26syedabdulmayeed.pdf

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Anniversary

June 16, 2014

Galloping demand forpower and mounting con-straints in its generationforced Power Development Boardat times to impose power cuts allover the country. The user indus-tries specially the process indus-tries have also been forced to gofor captive power plants to tideover the situation. Electric powergeneration is still predominantly astate controlled subject. Of late,however, government has takenup building lots of power plants oftheir own as well as liberalizedprivate power generation forbridging the demand-supply gap.The installed capacity has by nowexceeded 10,000 MW mark(10,264 MW in December, 2013)

Syed Abdul Mayeed

inclusive of 500 MW import from Indiathrough DC Regional interconnector.

The fact that private industries use cap-tive power answers the question of fi-nancial viability. For, the benefit interms of prevention of marginal loss ofproduction outweighs the cost of cap-tive power generation. Industries whichhave a high value added for electricityinput will naturally insulate themselvesthrough standby power.

Context of Captive Power PlantsUnfortunately, there is no dependablerecord of the total capacity of CaptivePower generation in the country owingto the fact that the records are not prop-erly maintained by any Authority. How-ever, it is estimated that the totalinstalled capacity would be around3000 MW i.e. around 30% of the totalinstalled capacity of the country. Thecaptive power plants are mostly run bynatural gas (70%) and the rest byHSD/HSFO (30%). As most of the cap-tive plants are used as stand by source,they are operated at a low plant factor(25-30%) while the process industriesusually run their captive plants more inhours. Most of these plants are IC enginedriven but there are few gas and steamturbines as well. During FY 2012-2013,Gas based Captive Power Plants con-sumed 3.235 billion CM. The averageefficiency of these plants is less than30%, while the gas and steam turbinesare even less. On the other hand, the in-vestment costs per KW of CaptivePower Plants are comparatively higherthan the large capacity conventionalpower plants feeding power to the na-tional grid.

Captive Power Plants - NationalPerspectiveFrom the national point of view, the is-sues are somewhat different. Here theobjective of the policy maker will be ef-ficient resource allocation. The alterna-tives differ for short and long runs. In theshort and medium run, power cut isgiven and the alternatives may be to

impose a uniform power cut on in-dustries.

impose an optimal power cut, mini-mizing production loss and unemploy-

ment.allow forc a p t i v epower gen-eration.

However, inthe longrun, powercut is not aconstraint,since extracapacity orreserve mar-gin can bep r o v i d e dfor. Growingdemand andp e r s i s t e n tfunds con-straint arenot suffi-cient argu-ments tonecessitatethe continu-ance ofpower cuts,since utili-ties can seg-ment themarket, pro-mote PrivatePower gen-eration andequilibratethe demandand supplyby increas-ing tariffs.Thus, thelong run al-t e rna t i ve sare whetherto satisfy acertain levelof peak de-mand by additional grid capacity or bycaptive power. The alternatives have tobe compared at the margin and there-fore it is not the average cost of electric-ity at the high tension (HT) terminal orthe HT tariff that is relevant, but the mar-ginal (average incremental) cost of elec-tricity. This has to be compared with thecost of captive generation at the givenlevel of demand for captive electricity.

In cost-benefit terms, the benefit of cap-tive power generation is not the savingin loss of production but the saving bynot producing grid electricity since thisis the next best alternative.

However, for the national economy, oneTaka invested in a captive plant is muchmore wasted than if it is put into a largepower plant. Larger sized power plantsare more efficient and less expensive on

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per MW basis.This should re-duce the hesi-tation ine x p e d i t i n gpower genera-tion programsby the Gov-ernment itself.If the scarcefunds do notgo into rela-tively efficientpower plants,they will betapped inscarce naturalgas or im-p o r t e dH S D / H S F Obased mostly idle captive power plantsbuilt with relatively higher cost sincethere is no alternative.

A Typical ExampleDhaka Export Processing Zone (DEPZ)atSavar, Dhaka houses a number of exportoriented industries, the electricity sup-ply of which are primarily met by aPower Plant promoted by BEPZA itself& established by a private power com-pany inside the DEPZ premises. Few in-dustries also have their captive powerplants.

