Questioning the Environmental, Economic and Technical
Feasibility of Rampal Power Plant
By BNP Research
I. Introduction
The proposed Rampal
power plant, fraught with triple jeopardies, dangers the integrity of the
Sundarbans, the largest natural mangrove forest of the world. The fault lines
are in all three domains of environment, economic and technical feasibility.
The proposed site of Rampal in the Bagerhat district of Bangladesh is 14
kilometres north of the Sundarbans. The 1,834-acre plant site is on the Passur
River in the Ganges tidal floodplain in the southwest of Bangladesh.
The Sundarbans is a
UNESCO World Heritage site, a designated Ramsar Conventions wetlands and part
of the UNESCO World Network of Biosphere Reserves. The Sundarbans is a symbol
of majestic beauty, tranquility and wilderness of nature and a hotspot of
biodiversity. The combination of various types of ecosystem (forest, coastal
and wetland) makes the Sundarbans a home to several uniquely adapted aquatic
and terrestrial flora and fauna.
As regards floral
species, the Sundarbans supports 53% of birds, 43% of animals, 42% of reptiles,
36% of amphibians. Of the 50 true mangrove plant species recorded throughout
the globe, the Sundarbans alone contain 35 species. Sundri (Heritiera fomes)
is the most important tree species in the Sundarbans. Besides Sundri, the other
prominent species are: Gewa (Excoecaria agallocha) (covers 16% of total
forest area), Baen (Avicinnia officinalis), Passur (Xylocarpus
mekongensis), Keora (Sonneratia apetala), Goran (Ceriops
decandra), Ora (S. caseolaris) and Hental (Phoenix paludosa).
Then, there are about 13 and 23 species of orchards and medicinal plants. The
Sundarban also offers high value non-timber forest products like Golpata
(Nypa fruticans).
The Sundarbans is also
rich in its faunal diversity. It supports various diversities of crabs,
lobsters, fishes, shrimps, birds, reptiles, amphibians, insects and mammals.
This forest is an important nursery and breeding ground for many species of
shrimp, crab and finfish, and provides habitat for diverse aquatic wildlife
e.g.: Estuarine crocodile (Crocodylus porosus), Turtles (Lepidochelys
olevacea), Dolphins (Platanista gangetica and Peponocephala
electra) and Molluscs like the Giant oyster (Crassostrea gigas).
The rich avifauna of the
forest includes Mangrove Pitta (Pitta megarhyncha), Mangrove Whistler (Pachycephala
grisola), Brown-winged Kingfisher (Halcyon amauroptera) and Collared
Kingfisher (Todiramphus chloris). Other species are purple heron, pond
heron, cattle egret, little egret, spotted dove, bee eater, tailor birds,
magpie robin, woodpeckers, barbets, owis, bee-eaters, bulbuls, shrikes,
drongos, starlings, mynas, babblers, thrushes, orioles, flycatchers etc. The
most important reptile species is the estuarine crocodile (Crocodylus
porosus). Other commonly found reptiles are Monitor lizard (Varanus sp.),
water monitor and snakes.
The Royal Bengal Tiger (Panthera
tigiris) is the most magnificent animal of the Sundarbans and in fact the
Sundarbans is the only remaining habitat of it. It is also home to thousands of
Spotted Deer (Axis axis) and barking deer (Muntiacus muntjak).
Other animal species are wild boars (Sus scrofa), monkeys, jungle
cats (Felis chaus), rhesus macaque (Macaca mulata), otters (Lutra
perspicillata) fishing cat, civet cat, bengal fox and jackle.
As many as 20 globally
threatened species inhabit in the Sundarbans, including major populations of
several threatened birds. One of the world's most endangered turtle species Batagur
baska is found in the Sundarbans. Two other endangered cetacean species are
Ganges River Dolphin (Platanista gangeticus) and Irrawaddy Dolphin.
Other threatened wildlife species are Bengal tiger, Python, King Cobra,
Adjutant Stork, White-bellied Sea Eagle, Clawless Otter, Masked Fin-Foot, Ring
Lizard and River Terrapin, Fishing cat, Spoon-billed Sandpiper, White-rumped
Vulture, Pallas's Fish Eagle, Greater Spotted, Eagle and Lesser Adjutant.
This biodiversity rich
region is also critically important for the livelihoods of the local
communities living in and around the site. Several natural and anthropogenic
factors have already put negative impacts on the forest area resulting in the
degradation of the biodiversity resources. The proposed power plant is found to
be putting more devastating pressures on the resources in various ways: (a)
power plant could alter the critical water balance in the region (b) pollute
the surrounding water and air (c) increase the risk of oil and coal spills and
so on.
The extra carbon
emission will have upsetting effects on the Sundarbans. The rate of carbon
emission of coal based plant is very high. Bangladesh has relatively less
forest land than the international standard. The Sundarbans plays a vital role
in purifying the air of the adjacent areas. The increased carbon will hamper
the process of photosynthesis and will reduce the natural vegetation.
The flow of wind towards
the forest land will increase the carbon level in the Sundarbans. The EIA
report reports that from November to February of every year, the wind flows
towards the Sundarbans. In addition, the there are threats of regular cyclones.
The ashes, which will be emitted by this power plant, will spread all over the
Sundarban and will damage the soil quality of this mangrove area.
