribution of the cement sector

was 7.02% in 2009-2010. In a crude measure, the total volume of the sector was

approximately BDT 265.7 billion in 2010-201129.

Cement, as the most important ingredient of

concrete, is essential in the development of

infrastructure and construction in general. The

expansion of the cement industry in Bangladesh

is underway due to government plans for big

infrastructure projects, as well as increasing

demand in the construction sector.

According to the Bangladesh Cement

Manufacturer’s Association (BCMA), the cement

industry is growing at an average rate of 10-12%

per annum. In addition, cement is exported to

different states of India and export demand has

increased gradually over the years. According to

the BCMA, export of cement from Bangladesh

stood at 152,000 tons in 2010 versus 100,000

tons in 2009.

Despite the increasing demand, per capita

consumption remains low when compared with

the world average; only 65 kg (FY 2009) while

neighboring countries, India and Pakistan, have

per capita consumption of 135kg and 130kg,

respectively. This underlines the tremendous

scope for long term growth in the Bangladeshi cement industry.

Cement is a high-volume, low-value commodity. Transporting it over long distances adds to

the cost, resulting in lower margins to the producers. This makes cement a regional

commodity where lower distribution cost makes it remunerative to producers. Cement

consumption varies regionally because the demand-supply balance, per capita income and

level of industrial development differ in each region. In Bangladesh, Dhaka, Chittagong and

Mongla account for 91% of total consumption. Most of the exports are to India, Myanmar and

Nepal.

Bangladesh’s cement industry is the 40th largest in the world. In 1995, the government first

permitted the establishment of cement industries in Bangladesh. Currently 123 companies

29http://www.rehab-bd.org/ Comprehensive Study On The Real Estate Sector Of Bangladesh.pdf

Box 5: Cement Sector Profile

Sector Earnings:Approximately 265.7 billion BDT

Industry Growth:BCMA: 10% - 12% per annum

Workforce:Unskilled Labor: 37,100Skilled Labor: 2,900Percentage share in Total Employment:0.08

Consumer Market:Major portion is consumed locally.

Cement is exported to India, Myanmar,Nepal and some other countries on asmaller scale.

Trade Associations:Bangladesh Cement ManufacturersAssociation (BCMA)Bangladesh Cement TradersAssociation


are listed as cement manufacturers in the country. The cement companies operating in

Bangladesh have a total production capacity of 21.043 million tons per annum. As shown in

Table 1630, the top 13 companies alone control over 78% of the total industrial capacity. The

capacity balance still remains quite fragmented. It has been found that the average

production capacity of the sector over last 4.5 years was about 66%.31

Table 16: Market Share of Major Cement Companies

Company Market Share

Shah Cement 14.2%

Heidelberg Cement 9.3%

Meghna Cement 7.4%

Seven Circle BD Ltd. 6.9%

Lafarge Surma Cement Ltd. 6.7%

Holcim BD Ltd. 6.4%

Unique Cement 6.1%

MI Cement 4.9%

Premier Cement 4.0%

Akij Cement 3.7%

Royal Cement 3.0%

Mongla Cement 2.9%

MTC Cement 2.8%


With the exception of Lafarge Cement which makes cement from basic raw material, all

cement companies in Bangladesh make cement from imported clinker obtained from

neighboring countries such as India, Vietnam, Thailand, China, Indonesia, etc. In some

cases the clinker is imported from a country and then again exported back to same country

as cement.

ABOUT CEMENT INDUSTRIES3.3.2.

The main ingredients for cement include clinker, gypsum, slag, limestone and fly ash. The

mills that produce cement from imported clinker are located mostly around Dhaka,

Chittagong, and Mongla to take the advantage of water transportation of raw material and

cement. Raw material and limestone deposits are situated in the St. Martin’s Island,

Joypurahat and Sylhet areas. However, they are few in number and of limited capacities.

The energy cost of Portland cement (see description below) production is 10% to 20% of the

total production cost. It has been observed during audits that efforts have been made to

reduce energy consumption in cement production through improvements in processes and

auxiliary facilities. If the energy cost is reduced, the manufacturing cost is lowered, resulting

in increased company profits.

30Note: Blue denotes that the company was audited under this program

31Prospectus of Premier Cement Mills Ltd.


END PRODUCTS3.3.3.

Bangladesh produces only bagged cement. The dominant types of cement used in

Bangladesh are Portland Composite Cement (PCC) and Ordinary Portland Cement (OPC)32.

Due to intense competition, cement prices from many companies in the industry are very

close to one another. Currently, the standard price for one bag of cement produced

by multinational and local cement companies ranges from BDT 400 to BDT 500.


Only OPC was available in Bangladesh until 2002, which was produced following the

American Standard Method (ASM). From the year 2003, other types of cement also became

available, which helped the cement industry to provide differentiated and improved products

to customers. The cement which has been widely used since 2003 is PCC made by

following the European Standard Methods (ESM). Currently, the ratio of production between

PCC and OPC is 19:1. Although PCC is of equal strength and durability to OPC, they rely

on different manufacturing technologies. PCC contains only 60-70% clinker while OPC

contains 95% clinker. So, worldwide, PCC has become more popular.

A cement production consists of the following three processes.

1. Raw material process

2. Clinker burning process

3. Finish grinding process

The raw material process and the clinker burning process may each be classified into the

wet process and the dry process methods. Energy (natural gas) consumption is almost 50%

less in the dry process, hence most new cement plants in Bangladesh are implementing the

dry process for production. The process flow diagram for a dry process cement grinding

plant is shown in Figure 7.

32Heidelberg Cement, 2004


Figure 7: Production Process Flow Diagram of Dry Process Cement Production inBangladesh


The primary energy source for cement factories in Bangladesh is electricity, which is

required to drive motors in several production processes. This electricity is either drawn from

the national grid or generated from on-site, captive power generators using natural gas. Only

20% of the units have their own captive power plant. In terms of specific energy consumption

(toe/ton of production) self-generation has higher specific energy consumption (SEC) than

grid electricity, as the typical efficiency of a captive power plant is only 30%.

All cement industries prefer to have their own gas connection and generate electricity from

natural gas to run the plant. If a gas connection is not available the industry prefers to obtain

grid connection at the 33 KV level.


Efforts at the policy level are needed to bridge the imbalance between gas and grid

electricity prices. This will avoid sub-optimal generation of electricity through captive power

plants.


Significant opportunities for energy conservation exist in the cement sector in terms of the

technology, processes and equipment’s used in Bangladesh when compared to international

standards. Major savings can be achieved through the installation of pre-grinding high press

roller mill, the use of vertical roller mills (VRM), efficient motors and drives, maintenance of

induced draft (ID) fans, and maintaining mill air flow. The details of the present practices and

scope for improvement are summarized in Table 17.

Table 17: Bangladesh Cement Industry – Energy Conservation Measures

Energy ConservationMeasures

Present Practice Proposed System

Ball Mill: For grinding ofclinker, gypsum and dry ormoist additives to anytype of cement. The milloperates in either an openor closed circuit andgenerally without a pre-grinder.

Mills operating without a pre-grinder generally producematerial of less than 40 mm insize. This affects the quality ofthe end product and leads tohigh rejection rates.

Installation of a pre-grindingroller press mill before the ballmill. This helps in reducing thematerial size to between 2mm and 0.08 mm, leading to areduction in SEC .

.

Ball Mill: For grinding ofclinker, gypsum and dry ormoist additives to anytype of cement. Balls areused to crush the rawmaterial.

The SEC of the ball mill isabout 35-45 kWh /ton.

Replacement of ball mill byvertical roller mill (VRM) whichoperates on the principal ofcentrifugal force. The SEC ofVRM is 28-32 kWh/ton.

Motors and Drives: In acement plant, ball millsuse motor in the MWcapacity range.

The motors are not energyefficient and there is nosystem of preventivemaintenance or vibrationanalysis.

High efficiency motors shouldbe used. Improving efficiencyby even 1-2% results insignificant savings as motorsare of MW size. Preventivemaintenance helps in avoidingdeterioration in efficiency andincreases the life of motors.Semi-annual vibrationanalyses helps in avoidingsudden breakdown of themotors.

Induced Draft FansBlades: Used to create avacuum or negative airpressure in a system orstack. It also assists inmaintaining elevatedventilation, resulting inincreased systemefficiency.

Since cement dust isconstantly in contact with thefan blades, they becomehighly corroded. Anti-corrosives are not available onthe market. The corrosion ofthe fans may also be due tothe unavailability of exhaustgas controls. Moreovercement dust is deposited on

ID fans blades should becleaned regularly to avoidhigh deposits on the blades.Fans may be changed every4-5 years to keep efficiencylevels high.




the fan blades.

Mill Air Flow: Maintainingair flow within the mill andoutlet duct improvesefficiency.

It has been observed that theairflow at the outlet duct is notadjusted according to load andis kept at a fixed position.

Measurement instrumentationand airflow controls should besuitably placed to maintain airflow at the design value asdetermined by the load.

In Bangladesh, most cement factories are only performing grinding processes, thus major

electrical energy savings can be achieved by using a pre-grinder roller press, VRM mills, and

using high energy efficiency motors.

Figure 8 presents the consumption of energy in various sections of the cement plant.

Figure 8: Energy Use Breakdown for the Cement Industry


Table 18 briefly illustrates the project findings regarding potential energy savings for the key

measures described above.

Table 18: Energy Savings Potential – Cement Industry


Replace Ball Mill with VRM 15%

Motor and Drives 5-8%

Induced Draft Fans 3%

Mill Air Flow 5-10%

Source: Project Findings based on Energy Audit Report under

ADB Bangladesh Industry Energy Efficiency Finance Program

70%

10%

1%2%

5%

7% 2% 2%1% Raw mat. Unloadg & transp� o storage

Cement Mill

Seperator

Bag Filters

I D Fan

Air Compressors

Conveyors & Elevators

Other appliances

Ligh�ng & office



International benchmarks for specific energy consumption in the cement industries are

compared to those for Bangladesh in Table 19.

Table 19: Specific Energy Consumption - Global Benchmark Values: Cement Industry

Type ofIndustry

UnitsInternationalBestPractice

InternationalRange

InBangladesh21


Grinding SEC(Clinker toCement)

toe/ton

0.002150.00215 –

0.00040.004 46

The large gap in the global and Bangladesh SEC may be due to conversion of gas to

electricity where about 70% loss of energy take place.


If the suggested conservation measures were implemented in the 20 audited cement

facilities, they would lead to USD 22.85 million in annual savings for an investment of USD

70.9 million. The measures can also contribute a CO2 emissions reduction of 28,116 tons

every year. The payback of the investment was found to be around 3.2 years, with an IRR of

28%33.

HUMAN RESOURCES AND SKILL ASSESSMENT3.3.9.

Bangladesh offers a substantial human resource advantage in terms of the availability of low

cost labor. The country boasts a trainable, enthusiastic, hardworking and low-cost labor

force, suitable for any labor-intensive industry. According to the Labor Force Survey, 2005-

06, the cement sector in Bangladesh employs 37,100 unskilled laborers and 2,900 skilled

laborers. The percentage share of the sector in total employment is 0.08.

As it is a manufacturing sector, the requirement for unskilled labor is much greater than that

for skilled labor. The nominal wage rate index for the manufacturing industry in 2009-10,

taking the year 1969-70 as an index, is BDT 6,536.53.

The management of cement mills comprises professionals, engineers and other support

staff. The number of engineers, professionals and other staff is not well balanced. Some

firms have no engineers and operate through technicians.

Table 20 represents the educational profile of employees across the cement sector in

Bangladesh. Most of the employees are minimally educated, having studied until the 10th

standard or below.



Table 20: Distribution of Human Resource by Education Level – Cement Industry



Post Graduates 1%

Graduates 10%

Diploma Holders/ Certificate Holders 2%

10th Standard or below (those requiring ‘short term/modular’capacity building of some form)

80%

Daily Wages/Contractual 6%Source: Tetra Tech Survey and Analysis

For capitalization of the high-end technologies and equipment suggested in earlier sections,

it is important that the industry has highly skilled and trained manpower. The availability of

such labor is low. Several actions must be taken in terms of capacity building and work place

culture in order to increase skilled labor.






Table 21: Energy Management Score Summary – Cement Sector

Area Of Management Matrix Reading Matrix Reading Interpretation

Policy 1 An unwritten set of guidelines


Communication 1Informal contacts between engineer andfew users

Information 1Cost reporting based on invoice data,Engineers compile report for internal usewith technical department




SSEECCTTOORR 44:: CCEERRAAMMIICCSS AANNDD GGLLAASSSS IINNDDUUSSTTRRIIEESS3.4.


The global ceramics industry is worth USD

20 billion34. Global production of ceramic

tiles increased from 9,515 million sq. ft in

2010 to 10,512 million sq. ft in 2011.

However, the most noticeable trend in

production is the geographical shift in

manufacturing from the traditional

European base to the nascent economies

of Asia, North Africa and the Middle East.

This is due to the fact that the traditional

ceramic industry is a labor-intensive

sector and companies in developed

countries face difficulties being

competitive in the face of rising labor costs

and economic slowdown due to the recent

global financial crisis.

This shift in production has benefitted

Bangladesh, which can offer low-cost

labor and relaxed trade policies

(Bangladesh has also enjoyed the benefits

of the generalized system of preferences

(GSP) that allows duty-free exports

without any quota restrictions to Europe

and the USA). The country’s ceramic

products enjoy a good reputation in the

international markets of North America

and the EU. It is perfectly positioned to be

a strategic partner in the global production

and supply of ceramic goods35. See Box 6

for more data on Bangladesh’s ceramics

and glass sector.

Currently, ceramics products (including

stone tableware, porcelain tableware,

bone china tableware, tiles and sanitary

34Nusrat Jahan et al, Bangladesh Ceramic Industry

35Board of investments, Bangladesh

Box 6: Ceramics and Glass Sector Profile

Export / Import Statics of the Sector FY-2011-12(‘000’US$)

Commodity Exports ImportsExportsGrowth

ImportsGrowth

Ceramicproducts

41,176 65,019 2% 33%

Glass andGlassware

904 82,917 -36% 33%

Source: International trade Centre:http://www.intracen.org/country/bangladesh/

Sector Growth: According to the Export PromotionBureau (EPB), earnings from ceramics exportstood at US$ 34.42 million during July-May of FY2012-13 as compared to US$ 31.09 million a yearbefore, growth of 10.71%.

