Import of liquefied natural gas (LNG) to meet growing energy demand has sharply increased the energy cost in Bangladesh. To reduce this cost, the government is likely to spend more than $1 billion (Tk 100 billion) during this fiscal year (2019-20) for subsidising import of liquefied natural gas. As a result, subsidy expenditure of the government has soared 29.36 per cent to Tk 463.85 billion in this fiscal year. To rein in this growing subsidy, despite objections from different quarters during public hearings in March 2019, the Bangladesh Energy Regulatory Commission (BERC) announced the hike in gas prices on an average of 32.8 per cent from July 1, 2019. As a result of the hike, industrial users are obviously hard hit. Industrial users now need to pay 40 per cent more than before for natural gas. This will trigger increase in cost of production affecting growth and competitiveness, and export is likely to suffer. On one hand, the government is under tremendous pressure as the subsidy needs for energy due to LNG import sharply increases. On the other hand, industry suffers due to the cost increase. The focus on energy efficiency, including waste-heat recovery, could be a solution to address the situation.
Among the industries, ceramic suffers the most. As reported in the media, the ceramic sector, with a market size of around Tk 300 billion, has experienced 200 per cent growth in production in the last 10 years; and Bangladesh now holds 0.14 per cent share of the global export market. Upon meeting 80 per cent of the local demand in fiscal 2017-18, local ceramic makers exported goods to over 50 countries worth around $50 million, a 20 per cent year-on-year rise, according to the industry association. Low-cost gas supply appears to be the main success factor of the sector. Ceramic manufacturing is energy intensive, as in general, 30 per cent of the total cost is spent on energy. The major energy consuming steps of the ceramic industry are transporting materials, forming shapes, drying, pre-processing, firing and post-processing. The ceramic industry also wastes a substantial amount of energy. For example, 30 per cent of energy input to kiln gets lost as exhaust. It's being reported that due to the recent natural gas price hike, Bangladesh's ceramic sector will experience an increase in the cost of ceramics production by around 10 per cent.
Like many other industrial sectors, the readymade garments and textile sector are likely to face an increase in the cost of production by 1 per cent due to the gas price hike. It's being reported that due to the increasing cost of labour and decreasing the cost of technology, Bangladesh has been steadily suffering from erosion of competitiveness. The recent preferential entry of Vietnam in the European Union market makes the situation worse, thanks to the signing of a free trade agreement (FTA) with the EU.
With the growing energy demand and depleting domestic natural gas reserve, Bangladesh is going to increasingly rely on LNG import. As a result, energy price in Bangladesh will keep rising in the foreseeable future. To counter the rise of production cost due to the increasing energy bill, it's time for Bangladesh to focus on energy efficiency. It is understood that the Sustainable and Renewable Energy Development Authority (SREDA) has chalked out a master plan for energy efficiency and conservation. It's time to pay serious attention to the implementation. As reported in a recent study, "findings from the 42 assessment reports show that on an average companies can save 17 per cent of energy consumption, 21 per cent of energy costs and 18 per cent of CO2 emissions." Among different options, waste heat recovery is one of the main sources of reduction of the energy bill in the industrial sector.
A substantial amount of energy consumed by industry is wasted as heat in the form of exhaust gases, air streams, and liquids leaving industrial facilities. Although it is not technically and economically feasible to recover all waste heat, a gross estimate is that waste-heat recovery could substitute for as high as 10 per cent of the total energy used by industries in advanced countries. The primary sources of waste heat in industrial facilities include exhaust gases from fossil fuel-fired furnaces, boilers, and process heating equipment. These types of high-grade waste-heat sources can readily be used to preheat combustion air, boiler feed water, and process loads. Recent research finds that systematic waste-heat recovery projects based on sound thermodynamic principles can yield annual energy cost savings of 10 per cent to 20 per cent with paybacks of 6 to 18 months for industrial facilities.
Boiler efficiency improvement is another major source of energy saving. Steam generation systems account for substantial energy used in the production of the textile sector. In certain industries, almost 30 per cent of industrial energy consumption goes for heating water in boilers. This shows that increasing the energy efficiency of boiler systems can bring substantial improvements to business operating cost and the environment. Among other areas, improved operation and maintenance of boilers may lead to 5 per cent energy saving. Similarly, improved water treatment and boiler water conditioning may save 2 per cent. Once all these incremental savings from diverse measures are added up, saving could be substantial. For example, through steady energy saving measures, UK ceramic industry succeeds in a 12 per cent reduction of energy consumption from 2000 to 2007.
To succeed with leveraging the potential of energy efficiency to contain industrial production cost caused by the energy price hike, a proactive approach should be undertaken. It should begin with the identification of waste-heat recovery and reuse opportunities. The technology and economic feasibility to exploit them should consider new technology options, such as energy-efficient motors, adjustable speed drives, advanced controls, heat exchangers, heat pumps, electric boilers, energy-efficient lighting, combined heat and power, cogeneration, energy storage and also distributed generation. The analytical exercise should proceed to the implementation of cost-effective projects that minimise energy intensity in a profitable manner.
Instead of relying on the import of turn-key solutions for energy harvesting or efficiency, the focus should be on stepwise progression in an incremental manner. To exploit this potential fully, attention should be given on increasing the supply side of technology, innovation, and human competence. Incentive should be given to industrial sectors for saving energy. It's time to transfer a portion of the cash incentive for adopting energy efficiency solutions to offset increased production cost due to energy price hike. Success in energy efficiency will also lower carbon footprint.
M Rokonuzzaman PhD is an academic and researcher on technology, innovation ands policy.
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