The coal based power
plant requires the clean-coal which means the coal need to be cleaned by water.
For cleaning of coal requires a huge amount of water. The water after cleaning
of coal will be polluted and the spilling of this polluted water would pollute
the water channel of Sundarbans. The water pollution will bring severe
catastrophe for the aquatic biodiversity of this forest land. In addition the
spilling of polluted water has severe health consequences on the habitats of
the forest. The heavy particles contained by the washed water and the spilling
of it will destroy the aquatic biodiversity of Sundarbans. The plant will
discharge hot water into the Passur River. The temperature of the washed water
will be above 2○ centigrade than the natural level of
temperature of water. A JICA report estimates that the temperature of water
might reach at 4○ centigrade in comparison to natural level.
Sound pollution is
another critical part of this project. To maintain the supply of coal, the
project will rely on the importation of coal. The coal will be supplied to the
power plant by using barge from deep sea port. As the route for transportation
is through the forest land, the regular movement of the barge will cause the
sound pollution. The increased sound pollution will hamper the natural movement
of fisheries in the channels of Sundarbans and will disturb the roaming of the
animals.
The livelihood of the
people of the project adjacent area will be hampered. The acquisition of lands
for the project reduces the net cultivable land of the people. The emission of
ashes will increase the alkalinity of soil. The presence of ashes will
drastically reduce the production of grains. The increased level of different
level of pollution such as air, soil, water and sound will affect the natural
production of the forest resources. Thus the reduction of forest resources will
negatively impact on the livelihood of the people who directly depends on the
resources of the Sundarbans.
The project activities
have also been questioned due to the project’s faulty Environmental Impact
Assessment (EIA) is found to be faulty.
Yet the government is
found to be arrogant to their decision to implement the project and official
agreement has already been made between India and Bangladesh. Specifically, the
partnership involves between India’s state-owned National Thermal Power
Corporation (NTPC) Ltd. and the Bangladesh Power Development Board (BPDB) under
the joint venture known as the Bangladesh-India Friendship Power Company Ltd.
(BIFPCL). Considering the risk for wildlife, thermal power plants are
undoubtedly at the top of the danger lists, several experts from India have
expressed that such project would never be allowed in India. They also has
expressed their surprise that why the NTPC Ltd. is building a plant near
Shundarbans of Bangladesh when it had never done so near the Shundarbans part
of India. They identified the project as a ‘Red category industry’ as it will
produce both effluent and emission and therefore very dangerous for the
environment (Basu, 2016).
There have been also
concerns expressed from different groups as regards potential dangers to the
world heritage site due to the current experience of toxic spills and
flooding from multiple coal mine and power plant sites in the province
surrounding the Ha Long Bay World Heritage Site. They also give numerous
examples, including coal ash waste spill in December of 2008 from the
Tennessee Valley Authority coal plant in Kingston, Tennessee, a January 2014
coal chemical spill into the Elk River in West Virginia that poisoned the
drinking water of 300,000 people, coal ash spill in North Carolina history by
Duke Energy into the Dan River in February of 2014 (EcoWatch, 2015).
The Paris Agreement on
Climate Change, to which both the countries are signatories, stipulates a shift
towards clean energy. Accordingly, the countries of the EU have moved towards
this direction. For example, the UK's remaining coal-fired power stations
will be shut by 2025 with their use restricted by 2023 (BBC, 2015).
II. The Rampal Project in Brief
The BPDB and the NTPC
signed a Joint Venture Agreement on Jan. 29, 2012, under which NTPC is
responsible for planning, building and operating the plant. The NTPC Ltd is
listed on the Bombay Stock Exchange and is 70% owned by the Government of India
(Institute for Energy Economics and Financial Analysis, 2016). The proposed
project would have a capacity of 1,320 MW, with two 660-MW units, and with a
provision for a Stage 2 expansion that could involve installing two more units,
each with 660 MW of capacity, taking the project to a potential 2.6
GW-capacity.
In July 2015 the
Bangladesh Infrastructure Finance Fund Limited (BIFFL), a company under the
Bangladesh Ministry of Finance, provided a pre-financing capital commitment of
US$200 million to the project to cover development costs incurred before
financial close (Haroon, 2015). The official estimate of the total capital cost
of the project has escalated over time and currently stands at US$1.82 billion.
The IEEFA study suggests a further capital cost blow out to at least US$2bn is
most likely. Equity capital is proposed at 30% of the total, with 50% of the
equity owned by the Bangladesh Power Development Board (BPDB) and 50% by NTPC
Ltd of India. Debt is proposed to cover 70% of the capital cost. All of the debt
financing would be provided by loans from the Indian Export Import Bank.
In order to implement
this project, BIFPCL plans to take a loan of USD 1600 million from the EXIM
bank of India (where the estimated total cost is USD 200 million). Under the
terms of the EXIM Bank, the total loan would be paid within 20 years and the
regular repayments will be started after 7 years. The rate of interest
will be calculated by adding 1% interest with London Inter-Bank of Rate
(LIBOR). The burden of the total loan will be on Bangladesh though the
ownership of the project is said to be shared (fifty-fifty) between the two
countries. The Government of Bangladesh will be bound to give the
‘guarantee’ of this total amount of loan. That means, if - (a) the project will
face any loss (b) the project will be stopped in the midway of implementation
(c) there is any failure in terms of installment payment, the Bangladesh Govt.
will be solely responsible to repay the loan.
