Research Title:

Coal-based Power Generation in Bangladesh: Problems and Prospects

Chapter 1
Introduction
1.1 Background
1.1.1: Bangladesh economy and energy consumption
Among a group of low income countries across world, Bangladesh is considered as one of the
Frontier Economies in Asia (Schipke, 2015). Bangladesh is experiencing sustained
economic growth linked to structural transformation (agrarian to industrialization), trade
liberalization and economic diversification (highly concentrated in readymade garments).
According to Schipke (2015), the frontier economies will emerge as next generation market
player following a strong growth conduit. Steady paces in GDP growth rate (5.5%-6.5%)
uphold Bangladesh economy amid intermittent political disorder and 2008 global-economic
meltdown. GoB has set an outlook to achieve double digit growth rate of 10% with a status of
middle income economy by 2021 (Planning Commission, 2012).
Bangladesh is a low energy consuming economy and according to ADB 2014 estimates, the
low-energy intensive services sector contributes about 56.2% of GDP. The policy makers
advocate access to electricity (%) of total population as one of the most important inputs to
electricity improvement indicator (Planning Commission, 2011). The per capita consumption
of electricity in Bangladesh is much lower than that of neighboring regions and South Asian
average as well (Planning Commission, 2011). Bangladesh is an electricity-hunger and one of
the worlds least energy consuming countries that badly inhibits the growth of economic
activities (CPD, 2011 and Masuduzzaman, 2012). Bangladesh consumes substantially less
electricity per capita 197.72 KWh than Viet Nam 1273 KWh which is another Asian frontier
economy (World Bank, 2012 and BPDB, 2012). The rate of access to power, however,
improves to 68% in 2014 and 72% in October, 2015 with multilateral donors investment and
technical assistance in power sector (Planning Commission, 2015).
Higher usage of electricity increases the likelihood that an economy is on energy and
development ladder (Asaduzzaman and Ahmed, 2011). The correlation between energy
consumption and economic development has been the point of interest for researchers since
1978. The positive causality relationship between per capita energy consumption and per
capita GDP has been identified for Bangladesh in various research findings. The study of
Asaduzzaman and Billah (2006), Ahamad and Islam (2011) and Alam et al. (2012) suggests
that higher level of energy consumption leads to higher level of GDP growth whereas,
Mozumber and Marathe (2007) suggested the opposite relationship i.e. economic growth
leads to electricity consumption. Masuduzzaman (2012) investigated the relationship adding
another variable of investment and suggested that the higher level of electricity consumption
and investment in Bangladesh, the more the economic growth will take place. At present,
Bangladesh is experiencing stable macroeconomic front and improving living standard that
put continuous pressure on supply-demand balance of electricity.

1.1.2: Current Power Generation Scenario

1.1.2.1: Power generation development
Bangladesh power sector has passed through variety of such problems as contracted natural
gas supply in power plants, crippling system loss (generation, transmission and distribution),
shortage of private investment and substantive government subsidies (CPD, 1999 and
Temple, 2002). ADB (2010) added that lack of investment in gas field exploration, sluggish
progress in installation of new power plants and absence of cross-border power co-operation
constraint the access to commercial energy. It is a quite common phenomena in Bangladesh
that supply-demand mismatch results in a frequent power outages that cause loss in annual
production and income which might exceed 0.5% (equivalent USD1 billion) of annual GDP
(Planning Commission, 2011 and Wiig & Murshid, 2001).
To overcome the electricity deadlock, Bangladesh government has prioritized power sector as
thrust sector taking notable initiatives as: (i) channeling substantial portion of annual budget
and annual development program; (ii) arranging road shows in Singapore, New York and
London to attract NRB investment communities; (iii) incentivizing the foreign investment
with exemption of corporate income tax and custom duties on plant machineries and
equipments and (iv) diversifying power generation mix through variety of power producers
(rental power, independent power producer, small power producers, private and public
entities) for different contract periods in place.
During 2008-2014 the derated generation capacity has been increasing gradually and
however, the shortages always remain between ever-increasing maximum peak demand and
maximum peak generation capacity (Figure 1.1). Maximum peak demand increases by 66%
(from 5,569 MW in 2008 to 9,268 MW in 2014) while the increase in maximum peak
generation about 78% (from 4130 MW in 2008 to 7356 MW in 2014) and the supply-demand
gap is 1,912 MW in 2014.

