Académique Documents
Professionnel Documents
Culture Documents
NIRAS A/S Reg. No. 37295728 Denmark P: +45 4810 4200 D: +45 48104200
Sortemosevej 19 FRI, FIDIC F: +45 4810 4300
3450 Alleroed, Denmark www.niras.com E: niras@niras.dk
1 ACROCYM, PARAMETERS AND VALUES .............................................. 5
3 INTRODUCTION ....................................................................................... 12
3.1 Background ............................................................................................... 12
3.2 The project organisation and set-up. ..................................................... 12
3.3 The project objective and structure ....................................................... 14
3.4 Stakeholder mapping ................................................................................ 15
3.5 Stakeholder consultations......................................................................... 19
4 NAMA ........................................................................................................ 23
4.1 What are NAMAs ? ................................................................................... 23
4.2 NAMA models ........................................................................................... 24
4.3 Advantages and disadvantages of sector NAMA ..................................... 25
4.4 Bangladesh climate mitigation actions and efforts relevant for steel sector
.................................................................................................................. 26
4.5 NAMAs in the steel sector from other countries ....................................... 27
6 BANGLADESH ......................................................................................... 30
6.1 Overview and Strategy ............................................................................. 30
6.2 Overview of the CDM procedure and specific CDM projects ................... 30
6.3 Overview of the Gold standard procedure and specific Gold Standard
projects ..................................................................................................... 33
6.4 Baselines, Standardised Baselines and grid emission factors ................. 33
6.5 Overview of the key characteristics of the industrial sector ...................... 33
6.6 Overview of the key characteristics of the steel sector ............................ 34
6.7 Energy production, consumption and supply in Bangladesh.................... 36
6.8 Electricity produced on Gas engine VS electricity from grid ..................... 38
6.8.1 Description of the connection between gas engine, factory and
electricity grid ............................................................................ 38
6.9 Electricity prices ........................................................................................ 39
9 BASELINE ................................................................................................. 73
16 CONCLUSIONS ........................................................................................ 96
16.1 Summary of conclusions ........................................................................... 96
16.2 Recommendation of next actions ............................................................. 97
ACRONYMS
BAU business-as-usual
EU European Union
IF Induction Furnace
QA Quality Assurance
USD US Dollar
Table 1. Acronyms
PARAMETERS
3
ng Density of natural gas, [kg/m ]
3
LHV Lower heating value of natural gas, [MJ/Nm ]
Table 2. Parameters
Exchange rates
The currency used in this study is euro and taka. The exchange rates are from
October 2013:
Values
xv
Grid factor electricity Bangladesh: 0.67 kg CO2e/kWh
3 3
Natural gas price (Euro/Nm ): 0.05 Euro/Nm
xxii 3
LHV : 9,72 kWh/Nm
Table 4. Values
1
The prices of natural gas and electricity are based on actual invoices from Vikrampur
Steel ltd
In a global context the steel sector is one of the sectors with greatest potential for
CO2 emission reductions whilst offering development co-benefits at the same
time. Therefore, the steel sector is being looked at as a candidate for the devel-
opment of Nationally Appropriate Mitigation Activities (NAMA) in many countries
including Bangladesh.
The development of a NAMA in the steel sector is a priority for the Bangladesh
Government and this NAMA is coordinated by the Department of Environment
(DOE). The NAMA development is strongly supported by the three steel associa-
tions 1) Bangladesh Auto Re-Rolling & Steel Mills Association, 2) Bangladesh
Steel Mill OwnersAssociation and 3) the Bangladesh Re-Rolling Mills Associa-
tion.
This study has contributed to that Bangladesh is at the forefront with the devel-
opment of a NAMA in the steel sector and is in the position to set an example
and pilot a NAMA in such an important sector with regard to reducing global
greenhouse gas (GHG) emissions. Further support from the international com-
munity is needed to secure implementation.
The following key findings should be including in the NAMA development and
implementation.
In the climate space the CDM and voluntary market have developed
methodologies, initiated standardised approach and suppressed demand
approach. These should be integrated to highest possible degree to se-
cure the NAMA is in line with international standard.
The monitoring should be done by the company and verified by the De-
partment of Environment or another appointed authority, for instance
SREDA. It is crucial to have a national validation and verification system
to avoid costly international system, like CDM. In case it will be decided
to involve an international institution/association in the verification pro-
The actual knowledge and overview of the steel sector is limited and an
effort should be done to prepare an inventory for this sector. Only based
on the full-scale inventory covering the steel sector a final decision of
how to develop a NAMA can be decided.