Export Earnings: Ceramic exports were $41.75million in FY 2011-12, 38.58 million in 2010-11 and$35.78 million in 2009-10

1.

Workforce: Currently employs around 100,000workers.

Consumer Market: Of the different ceramicproducts, ceramic table wares are exported toabout 50 countries including the USA and Canada,tiles to India, Nepal and Bhutan and sanitary wareto the Middle East, especially to the UAE.

About 75% of the total exports go to Europe, about15% to the US and the remaining 10% to othermarkets

Trade Associations:Bangladesh Ceramic Ware ManufacturersAssociation (BCWMA)

ware) produced in Bangladesh only account for 0.17%36 of the global ceramics market.

Meanwhile, Bangladesh has emerged as one of the most successful manufacturing and

exporting countries of quality ceramic tableware. With traditional skills and craftsmanship

handed down from generation to generation and the favorable economic

environment created for investment and export, Bangladesh has now reached such a stage

of development that it is rated as one of the best in the world for the ceramics industry. The

growth in overall investment projects in Bangladesh, registered by the Bangladesh Board of

Investment (BOI), is shown in the Figure 9. Glass industries have also flourished in recent

years in Bangladesh. Almost all manufacturers have succeeded in establishing their brand

names in the international ceramic tableware market. To ensure proper quality and maintain

good standing, all ceramic tableware production units use high quality raw materials. The

production equipment used is modern and conforms to the latest technology and standards.

Figure 9: Total Investment in Ceramics and Glass Sector

Source: Bangladesh Board of Investment (BBOI)

The rise of the real estate and housing sector in the last decade has driven growth in the

demand for sheet glass considerably. With access to advanced bone china technology and

creative human resources, ceramic and glass industries are one of the top growth sectors for

foreign trade.


The sector features prominently with units/factories in two major areas:

1 Ceramics Industry

2 Glass Industry

36ASA University Review, Vol. 5 No. 1, January–June, 2011;Marketing Strategies of Tableware

Ceramics Industry of Bangladesh: Some Empirical Evidence from International Players

0.89% 2.35% 0.27% 0.38%

11.66 %

194,154

173,247

274,978

558,806

539,076

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

100,000

200,000

300,000

400,000

500,000

600,000

2007-08 2008-09 2009-10 2010-11 2011-12

Mill

ion

Ta

ka

Total Investmen� n Ceramics and Glass Sector Total Investmen� n All Sectors



CERAMICS INDUSTRY3.4.2.1

The first ceramics factory in Bangladesh was established by Tajama Ceramic Industries in

the 1962. Presently, there are 40 ceramics companies throughout the country, which

produce table wares, tiles, sanitary ware, insulators, firebricks, etc. There is a local annual

demand for ceramic products worth BDT 2,000 million. According to the Bangladesh

Ceramic Association, during for year 2011-12, local industries produced 50,000 metric tons

of ceramic table wares, 64 million square meters of tiles and 21,900 metric tons of sanitary

ware.

The prime raw materials of ceramic products are white clay and sand. About 95% of the raw

materials needed for making quality and exportable ceramic products in Bangladesh are

imported from abroad. The materials are imported mainly from Japan, Germany, New

Zealand, South Korea and India.

Big industrial houses such as Monno Bone China37, Shinepukur, Bengal Fine Standard,

Peoples and National Ceramic are engaged in tableware production while RAK, Dhaka

Shanghai, Fu Wang, China- Bangla and Mir are engaged in the production of tiles and

sanitary ware. Most of the companies are export oriented. For instance, the local tableware

industry has the capacity to supply the BDT 3 billion domestic market but local

manufacturers account for less than BDT 500 million of that. This is because overseas

demand is increasing and the country’s major manufacturers are pumping 80% of their

production into the international market, thus creating a demand-supply gap in Bangladesh.

The major competitor for Bangladesh’s ceramic industry is inexpensive ceramics produced

in China. The trend has led to increasing imports of ceramics products to Bangladesh which

are increasing in parallel to the growth in export. Figure 10 illustrates the total exports and

imports in the ceramic industry up to 2011.

Figure 10: Import and Export of Ceramics Products

37These industries were audited during the program.

2007 2008 2009 2010 2011

Export 35,779 46,184 35,862 38,833 41,176

Import 24,100 34,209 39,590 53,904 65,019

0

10

20

30

40

50

60

70

mll

ion

US$

Source: BCWMA, Annual Report 2012

GLASS INDUSTRY3.4.2.2

By the end of 2002, Bangladesh’s entrepreneurs took the first move toward manufacturing

glass locally, noticing the growth in high-rise buildings and the dearth of quality glass.

Previously, the country was fully dependent on imported glass, whereas by 2008, the local

sector supplied 95% of total domestic demand while only 5%, corresponding to demand for

colored or luxurious designer glass, was imported from China, Thailand, Malaysia and

Indonesia. Local entrepreneurs started to establish glass factories in the private sector to

capture this opportunity. Presently, there is a market demand for glass products of BDT 2

billion which is increasing. Nasir Glass Industries, PHP Float Glass Industries Ltd., Usmania

Glass Sheet Factory Ltd. and MEB Glass Industries Ltd33 are the main producers of glass

products in Bangladesh. Of these, Usmania Glass Sheet Factory Ltd. is publicly owned, the

others are privately owned. The daily production capacity of Nasir Glass Industries33 is 250

metric tons, which serves around 48% of domestic demand; PHP Float Glass Industries Ltd.

produces 150 metric tons of glass daily. Apart from these companies, some factories

produce mirror glass, tampered glass and glass containers as value added items.

Most of the raw materials, including dolomite, limestone and chemicals for float and sheet

glass need to be imported from abroad. However, specialized sand, another essential

material for producing glass, is available on the local market. Local glass companies are

exporting their products primarily to South Asian countries, including India, Nepal, Bhutan

and Sri Lanka. See Figure 11 for import and export data for Bangladesh’s glass industry.

Figure 11: Export/Import Details for Glass and Glassware Products

Source: International Trade Center

END PRODUCTS3.4.3.

The ceramics sector in Bangladesh produces sanitary ware, table ware, tiles and insulators.

The ceramics products used for dining and showcase wares are called tableware products.

The tableware market can be divided into three categories:

2007 2008 2009 2010 2011

Export 3,745 6,587 3,682 3,515 904

Import 26,144 41,715 44,155 68,298 82,917

0

10

20

30

40

50

60

70

80

90

bil

lio

nU

S$


Dinnerware: Plates, bowls, cups, saucers and mugs

Glassware: Beverage ware, stemware and barware of both glass and crystal

Flatware: Eating utensils


Ceramics are made from a non-metallic mineral, hardened at high temperatures. Industrial

ceramics comprise all industrially used solid materials that are neither metallic nor organic.

Naturally occurring inorganic substances are heat-treated after adjusting grain size and

moisture, and some must be completely molten in order to be formed into ceramics; while

others are formed, heat-treated and made into the ceramic products in the sintered state,

immediately before being molten. The former product, formed in the molten state, is known

as glass. The latter product is finished in the sintered state and includes pottery,

refractories, sanitary ware, tiles and cement. These ceramics are called traditional ceramics.

By contrast, advanced ceramics are sintered at a high temperature and consist of extremely

fine, high-purity particles of inorganic substances such as alumina (AL2O3), silica (SiO2),

zirconia (ZrO2) and silicon nitride (Si3N4). These advanced ceramics are used in electronics

and mechanical parts.

Figure 12 depicts the ceramics manufacturing process used in Bangladesh.

Figure 12: Manufacturing and Production Process of Ceramics in Bangladesh


Almost every facility has a connection to the national grid (through different grid service

providers) at different voltage levels i.e.33KV/11KV. However, this is mostly used as backup

power when gas supply is interrupted or is of low pressure. Most of the kilns in Bangladesh

Mixing/

Pulverizing

Refining,

Sieving,

Deironing

Mud Feeding

FormingDryingBody Base

Inspec�onGlazing

Firing Inspec�on ShippingPacking

Molding

Plaster Mold

Procelain Clay Feldspar Clay Water PlasterGlaze


use natural gas. Since the gas does not contain any Sulphur, ceramic products from

Bangladesh tend to look brighter.

New gas connections have been suspended since March 2009, causing newer factories to

remain idle. A few new companies resort to using CNG or HSD due to restrictions in release

of gas/electric connections for industrial usage. Otherwise, HSD is predominantly used as a

back-up supply for plant lighting purposes only.

The ceramics industry is uniquely vulnerable to low voltage electricity and low gas pressure.

Ceramics manufacturers have lamented that they’ve lost a portion of the export market as

their output witnessed a sharp decline as a result of low voltage electricity and low gas

pressure. In fact, the industry needs uninterrupted power and gas supply around the clock to

maintain the required 360°C temperature required for ceramic tableware processes. Drops

in temperature take at least 12 hours to recover from, causing a huge loss in production. A

below temperature operation in ceramics processes cause issues with colour and quality,

resulting in high rejection rates.

OPPORTUNITIES FOR ENERGY CONSERVATION:3.4.6.

Major energy and cost savings can be achieved in Bangladesh’s ceramics sector by taking

advantage of the equipment and process upgrades summarized in Table 22.

Table 22: Bangladesh Ceramic Industry – Energy Conservation Measures



Utilize Exhaust fromFurnaces and Kilns inDryers: In most facilitieswaste heat in the kiln/furnaceexhaust is not being utilized.

Most of the factories do notdeploy waste heat recoverysystems.

Waste heat from exhaustflue gas can be used indryers. High capacityplants may even installwaste heat recovery onan on-site generator.

Utilization of HighEfficiency Motors:Typically, ceramics plantswill utilize as many as 50motors of various sizes,operated from 4000 hours to6,000 hours a year.

In Bangladesh, the motors foundat ceramics plants are generallytaken from ship wreckage. Thus,they are typically over-sized andof lower efficiency. When motorsdepreciate, plant owners oftentend to have them rewired ratherthan replace them with newmotors. Most facilities do nothave high efficiency motors.

HEMs show efficiencygains of 5% to 10% whencompared to the motorscurrently in use.Replacement ofdepreciated motors byHEMs makes a goodbusiness case incomparison to rewiredmotors.

Jacket Cooling of GasEngine Exhaust: Wasteheat in jacket cooling wateris not being utilized. Thequantity of heat becomessignificant in high capacitycaptive power plants.

Waste heat in the jacket coolingwater is not being utilized.

Jacket cooling water canbe used in chillers withvapor absorptionsystems.

Raw Material- Natural rawmaterials contain a mixtureof various components. The

Checking of raw materialconstitutes are random

It is essential to set upmaterial acceptancestandards to inspect





quality of ceramics productswill deteriorate if too muchiron or titanium are included.

chemical components,refractoriness, ignitionloss and other relatedfactors for each batch.

Crushing- Ore is crushed toget raw materials. Theforming and sinteringproperties vary according tothe grain size.

Checking is by experience andrandom.

Ideally, material shouldbe crushed to finerparticles for both formingand sintering. It should bechecked by propersample and instruments.

Forming- Metal mold andplaster mold patterns areused in most ceramicsforming processes.

Molds are manufactured withproper consideration ofshrinkage.

Since the ceramics willshrink when fired, it isnecessary to take suchshrinkage into accountwhen determining theshape of these molds.

Drying- Inappropriate dryingmay cause products to becracked or broken; thisrequires appropriatetemperature, humidity andduration.

Generally no parameters of thedrying chamber such astemperature, humidity andduration are measuredExperience is used.

Instruments should beprovided and used forcontrolling the dryingprocess and checking thecompleteness of theprocess.

Glazing- The purpose ofglazing is to provide asmooth, shiny surface thatseals the ceramic body. Notall ceramics are glazed.Metal oxides, such aschromium oxide, cobaltoxide, and manganese oxideoften are used to colorglazes.

Glazes are generally applied byspraying, but dipping or floodingalso is used to apply glazes.Temperature is maintained byexperience.

Glazes should be appliedby spraying only. Thedipping or flooding shouldnot be used to applyglazes. The temperature(from 600 degreecentigrade - 1500 degreecentigrade) should bemaintained depending ontype of glaze applied.

Table 23 briefly illustrates the project findings regarding potential of energy savings for the

key measures described above.

Table 23: Energy Savings Potential – Ceramics and Glass Sector


Exhaust of Furnace Air for Drying 10-15%

High Efficiency Motors 5-10%

Jacket Cooling of Gas Engine Exhaust 3-7%

Source: Project findings based on energy audit report under the ADB Bangladesh

Industry Energy Efficiency Finance Program


GLOBAL BENCHMARKS FOR SPECIFIC ENERGY CONSERVATION3.4.7.

International benchmarks for specific energy consumption in the ceramics and glass industryare illustrated in Table 24 and Table 25, respectively.

Table 24: Specific Energy Consumption – Ceramics Industry

Type of Industry UnitsInternational BestPractice

InternationalRange

InBangladesh21


Ceramic warestoe/ton

0.6 0.6 - 0.7 1.23 51

Table 25: Specific Energy Consumption – Glass Industry

Type of Industry UnitsInternational BestPractice

InternationalRange

InBangladesh21


Glass Sheet andGlasswares

toe/ton

0.4 0.4-0.7 0.75 46


The Consultants were able to identify important energy savings potential in the 20 audited

facilities, totaling USD 10.12 million in annual savings for a total investment of USD 37.3

million. The measures would also reduce CO2 emissions by 28,961 tons every year. The

payback on this investment was found to be around 3 years, with an IRR of 23%38.

HUMAN RESOURCE SKILL ASSESSMENT:3.4.9.

According to the Bangladesh Ceramic Ware Manufacturers Association (BCWMA), the

sector employs as many as 35,000 skilled workers. Still, the ceramics sector has been facing

a shortage of skilled manpower due to a lack of related educational institutes in the country.