The most recent targeted
commissioning date of Stage-1 of the project is 2020. In February 2016, the
main contract for the engineering, procurement and construction (EPC) of the
Rampal plant was reported to have been allotted to India’s state-run Bharat
Heavy Electricals Limited (BHEL), although no contract has as yet been signed,
as per BHEL’s response to a query by the Bombay Stock Exchange (Ahmed, 2016).
The managing director of BIFPCL stated in an interview that it would be done on
an accelerated rate, to ensure that it is completed in 7 months, as opposed to
the usual 12 months, concluding that financial close for the plant was targeted
to be achieved by July 2016 (Bhattacharya, n.d.). However, there has been a
series of delays since the project was first conceived in 2010, suggesting
financial close will not occur before 2017 at best. The financial close became
more difficult after one Norwegian pension fund pulled out of their investment
in the NTPC and three French banks announced their decision not to fund the
Rampal project (The Guardian, 2015).
In March 2016 the Indian
government’s external lending arm, the EXIM Bank, stated in a press release
that it was “in the process of extending a Buyer’s Credit of US$1.6bn” to
BIFPCL thereby looking to back BHEL’s offer with a massively subsidised loan
covering a full 70% of the project’s capital costs. This press release also
serves as a partial confirmation of the likely capital cost escalation for the
project, given that this debt facility was expected to be US$1.5bn as recently
as July 2015 (EXIM Bank of India, 2012). Once financial close has been
achieved—assuming that it is—formal construction can begin, although some
reclamation work and site preparation is already under way. The IEEFA models
that the plant is only likely to reach a formal commissioning by 2020 at the
earliest and that operation at full capacity will not occur until the financial
year 2021. A total of 1,834 acres of land has been acquired by the government
for the construction of the power plant. Reclamation and land development for
the main plant area is under way and connecting roads are under construction.
Power supply for construction is already available (IEEFA, 2016).
Table - 1: Project Timeline
Date
|
Event
|
August, 2010
|
BPDB + NTPC sign MOU
|
27th December, 2010 Prior to the EIA
|
Land acquisition order
for 1,834 acres
|
May, 2011
|
Department of
Environment approved land clearing
|
29th January, 2012
|
JV signed by NTPC and
PDB
|
January, 2013
|
Environment Impact
Assessment (EIA) released by Centre for Environmental and Geographic
Information Services (CEGIS)
|
12th April, 2013
|
A public Consultation
was arranged by PDB
|
20th April, 2013
|
Power Purchase
Agreement (PPA) and Implementation Agreement signed with BPDB
|
July, 2013
|
EIA (revised) released
by CEGIS
|
2014
|
Norwegian Government
Pension Fund Global Council of Ethics recommends the SWF divest NTPC
|
February, 2015
|
Norwegian SWF divests
NTPC
|
September, 2014
|
The Bangladesh
Planning Commission refused approval citing the project is not a public
Bangladesh Entity
|
November, 2014
|
BIFPCL invite bids for
EPC
|
February, 2015
|
Notice Inviting Tender
(NIT) delayed
|
18th May, 2015
|
EPC construction bid
submission delayed
|
18th July, 2015
|
EPC construction bid
submission delayed
|
22th September, 2015
|
EPC construction bid
submission delayed
|
July, 2015
|
Bangladesh
Infrastructure Finance Fund Limited (BIFFL) provided a pre-financing capital
commitment of US $ 200m
|
January, 2016
|
Conclusion of bidder
selection- finalists were:
|
February, 2016
|
EPC contract
informally awarded BHEL
|
Due mid 2016 to early
2017
|
Financial Close (7-12
months away)
|
Originally end 2018
Latest target 2020
|
Commercial Operation
|
Source: Project
Documents, Institute for Energy Economics and Financial Analysis (IEEFA)
Estimates
III. Environmental Consequences
1. Challenges of
Biodiversity Depletion
The plant site is
proposed at the edge of the Sundarbans, the world’s largest mangrove forest.
The Sundarbans, a part of which lies in India, is a national conservation area
in Bangladesh, a designated Ramsar Conventions wetlands and part of the UNESCO
World Network of Biosphere Reserves. The Sundarbans includes a UNESCO World
Heritage site composed of three separate wildlife sanctuaries on the
Bangladeshi side and one on the Indian side. The government’s Environmental
Impact Assessment (EIA) notes an additional major environmentally sensitive
zone situated to the north of the proposed project. According to the report,
total of 83 effects and risks of 12 types have been identified of which 11
types are associated with environment. These designations combined are clear
indications that the area is exceptionally sensitive to environmental impacts.
The Sundarbans area is rich in biodiversity and is home to Bengal tigers and
river dolphins. To go forward with the Rampal project, BIFPCL would need to
conduct dredging and widening of a 36-kilometre stretch of the Passur River
that would involve moving 32.1 million cubic metres of material to make the
river navigable between Akram Point and the Rampal project site (GoB, 2016:
110). In addition, maintenance dredging would be required annually for the life
of the project.