This study has also focused on potential investments which can contribute to the
sustainable development of a NAMA A significant number of investments can be
done in the steel sector and four illustrative examples have been selected in
close cooperation with the stakeholders The four potential projects 1) Optimisa-
tion of the melting process Waste heat recovery from the induction furnace, 2)
Optimisation of the reheating process Waste heat recovery from the reheating
furnace, 3) Combustion and feed control system and 4) Training programme.
If the above mentioned 4 projects only are implemented on 200 out of the 300
steel mills the yearly reduction in CO2 will be 120,860 tonnes and the total in-
vestment cost Euro 25 mio.
Different financial packages have been analysed for the different projects. In the
case of a 100 % self-finance scenario. The Net Present Value are positive for all
projects except for combustion and feed control system project. The project has
an IRR on 8 % which is just below the discount rate. It is worth noticing, that with
a 20 % in-crease in the gas price or a 20 % decrease in the CAPEX and OPEX
the NPV for the Combustion and feed control system turns positive.
Having above mentioned specific project ideas in mind an effort in the steel sec-
tor should include investments for tens of millions Euro. It should be noted that at
this stage it is based on simplified calculations and a survey including all steel
mills need to be performed to have a more accurate picture of the needed in-
vestment costs. The proposed investments illustrate and indicate the direction for
important initiatives which shall be developed further.
3.1 Background
Growth, sustainability and energy security are the three main dimensions in
Governments development plans nowadays, in light of growing threats such as
climate change, rising fuel prices and environmental degradation.
The industrial sector in Bangladesh contributes roughly to 1/4 of the GDP in the
country, in 2013, and is expected to have a growth trajectory in the upcoming
years, therefore, raising the alert for the progressive implementation of energy
efficiency measures in the sector, to curb major problems with energy security,
already affecting the energy panorama in the country, and to boost a greener
economic growth.
Amongst the several sub-sectors within the industrial sector, the steel industry
has been identified by the Government of the Peoples Republic of Bangladesh
(Government of Bangladesh) as a potential target to reducing energy intensity
(and GHG emissions), even though it only represents a small share of the overall
economic output of the industry in Bangladesh. It is recognised that an effort in
the steel sector will have a lot of other benefits, for instance the handling of
waste products and the improved workers environment
Project actors
Bangladesh Denmark
Department of
Viegand &
Modern Erection Environment of
Maage A/S
the Ministry of
Vikrampur Steel (MEL) ---------------- NIRAS A/S
Environment and
Ltd. ----------------
---------------- Forests of Engineering
---------------- Bangladesh consultancy Engineering
Engineering
Owners of the company ---------------- company consultancy
steel facility responsible for responsible for company leading
In-kind support to
where the pilot constructing the the design of the the development
the
project will be new heat new heat of the NAMA for
implementation
developed recoveery system recovery system the steel sector
of the Project and
components and capacity
coordinating
building activities
NAMA actions
Morten Pedersen, Mads Glent Abildgaard and Rune Jrgensen from NIRAS A/S
and Fridolin Mller Holm and Christian Risborg from Viegand Maage A/S have
been the main contributors of the NAMA steel report. All work has been done
with significant support and in close cooperation with Department of Environment
(DOE) of the Ministry of Environment and Forests of the Government of Bangla-
desh, Mr. Monsulrul Alam and Mr. Md. Ziaul Haque.
Figure 2 NAMA and Innovative Optimisation in the Steel Sector in Bangladesh: Project
streams.
The present report focus on the NAMA Stream of the Project, which particularly
involves:
Data collection from mainly Vikrampur Steel Ltd;
Create an overview of existing national policies and regulations;
Overview and discussion of other CO2 reducing in Bangladesh, for in-
stance CDM and Gold Standard
Develop a tool box of possible emission reduction initiatives
Preparation the first ideas to of a sector-level Measurement, Reporting
and Verification (MRV) system;
Drafting the initial ideas for a NAMA proposal, including the examples of
mitigation potential, costs, barriers and policy options;
This project is only covered the initial consideration and should be followed-up by
a full-scale feasibility covering the entire steel sector. But the extension is outside
the scope of the grant contract. Further surveys and implementation can be done
in several steps in order to secure progress and momentum.