Furthermore, production is being hampered from a shortage of skilled technicians. Currently

the ceramics sector suffers a 25% shortage in manpower. Since ceramics industries are not

able to employ the necessary skilled manpower from the domestic sources, they employ

experts from countries like India, Pakistan, Sri Lanka, and China, at an additional cost39.

There are two types of workers engaged in the ceramics industry: ceramics technologists

and ceramics designers. The ceramics designers use sand and clay for basic ceramics

materials while the technologists use materials produced through complex chemical


39http://www.daily-sun.com/details_yes_19-06-2012_Career-in-glass-and-ceramics-engineering_179_1_19_1_0.html#sthash.khR5y6rO.dpuf

processes. Ceramics designers play an important part by designing new products, meeting

buyers’ expectations with regard to functionality and aesthetics in order to top competitors.

Some ceramics technologists are specialized in glass work in industries involved in the

manufacture of tableware, fiber optics, bulbs, window panes and electronic ancillaries.

Others are specialized in structural clay work in the manufacture of enameled articles, pipes,

artificial limbs, cement used in construction or ceramic wares such as tiles, pottery, or

bathroom and kitchen fixtures.

The Bangladesh Institute of Glass and Ceramics, located at Tejgaon, Dhaka is the only

public technical institute that offers a four-year professional education program leading to a

diploma in glass and ceramics engineering. Established in 1951, it is the oldest institution of

its kind and generates most of the workforce for the ceramics industry. In 2010 Rajshahi

University of Engineering & Technology (RUET) also opened a four-year honors program in

glass and ceramics engineering. In addition, the Bangladesh University of Engineering and

Technology (BUET) has a post-graduate program on the subject. Some private institutes are

also opening up glass and ceramics engineering courses; The National Institute of

Engineering & Technology (NIET) Bangladesh is one such institution.

Still, the sector is lacking in valuable skilled labor as the labor pool has not expanded to keep

up with growth in the industry. At ceramics association and trade organization meetings,

charges and counter-charges fly between factory owners about luring away skilled workers.

This situation, of course, is advantageous for the factory employees and workers; since

those with high skill levels find themselves in a seller’s market40.


consultant using the Energy Management Matrix analysis (Ref Table-2) carried out for the 20




Table 26: Energy Management Score Summary – Ceramics and Glass Sector




Communication 1Informal contacts between engineer andfew users

Information 1Cost reporting based on invoice data,Engineers compile report for internal usewith technical department

Marketing 0 No promotion of energy efficiency


40 http://www.bangladesh-business.net/PageDetails.php?Id=124#sthash.o2vDJTAu.dpuf



SSEECCTTOORR 55:: CCHHEEMMIICCAALL,, FFEERRTTIILLIIZZEERR,, PPUULLPP AANNDD PPAAPPEERR,, PPLLAASSTTIICCSS IINNDDUUSSTTRRIIEESS3.5.


Basic chemical manufacturing

capability is a strong indicator of a

country’s development. As production

of chemicals makes a country

independent of multinational supply

chains, they are essential for

manufacturing within other industries..

Chemical industries have been

developed in Bangladesh to cater to

the paper, urea, textiles, dying, leather,

water treatment, waste water treatment

and other industries. See Box 7 for

more information on the chemical

industry in Bangladesh.

The Bangladesh Chemical Industries

Corporation (BCIC) was established in

July, 1976 by the Government of

Bangladesh to promote Chemical

industries in Bangladesh. It is currently

managing 13 enterprises (medium and

large). Urea and Triple Super

Phosphate (TSP) fertilizer, paper and

hardboard, cement, glass sheet,

insulator, sanitary-ware, etc. are

produced in BCIC factories. The only

fertilizer plant in the Bangladesh is

managed by BCIC. This fertilizer plant

has been the target of criticism in last

few years for its inefficient operation.

The plant could not be stopped partially or fully to implement efficiency improvements due to

fear of reduction in agriculture production. BCIC has been playing a major role in the

development of these sectors. However, free market reforms in the 1990’s opened up the

industry to development by the private sector. Figure 13 below presents the investment

projects in the chemical sector, as registered with Bangladesh Board of Investment (BOI),

between FY 2005-06 and FY 2011-12.

Box 7: Chemical, Fertilizer, Pulp and Paperand Plastics Sector Profile

Export / Import Statics of the Sector US$

Commodity Exports ImportsExportsGrowth

ImportsGrowth

Inorganicchemicals

22,799 169,834 -9% 7%

Organicchemicals

286 415,441 -39% 19%

Miscellaneouschemicalproducts

683 299,362 23% 17%

Fertilizers 37,355 901177 -10% 32%

Plastics 83,055 1,008,617 20% 15%

Pulp 0 109,376 - 21%

Paper 3,322 462,425 2% 17%

Source: International trade Centre:http://www.intracen.org/country/bangladesh/

Trade Associations:Bangladesh Chemical Industries Corporation(BCIC)Bangladesh Plastic Goods Manufacturer andExporters Association (BPGMEA)Bangladesh Fertilizer Association (BFA)

Figure 13: Investment Projects in Chemical Sector Registered with BOI (FY 2005-06 to2011-12).

Source: Bangladesh Board of Investment (BBOI)

TYPES OF INDUSTRIES:3.5.2.

The sector includes following industries:

1. Basic Chemicals Industries

2. Paper Industries

3. Plastics Industries

BASIC CHEMICALS INDUSTRIES3.5.2.1

The basic chemicals sector was started by the government to produce chemicals for other

government-owned factories. Gradually, all government-owned chemical plants were closed

and the vacuum filled by private sector enterprises. ASM Chemical Industries Ltd., Global

Heavy Chemicals Ltd, Samuda Chemical Complex Ltd., Tasnim Chemical Complex and HP

Chemicals are reputable names dominating the sector. Chemical factories are mainly chlor-

alkali plants, chlorinated product plants and hydrogen peroxide plants. The raw materials

used for the chemical plants are sodium chloride (common salt), Sulphur, and natural gas.

Chemical production in Bangladesh over the last five years is shown in Table 27.

Table 27: Chemical Production (2007-2012)

YearPaper('000' tons)

Fertilizer('000' tons)

2007-08 24.08 1581.68

2008-09 24.2 1347.36

2009-10 18.68 1165.21

2010-11 21.01 1013.54

2011-12 53.16 1047.21


20.18 %

7.71% 11.55%17.64%

28.19%

11.66% 17.74%

187,056

198,042

194,154

173,247

274,978

558,806

539,076

0

100,000

200,000

300,000

400,000

500,000

600,000

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

Mil

lio

nT

aka

Total Investment in Chemical Sector Total Investment in All Sectors (Million Taka)



PAPER INDUSTRIES3.5.2.2

The paper industry comprises one government-owned mill, Karnaphuli Paper Mills Limited

(KPML), governed by a public sector parent body, Bangladesh Chemical Industries

Corporation (BCIC), and around 80 private firms. 25 years ago, KPML used to produce

around 90% of the paper used in Bangladesh, but today it produces less than 5% thanks to

the influx of private sector production. The major private sector factories in Bangladesh have

been developed in the Dhaka and Chittagong regions along the bank of Meghna, the

Buriganga, the Sitalakhya and the Karnaphuli rivers to take advantage of water

transportation. Per capita paper and board consumption in Bangladesh is currently only 3.5-

4 kg compared to an average of 300 kg for advanced countries, and 50 kg in Asian

countries. Paper mills have a total installed capacity of 2,500 tons per day, with actual

production of about 2,000 tons per day. It is sufficient to meet the existing domestic demand.

KPML is the only integrated pulp and paper manufacturer in Bangladesh, other mills fully

depend on foreign pulps and recycled fiber as they do not produce their own pulp. KPML

produces both bleached and unbleached virgin pulps. Among the varieties of paper

produced are: writing, printing, packaging (Kraft/brown sulphate) and specialty papers.

The major private sector paper mills include T.K. Group (paper, board, and tissue),

Basundhar Group (paper, tissue, and newsprint), Magura Paper Mills, Sonali Paper Mills,

MAQ Paper Mill, Pearl Paper Mill, Hakkani Paper Mill (writing, printing/newsprint), Hossain

Pulp and Paper Mills (duplex, cigarette paper).

PLASTICS INDUSTRY3.5.2.3

The total export market of plastics was 75 million in 2011. A UN report indicates41 that

Bangladesh can play a significant role in global plastics production by raising revenue in the

plastic industry to USD 2 billion by 2015 and USD 4 billion by 2020. Over the last twenty

years the consumption of plastics has grown by a factor of 50, from a low of 14,000 tons in

1990 to 750,000 tons at present. Currently, the per capita consumption of plastics in

Bangladesh is 5 kg/year, as compared to the world average of 20 kg. This symbolizes the

huge potential of the plastics industry. Domestic market size is estimated to be around USD

875 million.42

Importantly, this industry includes plastics manufacturing and recycling units. There are more

than 3,000 manufacturing units of plastic and 300 recycling units which produce recycled

products from about 140 tons/day of plastic waste. According to BPGMEA, of the 3,000

plastic manufacturing firms 66% fall into the ‘small’ enterprise category, 1.7% into the ‘large’

enterprise category and the rest belong to medium enterprises. Most firms are located in

major cities like Dhaka and Chittagong. Some of the large players are RFL Plastics, Bengal

Plastics, Navana Plastics, Gazi Tanks, Boss Plastic Industries, Leos Plastic, Bismillah

Plastics, Dutch Bangla, Sino Bangla and N. Mohd. Plastics. Small and medium

41World Economic and Social Survey, 2013 - published by Department of Economic and Social

Affairs of the United Nations Secretariat

42Bangladesh Bureau of Statistics -2012

Final Report | TA 45916-01 BAN Industrial Energy Efficiency Finance Program.52

manufacturing firms consist of highly fragmented clusters scattered around the country with

the largest cluster being the Lalbagh-Islambagh cluster in Old Dhaka.

The import of polymers has increased from 10,000 tons in 1989 to 289,000 tons in 2007.

This is because Bangladesh has no polymer production units, thus demand is satisfied

mostly by imports. The availability of inexpensive labor and the fast development of the

postconsumer plastic recycling industry in Bangladesh points to the sector’s competitiveness

advantage in the global market. E

END PRODUCTS3.5.3.

BASIC CHEMICAL INDUSTRY3.5.3.1

The end products produced in Bangladesh’s chemical and fertilizer industry are illustrated in

Table 28.

Table 28: Bangladesh Basic Chemical Industry Production (tons/Day)

Productname

ASMChemicalIndustriesLtd

GlobalHeavyChemicalsLtd

SamudaChemicalComplexLtd.

TasnimChemicalComplex

HPChemicals

TotalProduction

PresentMarketDemand

CausticSoda (100%basisFlake/Liquid)

60(expandableto 100)

70 60 100 - 290275 -300

Chlorine(Cl2) FromElectrolizerMembraneCell

53 62 53 89 - 257 250-300.

HydrogenPeroxide(50%Concentrated, H2O2)

60 - 70 60 28 218 200~250

HydrochloricAcid (32%HCl)

110x2 100x2 100 140x2 - 800150 to170

SodiumHypochlorite(NaOCl)

10 10 20 15 - 55 10 to 15

StableBleachingPowder(SBP)

20 15 16 - - 51 15 to 20

Source: Chemical and Fertilizer Sector in Bangladesh: Challenges and Scope of Development, Journal of

Chemical Engineering, IEB Vol. Ch.E. 26, No. 1, December 2011

PLASTIC INDUSTRY3.5.3.2

Product lines currently offered by the Bangladesh plastics industry are shown in Table 29 .


Table 29: End Products Manufactured in Bangladesh: Plastics Industry

End Products Market Segment

Packaging material, bags, hangers, etc. Accessories for RMG

Tableware and kitchenware: buckets, jugs, plates,glasses, containers, etc.

Household Items

All kinds of food and non-food packaging material,Flexible Intermediate Bulk Containers (FIBC)

Packaging

Toiletries (soap cases, tooth brushes), medicalaccessories (blood bags, saline bags, syringes,medicine containers)

Health Care

Plastic pipe, door, toilet flush, etc. Building and Construction

Electrical cables and wires, switches, regulators,computer accessories, telecommunicationsequipment, etc.

Electrical and ElectronicsEquipment

Plastic pipes for irrigation, and plastic films forshedding crops

Agricultural Products

Engineering parts Industrial Applications

Source: Market Research, Tetra Tech

PULP AND PAPER INDUSTRY3.5.3.3

Different grades of paper produced by the private paper mills in Bangladesh are writing,

printing, packaging, liner, media, simplex, duplex, board, newsprint, tissue, cigarette, etc.

Paper Board is also produced by many units like Anant Board Mill, and Eastern Paper Mill.


PAPER INDUSTRY3.5.4.1

Paper production machines are based on the principle of the Fourdrinier Machine. The

Fourdrinier consists of a head box full of wet pulp and a specially woven plastic fabric mesh

conveyor belt, known as a wire (as it was once woven from bronze), that takes wet pulp from

the heatbox to create a continuous paper web, transforming pulp into paper. Figure 14

shows the different sections of the process.

Figure 14: The various sections of Fourdrinier Machine.

Source: http://en.wikipedia.org/wiki/File:Fourdrinier.svg

Table 30 shows present practice of process, technology and equipment used in the paper

industry.

Table 30: Bangladesh’s Paper Industry – Process, Technology and Equipment

Process,Technology andEquipment

Present Practice

Pulp MakingA hydra pulper, a tank with an integrated agitator, is typically used tomelt down the dry sheets and blocks of pulp.

De-InkingSecondary fiber, like waste paper, is treated with some alkalinechemical to remove ink.

Refining Normally, disc and conical refiners are used in series.

BlendingDifferent grades of stored pulps are blended by a mixing pump in ablend chest.

Wire Part The wire part process is basically the casting of pulp to form paper.

Pressing

The pressing process consists of three to four presses, each with twogranite press rolls, one on top and the other on bottom. The top roll ispressed into the bottom by pneumatic or hydraulic pressure rangingfrom 30 to 60 bar. Press rolls can also be driven by electrical motors.

Drying

Drying equipment consists of 20-30 carbon steel cylinders. Thecylinders are heated from inside by saturated steam. Paper is run alongtheir surfaces to dry. Each drier sub section is driven by one electricmotor.