2. Credibility Gap in
Environmental Impact Assessment
The BPDB asked the
Center for Environmental and Geographic Information Services (CEGIS), a Trust
under the Bangladeshi Ministry of Water Resources, to conduct an Environmental
Impact Assessment (EIA) study for the plant. The study was completed and
submitted to the BPDB in January 2013. Questions have been raised over whether
the study was truly independent and whether it presented a fair assessment of
the environmental risks associated with the project or the effectiveness of
proposed risk management plans. The Norwegian Government Pension Fund Global’s
Council of Ethics report, for one, is critical of the EIA report of the plant
for lacking in details on:
- how accidents like shipwrecks would be handled;
- responsibilities of various parties in such accidents;
- resources available for dealing with accidents through the mangrove belt; and
- risk assessments or contingency plans.
The Norwegian Government
Pension Fund’s Council of Ethics notes that lack of clarity undermines
confidence in the assertion “that the EIA provides an objective, comprehensive
analysis.”
3.3
Geographically Vulnerable Location
The government’s EIA
notes that the Rampal plant would be in the “wind risk zone” of Bangladesh, a zone
that has seen 16 cyclones in the past 25 years. These cyclones are associated
with storm water surges, one of which reached a height of 10 metres in November
2007, as per data compiled by Bangladesh Metrological Department. In
comparison, the mean elevation of the plant site is 0.8752 metres above mean
sea level (GoB, 2016: 80, 184). Inundation of the plant and waste ash slurry
ponds during such cyclones is a major risk. Although the EIA acknowledges this
risk, it states that the site is being developed for a “historical maximum
surge height” with a final finished level of 5.5 metres. However, NTPC has
reduced this tiny margin of error by adjusting plans by allowing a 5-metre
finished level (Bangladesh Power Development Board, 2012: ii). This level is based
on “local community perception,” and contradicts data recorded by the
Meteorological Department. The Norwegian Government Pension Fund’s Council of
Ethics recommends excluding the NTPC from its investment holdings and notes
that the height of storm surges is expected to rise materially in the years
ahead.
3.4
Coal Transportation risks the Sundarbans
In
order to generate electricity from the Rampal power plant 47 million tonnes of
coal and limestone will be needed annually and these will be transported
through the ‘Poshur River’, ‘Shibsha River’, ‘Boleshshor River’ and different
creeks inside the Sundarbans. The transportation path includes two dolphin’s
sanctuaries, roaming area of Royal Bengal Tigers and of many other endangered
species. Therefore, the faunal species will face severe risk of extinction.
This fear has also been expressed in the Environmental Impact Assessment (EIA).
Table
-2: Three ways for coal transportation for Rampal Power Plant
S. no
|
River Channel
|
% of Shundarbans
|
Total Distance
|
1.
|
Pashur
River
|
80%
|
145 km
|
2.
|
Shibsha
River
|
75%
|
153 km
|
3.
|
Baleshshor
River along with Ghoshiakhali Khal
|
Beside
the Shundarbans
|
196 km
|
The EIA states that
toxic chemicals can be mixed with the river waters inside the Sundarbans while
the coal will be transported. Then, it also cautions about the creation of fire
due to the friction of coal and wind. Therefore, it suggests for importing that
type coal which will not create fire through friction with fire. However, the
report does not discuss the fact that dust and toxic substances could spread
around during the transportation of coal from Rampal to the project area. Even
though, the report points out the negative impacts of coal transportation and
concomitant pollution on faunal species of Sundarbans. Among them, Royal Bengal
Tiger, two types of Dolphins (Platanista gangetica and Peponocephala
electra), Estuarine crocodile etc. might face serious threat of extinction.
Moreover, the adjacent
areas of the coal transportation path can also be affected negatively. The land
area (total of 3 million and 20 thousands acre) includes the agricultural land,
shrimp farms, forest area, wetlands and residents of local people.
Table - 3: Distribution
of Lands adjacent to the Coal Transportation Path for Rampal Plant
Type
|
Percentage (%)
|
Agricultural land and
Shrimp Farm
|
12%
|
Forest Area
|
36%
|
Wetlands and Residents
|
48%
|
Others
|
4%
|
Total
|
100%
|
On the basis of the EIA
report, the project implementing authority claims that they will be able to
implement the project without doing any harm to the Sundarbans as they are
following the suggestions of the report. But, it is totally unscientific to claim
that that the pollution would be controlled totally (100%). Because, there is
no technology in the world that could control the pollution from coal based
power plant totally. It can be said that the pollution will be minimized to
some extent. But, the fact is that minimum pollution can also cause devastating
impacts on Sundarbans as it is an ecologically sensitive area.
Moreover, the recent oil
spillage incidents inside the Sundarbans forced the authorities to impose
temporary ban on the movement of the vehicles through the river channel.
3.5
Violation of Legal Frameworks for Environmental
Protection
A report on the project
by the Norwegian Government Pension Fund’s Council of Ethics highlights the
various additional legal issues and risks associated with the proposed Rampal
project. The report notes, for instance, that the Sundarbans is a national
conservation area in Bangladesh, a designated Ramsar Conventions wetlands and
part of the UNESCO World Network of Biosphere Reserves, and a UNESCO World
Heritage site. As per Bangladeshi law, no such plants can be built within 10
kilometres of such a forest. The report quotes sources that dispute whether the
proposed location of plant is within the 10-kilometre range. Notably, similar
projects in India would not be approved because they would violate laws against
building such plants within 25 kilometres of ecologically sensitive areas like
forests (IL&FS Ecosmart Limited, 2010: 4-9).