Figure 1.1: Power Generation Capacity and Maximum Demand

Source: BPDB, 2008-2014
12000
9821

10000
Maximum Peak Generation

Maximum Peak Demand

8000

Capacity (MW)

8100

Derated
Installed Capacity
8537

6639

6000

5166

5271

2009

2010

4130
4000

Load shedding
2000
0
2008

2011

2012

2013

2014

Year

Before 2009, there were only 27 power plants with installed generation capacity of 4,942
MW producing electricity for 143 million populace. There was little addition to the installed
generation capacity and the existing plants were utilized at the maximum capacity in the late
1990s. Introduction of IPPs in 1999 boosted up the power generation and gross electricity
generation amplified to more than 25 terawatt hours in 2008 (Asaduzzaman and Ahmed,
2011).The power supply grew at average 8.2% during 1994-2004 but, the real growth in
electricity generation was recorded much lower 4%-5% during 1976-2003 (Asaduzzaman
2008). As a result of chronic load shedding, the expensive and inefficient captive power
generation commenced by large industrial establishments. Khan et al (2007) revealed a
survey study that about 35% of household consumers and 39% of capital-intensive
manufacturing industries experienced disorder or damage in domestic electronic appliances
and commercial machineries-equipments respectively due to fluctuation in voltage and power
supply. In 2008, per capita electricity generation was 158.20 kWh with 45% electrification
rate.
Post 2010 period can be documented as rapid but expensive success in power generation
adopting contractual agreements of rental/quick rental power plants to mitigate the severe
power crisis. During 2009-2014, total 65 power plants have been added with installed
generation capacity of 5,091 MW and total population increases to 156 million in 2014.
Bangladesh has reached the milestone in installed power generation capacity of 10,000 MW
in 2013 through commissioning of quick/rental power plants. Later on, the installed
3

generation capacity has been increased to 10341 MW in October, 2013; 10684 MW in

September, 2014 and 11534 MW in June, 2015 through commissioning of both rental power
plants (liquid fuel based) and few large power plants (combined cycle fuel based). The
maximum derated generation capacity is recorded at 8,177 MW in August, 2015 whereas
maximum peak demand 9,268 MW in 2014. Thus, the shortfall and load shedding remain to
be a pressing concern for GoB with the ever increasing demand.
However, the swift progress in power generation is not without defects. With a 26% installed
generation capacity, IPPs contributed 36% of total electricity generation that account for 53%
of total BPDBs expenses in power production and purchase from IPPs (BPDB, 2008).
Replacing gas-based power plants with quick/rental power plants increase both imported fuel
cost and average cost of electricity production. Price hikes in furnace oil (500%) and diesel
oil (240%) are reflected in import bills that has increased to USD4.8 billion in 2014 from
USD2.6 billion in 2010 (Kak, 2014). The financial health of power sector has influenced by
the expensive rental contracts: the purchase cost of fuel mix (oil and diesel: 18.3%) required
in power generation accounts for about 40% of BPDBs cost. The cost of electricity
generation also shoots up: BDT2.65/KWh in 2010, BDT5.16/KWh in 2012 to BDT6.10/KWh
in 2015 (Mujeri and Chowdhury, 2013 and Planning Commission, 2015). Increasing
dependence on imported fuel based rental power plants forces GoB to increase fuel and
energy subsidy. The effect of huge subsidy is to be adjusted by raising the bulk tariffs of retail
consumers at frequent intervals.
It has been also alleged that private quick/rental gas-based power plants are allowed to
operate at 80% capacity provided with sufficient gas supply compared to the public gas-based
power plants operating only at 47% capacity (Ahsan, newagebd.net, 2015). The government
run power plants can generate electricity at BDT2.23 per unit whereas, government has to
purchase electricity from quick and rental power plants at BDT5 per unit and BDT2.82 per
unit. Nevertheless, GoB has extended the contractual period of quick/rental power plants for
another five years due to long-lead time to be in operation of alternative power generation
sources (such as, coal, nuclear or hydro power) in the opposition of opponent party and
expert criticism.
1.1.2.2: Sectoral consumption of electricity
At present, the produced electricity is mostly consumed (figure 1.2a and 1.2b) in residential
sector: 16,531 MW (47.32%) followed by industry: 11,445 MW (32.76%) and commercial
sector: 2,996 MW (8.58%). Asaduzzaman and Ahmed (2011) reported during 1994-2004, the
electricity sale has increased from 2.3 Twh to 6.6 Twh in domestic and for industry it has
risen from 2.8 Twh to 6.7 Twh. This findings support the upsurge in domestic demand
(mainly urban) for electricity. The industry demand has declined since 2004 due to the
orientation of captive power generation. The captive power generation (liquid fuel/ gas based
generators) in RMGs added extra 5% annual cost amounting USD290 million that result in an
economic loss of BDT 33,563 crore (USD4,359 million @ BDT 77/USD) equivalent to the
value of 9500 MW during 2005-2006 (Khan et al, 2007).