CalenderingCalendering is done using stacks. A paper machine may have morethan one stack. Each stack has two to four carbon steel calender rolls.Every stack is driven by a motor.

The raw material for these mills is primarily imported waste paper. Because paper making

machines are extremely expensive, many of these mills use imported, second�hand

machines. Due to the age of these machines, energy consumption is high. Newer machines

have many heat saving features. The pulping section, which does not require sophisticated

equipment, is either fabricated locally or imported at very low cost from manufacturers that

sell inferior technologies.


Heatbox Slice Dolly Roller Felt Felt Dryer Heated Dryer Top Felt Felt Dryer

Bottom Felt Felt DryerCouch Roller Pickup RollerBreast Roller

Wet End Wet Press Section Dryer Section Calender Section

Wire Mesh Section Boxes


CHEMICAL AND FERTILIZER INDUSTRY3.5.4.2

The raw materials for urea production are natural gas, air and steam. After the removal of

Sulphur from natural gas, reactions take place in primary and secondary reformers, high and

low temperature shift convertors, methanators and finally the ammonia synthesis convertor.

The ammonia and carbon dioxide produced in the ammonia plant are used as feedstock to

produce Urea. Industries have utilized process technologies, for example Criterion

Continuous Concentration (CCC - USA) (for ammonia generation), Vetrocoke (for Urea

generation) and Chinese technologies for carbon dioxide removal.

Chlorine, caustic soda and hydrogen are produced through electrolysis of concentrated

Brine (Sodium Chloride solution) using a membrane cell process. Hydrochloric acid (HCl) is

produced from Hydrogen (H2) and Chlorine (Cl2) gases, which are cooled and filtered before

being sent to a hydrochloric acid synthesis unit. The HCl synthesis reactor includes a burner,

a hydrochloric acid absorber and a tail gas scrubber, used to avoid atmospheric air pollution.

The reaction is highly exothermic.

Sodium hypochlorite is produced by mixing Sodium Hydroxide (NaOH) and Cl2. The reaction

takes place under continuous operation in a liquid jet ejector. Concentration ranges between

100 and 150 gpl.

PLASTICS INDUSTRY3.5.4.3

The prevailing level of technological sophistication in the industry is considered to be low to

intermediate. Automated equipment is largely imported, although semi-automatic and

manually operated machines are manufactured locally. Injection molding machines are

manufactured locally and supplied to small manufacturing units. Large manufacturers

operate machinery imported from China, Taiwan, Japan and Germany.

The whole industry relies on molds that are usually imported. Although around 200 local

mold manufacturers exists in the Lalbagh cluster, these still only cover 10% of existing

demand. Usually, small manufacturers are supplied by the cluster’s mold makers. Large

manufacturers’ molds are supplied either from a local source or imported from China. Major

types of processing techniques include: blowing, extrusion and injection molding. Injection

molding machines produce solid plastic goods, such as buttons and furniture. Blow

machines produce goods such as bottles and polythene. Extrusion molding is very similar to

injection molding and it is used to make pipes, tubes, straws, hoses and other hollow pieces.

A combination of injection blow molding and extrusion blow molding called rotational molding

is also widely used.

Small contract manufacturers acquire raw materials and molds and subcontract the

manufacturing stage to existing machine owners. Such machine owners lease

machine/operator time for a defined hourly or daily rate. Machine leasers are much sought

after but delivery time may be uncertain due to high demand.



The fertilizer industry is very much reliant on natural gas as it is not only a source of energy

but also the main raw material in the production of the basic fertilizer product, Urea. Petro

Bangla supplies gas to the fertilizer industry.

The electricity supply situation is particularly bad in the Dhaka area, where the largest

clusters of the plastics sector’s SMEs are located. Frequently, particularly in the summer, the

firms experience five to six hours of ‘load shedding’. Productivity is badly affected by sharp

fluctuations in power supply and frequent energy shortages. However, firms with gas

connections rely on self-generation to ensure uninterrupted power supply and hence enjoy

higher productivity. Since early 2009, even large firms have experienced difficulties with their

planned expansion projects as the government has stopped issuing new gas supply

connections.

A common practice adopted in chemical, plastics and paper plants is to generate electricity

through self-generation and use it for continuous factory production. About 55% of units

have their own captive power plant.

Factories with both gas and electricity connections use grid electricity as backup power

when gas supply is interrupted or of low pressure. HSD is predominantly used only as a

backup for emergency lighting purposes only.


Significant opportunities for energy conservation exist in this sector in terms of the processes

technology and equipment followed in Bangladesh when compared to international

standards. Major savings can be achieved through the installation of waste heat recovery

from gas engine generators (GEG), improvement of combustion efficiency in

boilers/generators, co-generation in paper mills and efficient injection molding machines in

the plastics. The details of the present practices and scope for improvement are summarized

in Table 31.

Table 31: Bangladesh Chemical, Fertilizer, Plastics and Paper Industry – EnergyConservation Measures

Energy ConservationMeasures.


Waste Heat Recovery fromGEG exhaust - The exhaust ofGEG and jacket cooling watercarries a considerable amountof energy. The averagetemperature of the exhaust gaswas found to be between 400°Cand 600°C and the temperatureof the jacket cooling water was80°C.

In most factories GEGexhaust is not beingutilized. It is beingreleased into theatmosphere, resulting in ahuge waste of energy andan increase in carbonemissions. We have notcome across any companywhich is recovering heatfrom jacket cooling water.

The heat from the generatorexhaust can be recoveredby installing a waste heatboiler, economizer or airpre-heater, depending uponthe quantity of heat and theusage.

The heat from jacket coolingwater can be utilized inchillers and/or for airconditioning using vaporabsorption technology.


Energy ConservationMeasures.


Combustion Efficiency:Combustion in a furnace/boilerrequires fuel and air (Oxygen).Efficient combustion requires aspecific air/fuel ratio. Anydeviation from that ratio createsinefficient combustion andresults in the suboptimal use offuel.

In most factories, air-fuelratio in boilers/ furnaces iscontrolled by manual airinlet dampers. Generally,dampers are not operatedbased on load/fuel.Furthermore, there is noonline/offlineinstrumentation to checkthe combustion efficiency.

An automatic combustioncontrol system whichconstantly adjusts thedampers based on load/fuelon the boiler/furnace load.

A boiler or furnace shouldalways be equipped withcontinuous oxygenmeasurement system tocheck combustionefficiency.

Improved Insulation: A hotsurface radiates heat to theenvironment, thus losing energyand making the surroundingenvironment less comfortablefor workers.

Injection MoldingMachines (IMM) andextruder machines areused extensively in theplastics industry. Thesemachines use electricalheaters arranged inside abarrel to meltPolypropylene and similarraw materials. In mostcases, barrel surfaces arenot insulated.

High temperature IMM andextruder machine barrelsmay be insulated with rockwool or glass wool blankets.In general, any surfacegreater than 50°C should beinsulated to avoid heat lossdue to radiation.

Energy Efficient InjectionMolding Machine (IMM): IMMinject polymers into a mold athigh pressure in order toachieve a desired shape.Material for the part is fed into aheated barrel, mixed, andforced into a mold cavity whereit cools and hardens to thedesired shape.

In most factories injectionmolding machines areeither old or the barrelinsulation is not wideenough, resulting in heatloss.

Use of energy efficientinjection molding machinessaves approximately 30% ofthe energy consumed.



Table 32: Energy Savings Potential – Chemicals, Fertilizers, Plastics, Pulp and Paper


Waste Heat Recovery from GEG Exhaust 10-15%

Combustion Efficiency Improvements 5-10%

Improved Insulation 1-5%

Energy Efficient Injection Molding Machines 20-30%

Source: Project Findings based on Energy Audit Report under ADB Bangladesh Industry Energy Efficiency

Finance Program



International benchmarks for specific energy consumption in the ceramics industry are

illustrated in Table 33.

Table 33: Specific Energy Consumption - Global Benchmark Values: Chemicals,Plastics and Paper Industry

Type ofIndustry

UnitsInternationalBest Practice

InternationalRange

InBangladesh21

SavingPotential

(%)22

Plastic Industry toe/ton 0.1 0.1-0.16 0.18 44

Paper Industry toe/ton 0.26 0.26-0.3 0.32 19

Plastic industry in Bangladesh has higher SEC than international bench mark probably due

to conversion of gas into electricity by using gas generator instead of directly using grid

electricity. In the paper industry generally co-generation is used which nullifies this impact.


Were the suggested conservation measures implemented in the 20 facilities audited in the

chemical, plastics and paper sector, they would lead to USD 1.33 million in annual savings

for an investment of USD 4.25 million. The measures would also reduce CO2 emissions by

16,530 tons every year. The payback on the investment was found to be around 3.24 years,

with an IRR of 25%43.


The chemical and fertilizers industries are composed of well-organized corporate entities

that offer standard wages to their employees. Chemical Engineers have been critical in the

adoption on modern technologies and processes. Public sector companies employ Chemical

Engineers with long experience in relevant enterprises. Lately, these experts have been

involved in the evaluation of new technologies; however, the institutional arrangements to

assess, adapt and transfer the largely imported technology are still at an early stage. Thus,

the sector in general and the chemical industry in particular, has not yet gained the

experience and momentum to reach advanced levels of chemical engineering expertise,

innovation and creativity.

Over the last two decades, the plastics industry has evolved to be the most labor intensive

industry in this sector. There are more than 3,000 manufacturing units in the plastics

industry, providing direct and indirect employment to half a million people. The plastics

recycling subsector, composed of around 300 small units in Dhaka, employs 25,000

workers. The average number of regular employees per company is 18, of which 14 are

production workers and 4 white-collar workers. Remaining staff is on contract basis. Female

workers are almost not existent in paper mills, but represent about 5% of workers in the

43Project Life of 5 years is assumed.


chemicals industry and 50% of the workforce in the plastics industry. The workers in these

enterprises have an average of 8 years’ experience.

Existing training facilities are scarce and not adapted to the industry’s needs. Currently,

training is done on the job, but generally poor working conditions have led to a drain of

skilled workers. During the early 1950’s, Ahsanullah Engineering College provided large

corporations in the public sector, the initial manpower for development of chemical and

process industries.

The other training institutes in the sector include:

Bangladesh Industrial Technical Assistance Centre, Ministry of Industries

(BITAC): The Plastics Division in BITAC was established with UN assistance. This

division still lags well behind the current needs of the plastics industry in Bangladesh,

however, mould making expertise at BITAC is suited to advancements in technology.

Bangladesh Institute of Plastic Engineering and Technology (BIPET): Providing

technical education in plastics industry.

Bureau of Manpower, Employment and Training (BMET) delivers skills training

through 37 Technical Training Centers (TTCs) and one Institute of Marine

Technology (BIMT). Six TTCs are reserved exclusively for women.


consultant using the Energy Management Matrix analysis (Ref Table-2) carried out for all the

20 companies audited in this sector. The ratings of the companies in each area were

averaged and a summary representing sector-wide findings was established. A summary of

the ratings of the sector is shown in Table 34.

Table 34: Energy Management Score Summary – Chemical, Fertilizer, Plastics andPulp and Paper Sector




Communication 1Informal contacts between engineerand few users

Information 1Cost reporting based on invoice data,Engineers compile report for internaluse with technical department


Investment 1 Only low cost measures taken


SSEECCTTOORR 66:: AAGGRROO--IINNDDUUSSTTRRIIEESS,, IINNCCLLUUDDIINNGG SSUUGGAARR AANNDD JJUUTTEE IINNDDUUSSTTRRIIEESS3.6.


The agricultural sector contributes around 29% of

Bangladesh’s Gross Domestic Product (GDP) and

generates employment for 63% of the total labor

force44. The sector is dominated by cultivation of

rice crops, jute, cotton, sugarcane, flowers,

sericulture, horticulture, fisheries, vegetables,

livestock, soil development, and seed

development and distribution. See Box 8 for more

information on the agro-industries sector.

Although the country faces challenges due to

frequent fluctuations in food prices, the basic

supply of raw materials, improved marketing

techniques and modern processing facilities have

enabled agro-processing industries to grow

domestically as well as in export markets.

Figure 15 illustrates the growth in local investment

projects in agro-based industries registered with

the Board of Investment over the period from

Financial Year 2005-2006 to 2011-2012.

44Ministry of Agriculture, Bangladesh

Box 8: Agro-Industries SectorProfile

Sector Export Earnings (FY 2011-12):US$ 402.70 million;

Industry Growth:BCMA: 10% - 12% per annum

Workforce:63% of available 77 million labor force.

Industry Growth: Less than 2.0% peryear during the first two decades afterindependence in 1971 to around 3.0%during the last decade

Trade Associations:Bangladesh Jute Mills Corporation(BJMC) (Public Sector)Bangladesh Jute Spinners Association(BJSA) (Private Sector)BJMA Bangladesh Jute MillsAssociation (Private Sector).Bangladesh Sugar and Food IndustriesCorporation (BSFIC).

Investments have been aggressive, with the growth of around 600% registered over the last seven years. The main reason for such phenomenan growth is the increase export of yarn and conducive trade policies for agro based industries in Bangladesh.


Figure 15: Local Investment Projects Registered with the BOI over the Period FY 2005-06 to 2011-12 in Agro-based Industries

Source: Board of Investment


The sector features prominently with units/factories in two major areas:

1. Jute Mills

2. Agro and Sugar Mills

JUTE MILLS3.6.2.1

Bangladesh is the largest producer of jute goods in the world. One fourth of the country’s

population is directly or indirectly involved in different activities of the jute sector. Jute mills

are either government owned or privately managed. Government mills are directly controlled

by the government-controlled Bangladesh Jute Mills Corporation (BJMC). Private mills are

represented by the Bangladesh Jute Spinners Association BJSA and Bangladesh Jute( )

Mills Association (BJMA), see Table 35 for a breakdown of the major jute mills.

Table 35: Jute Mills in Bangladesh

BJSA Mills BJMA Mills BJMC Mills TOTAL

Number of jute mills 81 UNITS 97 UNITS 27 UNITS 205 UNITS

Number of workers employed(Approx.)