The project is developed fully in line with the Bangladesh Climate Change Stra-
tegy and Action Plan 2009. Without any larger screening it has been agreed to
focus on the steel sector as it can have significant impact on the sustainable
1development in Bangladesh. The steel sector has to some extent been an over-
looked sector in relation to environment and energy as it is mainly a domestic
sector.
As part of the larger grant financed project by the NCF and the Danish Embassy
a pilot investment project (Vikrampur Steel Ltd) co-financed by Vikrampur Steel
Ltd and MEL is under implementation and the experience until now from the pilot
project and training have been integrated in the proposal for this NAMA.
Below is an overview of the key stakeholders identified and they have all been
informed about the project. In this first part of the project the focus has been
DOE, MoF, Steel Associations and the steel mills.
In the overview only selected key stakeholders are presented. For instance only
one steel mill is mentioned, but of course all still mills should be part of the pro-
ject.
Specialist in
providing energy
audits, analyses,
feasibility studies,
financial and
technical decision
Table 5. Stakeholders
DOE
O
Steel Association
MPEMR
Steel Mills
MoI
NIRAS/VM/MEL
DOE has been the coordinating government institution for this project on behalf
of the host country and the DOE is also the focal point for any communication
with UNFCCC, in particular in the context of submitting NAMA proposals to the
UNFCCC NAMA registry (see below).
The presentation is a simplified overview to present the key players and the main
interaction routes.
Two larger stakeholder consultations have been performed one in March 2014
and one in May 2014.
th
At the stakeholder meeting 12 March 2014 the focus has been the private sec-
tor involvement and the focus have been the three steel associations: The Bang-
ladesh Auto Re-Rolling & Steel Mills Association (BARSMA), Bangladesh Steel
Mill OwnersAssociation (BSMOA) and the Bangladesh Re-Rolling Mills Associa-
tion (BRMA) and individual steel mills (see picture 2). The steel mills and steel
st
The stakeholder meeting 21 May has had a broader approach and the stake-
holder meeting was coordinated and managed by the DOE. The approach has
been to present the findings of the NAMA proposal and secure feedback from
the involved stakeholders. The stakeholder meeting has had a good mix of Gov-
ernment representatives, like the DOE, the steel mill associations, steel mills,
other initiatives managed by GIZ and the sponsors NCF represented by NEFCO
and the Danish Embassy. (see picture 3 5)
The political and administrative framework for NAMAs will probably be evolving,
but NAMA seems to be new standard element of the international climate policy
regime.
NAMAs entered as a topic in the climate policy debate through the 2007 Bali
Action Plan when the Conference of Parties (COP) to the United Nation Frame-
work Convention on Climate Change (UNFCCC) agreed to using NAMAs to ad-
dress mitigation in a broader scale.
The agreements from the COP 16 in Cancun in 2010 recognise two categories of
NAMAs those developing using domestic means (domestically supported NA-
MAs) and those requiring international support NAMAs (international supported
NAMAs). The support could for instance be financial assistance, technology
transfer and/or capacity building.
At COP 16 In Cancun it was also agreed that developing countries can apply
NAMAs to achieve a deviation from business-as-usual (BAU) emissions by 2020.
Many countries submitted NAMA concepts, but not Bangladesh, to the
UNFCCC.
At the COP 18 in Doha limited progress was made in relation to NAMA develop-
ment and instead it was decided to start a New Market Mechanism (NMM) of
which only very rudimentary decisions could be made on at COP 18 in Doha.
The NMM will need much more detail to be a fully operation mechanism and it
At the COP 19 in Warsaw limited progress has been observed related to NAMA
and the focus is to have a treaty in place at the COP in Paris in 2015 and realis-
tic NAMA will only be a formal part of a climate agreement afterwards.
As mentioned in above section two types of NAMAs have been identified and
acknowledge by the COPs: Unilateral support NAMAs and international sup-
ported NAMA.
Sector crediting
Sector trading
By contrast, sector trading would follow the cap-and-trade approach. The sector
target would be a mandatory cap and the developing country would receive trad-
NAMA Overview
Advantages :
included)
Disadvantages :
4.4 Bangladesh climate mitigation actions and efforts relevant for steel
sector
At the Cop 15 in Copenhagen a decision from the Copenhagen Accord that both
Annex 1 and non-Annex 1 could forward pledges for the National Appropriate
iii
Mitigation Actions. Bangladesh has not forwarded any pledges.
UNFCCC reporting
The mitigation potential for different mitigation measures, including steel mills
has been calculated. Out of 21 mitigation measures steel mill is the seventh most
attractive mitigation measure. For the steel sector there is the following sum-
mary:
In the SNC the assumptions are described and the uncertainties are stressed.