3.6
Lack of Viability in terms of Environmental and
Social Risks Management
The Bank Track has
carried out an analysis of the Rampal project based on the Equator Principles
(EP), an environmental and social risk management framework for financial
institutions, and has found that the project fails to comply with six of the 10
principles of the EP. The Equator Principles are understood to be the minimum
standard for responsible investment and management of environmental and social
risk in the project finance sector. As detailed in this report, the Rampal coal
plant fails to comply with even the minimum environmental and social norms
established by any one of the Equator Principles (1-6) included in the scope of
this analysis (Bank Track, 2015).
Equator Principle - 1: Review and Categorization Principle:
The Rampal coal plant is in Category A, with irreversible adverse impacts that
include the loss of 1,834 hectares of fishing and agricultural land. Potential
adverse impacts that threaten the Sundarbans are also diverse and, according to
expert environmental assessments, largely irreversible. The Category -A, the
highest level of risk, is assigned to a project if it is known to pose
“potential significant adverse environmental and social risks and/or impacts
that are diverse, irreversible or unprecedented.”
Equator Principle 2:
Environmental and Social Assessment: An Environmental and Social Impact Assessment (ESIA) is required
for all Category A projects. Importantly, this principle notes the specific
risks posed by a Category A project may also require more specialised studies
to be undertaken. Further, the assessment is required to be “an adequate,
accurate and objective evaluation and presentation of the environmental and
social risks and impacts, whether prepared by the client, consultants or
external experts.” Assessment documentation “should propose measures to
minimise, mitigate, and offset adverse impacts in a manner relevant and
appropriate to the nature and scale of the proposed Project.” The assessment
process and documentation for the Rampal coal plant falls far short of these
minimum requirements under Principle 2.
Equator Principle 3:
Applicable Environmental and Social Standards: Under EP - 3, the borrower’s assessment process
must address compliance with “relevant host country laws, regulations and
permits that pertain to environmental and social issues”. The Rampal plant
involves violations of key pieces of legislations: the Environmental
Conservation Regulation 1997 (ACR 1997), the Environment Conservation Act 1995,
and the Forest Act 1927. Under Bangladesh’s Forest Act 1927 and Section 5 (1)
of the Environment Conservation Act 1995, the Ministry of Forestry and
Environment has established a protected buffer area of 10 kilometers in width
around the entire perimeter of the Sundarbans Reserve Forest. This protective
zone is designated as an Ecologically Critical Area (ECA) and Industries or
projects that cause soil, water, air and noise pollution to these areas are
prohibited. The outer perimeter of the ECA around the Sundarbans is located
just 4 kilometers from the Rampal coal plant, raising concerns about potential
adverse impacts within the ECA itself.
Equator Principle 4: Environmental and Social Management
System and Action Plan Principle: 4 The purpose of the Environmental
and Social Management System (ESMS) is to identify and detail the borrower’s
commitments to address and mitigate risks and adverse impacts identified during
the assessment process. Importantly, EP 4 requires that “the level of detail
and complexity of the ESMP and the priority of the identified measures and
actions will be commensurate with the Project’s potential risks and impacts.”
Thus, in complex projects, the ESMP may include a series of comprehensive
management plans (e.g. water management plan, waste management plan,
resettlement action plan, emergency preparedness and response plan). No
evidence has been found that an ESMS or an ESMP has been prepared for this
project. If correct, this is a clear violation of Equator Principle 4.
Equator Principle 5:
Stakeholder Engagement Principle: The Principle - 5 stipulates that the EPFI “will require the
client to demonstrate effective Stakeholder Engagement as an ongoing process in
a structured and culturally appropriate manner with Affected Communities and,
where relevant, Other Stakeholders.” Further, for projects with “potentially
significant adverse impacts on Affected Communities” – such as the Rampal power
plant – the EPFI will also require the client to conduct an Informed
Consultation and Participation process. Principle 5 also requires that the
consultation process be “tailored” to the risks and impacts of the Project and
should be “free from external manipulation, interference, coercion and
intimidation.” The Rampal coal plant has grossly violated each of these Equator
Principle 5 requirements. Legitimate stakeholders protesting the project has
been “constantly harassed by powerful quarters”, subjected to threats, physical
assaults, and intimidation that includes the filing of false cases against
them. The Bank Track finds that stakeholders opposing the project were fully
aware of the likelihood of these project risks: “They apprehended that if the
government wish to compensate for loss of their land through paying cash there
would be chances of corruption and they may not get the full compensation money
or it (compensation payment) would take long time that the money would remain
unproductive. They were also in doubt about their rehabilitation.” There is no
indication that effective action has been taken to adequately address these
ongoing violations of Equator Principle 5 requirements.