55,868 39,000 61,681 1,56,549

Source: Bangladesh Jute Mill Corporation

A sizeable quantity of locally produced raw jute is used in the local jute industry. Jute mills

are overwhelmingly dependent on the export market, with more than 85% of their total

production (including raw jute and jute products) exported every year. The plastics industry

has become the biggest competitor for jute manufacturers in Bangladesh which observed

abysmal performance in last decade. However, recent interest in the export market,

environmental pressures and conducive trade policies are reviving the jute industry.

According to the Export Promotion Bureau (EPB) of Bangladesh, during FY2011-12, export

9,657 8,162 9,511 8,223

23,251

52,007

61,195

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

Mil

lio

nB

DT

Local Investment Projects


of jute and jute products accounted for USD 974 million, a growth of more than 40% over the

previous year both in terms of value and volume . This rise can be mainly attributed to an

increased export of yarn. Yarn exports have increased at a compound annual growth rate of

4.5% over the last six years. The jute industry’s recent export performance can additionally

be attributed to a rise in the price of jute products in the global market.

Over the last six years, prices for sacking materials, yarn and hessian, has increased by

14%, while the volume of export has increased by 1% for yarn and 4.5% for hessian.

Contributing to this price rise is a high cost of production, due to the high cost of raw jute.

SUGAR MILLS3.6.2.2

The sugar industry ranks second among major agro-based industries in Bangladesh. It has

had a significant impact on the country’s economy, especially in the rural sector. Total land

use dedicated to sugarcane cultivation is 0.17 million hectares, with an average annual

sugarcane production of about 7-7.5 million tons45.

In Bangladesh, there are 21 sugar factories, of which 15 are in the public sector under the

Bangladesh Sugar and Food Industries Corporation (BSFIC) and the remaining 6 are private

sector. Sugar export is low; most of the production is currently for domestic use. The annual

production capacity of the 15 public sugar mills of BSFIC is 210,000 tons. The present

annual demand for sugar in the country is about 1,400,000 tons. Compared to the actual

demand of sugar in the country, the production of sugar in sugarcane-based sugar mills

under government supervision is insufficient. As a result, the shortage of sugar is met by

sugar refineries established in the private sector. Most of the industries in the private sector

are basically sugar refineries. They import raw sugar and supply refined sugar to the local

market. A production target of 135,376 tons of sugar was set in FY 2011-12, but only

69,346.80 tons of production were achieved. Production of sugar was less than the target

due to the high price of molasses and other competitive by-products of sugarcane.

Several manufacturers have ventured away from the sugar industry and into agro products,

as witnessed by a recent trend among packaged food manufacturers like Pran Group. These

manufacturers have done well by serving rising income among Bangladeshis. These

industries are not only meeting the local need but also exporting products to South Asian

and neighboring countries.

END PRODUCTS3.6.3.

Jute mills in Bangladesh are mainly concentrated on producing end products like:

1. Yarn and Twine: Prominently used in carpet weaving, core in cable/wire, ropes,

tapestries, soft luggage, etc.

2. Sacking Cloth: Made up of low quality jute fibers, sacking cloth is loosely woven

heavy cloth used for packing sugar, food grains, cement, etc.

45BSFIC Report on 03-01-2013.

3. Hessian Cloth: A plain woven, superior quality jute fabric. Also known as burlap, this

cloth is widely used in applications including sacks, plant bags, etc.

4. Other Products: These include carpet backing cloth, tobacco sheets, hydrocarbon

free jute cloth, geo-textile, canvas, serim cloth, bags, hessian tapes and gaps.

Sugarcane is used in three main products:

1. Sugar production (32.6% of total production)

2. Gur and Khandsari production (52.6% of total production)

3. Seed and Juice production (14.39% of total production)

Government-owned sugar mills buy sugarcane from farmers (in some instances it is

cultivated directly) and processes it into sugar. Private sector mills either import or purchase

raw sugar and further refine it to meet export quality. Gur and Khandsari production is mostly

confined to the unorganized sector.

PROCESS, TECHNOLOGY AND EQUIPMENT (PRESENT USE)3.6.4.

JUTE MILLS3.6.4.1

The technology used in the jute manufacturing sector has not changed much over the years,

possibly due to minimal changes in product demand. Most of the equipment used in jute

mills are old and are running beyond their typical life.

Some composite mills are found to use both softener and spreader machines in the

production process; others use trollies for handling output from the spreading and carding

sections. Some mills use overhead blowers in spinning frames for cleaning and smoothing

operations. Others use flyers and bobbins to increase production, while some have replaced

ring flyers with Baxter flyers to attain higher rotations per minute (rpm).

New techniques are being applied by the mills. For example, drawing operations in some

mills take place at four stages; similarly, 110-spindle frames are being used in some mills;

yarn teasers and teaser card machines are used to recycle wasted fibers; dust shakers are

used in some mills; hydrometers are used at the collection zone to measure the humidity

ratio of raw jute; rail tracks are available on-site for transportation of raw materials.

While old machines dominate the overall equipment stock, installation of new machines,

either for replacement or expansion of operations, is becoming more apparent these days. A

number of jute mill equipment manufacturers, like Lagan Engineering Company Ltd., Milltex

Engineering (P) Ltd., GSL (India), and Zhejiang Golden Eagle Co., Ltd. (China) manufacture

and supply jute processing equipment to Bangladesh’s jute industry.

Table 36 shows the different practices and equipment presently used in the jute industry.


Table 36: Bangladesh’s Jute Industry – Process, Technology and Equipment

Process,TechnologyandEquipment

Present Practice

BatchingSoftener has historically been used to soften raw jute. Now, spreader is graduallyreplacing the softener. Manpower and space requirements are less whenspreader is used, due to the automatic doffing and ejection of rolls.

Carding

Traditionally, there are three stages in the carding process: breaker, inter andfinisher. Advancements have reduced this to two stages, breaker and finisher.The industry in Bangladesh, however, has still not been able to achieve thisreduction in stages or increase the speed of existing process. Wooden cylindershave been replaced by steel cylinders.

Drawing

The stages of the drawing process have not changed (1st drawing, 2nd drawingand 3rd drawing) and speeds have also not increased significantly. The onlychange has been that push bars have been replaced by screws and rotary gills,resulting in productivity enhancement.

Spinning

The speed of the spinning frames has remained largely unchanged. Apron draftis now used in place of slip draft, which improves the yarn regularity, and the twolegged flyer has mostly been replaced with the Baxter flyer. Ring spinning hasbeen very limited in the jute industry as it requires better back processing andhigher quality raw jute.

WeavingThe industry is still running traditional shuttle looms that are mostly used forhessian and sacking. These looms run at slower speeds, create a lot of noise andproduce a lower quality product when compared to shuttle-less looms.

SUGAR MILLS3.6.4.2

Private mills in the sugar sector produce refined sugar from raw sugar. The present

practices, process, technology and equipment used in this industry are described in Table

37.

Table 37: Bangladesh’s Sugar Industry – Process, Technology and Equipment

Process,Technology and

EquipmentPresent Practice

Furnaces

Furnaces for open pan boiling use dried bagasse as fuel but can vary indesign and size to suit local conditions and preferences .These are ofdifferent types:

Simple permanent single-pan furnacesSimple temporary single-pan furnacesPermanent multi-pan furnacesTemporary multi-pan furnaces

CentrifugalMachines

Two types of centrifuges are used:Batch type: used for separating high purity messecuiteContinuous type: used more on lower purity and higher viscositymaterial



Juice HeatersUsed for heating raw, Sulphur and clear juice from 30°C to 40°C, 40°C to60°C, 60°C to 75°C or 75°C to 105°C.

Evaporator

These are of three types:Robert (300 – 4000 sq. meter heating surface)Falling Film (300 – 5000 sq. meter heating surface)Semi Kestner

Vacuum Pans

Batch and continuous type pans are designed to achieve rapid boiling,uniform grain sizes, a uniform degree of super saturation and large downtake for rapid circulation.

Batch: 30 – 120 ton/hrContinuous: 15 – 100 ton/hr

Continuous pans are made with floating calandria for effective circulationand an optimum circulation ratio of 1:1. Multiple entry points forsteam/vapor and the efficient use of low pressure vapors with steadyconsumption results in stabilized operation of evaporators andsubsequent steam economy.

Crystallizers Air cooled, water cooled and vertical crystallizers are in use.


Jute mills in Bangladesh have run primarily on electricity since their early days. Almost every

facility has a connection to the national grid (through different grid service providers) at

different voltage levels i.e.11/0.4 KV.

In agro based plants, a common practice is to generate electricity through self-generation

and use it for continuous factory production. 50% of the units have their own captive power

plant, utilizing diesel and gas as fuel sources. Some industries which are unable to get a gas

connection or which receive low gas pressure utilize diesel for production and lighting. Since

diesel is costly, the production cost of such industries becomes high, any possible electricity

savings can prove substantial in reducing of the overall cost.


Breakdowns of energy consumption within the sugar and jute industries are shown inFigure 16 and Figure 17 respectively.

Figure 16: Energy Consumption by End Use - Sugar Industry

Centrifuging

38%

Pan

Boiling

18%Clarifica�on

15%

Sugar Drying

6%

Boiler

13%

Decoloriza�on 6%

U�li�es

4%



Figure 17: Energy Consumption by End Use - Jute Industry


WASTE HEAT RECOVERY FROM GAS ENGINE GENERATORS3.6.6.1

Large quantities of hot flue gases are generated from boilers. If some of this waste heat

could be recovered, a considerable amount of primary fuel could be saved. In the sugar

industry steam is used for refining and in the jute industry it is used in calendering. A typical

example of waste heat recovery in this case would be pre heating boiler feed water or

process water.

COGENERATION3.6.6.2

All the sugar mills require high quantities of low pressure steam. Low pressure steam

generation is usually inefficient. Therefore most of the industries resort for cogeneration –

generating steam at high pressure using initially for power generation and then for process.

However in the absence of attractive policy for feeding power to the grid most of the factories

generate only enough power for their own use. The power plant is operated inefficiently at

40-50% capacity.

USE OF ENERGY EFFICIENT MOTORS3.6.6.3

In the jute industry, most energy is consumed by motors. Manufacturers purchase motors

from the ship breaking yard at a very low price with complete disregard to the design

capacity and efficiency of the motor. In one of the new jute plants the Consultant noticed 20

year old motor in use. It is widely accepted that replacing standard motors with high

efficiency motors is a sound business case with payback of 12-18 months.

VARIABLE FREQUENCY DRIVE3.6.6.4

Adding a variable frequency drive (VFD) to a motor-driven system can offer potential energy

savings in a system in which the loads vary with time. VFDs can be installed on air

compressors and in other drives.

Spinning

45%

Loom

20%

Carding

10%

Twis�ng

17%

Other

3%

Ligh�ng

5%




Table 38: Energy Savings Potential – Agro-Industries


Waste Heat Recovery from Gas Engine Generator 10-15%

Cogeneration 20%

High Efficiency Motors 10-15%

Variable Frequency Drives 8-15%

Source: Project Findings based on Energy Audit Report under ADB Bangladesh Industry Energy

Efficiency Finance Program


International benchmarks for specific energy consumption in the sugar and jute industry are

illustrated in Table 39.

Table 39: Specific Energy Consumption (SEC) - Benchmark Values

Type of Industry UnitInternationalBest Practice

InternationalRange

InBangladesh21


Sugar Industry toe/ton 0.52 0.52-0.63 0.75 30

Jute Industry toe/ton 0.034 0.034-0.043 0.06 43


The energy conservation measures identified at the 18 audited facilities would lead to USD

4.69 million in annual savings for an investment of USD 12.34 million. The measures would

also reduce CO2 emissions by 24, 921 tons every year. The payback on the investment was

found to be around 2.7 years, with an IRR of 25%.46


There is no standard practice for the use of workers in different sections of the jute mill. The

man-machine ratio is more homogenous in the carding, drawing, spinning and weaving

sections; but less so for softening, winding and calendaring sections in the companies.

Jute mill operations are male-dominated, female workers are found mostly in the drawing,

carding and softening areas, where the activities are relatively less skill-oriented and less

labor intensive.

46Project Life of 5 years is assumed.


It is important to note that the average number of workers employed in jute mills in 2011

was about 39% less than in 2007. Reductions in employment were as high as 44% in the

case of spinning mills. This is due to the difference in wages between the jute manufacturing

sector and the other sectors. The average wage of workers in December 2010 was

estimated to be BDT 163, while pulling a rickshaw/van would provide a daily wage of BDT

300. Although workers in jute mills are compensated through in-kind benefits such as

housing, schooling, etc., compensation is still not considered to be adequate compared to

high-paid off-farm jobs.47

A large portion of the agro sector value chain is in the unorganized sector and is highly

fragmented, starting with the farmer, to the market and then to the processor. The organized

sector contributes about 65% of the value of the output to the sector. Figure 18 illustrates the

profile of people employed in agro and jute industries.

Figure 18 : Profile Agro and Jute Sector Workforce


The management of jute and sugar mills comprises professionals, engineers and other

support staff. The number of engineers, professionals and other staff is not well balanced in

small jute mills. Some firms have no engineers and rely on technicians.

Table 40 represents the educational profile of employees across the agro and jute sector in

Bangladesh. Most of the employees are minimally educated, having studied until the 10th

standard or below.

47Technological Up gradation in the Jute Mills of Bangladesh Challenges and Way Out; CPD working

Paper 100; published by Centre for Policy Dialogue Bangladesh

Passes 10th to 12th standard orbelow, with 1-2 years' experience,

ITI's, short-term cer�fica�oncourses

12th standard or below, with 1-2years' experience, ITI's, short-term

cer�fica�on courses

University graduates, Diplomaholders with 3-4 years' experience

Engineering graduates, Diplomaholders with 7-8 years' experience

Large Units: MBA/ M. Eng.

Small Units: Engineer, persion with10-15 years' experience

Unit Manager

Procurement andMarke�ng Head

Produc�onManager

LineSupervisors

MachineOperators

UnskilledLabor

Maintenance/Tes�ng

Technicians

Administra�ve Staff


Table 40: Distribution of Human Resource by Education Level



Post Graduates 1%

Graduates 10%

Diploma Holders/ Certificate Holders 1%

10th Standard or below ( those requiring ‘shortterm/modular’ training skills building of some form or theother)

80%

Daily Wages/ Contractual 7%


Managers at most of the firms have had years of work experience in the sector. However,

such long work experience does not always result in operational efficiency and better

productivity. The methods and processes followed by mill management for operations and

maintenance seem to be less effective for higher productivity and efficiency. Most of the

operations are manually driven with limited automation and computerization.