There are no specific references to the assumptions so it is not possible to verify
the data and furthermore elaborate on this data and assumptions and it is not
specified what is included in rehabilitation of steel mill.
In the Interim Action Plan for Improvement of Energy Efficiency & Conservation
vi
of 14 October 2012 it is stated a new unit will be established in the Ministry of
Power, Energy and Mineral Resources and this unit should will be named Sus-
tainable & Renewable Energy Development Authority (SREDA) The unit is es-
tablished and in operation.
SREDA will broadly regulate and oversee the energy efficiency and conservation
activities in industrial, commercial and residential sectors.
This is a broad approach but the steel mills should be able to benefit from
SREDA.
Globally the steel sector has been and is under investigation for potential NA-
MAs. These surveys are all in a very initial stage and therefore it is not possible
to incorporate experience from these in the development of the NAMA in the
steel sector in Bangladesh.
Global overview
Over 1.5 billion tons of crude steel are produced and used every year. Currently
vii
most steel is produced and used in China.
According to the International Energy Agency, the iron and steel industry ac-
counts for approximately 4-5% of the total world CO2 emissions. On a global
scale 1.9 tonnes of CO2 are emitted for every tonne of steel produced.
In a global context there is significant and continued growth which prevents the
demand for steel being met by means of recycling of the end-of-life steel prod-
ucts and therefore it is necessary to continue converting virgin iron into steel. In
2012 the world crude steel production was 1.55 billion metric tons and nearly
viii
every year there is an annual increase in the crude steel production .
In the past 30 years the steel industry has reduced its energy consumption per
tonne of steel produced by 50%. Some steel mills have made significant im-
provements and for many steel mills in some development countries, including
Bangladesh, have nearly not had any focus on energy efficiency.
A critical element in reducing the carbon emissions from the steel life cycle is to
optimise the use of recycled materials. Steel can be nearly infinitely recycled
without loss of properties or performance. The sector the steel recovery rates are
estimated at 85% for construction, 85% for automotive, 90% for machinery and
50% for electrical and domestic appliances.
The production of steel results in the generation of by-products that can reduce
CO2 emissions by substituting natural resources in other industries. The recovery
and use of the steel industry by-products has contributed to a material efficiency
rate of 97% worldwide.
Use of finished steel can contribute to a longer life time of projects and improve
the carbon footprint of different products.
The World Steel Association has a framework for a lower carbon development
consisting of four building blocks:
3. All steel mills use best available technologies through benchmarking and
technology transfer.
The World Steel Association has invited all companies, also non-members of the
Association to use the data collection system and methodology to calculate the
CO2 emission reduction. The goal is to have one uniform methodology to calcu-
late CO2 emission reductions from the steel sector in a global scale.
The methodology for calculating CO2 emissions incorporates the three scopes of
ix
the GHG Protocol . A user guideline for CO2 emissions data collection has also
x
been developed
Steel mills can on an annual basis forwarded data collected according to the
methodology. The data must be complete, verifiable and approved for each year
of collection. The collection process is overseen by world Steel Association staff
and verified by a panel of experts who review all submissions against standard-
ised parameters and guidelines.
The data is held in the strictest confidence and will be known only to the compa-
ny or site itself and World Steel Association project staff. A participating company
or site will receive a report showing the process route average emission data and
range to which it can compare itself. The recognition scheme is governed by the
World Steel Association Board of Directors.
Given that Bangladesh has very low levels of GHG emissions, its climate change
strategies are couched within the government's long-term vision to eradicate
xi
poverty and to achieve national economic and social wellbeing based on the
Outline of the Perspective Plan, Vision 2021 which includes Mitigating the
Impact of Climate Change as a part of the strategy to ensure sustainable devel-
xii
opment and Bangladesh Climate Change Strategy and Action Plan . In 2009
the Bangladesh Climate Change Strategy and Action Plan has been updated
xiii
and approved by the Government of the Peoples Republic of Bangladesh. .
The Climate Change Action Plan is a 10 year programme (2009-2018) and in the
first 5 year period (2009-2013), the programme comprise of six pillars: 1) Food
security, social protection and health 2) Comprehensive Disaster Management,
3) Infrastructure, 4) Research and knowledge management, 5) Mitigation and
low carbon development and 6) capacity building and institutional strengthening.