Figure 1.2a: Sectoral Allocation of Power Consumption (in Unit)

Source: Bangladesh Buearue of Statistics (BBS), 2013
18000
16000
14000
12000
10000
Others
Agriculture
Unit in million kilowatt hours
8000

Commercial

Industrial

Domestic

6000
4000
2000
0
2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

year

Figure 1.2b: Sectoral Allocation of Power Consumption (in Percentage)

Source: own estimation based BBS 2013 data
50.0%
45.0%
40.0%
35.0%
30.0%
Domestic
Unit in Percentage

25.0%

Industrial

Commercial

Agriculture

Others

20.0%
15.0%
10.0%
5.0%
0.0%
2004

2005

2006

2007

2008
Year

2009

2010

2011

2012

2013

1.1.2.3: Primary fuel mix in power

Power generation is overly depended on natural gas for over the years (2009: 88% to 2014:
72%). Natural gas is widely preferred primary fuel in electricity generation. US Energy
Information Administration estimates that gas-fired power plants comprise 75% of new
installed capacity additions between 2012 and 2016 (Hossain, ep-bd.com). Without
exception, the energy basket in Bangladesh power generation is less diversified and mostly
skewed to natural gas while the share of other energy sources (oil, coal and hydro) is
relatively insignificant. Total energy demand in June, 2014 is estimated 26.55 million tons oil
equivalent in which natural gas comprises of 20.50 million tons oil equivalent and only 5.35
is from imported oil (Obaidullah, ep-bd.com). The administered gas price in Bangladesh is
deliberately kept undervalued relative to other fuels.
Both coal and hydro power based gas generation capacity is limited to 250 MW in
Barapukuria coal power plant) and 230 MW respectively. It is worthy to mention that both
and coal and hydro power capacity is on declining trend. The proportion of liquid fuel based
rental or quick rental power plants are on song increasing to 18% in 2014 from only about
5% in 2010. The share of liquid fuel based generation has increased to 29% and gas based
generation fall down to 63% in June 2015. This is an indication of constricted gas supply as
primary fuel for power generation in the country. The dependency on liquid fuel and gas
based power generation is expected to continue until 2018 and oil fuel cost would jump to
USD3,000 in 2022 from USD7000 million in 2013 (Planning Commission, 2015) and
allocated subsidy is estimated at USD4 billion to run quick/rental power plants.
Figure 1.3: Primary Fuel Mix (2009-2015)
Source: Power Division, 2014 and BPDB, 2015
100.00%
90.00%
80.00%
70.00%
60.00%
Natural Gas
Fuel Mix in Percentage

Coal
50.00%

Liquid Fuel (Furnace Oil/Diesel)