There is a dearth of human resources in the manufacturing sector, particularly at mid-level

management. This can mainly be attributed to narrow career opportunities, unattractive

salary packages, and better opportunities in textiles and other sectors. Mills suffer from a

lack of engineers, since most prospective engineers are not motivated to join jute mills. More

importantly, there is no specialized technical institution in Bangladesh for the jute sector.

Most of the engineers in jute mills have been trained in textiles colleges. A lack of skilled

manpower has put the industry in a grave situation.


Consultant using the Energy Management Matrix analysis (Ref Table-2) carried out for all

the 18 companies audited in this sector. The ratings of the companies in each area were

averaged and a summary representing sector-wide findings was established. A summary of

the ratings of the sector is shown in Table 41.

Table 41: Energy Management Score Summary – Agro-Industries



Organization 0No energy management or anyformal delegation of responsibilityfor energy consumption

Communication 1Informal contacts betweenengineer and few users

Information 1

Cost reporting based on invoicedata, Engineers compile report forinternal use with technicaldepartment

Marketing 1 Informal contacts used to promote

energy efficiency

Investment 0No investments in increasingenergy efficiency in premises


POLICY SUPPORT4.

Energy efficiency is widely considered to be an important and often low-cost option to reduce

GHG emissions and bridge a nation’s energy supply-demand gap. It also offers many other

advantages (reducing energy costs and improving competitiveness, improving access to

energy and security of supply, and reducing local air pollutants) and often brings a range of

process improvements to industry. These significant benefits and co-benefits make

improving energy efficiency, in many cases, a no-regrets strategy, especially in developing

countries such as Bangladesh.

Industry accounts for about a fifty percent of the world’s final energy consumption48 and this

is no different in Bangladesh. Substantial energy efficiency improvement potential exists

within this sector. However, there are various barriers (financing, information and skilled man

power etc.) towards achieving those energy savings, which are preventing companies from

changing their business practices and making necessary investments. Therefore, industrial

energy efficiency policies have an important role to play in removing or reducing these

barriers and in encouraging action.

This chapter proposes that an effective policy package is required in Bangladesh to promote

energy efficiency in the industrial sector. A policy package comprised of sufficiently

ambitious, effort-defining policies to outline energy efficiency goals, and supporting policies

and measures that address various barriers and that are mutually reinforcing and encourage

action (i.e. in the form of sticks and carrots). An implementation toolbox should be developed

to support the implementation of such policies and measures in a transparent and efficient

manner. Before discussing policy packages for Bangladesh, a best practices analysis of the

policy packages of six countries, China, India, Japan, Netherlands, UK and US, are

presented. The best practice analysis is based on the following review of national level

energy efficiency policies and strategies taken from “Insights into Industrial Energy Efficiency

Policy Packages, 2012” by Julia Reinaud and Amélie Goldberg. This report also introduces

the concept of a pyramidal approach to energy efficiency policy consisting of: effort-defining

policies; supporting measures and an implementation tool box The Consultants have

recommended this pyramidal approach for Bangladesh also.

Thus the policy package suggested for Bangladesh is based on this best practices analysis,

the experience of the Consultants, the energy audits of 120 Bangladeshi companies and

through interaction with the Government of Bangladesh, regulators, entrepreneurs, financial

institutes, banks, industry associations and other stakeholders. Consultations were held with

the stakeholders on several occasions, such as during marketing of the program, energy

auditing, pre-report submission discussions, two workshops and other formal and informal

one-to-one meetings. China

As industrial energy use accounts for approximately 70% of the total national energy

consumption in China, strong efforts are made to address the high energy-intensity and

outdated technology of the industrial sector. Economy-wide targets under the central

48http://www.eia.gov/tools/faqs/faq.cfm?id=447&t=1


government’s Five Year Plans are a key driving force in all industry-related policies and

measures. The target in the 11th Five Year Plan (FYP) was to reduce energy use per unit of

GDP by 20% between 2006 and 2010. In February 2011, China announced that it had met

the target, with a final reduction of 19.1%. To meet 11th FYP targets, a wide array of policies

were implemented, some of which have continued into the 12th FYP period. The major

effort-defining policy in the industrial sector that supports the achievement of China’s 12th

FYP targets is the Top 10,000 Enterprise Program.The Top 10,000 Program aims to cover

two thirds of China’s total energy consumption, and will include 15,000 industrial enterprises

that consume more than 10,000 tons of coal equivalents (tce) per year. To underpin the Top

1,000 and Top 10,000 Programs, a number of mandatory supporting measures have been

instituted, including:

Assignment of energy managers, implementation of energy conservation plans and

implementation of energy management systems (under the Top 10,000);

Reporting of energy consumption data;

Energy audits according to the Chinese audit standard GB/T 17166-1997; and

Energy efficiency benchmarking (under the Top 10,000).

China has also introduced regulatory backstops to improve minimum performance at the

bottom-end of the market. These include industrial energy performance standards

introduced in 2008 and covering over 20 industrial products as well as regulations that

mandate small plant closures and phasing out of outdated production capacity. All new

investments must undergo independent assessments and government reviews on their

energy saving status before being approved by regulators.

Several other supporting measures that encourage industrial energy efficiency and

supplement the effort-defining policies include: the use of differentiated electricity pricing, in

which electricity prices are higher for companies with higher electricity intensity, which differs

from common practice in other countries. Measures not targeted specifically at the industrial

sector but which are aimed to facilitate industrial energy efficiency include: fiscal incentives

for qualifying ESCOs, demand-side management for utilities, energy efficiency financing

regulations, instruments targeting financial institutions and financial rewards for energy-

saving technical retrofits. The program supports boiler/furnace retrofitting, waste heat and

waste pressure utilization, motor system energy conservation, energy system optimization,

green lighting, and energy conservation in buildings. China’s implementation toolbox

contains a range of guidelines and tools such as training programs, standards for energy

management and audits, facility closure thresholds, efficiency standards for various

industries, and eligibility criteria for ESCOs to receive fiscal incentives.

IINNDDIIAA4.1.

While the energy intensity of industry is, on average, still relatively high compared to other

regions in the world, India has made reasonable progress in recent years. There are,

however, large variances in India’s industrial sub-sectors due to a wide range of vintages,

production capacities, raw materials quality and product mixes.

The Energy Conservation Act (ECA) of 2001 provided for the establishment of the Bureau of

Energy Efficiency (BEE), the development of energy efficiency standards according to


industrial product/process, a requirement to have energy audits carried out by an accredited

energy auditor and assign an energy manager in energy-intensive industries and other high

energy consumers (known as designated consumers).

In practice, India’s industrial energy efficiency policy was, until recently, limited to the

mandatory energy management component of the ECA and the Energy Conservation

Awards. In 2010, the Government of India developed a new certificate scheme (trading of

energy savings) following a 2010 amendment to the ECA. This so-called Perform Achieve

and Trade (PAT) scheme is a comprehensive policy, aiming to achieve energy savings of

over 10 million metric tons oil equivalent over three years. The PAT scheme is India’s main

effort-defining policy. SEC targets have been set through several performance categories

based on historical performance (i.e. “clusters”) within each of the sectors. Each category

will have targets based on benchmarking. The PAT can provide an effective mix of

regulation by setting mandatory energy intensity targets for energy savings combined with a

flexible market mechanism, the trading of energy saving certificates (“white certificates”) to

ensure overall cost effectiveness.

India’s annual Energy Conservation Awards have been in place since 1991, and historically

have played an important role in India’s policy package in the absence of mandatory

measures. In this program, enterprises from a number of sectors submit a questionnaire to

the BEE and are entered into a competition, judged by government officials, culminating in

an awards ceremony. It has grown significantly since its inception with close to 600

participants from 35 industrial sectors. In 2011, India also introduced a range of financing

mechanisms administered by the India Renewable Energy Development Agency (IREDA);

and preferential loans, venture capital funds and guarantees administered by Energy

Efficiency Services Limited (EESL) under and the Framework for Energy Efficiency

Economic Development (FEEED). The implementation toolbox is focused on energy

management and auditing, with certification and training of auditors from the Bureau of

Energy Efficiency.

JJAAPPAANN4.2.

From 1990 to 2008, Japan’s energy use in the industrial sector declined to 30% of total

consumption. This is the result of several factors, including energy efficiency changes in

major industrial sectors, shifts in the mix of production, and changing production levels.

Over the past decades, the Japanese Government has strongly relied on voluntary

approaches to stimulate industrial energy efficiency, mostly due to competitiveness

concerns. A new mandatory benchmarking policy introduced in 2010 sets Japan towards a

greater emphasis on regulatory approaches. Also in 2010, Japan announced mandatory

energy efficiency standards based on the highest international benchmarks. This policy

requires energy efficiency targets in the form of benchmarks and introduced a 1% annual

energy efficiency improvement obligation. For designated sectors (steel, electricity, cement,

paper and pulp, oil refineries and chemical), targets have been set at the energy efficiency

level of the best performing companies (the top 10%-20%) within that industrial sub�sector.

These targets must be met in the medium term (2015) and long term (2020). Those

industries that have taken early actions and have achieved the benchmark target level can

ask for an exemption from the annual 1% target by helping small and medium-size

companies achieve higher energy efficiency levels.

Prior to the mandatory benchmarking, Japan relied on two voluntary policies for encouraging

industrial energy efficiency: the Keidanren Voluntary Action Plan (VAP) and a voluntary

emissions trading scheme, known as JVETS. The Keidanren VAP for industry was

considered the pillar of Japan’s industrial energy and emissions policy. The VAP is

comprehensive in coverage (40% of Japan’s total emissions and 80% of industrial

emissions) and successful in terms of reaching its set targets. In addition, mandatory energy

management has been a prominent feature of Japan’s policy package since the 1970s. Over

the years, the Rational Use of Energy Act has been amended to provide greater coverage

and increase energy management requirements. All factories (Class 1 – using more than

3,000 kL crude oil equivalent - and Class 2 – using more than 1,500 kL but less than 3000

kL) are required to appoint a certified energy manager. For higher energy users (Class 1

only), companies must also develop and report a mid- and long-term energy efficiency plan.

The implementation toolbox has a relatively strong focus on energy management and

auditing, with guidelines, training and an energy audit support program.

TTHHEE NNEETTHHEERRLLAANNDDSS4.3.

An energy-intensive industrial economic structure, along with a very open, export-oriented

economy, has led to long-lasting attention to industrial energy efficiency in the Netherlands.

High industrial energy-intensity has led to much emphasis on improving energy efficiency

and the use of benchmarking to measure performance in energy efficiency and carbon

intensity.

The Netherlands’ policy package has had a strong emphasis on negotiated agreements,

which have been in place since the early 1990s. More recently, there has been a stronger

role for the mandatory EU Emissions Trading System (EU ETS). The Negotiated Agreement

contains targets that are negotiated between the industrial sector and the government using

independent analysis on mitigation or energy savings potential. Many additional actions are

required, such as the obligation to carry out an energy efficiency plan and make investments

that are deemed “profitable” according to government-defined guidelines. The scope of

these agreements has increased over time, both in terms of sector coverage as well as the

eligibility of measures to meet the targets, which has been extended from on-site energy

efficiency only to off-site (or chain) efficiency.

Currently EU ETS is expected to be the principal driver of efficiency improvements,

superseding the incentive to act under the negotiated agreements. A range of other policy

instruments, including various subsidies and fiscal incentives, supports to the negotiated

agreements and EU ETS targets. Companies that participate in the agreements and/or the

EU ETS are exempt from complying with both the requirements under the Environmental

Management Act’s environmental permits (which are similar in nature to the requirements in

the agreements) and with the energy/carbon tax. The implementation toolbox in the

Netherlands is well equipped with a broad array of tools and resources, including technical

support, training and workshops from the energy agency, energy management checklists,

benchmarking manuals, technology eligibility lists, and monitoring and reporting protocols.



UUNNIITTEEDD KKIINNGGDDOOMM4.4.

Industrial energy consumption constitutes about 22% of total energy consumption in the UK.

Approximately 55% of the primary energy used in industry is consumed by energy-intensive

sectors. Compared to other industrialized countries (including the Netherlands), industry in

the UK accounts for relatively less energy as a proportion of total energy use. Like the

Netherlands, the UK’s Climate Change Agreements (CCAs) are one of the country’s central

effort-defining policies. The agreements are negotiated between the government and

industry associations; while third party experts help the government assesses the ambition

of industry’s suggested targets.

Companies participating in CCAs are exempted from the Pollution Prevention and Control

(PPC) Act technology requirements. CCAs are supported with advice on saving energy,

setting targets, carbon management and receiving financial support from the Carbon Trust;

guidance on monitoring, reporting and a fiscal stimulus by means of the enhanced capital

allowance scheme. Lists of technologies and products eligible for financial support are also

available to companies.

UUNNIITTEEDD SSTTAATTEESS4.5.

Energy production and transport represent a large share of total GHG emissions in the

United States and overall energy efficiency is lower in the US in comparison to countries of

the Organization for Economic Development and Cooperation (OECD). The major US effort-

defining policies at the federal level include GHG permitting and new-source performance

standards under the Clean Air Act (CAA), the Better Buildings, Better Plants program

(formerly Save Energy Now), Superior Energy Performance (SEP), and the Energy Star

Program for Industry. Participants of these programs are given priority access to energy

assessments and other resources. New-source performance standards for power generators

are also being implemented.

A new certification program relies on voluntary company participation, the Superior Energy

Performance Program (SEP). SEP will provide companies with a framework for

implementing the international standard for energy management systems ISO 50001 and for

achieving awards (silver, gold or platinum) based on a set of predetermined performance

criteria. Participating companies’ performance can be recognized according to two “energy

pathways”: 1) a pathway for companies that are new to energy management requires that

they demonstrate savings of at least 5% over a three-year period; and 2) a mature pathway

for companies with longer experience that requires these companies demonstrate at least

15% savings over the last ten years and receive a minimum score according to the “Best

Practice Scorecard” (SEP, 2012). The Government will leverage the SEP to deploy other

federal programs.