In the pillar 5) Mitigation and low carbon development there are 5 priority areas
and two of these are a) seek the transfer of state-of the art technologies from
developed countries to ensure that we follow a low-carbon growth path (e.g.,
clean coal and other technologies and b) Review energy and technology poli-
cies and incentives and revise these, where necessary, to promote efficient pro-
duction, consumption, distribution and use of energy.
The development of a NAMA in the steel sector is fully in line with the above
mentioned strategy and action plan and the two indicated pillars of the action
plan.
CDM procedure
Planning Commission,
Ministry of Environment
and Forests, Industries,
Agriculture, Foreign
Affairs, Communications,
Science information and Director (Technical)
Secretary, Ministry of
Communication Department of
Environment and Forests
Technology, Power, Environment
Energy & Mineral
Resources, ERD, LGED,
BOI, Bangladesh Bank,
Department of
Environment and others
Planning Commission
Secretary/Secretaries of Director General,
Principal Secretary to the
the Relevant Ministries Department of
Prime Minister
including the Ministry of Environment
Environment and Forests
The sustainable development criteria to approve CDM projects were defined for
four different dimensions, as follows:
Environmental
o Global environment: GHG emissions reduction;
o Local environment improvement (e.g. air, water, soil);
o Efficient resource utilization
Economic
o Contribution to the reduction of foreign expenditures
o Contribution to national debt reduction
o Cost-effectiveness
Social
o Poverty alleviation
o Creation of new jobs
o Creating of new economic activities
o Positive impacts on local communities
o Positive health impact
o Gender equity (women empowerment, equitable distribution of
wealth)
Technological
o Transfer of clean and cost effective technologies
o Contribution to the sustainable use of natural resources
o Ease of adaptation to local condition
These criteria should be discussed during the NAMA development and shall be
incorporated as appropriate.
CDM projects
According to the DOE primo February 2013, it has been stated that 14 CDM
projects have been approved by DNA of Bangladesh. 7 projects have been reg-
istered at CDM Executive Board but later 1 project was cancelled, so total regis-
tered project at CDM Executive Board stands at 6. However, the numbers of
CDM projects are very small in the country compared to its emission reduction
potentials.
The DOE has approved 7 projects, which have not yet been registered by CDM-
EB.
In the industrial sector Bangladesh has successfully CDM experience within the
brick-making industry.
In a global scale several CDM projects in the steel sector have been implement-
ed. These projects are facing the same type of problems as other CDM project in
6.3 Overview of the Gold standard procedure and specific Gold Stand-
ard projects
xiv
Among the voluntary carbon market programmes the Gold Standard is the
most relevant for potential steel projects.
The DNA does not follow the Gold Standard project closely.
According to the DOE the actual grid emission factor for electricity is 0.67 kg
xv
CO2e/kWh for projects in Bangladesh. and for natural gas it is 0.2
xxxi
CO2e/kWh .
The development in the steel sector has not been described in the Second Na-
tional Communication and really no systematic overview exist.
xviii
Bangladesh has about 300 operating steel re-rolling mills and some large
scale units have set up for both steel smelting and rolling (l-rot and cold roiling).
These 300 mills only have automatisation to a very limited degree and the steel
re-rolling used is a very simple manufacturing process. Steel ingots are heated in
a furnace and after achieving pre-determined temperature these are passed
through a series of rollers to achieve specific size and shape to form bars, ,
plates, rods or other products. Many of the mills have scrap smelting facilities.
The energy is consumed both in the form of electricity and thermal energy to
heat ingots. Considerable amount of energy is needed for materials handling.
Electricity is a raw material for this sector and most companies use grid electrici-
ty and Most mills have standby electricity generation capacity'. Re-heating fur-
naces use natural gas as resource whereas arc/induction furnaces use electricity
either by passing a current thought the charge material or by inducing a magnet-
ic field around the charged material. The melting process is the most energy
intensive process in the steel making process. Steel re-rolling mills process steel
ingots into iron rods and flat bars. The annual production total of all mills in Bang-
ladesh is about 2.5 million tons. The process is simple: a gas-fired furnace sof-
tens steel ingots which are then drawn through a series of rollers to produce rods
of different sizes. The ingots come from the so-called 'steel mills' where scrap
iron (derived mainly from ship breaking or steel waist locally or imported) is
xvi
melted in induction furnaces.
Most of the companies can be categorized as small and medium sized compa-
nies. In the further development of the project there will be a need for further
information from each company and as a courtesy a questionnaire concerning
the steel mills has been prepared and enclosed as annex A.