Here are lists containing few typical fig-ures of gas based Captive power plantsin operation inside Dhaka EPZ prem-ises. The lists show several standby(Table I) as well as full time power plants(Table II). The total installed capacity isaround 65 MW out of which ownersoperate around 34 MW in total on fulltime basis, individual unit capacitiesranging from as low as 280 KW to 1750KW, from their smaller power plants ofcomparatively lower efficiencies. Theyfind their operating cost apparentlylower (!) than the BEPZAs large sized(say 100 MW), more efficient (45%) re-liable power plant located beside theirindustries and chose to keep the later asstandby. A typical exercise shows thatwhile considering the 34 MW captivepower plants in operation in DEPZ at aPlant Factor of 70% for a period of onemonth, the BEPZA power plant pro-

duces 8.6 million Kwh more electricitywith the same amount of gas consumedby the above captive power plant (An-nexure I). BEPZA power plant invest-ment cost is around USD 600/KW asagainst small capacity power plantswhich is in the range of USD 750/KWor above.

Annex 1The different IC engines used in captivepower has unit capacities ranging fromas low as 280 KW to as high as 1750KW. Total installed captive generationcapacity under continuous operation inDhaka Export Processing Zone (DEPZ)is approximately 34 MW.

Considering a typical 800 KW IC en-gine, the efficiency can often be foundto be below 30%. For this study, effi-ciency has been considered to be 30%.The heating value of gas is 950 KJ/SCFT(LHV).

From the above information, HeatRate of a typical IC engine can be cal-culated, as follows:

Heat Rate KJ/KWHR = (3600) Efficiency %= (3600*100) 30= 120,000 KJ/KWHR

Volume of Gas required per KWHRcan be calculated as follows:

Using Heating Value of Gas as 950KJ/SCFT

Volume of Gas

= Heat RateKJ/KWHR Heating Valueof GasKJ/SCFT= 120,000K J / K W H R950 KJ/SCFT = 12.632SCFT/KWHR= 0.358m3/KWHR

Fuel Con-sumption forcaptive gener-ation capacityunder contin-uous opera-tion = 0.358

m3/KWHR

BEPZA Power Plant employs state-of-the-art reciprocating engines with oper-ational efficiency of 45%.

Heat Rate of engines employed byBEPZA Power Plant can be calculated,as follows:

Heat Rate KJ/KWHR= ( 3600) Efficiency %= (3600*100) /45= 80,000 KJ/KWHR

Volume of Gas required per KWHRcan be calculated as follows:

Using Heating Value of Gas as 950KJ/SCFT

Volume of Gas = Heat Rate KJ/KWHR Heating Valueof Gas KJ/SCFT= 80,000 KJ/KWHR 950 KJ/SCFT = 8.421 SCFT/KWHR= 0.238 m3/KWHR

Fuel Consumption for BEPZA PowerPlant = 0.238 m3/KWHR

To produce 34 MW in one calendarmonth, volume of gas required by cap-tive generation in DEPZ can be calcu-lated as follows:

Assumptions:Capacity (34 MW) = 34000 KWRunning Hours in a month = 720 HoursPlant Factor = 70%

Generation in 1 Month

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= Capacity x Running Hours in a Month = 34000 x 720 x 70%= 17,136,000 KWHR

Total Volume of Gas required forGeneration in 1 Month by Captive= Generation in 1 month x Fuel Con-sumption = 17,136,000 KWHR x 0.358m3/KWHR= 6,134,688 m3

With the same Volume of Gas(6,134,668.000 m3), amount of powerthat can be produced by BEPZA Plantcan be calculated as follows:

Generation by BEPZA= Volume of Gas used by Captive PerUnit Fuel Consumption of BEPZAPLANT=6,134,668.000 m3 0.238 m3/KWHR

= 25,776,000.000 KWHR

Thus Generation by BEPZA Power Plantwhen compared with Captive Genera-tion stands as:

50% more efficient

50% more generation by utilizingsame volume of gas per month

8,640,000 KWHR of additional gen-eration per month

In consideration of optimum utilizationof scarce natural gas and best use offund on a national economy point ofview, all the industries inside DEPZshould full time receive electricity fromthe BEPZA power plant and keep theircaptive power plants as standby.

ConclusionUnit based captive power generation

means pressure on scarcer Natural Gas,lower efficiency, loss of economies ofscale and a built-in capacity underuti-lization. The findings of a typical reallife example illustrated above suffi-ciently confirm that. Though it might ap-parently seem involvement of asomewhat reduced lumpiness in invest-ment and affording quick capacity ad-dition in case of captive power plantsbut nevertheless on a national economypoint of view, in the present context ofBangladesh, operation of gas operatedcaptive power plants should be discour-aged at all levels where grid power isavailable save & except for feeding fewcritical emergency loads.

Syed Abdul Mayeed;Former Chairman, BPDB

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EP