Hydro

Import

40.00%
30.00%
20.00%
10.00%
0.00%
2009

2010

2011

2012

2013

2014

2015

Year

The power import from India through regional grid connectivity has added another 500 MW
to the national grid in 2014. Process to import another 100 MW import is on the wheel and
6

additional 500 MW through existing transmission grid. Asian Development Bank has
provided required technical and financial assistance for Bangladesh-India electrical grid
interconnection. In effect, the power trade is expected to facilitate Indias private investment
in Bangladesh power sector (Planning Commission, 2011).
1.1.2.4: Primary fuel reverses
The important primary mineral fuels Bangladesh is producing are natural gas, coal and
petroleum: crude oil & refinery products (USGS, 2012). Uninterrupted production and liberal
consumption are responsible for shortage of gas reserve whereas, the annual domestic coal
production and petroleum refining capacity from imported crude oil is limited. Bangladesh
has proved reserves of natural gas is about 8.9 TCF (BP, 2015) and measured coal reserves
are 1,168 million tons equivalent 30.74 TCF natural gas (PSMP, 2010).
1.1.2.4.1 Gas reserves
Gas exploration is conducted by both public (BAPEX) and private (International Oil
companies) arrangements in Bangladesh. The average production of gas exceeded 2770
MMCFD (June, 2015) from 1,744 MMCFD (January, 2009) aided by capacity enhancement,
drilling wells or work over (Planning Commission, 2015). The daily gas production is 2700
MMCFD in which 59% comes from IOCs and the daily demand for gas is 3200 MMCFD,
shortage of 500 MMCFD. Bangladesh has already consumed 13.032 TCF out of 27.12 TCF
under 20 operating gas fields and remaining reserve tends to be 14.088 TCF (Planning
Commission, 2015). Petro-Bangla estimate suggests that gas production will tend to decrease
from 2016 whereas, gas demand is expected to reach 7,400 MMCFD in 2025 and thus,
demand-supply gap would become 7 to 9 TCF by 2029.
Petro-Bangla (2008) reported that power sector (including captive power) contributed 54%
(more than one-half) of natural gas sales compared to demand from other sectors: fertilizer
18%, industries 15% and domestic 12%. Asaduzzaman and Ahmed (2011) estimated that the
gas demand could be doubled with growth rate 13% and 12% from other industries and
domestic respectively in about 7-8 years whereas, growth rate in power sector was expected
to be 8.16%. It is projected that gas demand from industry and domestic sector would
increase to 61% in 2030 (Planning Commission, 2015). With 7% and annual growth rate in
demand, natural gas reserve would be depleted by 2023 subject to no major discoveries of gas
fields (Planning Commission, 2015) and the reserve/production ratio is 10.7 (BP, 2015).
Bangladesh gas sector certainly needs the coordinated effort from both public and private
companies to initiate surveys and explorations required to tap the unexplored gas reserves.
The 10-years old survey conducted by Petro-Bangla and USGS indicated that there could be
8.4 TCF (on-shore: 6 TCF and off-shore: 2.4 TCF) of gas resources. If only half of this
resources tend to be available for power generation, it would be utilized in 2,500 MW
efficient combined cycle power plants. In addition to that, recent maritime boundary dispute
resolution between Bangladesh and Myanmar opens up new opportunity for off-shore gas
exploration.
1.1.2.4.2 Coal reserve

Bangladesh has discovered 5 coal fields of 3300 million tons remain idle in the north-western
part of the country (PSMP, 2010). The domestic coal (North-west region at mine mouth)
constitutes about 29.07% of total fuel mix to produce about 11,250 MW electricity. It is
suggested that the increasing use of other fossil fuel especially coal would be as comparative
alternative if gas subsidies are taken back. The lone Barapukuria coal mine is extracting using
sub-critical technology (Long Wall Top Caving) of UGC method to fuel mostly as primary
fuel to two mine mouths (2 x 125 MW) and partially to brick kilns (Planning Commission,
2015). It is producing about 1 million tons per year which is only one-third of its generation
capacity (Ahmad and Tanin, 2013).
Table 1.1: Domestic Coal Reserve
Coal Fields
Year of
development

Depth (m)

Measured coal
reserve (million
tons)