There is a growing demand for steel in Bangladesh and therefore steel is cur-
rently being imported. The steel products produced in Bangladesh are for the
domestic market. More steel production capacity is therefore expected to be
established in the years to come and due to the countrys infrastructure many of
these will be small and medium-sized.
Bangladesh does not have any production of steel based on iron ore.
The Bangladesh Re-Rolling Mills Association (BRMA) has 140 member compa-
xvii
nies
Bangladesh Auto Steel and Re-Rolling Mill Association (BARSMA) has approxi-
xviii
mately 15 member companies .
A new steel mill will need to apply for a construction and production permit and
during the process an industrial facility will be categorized in one of the four cat-
egories 1) Green 2) Orange A 3) Orange B or 4) RED.
The industries with highest potential negative impact of the environment will be
categorized in the category RED. The Iron/steel sector is considered to be RED.
As final stage of approval As part of the final approval the company shall have
issued an environmental clearance.
The international fleet of ship are selling ships for scrapping in Bangladesh.
There is not a detailed testing in Bangladesh whether these imported ships have
been transporting radioactive material. This is an un investigated potential risk
for the steel sector as part of the raw material in the steel processing industry is
scrap from ships
In Vikrampur Steel Ltd it has been investigated in 2012 whether any radioactivity
could be detected in the production site. The test result indicated no radioactivity.
Natural gas is the absolutely most dominant fossil fuel in Bangladesh. The natu-
ral gas is for instance used for the grid electricity generation, industrial captive
electricity generation and industrial process heating.
Natural gas from 18 producing gas-fields accounts for 74% of the total commer-
cial energy supply. This is supplemented by a small amount of indigenous coal
and hydro. Nearly all of the liquid fuel, which represents 16% of the commercial
energy, is imported. Bangladesh also imports 2-3 million tons of coal for brick
manufacturing.
The net consumption of electricity has had on average increased with 12 % from
2000 to 2010. To sustain similar high real growth rates in GDP as in the last
couple of years (between 6 and 7 %.), it is necessary to keep a minimum
xx
electricity growth rate at a factor of 1.5 of the GDP growth rate. If the growth
rate in GDP continues this trend, it is plausible that the growth in consumption of
electricity also will continue.
45
40
35
Biollions of KWH
30
25
20
15
10
5
0
1980 1985 1990 1995 2000 2005 2010
xxi
Figure 6. Net consumption of electricity in billions of kWh, Bangladesh.
50.000.000.000
40.000.000.000
30.000.000.000
20.000.000.000
10.000.000.000
0
1980 1985 1990 1995 2000 2005 2010
The price of electricity is heavily subsidized by the government. The prices both
for the bulk users (distribution companies) and the retailers/end-users are deter-
mined by the independent authority Bangladesh Energy Regulatory Commission.
Since February 2011 the commission has increased the retail tariff by 43.75
xxiii
%.
The CO2 emissions have along with total consumption of fossil fuels increased.
However, in 2010 the CO2 emission pr. capita in Bangladesh was around 28 %.
of the average CO2 emission pr. capita in South Asia. This indicates a gap in the
CO2 emissions between Bangladesh and the rest of South Asia, which com-
bined with the economic growth, makes it very likely, that the total CO2 emission
will continue to increase.
50000
30000
20000
10000
0
1980 1985 1990 1995 2000 2005 2010
xxiv
Figure 8 Total CO2 emission from Bangladesh
The latest overview of CO2 emissions from the industrial sector is from 2005 and
in the industrial sector the Iron and steel sector accounts for 3% of the CO 2
emissions in the industrial sector.
6.8.1 Description of the connection between gas engine, factory and electricity
grid
The figure below shows the normal connection between a gas engine and the
steel factory. The engine is normally near the factory and produces electricity
that is delivered directly to the factory for instance for the induction furnaces. At
some systems their possibilities to deliver the electricity to the grid when there
are no production but this is not the case at Vikrampur.
Factory
Heat Loss
Natural gas is burned in the engine, which produces electricity and heat is emit-
ted from the engine. The different steel factories Viegand Maage has seen in
Bangladesh have had engines of a Western brand, such as Rolls Royce. Bang-
ladesh does not have a large production of engines and therefore these are usu-
ally imported. The efficiency of these engines Viegand Maage has estimated to
40%. This based on estimations and discussion with experts within the field.