Another voluntary program, Better Buildings, Better Plants is a comprehensive energy

efficiency program that includes a 10 year, 25% energy-intensity improvement target and

progress reports to the Department of Energy. Partners wishing to pursue more extensive

EE activities or exercise leadership in their field can be recognized as “Challenge Partners”

(companies that simply meet the requirements are recognized as “Program Partners”). At

the federal level, supporting measures include a tax credit scheme, an accelerated

depreciation scheme, and a loan guarantee program. Underpinning these voluntary effort-

defining policies and supporting measures are extensive implementation tools provided by

the government: calculation tools, monitoring formats and free energy management support.

BBAANNGGLLAADDEESSHH4.6.

In Bangladesh policy should focus on defining the benchmarks, sector targets, incentives or

mechanisms needed to create an environment of industrial energy efficiency. The focal

institution for driving industrial energy efficiency in Bangladesh, the Sustainable Energy

Renewable Development Authority(SREDA), is under development. The agency is expected to issue

regulations and policy guidelines. Other institutions involved in developing policy and

regulatory frameworks for industrial energy efficiency are: the Government of Bangladesh,

Bangladesh Energy Regulatory Commission (BERC) and Renewable Energy Development

Agency (REDA). SREDA, constituted under the SREDA Act of 2012, is the lead body for the

promotion of energy efficiency in the Bangladesh. Thus, the legal framework in Bangladesh

for energy efficiency consists of following:

National Energy Policy

Bangladesh Energy Regulatory Commission Act, 2003.

Sustainable Renewable Energy Development Authority Act, 2012

Energy Efficiency and Conservation Regulations

The National Energy Policy sets the key objectives for energy exploration and use in the

country. The policy puts emphasis on commercial fuels, biomass and renewable energy

sources. The energy requirements of different socio-economic groups, living in different

zones of the country must be met. The policy encourages public and private sector

participation in the development and management of the energy sector.

To promote professionalism in the utilities and provide them with independence, the

Government of Bangladesh enacted the Bangladesh Energy Regulatory Act (BERA) in 2003.

It covers both electricity and natural gas. Section 34 of the BERA Act states that the

Commission should take energy efficiency into consideration while making any policy.

Section 22 of the Act expects the Commission to determine efficiency standards for

equipment and appliances and to ensure compliance through energy auditing, verification,

monitoring, and analysis - resulting in the economic and efficient use of energy.

As per the SREDA Act, SREDA will be responsible for:

a) Providing public fund(s) in the form of loans and/or grants to SMEs to invest in

energy conservation measures;

b) Extending technical assistance and consultation services for identifying and

implementing energy conservation measures;

c) Undertaking energy conservation training programs for SME entrepreneurs;

d) Developing and setting criteria for identifying and designating “large energy

consumers” for the purposes of applying these rules. The criteria shall be based on

energy consumption. Depending on the specific conditions and capabilities of the

businesses, these criteria may be set individually for specific categories of industries

and facility types;



e) Creating, maintaining and updating a list of Designated Large Energy Consumers.

The list shall be accessible to the public;

f) SREDA may require any energy consuming establishments, including those

designated as “large energy consuming establishments” to report energy use and

other relevant data as prescribed.

To fulfill the above energy efficiency objectives, SREDA has prepared rules and circulated a

draft for public comment. Energy Efficiency and Conservation Rules are expected to make

the most direct impact on industrial energy efficiency in Bangladesh. The following are the

key features of the rules49:

a) Designated Large Energy Consumers shall be required to conduct an energy audit

on annual basis. The results of the audit, including planned energy conservation

measures and targets based on the audit, shall be reported to SREDA as the “annual

energy report”.

b) Designated Large Energy Consumers will appoint a full-time energy manager to keep

account of energy conservation by the establishment, and suggest energy efficiency

improvement measures.

c) Designated Large Energy Consumers shall be bound to meet the energy

conservation measures and targets set in the energy audit report. The requirement

will initially be on a voluntary basis, and gradually be made mandatory. The Agency

shall provide the framework and timeline for this transition.

d) The Agency shall establish a system of accrediting Energy Services Companies

(ESCOs) and set specific requirements for qualifications for accredited ESCOs.

PPRROOPPOOSSEEDD PPOOLLIICCYY PPAACCKKAAGGEE FFOORR BBAANNGGLLAADDEESSHH4.7.

Based on the above analysis the Consultant suggests following pyramidal policy package

approach for Bangladesh, (See Figure 19).

Figure 19: Policy Implementation Approach for Bangladesh

Effort-Defining Policies

Supporting Measures

Implementation Toolbox

49Full draft of rules is available at website of Ministry of Power, Bangladesh


EFFORT-DEFINING POLICIES4.7.1.

Here, Bangladesh needs to set targets for reduction of energy consumption in individual

industrial sectors and the country as a whole. Based on the sector-specific analyses

provided in this report, the consultant has proposed the targets summarized in Table 42.

Table 42: Suggested Energy Reduction Targets for Bangladesh

Sector Reduction Target

Sector 1: Textiles, Garments, Leather, and related industries 32%

Sector 2: Steel, Iron, and related industries 41%

Sector 3: Cement, Clinker, and related industries 23%

Sector 4: Ceramics, Glass, and related industries 25%

Sector 5: Chemicals, Fertilizers, Pulp and Paper, Plastic, and relatedindustries

24%

Sector 6: Agro-industries, including Food Processing, Sugar and Jute 18%

A timeline for achieving the specified targets must also be defined. This depends upon

several factors, such as the supporting policies and measures undertaken, the economic

and political situation in Bangladesh, the export market, new energy exploration, the supply-

demand gap, etc.

SUPPORTING MEASURES4.7.2.

The hurdles in implementation of energy efficiency measures in industrial sector of

Bangladesh have been explained in section 2.2.1. The key obstacles in Bangladesh’s

industrial energy efficiency framework from policy perspective have been explained here in

further detail:

1. Energy Pricing: Energy prices for major fuels, e.g. natural gas and electricity, must

meet their true market values. This will raise the awareness of users towards the

importance of energy and encourage them to avoid energy waste, which is currently

quite high.

2. Differentiation in Pricing of Different Forms of Energy: The current pricing of

various forms of energy in Bangladesh is shown in Table 43.

Table 43: Energy Prices in Bangladesh

Electricity Gas (Process) Gas (Power) Diesel

PerKwh

Per 1000Kcal

Per Cu.Meter

Per 1000Kcal

Per Cu.Meter

Per1000Kcal

PerLiter

Per 1000Kcal

6.95 8.08 5.86 0.7 4.18 0.5 68 7.62


Clearly the first choice among energy sources is natural gas. Even industries such as

cement, steel, jute, etc. which require electricity as the primary source of energy,

prefer to purchase gas rather than electricity. Gas engines are used to generate

electricity on site with 30% efficiency, leading to electricity costs of only about BDT 2-

3/kWh. On the other hand, electricity purchased from the utility costs about BDT

6.95/kWh. The electric utility runs large power plants where gas is used to generate

electricity at about 45%-50% efficiency; thus a 15% loss in efficiency results from on-

site generation. These imbalances in energy prices need to be removed gradually but

with a definite target and timeframe. To begin, subsidized gas prices for power

generation should be stopped and one gas price for industry should be introduced.

This will make metering of gas easier and reduce the appeal of self-generation

through gas engines. Instead of on-site self-generation by industry, community-based

power stations using combined cycle technology should be encouraged. This will

avoid current inefficiencies in power generation from gas, which is currently the

source of electricity in more than 90% of the industrial sector.

3. Power Factor: Efforts for maintaining a high power factor are minimal. The current

policy imposes a penalty for maintaining a power factor of less than 0.95, but there is

no incentive for maintaining higher power factors. The consultant suggests that

industrial accounts in Bangladesh should move towards KVAh billing, rather than

kWh billing. KVAh billing provides an incentive and penalty in proportion to the power

factor.

4. Capacity Building: Massive efforts for capacity building are needed. The proposed

Energy Efficiency and Conservation Rules will make it mandatory for industries to

have an energy manager and receive energy audits from certified professionals. This

will create a huge requirement for qualified energy managers and energy audits.

Such a requirement for quality manpower can only be fulfilled through the

establishment of a robust and long-term capacity building program. There is an acute

shortage of technical manpower among industries. The Consultants found that in

some facilities, equipment is either operated inefficiently or is underutilized due to a

lack of technical knowhow. More detailed capacity building recommendations are laid

out in Section 5.

5. Energy Substitution: It is important that proper forms of primary energy are being

used. For example, natural gas should be used for thermal applications, such as

furnaces, boilers, and heaters, etc. while electrical energy is used for motors,

induction furnaces, compressors, etc. In Bangladesh, use of gas for thermal

applications is appropriate, but in a large number of plants gas is also used as the

primary source of electricity. This is the low-cost option, but is inefficient from an

energy perspective. Similarly, use of solar energy should be encouraged, particularly

in textiles and leather tanneries, where it can substitute gas/HSD in water heating

applications.

6. Use of Energy Efficient Appliances: Low energy prices are the biggest barrier

confronting energy efficiency. The biggest example is motors. The consultant noted

that several facilities, including new facilities prefer purchasing old motors from the

Chittagong ship breaking yard. These motors are available at very low prices but are

more than 20 years old, when efficient motor technology did not exist. Often, proper

motor capacity is compromised and oversized motors are installed. This decreases


the efficiency of the motor further. The same is true for gas engines and other

appliances such as compressors, heaters, blowers, pumps, etc.

7. Peak Hour Restriction: Peak hour restrictions are applicable to continuous process

industries, such as ingot producing induction furnaces. As a result, furnaces are

cooled down during peak hours and need to be re-heated after peak hours. In many

Asian countries, such continuous process industries are exempted from peak hour

restriction. Similarly only two burners are allowed per gas connection. With two

burners it is difficult to heat the product from all directions leading to higher gas

consumption.

8. Promotion of Energy Efficient Technology: Energy efficient technologies, such as

co-generation in the sugar and paper industry, automation in steel sector, VRM in

cement sector etc. (Refer Chapter-3) should be encouraged. This will require a clear

and encouraging policy for feeding the surplus power to the national grid. Use of

variable frequency drives in motors, and vapor absorption technology for utilizing

waste heat are other prime examples for all the sectors.

IMPLEMENTATION TOOL BOX4.7.3.

To control energy use, it must first be measured. Instrumentation and measurement in

industrial processes in Bangladesh is extremely uncommon. In many facilities, there is a

utility meter for billing but no meters further down the line to measure consumption of energy

in specific appliances. Similarly, gas generators are not equipped to meter the gas feed or

electricity generated.

Standardization of energy consumption for major equipment will be very helpful, for example,

boilers, furnaces, motors, and compressors. This will help companies to determine their

potential for savings when investing in efficient equipment. Benchmarking major industrial

sectors will also be helpful.

Making information available on the latest in energy efficient technologies, equipment and

global benchmarks will also drive industries to become more efficient. The website of SREDA

has such information, which is a good starting point. Freely available software tools for

calculation of energy consumption and benchmarking against standards will also be helpful.

Financial or fiscal instruments e.g. soft loans, subsidies, investment deduction schemes or

rebates, will further help in removing the financing barriers. An energy tax or energy tax

exemption is also useful tools.

CAPACITY BUILDING FOR PROMOTING ENERGY EFFICIENCY IN5.BANGLADESH

AA NNEEEEDD FFOORR CCAAPPAACCIITTYY BBUUIILLDDIINNGG5.1.

The organizational analysis carried out on the basis of Energy Management Matrix (Refer

Table 2) for the 120 audited plants in Bangladesh and extrapolated for each of their six

respective sectors clearly demonstrates that capacity building can be a significant catalyst in

the promotion of energy efficiency in the industrial sector of Bangladesh.

Empirical analysis has shown that success in developing profitable energy efficiency

business cases depends on the maturity of the market in the respective country and market

segment, and on the policies and measures hindering or fostering success of energy

efficiency service providers. Political decision-makers and bureaucrats at the national level

have a large responsibility in providing a supporting framework for market development and

a level playing field that gives equal opportunity to all market actors.

As discussed in earlier chapters, the energy demand of Bangladesh is expected to triple by

2020, and a significant portion of this increase can be avoided by adopting large-scale

energy efficiency measures.

At the institutional level, Bangladesh needs to identify, co-develop and invest in

commercially viable energy efficiency projects in both the public and private sectors. In doing

so, skilled human resources and capacity building measures will not only contribute towards

overcoming existing legislative, financial and technical barriers but also promote the

sustainable development of a transparent and competitive energy efficiency market through

the design and implementation of replicable Public Private Partnership (PPP) models.

A lack of financial and human resources is impeding the realization of national energy goals.

The majority of Bangladeshis are not aware of the environmental problems resulting from

current energy use, or of the need to use modern, affordable and energy-efficient

technologies. Other stakeholders in the power sector of Bangladesh face similar problems.

Capacity building programs can provide development support and build awareness towards

financing energy efficiency projects that meet required commercial, technical and

environmental standards.

PPRROOJJEECCTT FFIINNDDIINNGGSS5.2.

The Consultants conducted human resource skills assessments while carrying out the

energy audits. These assessments have been incorporated into this report, taking an

average for all six sectors. It was observed that standard benchmarking skills do not align

directly with the requirements of mandatory energy efficiency assessment programs (EEA).

The gaps identified include:

Capacity shortfalls are found among the workforce in areas specific to energy data

collection and analysis, developing energy mass balances and in the area of the

assessment, installation and use of appropriate monitoring equipment.


Competence, the combination of skills and experience that enables a high standard

of performance, is required. Employers are unable to fill, or have considerable

difficulty in filling, vacancies due to current levels of remuneration and accessibility of

their location. Findings indicate that more than 70% workforce has qualification of

matriculation (10th Standard) or lower. On the other hand only 3% workforce is post

graduate or engineering graduate.

There are no current relevant accreditations systems followed in Bangladesh that

can guide the selection of consultants for promoting energy efficiency programs.