Equator Principle 6:
Grievance Mechanisms:
The Principle 6 stipulates establishment of a grievance mechanism “designed to
receive and facilitate resolution of concerns and grievances about the
Project’s environmental and social performance” in all Category A projects
(and, as appropriate in Category B Projects as well). The grievance mechanism
must be scaled to the risks and impacts of the project and “seek to resolve
concerns promptly, using an understandable and transparent consultative process
that is culturally appropriate, readily accessible, at no cost, and without
retribution to the party that originated the issue or concern.” In direct
violation of Equator Principle 6, the Bank Track states that there is no
evidence that an accessible, legitimate, and functioning grievance mechanism
has been established to address and resolve the concerns of people who have
been harmed by the forcible acquisition of land and other resources that
formerly sustained them. On the contrary, it records that there are widespread
reports from numerous independent and highly credible sources that stakeholders
seeking resolution of their concern and grievances have been subjected to
relentless harassment, intimidation, physical assaults and spurious legal
actions.
IV.
Economic Consequences
1. Rising Cost of Electricity
Generation
The electricity sector
in Bangladesh has seen a steep increase in power generation costs in recent
years. Average costs of electricity production have increased at an annualized
rate of 17.8%, rising from Tk2.6/kWh (US3.3c/kWh) in 2009-10 to Tk5.9/kWh (US7.5c/kWh)
in 2014-15. The rising cost of generation has put pressure on the already
troubled Bangladeshi power system and has led to the Bangladesh Power
Development Board (BPDB) posting massive losses over 2008-2015. In 2007-08 BPDB
lost Tk6.6bn (US$96m), or US$53.9 per customer.
Figure - 1: Average Cost
of Electricity Generation in Bangladesh
Source:
Project Documents
Those loses had
increased 10-fold by 2014-15, when BPDB lost Tk72.8bn (US$937m), or US$296.7 on
each customer. The losses reveal how electricity in Bangladesh depends on
subsidies at multiple levels. This phenomenon has been examined by The
International Institute for Sustainable Development (IISD) (Mujeri, 2013).
- All input fuels for electricity generation, i.e. natural gas, furnace oil, diesel and coal, are subsidized;
- Bangladesh Power Development Board (BPDB) sells electricity to six distribution companies at lower-than-generation cost;
- The Bangladesh government provides loans to the BPDB at interest rates that are lower than the market rate in exchange for BPDB selling electricity to distribution companies at lower-than-generation cost;
- Electricity tariffs for certain consumer segments, especially residential consumers and farmers, are lower than production costs; and
- Industrial and commercial segments pay higher tariffs to compensate for the losses incurred due to lower-than-cost tariffs paid by residential and agricultural sectors.
2.
Subsidies
Failing to Benefit the Poor
Subsidies amounted to
nearly 0.9% of GDP in FY2012 as per IISD’s estimates. They especially benefit
lower middle-income groups in Bangladesh but fail to benefit many of the
poorest people in Bangladesh, who are off the grid entirely and unable to
access richly subsidized electricity. These subsidize, all in all distort the
free market and leave less government resources for development of other
important areas of the economy. By artificially keeping retail electricity
prices low, the subsidies also act as a barrier to the cost effectiveness of
distributed rooftop solar and energy efficiency.
3.
Continuous
Losses in Power Sector
The ongoing losses also
act as a major obstacle to global financial investment inflows, given the
unsustainable nature of the current electricity pricing structure and the inevitability
of policy changes. They also create non-bankable counterparty risk. The
Bangladesh grid transmission and distribution system reported electricity loss
rates of 14% in 2014-15, 72 up from 6-8% a decade ago (Bangladesh Power
Development Board, 2015; World Bank, 2015). This also puts significant
financial pressure on any electricity system planning utility scale projects as
an alternative to distributed generation alternatives.
Figure - 2: Bangladesh
Power Development Board Plagued by Continuous Massive Losses
Source: IEEFA (2016)
4.
Increasing
Capital Cost Estimate
The Project timetables
and cost estimates for the Rampal project have risen repeatedly over the years,
mirroring trends for most thermal power plants in the region in terms of both
cost and time over-runs. Initial reports put capital costs at between US$1.2bn
and US$1.5bn, with the former probably excluding interest-funding costs
capitalised during construction. More recently, the NTPC’s December 2012
feasibility report put the cost of developing Rampal project at US$1.68bn (The
Economic Times, 2015; Dhaka Tribune, 2013; Bhattacharya, n.d.).
As per the latest
reports, state officials say that plant costs will now be US$1.8bn, owing to
additional design modifications that include a Flue Gas Desulphurisation System
and covered barges for coal transportation, changes aimed to move the project
closer to minimal environmental standards. A report in the Indian media in
April 2016 placed the cost of the project at US$2.4bn (Moneycontrol, 2016). The
latest official estimate—of US$1.8bn—implies a cost per GW of US$1.38bn
(Institute for Energy Economics and Financial Analysis, 2016: 28). Given the
history of capital costs and time blowouts for power plants in general, IEEFA
doubts that Rampal can be built for US$1.38bn per GW, especially when the
International Energy Agency puts typical capital costs globally for such
projects at US$2-3bn per GW. IEEFA, all things considered, has therefore used a
slightly higher cost for Rampal of US$1.5bn per GW. Accordingly, IEEFA
estimates that Rampal plant capital costs would be about US$2 billion, about 9%
or US$160m above the official estimates.
5.
Burden
of High Tariff
The revenue requirements
of the Rampal plant materially exceed the average per-unit electricity-generation
costs in Bangladesh. The plant would require tariff levels that are 32% to 62%
higher than the current average cost of electricity production in Bangladesh.