Effeciency () = 40 %
3
The electricity from combustion om 1 Nm natural gas en the engine can be
calculated from:
CDM in general
Description
As mentioned the CDM is well-known and it has actively been used for more
than 10 years and therefore the general introduction is not needed.
In this section some general experience from CDM is presented and of course It
is a generalised picture, but it should indicate some points which should be con-
sidered carefully when developing a NAMA.
Conclusions
The additionality test has to some extent shown to be unpredictable and a delay-
ing factor.
- High upfront costs, the PDD costs, validation and verification are consid-
ered very high
- Low number of CERs from a project in Bangladesh and therefore not at-
tractive in a global market.
Description
In CDM the main part of the steel projects have been using the Approved consol-
idated baseline and monitoring methodology ACM0012 Consolidated baseline
methodology for GHG emission reductions from waste energy recovery projects
For smaller projects in the steel sector it could also be have been interesting to
consider AMS II D, Energy efficiency and fuel switching measures for industrial
facilities
Conclusions
Several suitable CDM methodologies are available for the steel sector. The ac-
tual CDM methodologies and CDM steel projects are mainly for larger projects
which are very different from the Bangladesh context.
Suppressed demand
Description
Until now 8 CDM methodologies have included the suppressed demand ap-
proach, for instance clean drinking water and rural electrification
Until now the suppressed demand in the industrial production sector has not
been addressed in the CDM methodologies..
But the approach with improved electricity supply have been addressed both
through new renewable energy supply sources and through grid extension.
Conclusions
The steel mills in Bangladesh are operating under suppressed demand condi-
tions, for instance due to unstable electricity supply.
Standardised baseline
Description
In 2011 and 2012 it has within CDM been a priority to develop standardized
baselines. Below is an overview of the main decisions and key issues.
Guidelines for Quality Assurance and Quality Control of data used in the estab-
lishment of standardised baselines (EB 66 A 49) February 2012
The QA/QC Guidelines include the quality control (QC) procedures and the quali-
ty assurance (QA) procedures.
The following data quality objectives are intended to guide the implementation of
the QA/QC procedures : 1) Relevance 2) Completeness 3) Consistency 4) Cred-
ibility 5) Currentness 6) Accuracy 7) Objectivity 8) Conservativeness 9) Security
10) Transparency 11) Traceability
The CDM also require less information for LDC countries, like Bangladesh.
Conclusion
It seems that it has not been a priority to develop a standardized baseline for the
steel sector yet.
Co-benefit
Description
This is a very new concept and really no experience in using this voluntary tool
for evaluating sustainable development co-benefits.
Conclusions
A NAMA in the steel sector will due to actual status before implementation gain a
lot of co-benefit when implemented and therefore it must be in the interest of the
Bangladesh Government to have co-benefit and sustainable as part of a NAMA.
Probably it should an a voluntary basis as it is quite difficult to quantify co-
benefits.
7.2 Experience and lessons learned from the voluntary carbon market
Suppressed demand
Description
Gold Standard has included the suppressed demand approach in several meth-
odologies.
1) Suppressed demand methodology for low GHG food preservation. The meth-
odology comprises project activities which (i) provide food preservation with low-
er associated greenhouse gases emissions and (ii) expand the food preservation
Conclusions
The industrial plants, like steel production, have not been the focus in this devel-
opment.
The description of the Emission Trading Scheme has been extended as it should
give an idea of how a model could be developed in Bangladesh and the conclu-
sion sector few points are highlighted which Bangladesh should consider in clari-
fying a future system
Description
The following countries and regions are involved seriously in Emission trading
schemes:1) EU-ETS, 2) Switzerland, 3) Australia, 4) South Korea, 5) New Zea-
land, 6) China, 7) Japan 8) USA (California) and 9) Canada (Quebec).
Probably the most developed is the EU-ETS and furthermore they have an inter-
esting approach with benchmarking for the period 2013-2020, which could be of
interest in developing a model in Bangladesh. Therefore the EU-ETS model for
free allocation in the period 2013-2020 is described in more detail.
In the EU-ETS for the period 2013-2020 the free allocation is based on bench-
xxvi xxvii
marking. . . The allocation is based on data given from the relevant com-
panies from 2011 and 2012. The general principle is that the amount of free allo-
cation should decrease over the years. But for installation with international
competition the installation will have the same amount of free allowances, each
year. This is valid for the steel sector. The EU sector guidance document has
xxviii
also a decision on the free allocation of allowances for steel . The guidance
document is part of a group of documents, which are intended to support the EU
The guidance document gives and requires the following information for each
product referred to by a product benchmark:
In Bangladesh the induction furnaces are much more common than EAF. But the
presentation of the model for EAF in the EU-ETS for the period 2013-2020, could
be as model for Bangladesh to consider.
