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Thursday, September 8, 2016

Triple jeopardy in the Sundarbans



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:
  • Marubeni Corp & L+T
  • Harbin Electric Int. Co
  • ETERN
  • Bharat Heavy Electricals Limited (BHEL)
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
  • Original target date
  • Completion and start commissioning 41 months after financial close
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
https://lh4.googleusercontent.com/FLTlxm8HRvPDq0akPP97lamKa_6uqYZo9vdxXUbeB9Gn9BdwdWANVkT3zv2AdD45umpMT9huvEepIDeKDlZ9qUp3IiM8QGmp8HwKH2z3GN30YE6DzWAAtNIBetcmj_XjNCCoYCkPKKXdiHH38w
            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
https://lh3.googleusercontent.com/t_dbS78EgyFvIR53XFoxSsnEW8lKBi8tEju6lE6jUp0FyKfrIyPC_lnvhzwy96Sbwf4DWVZGG0u6OQwdOn6oVCb2PAiRVXDJKlYsyGHIkdKsb3n52r2wpO05y_Wj5z3PnfH5gXnW2c5T-qhkXw
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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