The higher required tariff of this plant—ranging from Tk7.78/kWh (US9.9c/kWh)
at highly subsidised level of debt to Tk9.5/kWh (US12.1c/kWh) for unsubsidised
debt—would push the average cost of production up and would either place a
significant upward pressure on consumer tariff rates or increase the subsidy
burden substantially—a bad outcome either way (IIEFA, 2016).
Table - 4: Capital Costs
for Construction of New Coal Fired Power Plants (US$m)
Project
|
Country
|
Technology
|
Technology Supplier
|
Completion
|
Capacity GW
|
Cost
US$ bn
|
Cost
US$ bn/GW
|
Matarbari
|
Bangladesh
|
USC
|
NA (Debt funding
commitment by Japan International Cooperation agency –JICA)
|
2023
|
1.2
|
4.6
|
3.9
|
Luz de Atacama
|
Chile
|
USC
|
NA
|
2021
|
1.4
|
4.2
|
3.0
|
Kudgi STPP
|
India
|
USC
|
Doosan Heavy
Industries (South Korea) and Toshiba (Japan)
|
2016-2017
|
2.4
|
2.3
|
0.9
|
Yermarus TTP
|
India
|
SC
|
BHEL (India), Alstom
(France) and Siemens (Germany)
|
2016
|
1.6
|
1.7
|
1.1
|
Gadarwara TTP
|
India
|
SC
|
BHEL (India)
|
2017-2018
|
1.6
|
1.7
|
1.1
|
Khargone TTP
|
India
|
USC
|
BHEL (India)and Alstom
- Bharatforge (France-India)
|
2019
|
1.3
|
1.5
|
1.1
|
Bellary TTP
|
India
|
SC
|
Alstom (France) and
Siemens (Germany)
|
2016
|
0.7
|
0.7
|
1.0
|
Batang Power Plant
|
Indonesia
|
USC
|
PT Adargo Energy
(Indonesia), J- Power Electric Power Development Corporation Ltd. and Itochu
Corp. (Japan)
|
2018
|
2.0
|
4.0
|
2.0
|
Jawa 7
|
Indonesia
|
SC
|
China Shenhua Energy
(China) and PT Pambangkitan Jawa Bali (Indonesia)
|
2020
|
2.0
|
5.0
|
2.5
|
Manjung Power Plant
|
Malaysia
|
USC
|
Alstom (France) and
CMC (China)
|
2015
|
1.0
|
1.2
|
1.2
|
Tanjung Bin 4
|
Malaysia
|
SC
|
Alstom (France),
Mudajaya Shin Eversindai (Malaysia)
|
2016
|
1.0
|
1.1
|
1.1
|
Mae Moh Power Plant
|
Thailand
|
USC
|
Alstom (France) and
Marubeni Corp. (Japan)
|
2018
|
0.6
|
1.1
|
1.8
|
Source: IEEFA (2016)
V. Technical
Non-viability
The key
questions to be asked include: (a) whether efficient use of the technology can
be assured in the context of the concerned case; (b) whether the damaging
effect of the plant on Sundarbans would be possible to minimize or not by using
the technology; (c) whether the technologies have any limitation or any
negative effects.
Emission
of Nitrogen Oxide: In
order to reduce the emission of nitrogen oxide, the Rampal project plans to use
Low-nox burner technology instead of Selective Catalytic Reduction (SCR)
technology. But, the efficiency of the former one is almost half of the later
(Bell & Bukingham, n.d.) Based on the EIA report, 84.6 tonnes of Nitrogen
Oxide will be emitted on daily basis. At present, in the Shundarban’s air
average concentration of nitrogen oxide is found to be 18 micrograms per cubic
meter. When the power plant will start to generate electricity, that
concentration will rise to 47.2 micrograms which will be obviously much more
dangerous than the general condition.
Extent of Particulate
Matters: It has been said that
Electrostatic Precipitator (ESP) will be
used to reduce the emission of particulate matters in the air. But, there are
many sources (outside the capacity of ESP) like construction works, coal
transportation, ashes management etc. that could create particulate matters in
different areas of Sundarbans. There is no estimation in this case and also
there is no guideline for the management of these particulate matters.
Use of FGD: According to the EIA report, the FGD was not mandatory.
It has been said that if sulphur (contained in coal) would be more than 0.6%
then the FGD would be used. But, now it has been planned to use the FGD in the
face of criticisms at different levels regarding the emission of sulphur. The
FGD is a costly method for the treatment of SO2 (200 to 500 dollar per ton).
Moreover, the use of FGD also involves risks of containing chloride, sulphate,
bi-carbonates, Gypsum, fly ash, ammonia, arsenic, boron etc. with the FGD waste
water. The extent of such toxic chemical substances varies with nature of coal
and limestone and therefore there is no specific ‘One-Size-Fit-For-All’ method.
Thus, the treatment of these chemicals is difficult and costly (Higgins et al.,
2009).
Elimination of Mercury: There is no estimation regarding the extent of
emission of mercury. By using FGD and ESP, total amount of mercury can’t be
eliminated fully. On an average 48% and almost 69% of mercury can be eliminated
(Freely, et al., 2006).
Management of Ashes: Government is saying that the fly ashes will be
sold to the cement companies. On the other hand, the cement companies are
advertising on cements that excludes the fly ash. Therefore, the sale of fly
ashes, produced not only from the Rampal plant but also from the other proposed
plants, is under serious suspense.