Barapukuria (Dinajpur)
Phulbaria (Dinajpur)
Khalaspir (Rangpur)
Dighipara (Dinajpur)
Jamalganj (Bogra)

118-506
150-240
257-483
328-407
640-1,158

303
572
143
150
1053

1985-87
1997
1989-90
1994-95
1962

Measured
plus probable
coal reserve
(million
tons)
390
572
685
600
1053

1.1.3 Power generation outlook

With the short-term contingency plans Bangladesh has successfully overcome the brownout state of 10-12 hours load-shedding prevailed in 2009. The vision 2021 (100%
electrification at affordable price through low-cost power production and reliable supply of
primary fuel) and enrollment into middle income economy in the golden jubilee of liberation
war has become the prime concern for government. To revive the stagnant economic growth
rate of 6% to double digit, Bangladesh needs stable supply of electricity improving the fuelconstraint power generation.
It is expected for a developing country to record 1% growth in GDP following a 1.4%
increase in demand for electricity (Planning Commission, 2011). CPD (2011) estimated that
about 0.23% increase in per capita GDP results from 1% increase in per capita energy
demand. Hossain (2012) cited in Ahamad and Tanin (2013) that average 8% increase in
electricity demand calls for installation of extra 400 MW in generation capacity. Bangladesh
has experienced a range of fluctuation (5% - 6.5%) in GDP growth rate since 2008 and thus,
it would imply an increase of 7% - 9.1% in power supply. Mujeri and Chowdhury (2013)
suggested that energy consumption speeds up when economic activities are intensified in
development wheel compelling the range of GNI per capita in between USD1,000 and
USD10, 000.
Gicquel and Gicquel (2013) has explained per capita energy consumption function of GDP
per capita based on World Bank 2010 data (figure 1.4). According to them, low income
countries (less than USD975) with average GDP per capita of USD 1,140 have average per
capita commercial energy consumption is 365 kg oil equivalent per year. The average GDP
per capita of middle income countries (lower middle income: between USD975 and
USD3,855; upper middle income: between USD3,855 and USD11,905) are USD5,935 and
8

average per capita energy consumption is 1,310 kg oil equivalent per year. Ntanos et al.
(2015) have reported positive relationship between GDP and energy consumption (figure
1.5). The total primary energy supply (TPES) for lower middle income (> USD1045 and
<USD4,125) and high middle income (> USD4,125 and <USD12,746) countries is 0.451
tonnes of oil equivalent and 1.480 tonnes of oil equivalent respectively. Thus, to envision the
status of middle income country accompanies with universal electrification Bangladesh needs
a substantial amount of energy. The current energy consumption is only 279 kg of oil
equivalent which is below than the average of lower middle income countries 654 kg oil
equivalent (World Bank, 2012).