There is limited on-the-job training, other professional development programs, etc.

Recent graduates also require additional skills, knowledge or experience before they

are able to effectively undertake an EEA.

There is demand for a database of resource material which can be used to

support the development of training programs and conduct EEAs.

There remains a clear need to increase the skills base of the existing workforce, and to

complement those skills with increased knowledge and experience. Any skills development

strategy must also take into account the need to build capacity for those responsible for

executing the skills development program – i.e. the training workforce.

Knowledge gaps, in both industry and energy services providers, exist in relation to the

process and compliance requirements of energy audit programs. The demand for more

experienced personnel is hard to address, however, providing resources that increase the

confidence of the personnel learning on the job will be of great benefit. There is a need to

create institutions for skill development and higher education in upcoming industrial sectors

such as ceramics, leather etc.

TTOOPP--DDOOWWNN AAPPPPRROOAACCHH5.3.

It is often difficult for organizations to change or develop without external assistance or

incentives. Thus, capacity building typically involves the provision of financial and/or other

resources to organizations from external sources. Bangladesh is in the position to benefit

from a large influx of development assistance from funding bodies which can shape these

initial efficiency programs. The focus for these programs must be spread across four logical

phases:

Phase A: Capacity building for financing and implementation of energy efficiency

projects for the Ministry of Energy, the Bangladesh Power Development Board, Petro

Bangla board, stakeholders at the national and district levels, and selected

community-based energy suppliers.

Phase B: Raise awareness among commercial banks and other financial institutions

to increase the availability of financing to private companies interested in

implementing energy efficiency measures.

Phase C: Conduct further energy audits. Assist in the development of the tools and

methodologies required to carry out and monitor the sustainable implementation of

energy efficiency projects (performance indicators, best practice guides, network

analysis tools, impact calculation models).

Phase D: Establish contract models which would govern projects with public or

Energy Services Companies (ESCOs), such as energy performance contracts



(EPC), using standard industry models adapted for the regulatory regime in

Bangladesh.

Figure 20 shows the recommended timing for the energy efficiency market capacity building

phases.

Figure 20: Capacity Building Measures for Energy Efficiency Market Transformation inBangladesh

IINNDDUUSSTTRRIIAALL EENNEERRGGYY EEFFFFIICCIIEENNCCYY FFIINNAANNCCEE PPRROOGGRRAAMM5.4.

Phase A and Phase B are important as they will be fundamental to a sustainable, long-term

market transformation. These phases will involve capacity development for industrial units in

growth-intensive sectors of Bangladesh. It will therefore involve project-specific technical

assistance to industrial enterprises to demonstrate and transfer state-of-the-art efficient

energy systems and energy management technologies.

Related activities to be accomplished in these phases also include:

Institutional capacity-building on development, implementation and monitoring of

industrial energy efficiency policies and programs, including energy management

standards.

Tailor-made intensive training programs on industrial energy system optimization

(motor, pump, steam, compressed air systems, etc.).

Intensive training programs on the development and use of energy management

standards.

IC/E

S

Energy Savings (ES)

2014 2015 2016 2017 2018 2019 2020 and onwards

Phase A Phase B Phase C Phase D

Energy Efficiency Market Transformation Successful EE Policy

2013


PPRROOGGRRAAMM FFIINNDDIINNGGSS5.5.

The analysis of the current state of energy management at the national level (considering all

six sectors surveyed in this study) was done by the consultant using the Energy

Management Matrix developed by the UK Oxfordshire based Carbon Trust’s Energy

Efficiency – Best Practice Program (EEBPP) – Good Practice Guide 119: Organizing Energy

Management – A Corporate Approach. (Refer Table-2)

The ratings for each target sector were averaged and a summary representing the full scope

of BEEIFP findings was established. A summary of the ratings is shown in Table 44, while

the comprehensive scoring matrix is shown in Table 45.

Table 44: Energy Management Score Summary – National Level

Area Of Management Matrix Reading

Policy 0

Organization 0

Communication 1

Information 1

Marketing 0

Investment 0

Table 45: Energy Management Matrix – National Level

Policy Organization Communication Information Marketing Investment

4

Energy policy,action plan andregular reviewhavecommitment oftopmanagementas part of anenvironmentalstrategy.

Energymanagement fullyintegrated intomanagementstructure. Cleardelegation ofresponsibility forenergyconsumption.

Formal and informalchannels ofcommunication regularlyexploited by energymanager and energystaff at all levels.

Comprehensivesystem setstargets, monitorsconsumption,identifies faults,quantifies savingsand providesbudget tracking.

Marketing thevalue of energyefficiency andtheperformance ofenergymanagementboth within theorganizationand outside it.

Positivediscrimination infavour of ‘green’schemes withdetailedinvestmentappraisal of anew-build andrefurbishmentopportunities.

3

Formal energypolicy but noactivecommitmentfrom topmanagement

Energy manageraccountable toenergy committeerepresenting allusers, chaired by amember of themanaging board.

Energy committee usedas main channeltogether with directcontact with major users

M&T reports forindividualpremises basedon sub-metering.But savings notreportedeffectively tousers

Programme ofstaff awarenessand regularpublicitycampaigns

Same pay backcriteria employedas all otherinvestment

2

Unadoptedenergy policyset by energymanager orseniordepartmentalmanager.

Energy manager inpost, reporting toad-hoc committeebut linemanagement andauthority areunclear

Contact with majorusers through ad-hoccommittee chaired bysenior departmentalmanager.

Monitoring andtargeting reportsbased on supplymeter data.Energy unit hasad-hocinvolvement inbudget setting

Some ad-hocstaff awarenesstraining

Investment usingshort term payback criteria only


1

An unwrittenset ofguidelines

Energymanagement thepart timeresponsibility ofsomeone with onlylimited authority orinfluence

Informal contactsbetween engineer and afew users

Cost reportingbased on invoicedata. Engineercompiles reportsfor internal usewith technicaldepartment

Informalcontacts usedto promoteenergyefficiency

Only low costmeasures taken

0No explicitpolicy

No energymanagement or anyformal delegation ofresponsibility forenergy consumption

No contact with users

No informationsystem. Noaccounting forenergyconsumption

No promotion ofenergyefficiency

No investment inincreasing energyefficiency inpremises

These ratings suggest that industrial companies in Bangladesh must pay more attention to

energy policy and require staff training to increase their awareness of energy use, targets,

and success stories every quarter; this must be formalized by their human resources

management. Top management of these companies need to drive this process initially until it

is implemented and appreciated by lower level staff.

An energy management team needs to be created in each company. The team should

include the internal energy auditor, factory manager, production manager and utility

manager. The team will develop energy programs, communicate to all staff and provide

monthly updates on implementation and results. The team should also set an annual target

for energy consumption. The energy management team should be extended the full support

of General Management and the Managing Director. To improve staff awareness, energy

saving tips should be circulated, publicly posted in the staff cafeteria and addressed in

quarterly staff meetings and newsletters.

Investments in developing an energy policy and building the energy management capacity of

the staff will help this sector to drive the energy efficiency measures on a sustainable basis.

PPRRIIOORRIITTIIEESS FFOORR CCAAPPAACCIITTYY BBUUIILLDDIINNGG5.6.

There is a notable lack of awareness and resource material in the area of energy efficiency

in Bangladesh. Companies follow an unwritten set of guidelines with no formal energy saving

policy in place. Low cost energy efficiency measures, which require almost no investment,

are taken in some progressive companies.

At a national level, promotion of energy efficiency is not represented in government energy

policy documents. Sharing of best practices across various levels, training and policy

initiatives can help to improve the progress towards an energy efficiency market

transformation.

As industrial sectors are most energy intensive, they have the potential to achieve the

greatest levels of energy efficiency through the installation of upgraded equipment such as

energy-saving lighting, heat pumps, and motors. Capitalizing on energy efficiency training for

human resources can substantially reduce industrial consumers’ energy profile and costs

and can help the country to free up supply capacity to meet rising demand.

CONCLUSION6.

Bangladesh has maintained about 6% economic growth over the last 10 years, which is

poised to increase over the next couple of decades. To achieve this continued growth, it has

been estimated that energy consumption should grow at a rate of at least 10%. Coupled with

this is a deficit in the ‘common man’s fuel’ in Bangladesh, i.e. CNG, which is only expected

to last until 2030 given increases in demand. Efforts to secure new energy resources for

generation, such as coal, are underway, but it will take time, as it requires reasonable

political commitment and policy level developments to make progress possible.

In the current energy situation of Bangladesh, industrial energy efficiency is among the most

promising solutions, and the Industrial Energy Efficiency Finance Program is a timely

advance in this direction. This study’s analysis suggests that the textile sector, which brings

the highest amount foreign exchange into the country, holds a potential of about 32% energy

savings. The energy audits of 22 textiles and leather facilities identified a one-time

investment of USD 4.45 million against an annual savings of 1.37 million USD. This indicates

that the textile and leather sector is a very attractive target for investment in energy

efficiency. The energy audit of all 120 facilities identifies an investment of USD 139.6 million

with simple payback period of 3 years. The highest energy saving potential of 41% is found

in iron and steel sector.

The Consultants concludes that successful industrial energy efficiency program in

Bangladesh will require implementation of energy efficiency process, technology and

equipment’s; policy support; capacity building; installation of instrumentation & control and

developing interest & participation of financial institutions and banks. In the following text the

Consultants have provided their key conclusions in respect of each of these areas.

The Consultants observed that all industries in Bangladesh are either currently using gas

generators for electricity production or wish to use a gas generator, provided they obtain a

gas connection. Analytic evidence shows that the efficiency of gas generators across the

audited sectors is around 30%. The manufacturers claim that efficiency can go up to 80%

with the use of waste heat from exhaust gas and jacket cooling. The Consultants noticed

the utilization of waste heat from exhaust gases in a few facilities, but there was no evident

use of waste heat from jacket cooling.

Another striking observation was the use of small capacity, open cycle captive generation,

which is an inefficient solution. The Government of Bangladesh needs to drive industries to

transition from small capacity captive generation to community based captive generation

and/or encourage the use of grid power generated in higher efficiency combined cycle

plants. In several industries, particularly in leather tanneries, jute mills and the agro sector,

HSD is used if gas or grid electricity supply is not available. Most of these facilities operate

during the day time; thus the Consultants suggested the use of solar based heating and

generation of electricity rather than HSD.

Bangladesh’s largest ship breaking yard is in Chittagong, which plays an important role in

the nation’s economy by contributing towards steel production. A good number of local

enterprises have developed out of this industry offering the resale of used motors and gas/


diesel engines at low prices. These motors and engines are typically 15-20 years old, when

high efficiency motors and engines available today did not exist. During the audits, the

Consultants found that a considerable percentage of industries (especially jute mills50)

purchase these old, used motors and engines without any regard to their capacity or

efficiency. This results in low capacity operation and at low efficiency.

Although interest in the energy efficiency sector is evidently increasing across the financial

institutions and industries surveyed, for the most part, the conditions are not yet in place to

create opportunities to make EE an interesting investment opportunity ‘at scale’. Part of this

challenge is at the industry level, and lies in the perceived loss of production through testing

‘new waters’ which may impact the bottom line (fear of reputation and export loss).

In most cases, it is difficult to build a strong business case for energy efficiency based on the

energy savings alone. The argument becomes more interesting if profits from increased

production due to energy savings are taken into account. Some foresighted entrepreneurs

have been willing to implement energy efficiency from a purely energy security perspective.

The Consultants also noticed a concern towards the environment among a few young

entrepreneurs. Other drivers, such as low price subsidy incentives, are the same in

Bangladesh as they are in other developing Asian countries.

On the policy front, support is very patchy as political initiatives in Bangladesh are not yet

providing an overriding, clearly visible framework for sustainable energy that is specific

enough to indicate EE as a priority. There is a need for setting sector targets, identifying the

top energy consuming industries, deploying energy efficiency recommendations at

demonstration companies, providing incentives for the substitution of fossil fuels with

renewable energy and encouraging policy for feed-in supply. An effective and integrated

policy approach is needed, not only to reflect the urgency and the level of economic

transformation required to cope with energy security issues, but also to create the conditions

for scalable, bankable investment opportunities.

There remains a clear need to increase the skills base of the existing workforce, and to

complement those skills with increased knowledge and experience. The observed

knowledge gaps also include demand for a database of resource materials and a current

lack of relevant accreditation systems. In several industries, particularly textiles, plastics and

ceramics, the consultant has noticed the use of modern equipment and advanced

technology. But the benefits have not been fully exploited due to the absence of skilled

manpower capable of operating such equipment. Capacity building is also required for lower

and mid-level management to manage plant operations based on quantitative measurement

and testing in addition to qualitative experience.

The Consultants have noticed that the instrumentation needed to measure energy

consumption is almost non-existent in the audited facilities. In many facilities the only

energy measuring instruments are the utility meters. General housekeeping and cleanliness

standards are also not properly followed. The Consultants have also noticed that there is no

system of preventive or regular maintenance as recommended by manufacturers. The

energy audit reports prepared for the companies highlight and suggest various measures to

50Jute mills have multiple motors in comparison to any other industries.



improve housekeeping which can indirectly contribute in avoiding industrial accidents and

providing safe working conditions for the workforce.

The Consultants observed a lack of awareness about industrial energy efficiency on the part

of banks and financial institutions. Most lenders are unfamiliar with EE technologies and

approaches and require technical support to appraise and manage loans for EE projects.

Also, there is a limitation in bank appraisal methods. There is a need to sensitize them to

these low risks, high return business opportunities. Increasing awareness for a need to

develop special units with trained manpower and capacity to apply new financing tools for

quick appraisal can internally encourage FIs and banks to proactively participate in financing

energy efficiency.

There is a ‘chicken and egg’ element to the energy efficiency situation in Bangladesh. At this

point in time, however, appears to be the beginning of a very significant and exciting wave of

activity and investment interest in this area, as evidenced in the numerous sector reports

and analyses that have been developed. It is critical that these reports, and the present, are

not allowed to gather dust, but are acted upon to further spur energy efficiency development.

Documents

45916-014: Industrial Energy Efficiency Opportunities and Challenges in Bangladesh