Water Purification: Though it has been said that the polluted water
will be purified using the Effluent Treatment Plant, the efficiency of it can
be questioned. In terms of purification, only the handling of pH is not enough.
Rather, it is also necessary to handle the toxic heavy metals like BOD, TDS, TS
etc. which is not often being done. A research based on 272 coal power plants
of USA shows that during the discharge of polluted water into the 188 rivers no
rules have been followed to control chemicals such as arsenic, boron, mercury
and so on. In fact, it is difficult to do and also costly. So, it can’t be
expected that the polluted water of the plant will be purified totally before
discharging into the rivers of Sundarbans.
Temperature of
Discharged Water: In the previous days,
it had been said that the temperature of the discharged water will be totally
normal! Later, it has been accepted that the temperature will rise by 2 degree
centigrade. But, to what extent the temperature will rise is a matter of
question. According to a report of JICA, due to the emission of thermal
effluent the temperature of water can rise up to 4 degree centigrade and which
is very much dangerous for the fishes of the wetlands (Ministry of Power, Energy
and Mineral Resources, 2015).
Online Monitoring: Under the system of online monitoring, only the
air pollution is being monitored. But, there are many other types of pollution.
And, it is also questioning that whether the identified pollutions will be
eliminated or not. The monitoring authority gave a report by identifying the
pollutions caused by land creation, dredging etc. in the pre construction
phase. Then, in November, 2014 in the third monitoring report it has been said
about the management of dusts, noise pollution by dredger and emission of black
smoke. But, in the 8th monitoring report of February 2016 it has been
found that the above mentioned problems haven’t been solved yet.
VI. Conclusions
and Recommendations
The planning for power generation
must match with the demand of power. The state of daily demand of power in
Bangladesh has unique characteristics. If one closely looks at the daily load
curves as regards demand for power, the demand for power in the early morning
hours of a day (from 12 am to 8 am) is the lowest, varying from 3500MW to
4500MW. During the period from 8 am to 5 pm, demand varies from 5000MW to
6500MW. In the evening hours - from 5 pm to 11 pm - the demand for power soars
up. The demand reaches its peak normally between 9 pm to 11 pm. So, the daily
demand for power can be divided into three periods:
Period - I: Low demand of power from 12 am
to 8 am,
Period - II: Intermediate demand of power
from 8 am to 5 pm; and
Period - III: Peak demand of power from 5
pm to 12 pm.
Usually, for Period – I,
the provision is made through base load power. During this period, the power
plants having high generation capacity, particularly thermal power plants
(either coal or gas fired) operate. If these plants run with full plant factor
and efficiency for 24 hrs, the output from these power plants will be high and
will require low maintenance. If the plant factor of large power plants
plummets frequently, consequently the cost of maintenance and the cost of
energy (CoE) are high. In case of plant factor falling below 40% efficiency
level, the CoE increases. During Period - II, the high capacity plants can be
replaced to source from power plants having medium capacity. These medium
capacity power plants are thermal power stations, which are fired by either
coal or gas. It is better to run the coal and gas fired thermal power station
with high plant factor as long as possible. For the provisions in the peak
hours, peaking power plants are required. Peaking power plants include simple
cycle gas fired plant, hydro-power plants and liquid fuel (HFP, Diesel or HSD)
based power plants. The operation and the shutdown of these power plants can be
done flexibly. For the operation of these power plants requires maximum
efficiency and the plant factor must not be less than 40%.
Currently, installed
capacity of power generation is claimed about 13,000MW and de-rated capacity is
about 12,000MW. Daytime peak generation is shown as 6500MW, evening peak
generation is about 8500 MW and the lowest generation in the early morning
hours is about 4500MW. Average plant factor shown by BPDB (in their Annual
Report of 2014-15) is 45% and system efficiency is 33%.
The Government is
planning to install about 15,000 MW new coal based power plant besides the
power generation using LNG and oil to pull the generation capacity to 30,000 MW
by 2030. The endeavor to enhance the generation capacity is to meet the maximum
demand showed in the Power System Master Plan 2015. It is obvious that the
demand for power is increasing in the evening hours but the daytime or base
load demand is not increasing. In order to meet the peak demand of evening,
installation of high capacity plants will incur economic loss. The demand of
power in evening soars due to increasing residential electricity connections.
Until extensive industrialization takes place, the base load and daytime demand
for power will remain the same. So, the installation of such new power plants
will result in the low plant factor and the inefficiency of the power system
will remain adding more to loss figures.
Therefore any
sustainable plan for power generation system must be geared towards to address
the variations in loads - the base load, daytime load and evening peak load.
Accordingly, the Least Cost Generation Plan suites perfectly to the conditions
of Bangladesh. Under a Least Cost Generation Plan, the country will not need so
many large coal or gas based power stations because these power plants operate
with low plant factor and low efficiency, resulting into incurring huge losses
even with higher electricity tariff. This is borne by the fact of the Daily
Generation Report of BPDB, which testifies that the large power stations in the
public sector are either remaining shutdown or running with low plant factor.
As a result, the loss burden is piling up every year at a rate of Tk. 6,000 to
Tk. 7,000 crores per annum.
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