Figure 1.4: Per capita energy consumption function of GDP/cap

Source: Gicquel and Gicquel, 2015

Figure 1.4: Per capita energy consumption function of GDP/cap

Source: Gicquel and Gicquel, 2015

10

With average 10% annual growth in electricity consumption coupled with target of double
digit growth in GDP to enter into a middle income economy zone, Bangladesh is expected to
experience a rising trend in electricity consumption by various sectors (Planning
Commission, 2012 and PSMP, 2010). GoB has devised long-term (2016-2030) power
generation plan in Power System Master Plan 2010 (a sequel of PSMP 2005) attaching prime
focus on fuel diversification, private and public investment in power infrastructure, crossborder energy co-operation agreements and efficient energy utilization and conservation
system. GoB has outlined power generation plan of 24,000 MW in 2021 and 38,700 MW in
2030. A strategic shift has been identified in fuel mix of power generation: 50% from coalfired power (currently about 3%) and 20% from nuclear power, regional grid connectivity
and other renewable sources.
Existing gas reserve depletion with limited possibility of techno-expensive new gas field
exploration augments the energy demand as mounting crisis. Besides, it is impracticable to
continue power generation using expensive imported liquid fuel in long-term horizon and
also, there are limited potentials for renewable energy sources (solar, wind, hydro) with high
initial installation cost in commercial energy. Thus, GoB has emphasized coal-based in power
generation which accounts for 19,650 MW out of 38,700 MW in 2030. Various large-scale
coal-based power plants are in the planning and implementation stages to meet the gap
between supply of and demand for electricity over the upcoming years.
The conception of nuclear power plant in Bangladesh is a five-decade long story since
Figure
1.4: Per
capita
functionthe
of GDP/cap
1960s.
Rooppur
was
then energy
selectedconsumption
as site to empower
western part of the country which
Source:
Gicquel
and Gicquel,
2015
lacked
indigenous
energy
sources comparing
to the eastern part. The heavy weights proposed
Bangladesh to set up a nuclear plan: USA (60 MW), USSR (400 MW) and Belgium (200
MW). The final deal with Belgium was about to be settled but they backed out due to
liberation war in 1971. Thereafter, a number of attempts were initiated by Bangladesh Atomic
Energy Commission (BAEC) but none was materialized. Bangladesh is going to join the
league of countries where nuke power is going to be set up in 2020s to meet up 10% energy
demand set in vision 2030. Bangladesh has just signed of USD12.65 billion nuclear power
plant contract with Russia.
Power import is a new addition in power generation mix for Bangladesh constituting about
9% in the proposed fuel mix of vision 2030. Strategic location of Bangladesh between geoeconomic areas (South Asia and Southeast Asia) opens up regional energy strategy (Wiig and
Murshid, 2001). It is expected that about 3500 MW would be added to the national grid
through regional power trading during 2015-2030. Large-scale hydropower potential in
Bhutan (about 11 GW in 2020) and Nepal (estimated to about 42 GW) can be connected to
Indian load centers through a strong interconnected transmission in the India-BangladeshBhutan-Nepal sub-region to meet power demand in India and Bangladesh (Wijayatunga and
Fernando, 2015). A joint working group of Bangladesh-India-Bhutan is now investigating
the viability of Bangladesh investment in Bhtuans hydropower projects along with re-export
opportunity to Bangladesh through existing power grid (Rahman et al. 2014). A 900 km
pipeline gas project of Rakhine State-Tripura-Brahmanbaria (Myanmar-India-Bangladesh) is
also proposed for 5 billion cubic meters of gas (Rahman et al. 2014).
Figure 1.5: Total primary energy supply and GDP/cap
Source: Ntanos et al., 2015

11

1.2 Statement of the problem

Depletion of natural gas reserves (decade-long reliance as mono fuel in power generation),
lack of initiatives in exploration of new gas fields and price volatility in imported fuel turn
Bangladesh into a standstill to materialize its 2021 vision. The major contribution (50% of
total fuel composition) of coal-based power in the overly optimistic long-term (2016-2030)
power generation master plan hinges upon imported coal and politically-trapped domestic
coal mining. At present, Bangladesh government is focusing on imported coal-based power
plants instead of mining domestic coal following (i) immense opposition from green group
and civil society regarding Phulbaria Coal Exploration by Asia Energy Co. during 20062008 and (ii) inefficient mining operation causing serious problems (death of miners,
flooding, gas explosion etc) at Barapukuria.
Bangladesh is embarking on coal (the dirty fuel) to resolve its ever-going energy crisis and to
provide universal electrification at affordable price. This is totally a new experience for
Bangladesh for setting up such large-scale power plants which may take more times to
complete than the scheduled date. Civic groups and experts are concerned about socioenvironmental impact from coal-based power plants. The other associated issues regarding
coal sourcing, national coal mining policy, investment-led infrastructure, impact of climate
change have gained strong ground in the present time. Thus, a study detailing issues
(problems or challenges) in coal-based power generation in Bangladesh would elongate a
significant contribution in the prospect of implementing such large-scale coal-fired power
plants.
A few researches have been conducted mentioning the potential power generation options for
Bangladesh in the long-term horizon. However, the proposed research would be an empirical
study in the area of large-scale coal-based power generation in Bangladesh and so far, this
type of academic attempt is limited. This research would certainly contribute to policy
markers decision about various problems or challenges in implementing coal-fired power
generation in least-developed countries like Bangladesh.
1.3 Research objectives
The overall objectives of the research study are:
i.
ii.

To identify problems associated with coal-based power generation in Bangladesh

To prioritize the problems of coal-based power generation in Bangladesh.

1.4 Scope of the study

Power sector includes operations of power generation, transmission and distribution in
Bangladesh. The proposed research study will only focus on long-term (2016-2030) coalbased commercial power generation in Bangladesh.

12

Chapter 2
Methodology
2.1 Research concept
The study is an exploratory qualitative research aiming at understanding the nature of
problems in coal-based power generation in Bangladesh. The purpose of exploratory study is
to provide insights since the problems associated with large-scale coal-based power
generation in Bangladesh are not much known and availability of information about such
problems in similar other cases are limited. The exploratory is conducted to have
comprehensive identification of the problems at the point of focus before applying conclusive
design to confirm findings (Sekaran, 2006 and Malhotra & Birks, 2007). The qualitative
nature of this study will focus on extensive relative judgment of industry experts who are
usually quality individuals having pronounced expertise level and sensitive thoughts
regarding issues concerned (Malhotra & Birks, 2007). The assessment of problems associated
with coal-based power generation is rather qualitative than quantitative in manner.
The preliminary theoretical model (figure 2.1) of this research follows sequential steps
beginning with literature searching. The articles and official published reports will be
reviewed in terms of three aspects: coal-based power policy in Bangladesh, associated factors
affecting coal consumptions in power generation and international experiences in coal-based
power generation. A comprehensive list of problems observed in coal power generation will
be sorted out. With preliminary discussion with the industry experts (power sector) will be
carried out to specify the problems of coal power generation in Bangladesh context to finalize
the list of problems (alternatives) with setting evaluation factors (criteria). After preparing the
questionnaire, the data will be collected from a sample of 10-12 experts through interview.
The sample selection will be based on non-probabilistic method (judgmental sampling) and
sample size is small and non-representative. The data will be analyzed using Analytical
Hierarchy Process (AHP) to derive the prioritized the problems of coal-based power
generation in Bangladesh. Finally, the findings and discussions of the analysis will be
documented.
2.2 Data analysis technique
Analytical Hierarchy Process, developed by Thomas L. Saaty, is a theoretical measurement of
expert opinions to support trade-off in decision-making activities. AHP provides a framework
to structure a multi-factor problem into a hierarchy through pair-wise comparisons of expert
judgements (qualitative) to get priority scales (Saaty, 2000 & 2008). The pair-wise
comparison matrix of relative judgements is developed using a single ratio scale of numbers
ranging from 1 to 9 (equally importance to extreme importance). This represents which
element is important and how much one element is important than the other with respect to
given criteria or evaluation factors with respect to which elements are to be compared. The
priority scales or weights will be derived by using AHP software or by manual calculation of
normalized geometric mean method. The derived priority scales will be synthesized by
multiplying them by the priority of their parent nodes and adding all such notes (Saaty, 2008).
The AHP process of this study (figure 2.1) will begin at the stage finalizing the list of
problems by setting criteria (evaluation factors) and alternatives (proposed problems)
followed by questionnaire preparation and data analysis.

13

Literature Reviews

Bangladesh Coal-based
Power generation policy

International Experience
in coal-based power
generation

Factors affecting coal

consumption in power
generation

Comprehensive list of problems in coal-based power generation

Consult with subject

matter experts in
Bangladesh

Finalize the list of problems in coal-based

power generation in Bangladesh
(Setting criteria i.e. evaluation factors and
alternatives)

Choosing Survey
method
(Expert Opinion)

Preparing
Questionnaire

Sample selection
(Judgmental Sampling)

Conduct Interviews

Data Analysis
(Pair Comparison matrix)

Findings and Discussion

Figure 2.1: Preliminary Theoretical model

14

Analytical
Hierarchy
Process
(AHP)

Chapter 3
Literature Review
3.1 Coal consumption and economic development
The contribution of energy towards economic development is generally reflected in
increasing production output through efficient energy use. The European real GDP increased
by 21.5 times with the boost in energy use of 4.7 times during 1840-1990 (Grubler et al.
1996). In the 2000s the increase in output from using each unit of energy was estimated as
much as 4.5 times higher than that of 1850s (Markandya and Wilkinson, 2007). Long-term
global economic development demands sustainable-affordable-environmentally friendly
energy sources from fossil fuels (coal inclusive) (Jin-Ke et al., 2009). Over the last three
decades, coal has been dominating the global power generation sector due to not only lowcost primary fuel; worldwide availability at predictable price and stable supply; but also
frequent price hikes and supply disruptions of oil and natural gas from politically unrest
regions (Restrepo et al., 2015; Kavouridis & Koukouzas, 2008 and Chikkatur et al., 2007).
The contribution of coal-based power producing companies in employment benefit is also
well documented in industrialized economies like U.S and EU-25 economies (Kavouridis &
Koukouzas, 2008 and Bezdek, 2010).
About 40% of global electricity is generated from coal combustion that has 29.9% of global
primary energy consumption in 2012 (IEA, 2012 & BP, 2012). The world proven coal reserve
is expected to serve 110 years of global production and top six coal consuming countries
(China, USA, India, Japan, South Africa and Russian Federation) constitute 79% of world
coal consumption (BP, 2015). Coal is expected to remain the leading fuel in global power
sector accounting for 23% of world primary energy mix in 2035 (IEA, 2013). Yang and Cui
(2012) projected that around 76% of proposed 1,200 new power plants is going to be installed
in Asian developing economies mainly, China and India. Jin-Ke et al. (2009) studied
diversification in causal relationship across developing and developed economies due to
difference in economic structure and coal-consumption pattern. According to them, the
former prioritize the economic development that stimulates carbon-intensive high coal
consumption ratio in their energy structure.
The relationship between coal consumption and economic growth is at the focused point of
many academic researches. Ferguson et al. (2008) studied 100 countries and concluded the
positive association between electricity consumption and economic growth. The causality
from economic growth to coal consumption has been identified in Tawian (Yang, 2000) and
in China (Lie et al, 2008; Yuan et al. 2008 and Wolde-Rufael, 2010). However, Yuan et al.
(2008) and Govindaraju & Tang (2013) reported bi-direction causality between coal
consumption and economic growth for China. The coal consumption is provoked by
continuous growth in GDP in Japan and China but the causality is absent for India and South
Africa (Ji-Ke et al., 2009). Yoo (2006) examined bi-directional causality between coal
consumption and GDP growth. Average 7.4% growth rate in real GDP due to fast growth in
manufacturing sectors fueled coal consumption by 3.9% annually during 1968-2002. Korean
economy largely is depended on imported energy sources and expansion of coal supply
capacity by 18.6 million tons of oil equivalent in 2010 from 42.9 million in 2000 requires
substantial investment in coal supply infrastructures (Yoo, 2006). The study of Lei et al.
(2014) discovered that bi-directional causality between coal consumption and economic
development exits in Germany, Russia and Japan; uni-directional causality between economic
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growth and coal consumption is omnipresent in China whereas, India and USA lack any type
of causality. They have reported that 1% increase in GDP produces an increase in coal
consumption of 8.16%, 0.39%, 0.472% and 0.30% in China, Germany, Russian Federation
and Japan. The coal consumption is quite less in three countries compared to China indicating
because of implementation of improved coal utilization techniques and different coal
consumption policies among the countries.
3.2 Factors affecting coal consumption in power generation

3.3 Coal-based power generation in Bangladesh

3.3.1 Coal-based power policy
Relatively stable and competitive coal pricing and domestic coal reserve abundance, to some
extent, makes the black gold as affordable power fuel for many developed and developing
countries over the years. Coal-based power makes up a major proportion (50%) in long-term
power generation plan of 38,700 MW in 2030. As a part of vision 2030, the planning
commission (2015) has drafted Seventh Five Year Plan (FY2016-FY2020) detailing
electricity generation target of 12,584 MW. Coal will account for 36% installed generation
capacity in 2016-2020 fuel compsotion (Figure 2.1).

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