Calculation of preliminary allo- The product benchmark for EAF carbon steel is
cation based on total emissions since energy pro-
duced from fuels is exchangeable for energy
from electricity. Allocation should however be
based on direct emissions only.
Calculation of preliminary allo- The product benchmark for EAF carbon steel is
cation based on total emissions since energy pro-
duced from fuels is exchangeable for energy
from electricity. Allocation should however be
based on direct emissions only.
For both the EAF carbon steel and EAF high alloy steel the annual allocation can
be calculation based on this formula.
Conclusions
Through the EU-ETS and the allocation of allowances model can illustrate the
complexity of what is needed to be done in case a trading scheme and/or alloca-
tion scheme should be developed in Bangladesh. It will of course be different
calculation models and parameters due to size differences and technology dif-
ferences between the EU and Bangladesh.
8.1 Introduction
During the preparation of Second National Communication of Bangladesh (SNC)
different mitigation options have been analysed based on 6 different parameters.
A catalogue of the best available technologies and practices to save energy and
reduce environmental impacts in the steel industry is to be found in this refer-
xxix
ance.
At a stakeholder meeting the 26 October 2013 with the Bangladesh Steel Mills
Owners Association the sustainable and environmental friendly development of
steel mills where discussed and the Steel Association identified 10 priority areas
for a further effort:
2 To minimize wastage
For each solution a toolbox, a summary table, with the focus on three parame-
2
ters 1) CO2 emission reduction 2) Cost and 3) Pay-back time . The costs cover
both costs for construction work, equipment, operation, maintenance and consul-
tancy services. The costs of consultancy services in the preparation and imple-
mentation period are estimated to be 10 % of the investment costs. It covers cost
for mill-specific feasibility studies and design. The costs of consultancy services
in the operation phase are estimated to be five % of operation and maintenance
costs. Revenue only includes savings in consumption of electricity and gas, not
revenue from increases in production due to capacity increases (which in some
cases are significant). Both the total number of relevant mills and the number of
mills with own power production are subject to great uncertainty, therefore the
simple payback of the reheating and training program are calculated both for a
mill with and without own power production. It is assumed that whether a mill
uses gas, or electricity do not affect the investment or maintenance and opera-
tion cost, but only the yearly savings.
Scrap melting:
The plant is producing 5 batches per day in average in an induction furnace. The
induction furnace has a capacity of 7 ton per batch. There are 320 production
days per year. Based on these assumptions then the yearly production will be
11,200 tones.
The specific electricity consumption is assumed to be 700 kWh/ton
2
Calculated as the initial investment divided by the yearly earnings
Bottlenecks:
All projects in Bangladesh will be facing bottleneck, which for various reasons
challenges the introduction of new project/technology. Below is listed some of
the most significant bottlenecks that has been identified.
Many steel re-rolling mills are facing problems in pay their full utility bills.
Many steel re-rolling mills operate on a very informal basis, which may
include intermittent operation. It would be very difficult to convince them
to invest in modernization without also undertaking other efforts to be-
come more commercial
High quality and independent, detailed audits are required to reflect indi-
vidual steel mill layout and requirements; there is limited capacity for this
in Bangladesh
8.3 Optimisation of the melting process Waste heat recovery from the
induction furnace
8.3.1 Introduction
One of the main focus areas in relation to the melting process is treatment and
utilisation of the off gas from the furnace and this can be improved at almost all
steelwork shops in Bangladesh.
About 47 % of the total energy input is leaving the process with the slag, cooling
water and fume gas. The fume gas accounts for approximately 20% of the total
xxx
input, which is equivalent to 130 kWh/ton of produced steel .
The selected example is a project where the incoming scrap is preheated with
fume gas from the furnace, which will lead to a reduction in the energy consump-
tion.
For this purpose the scrap is transported counter flow to the fumes in a closed
transporting system. When the hot fume gas is passing the cold incoming scrap
then heat is being transferred form the fume gas to the scrap. The fumes are
transported by a suction blower and released to the surrounding or to a fume gas
treatment system (e.g. scrubber system).
The blower must be adjusted to prevent intrusion of excess air into the scrap as
this will act as a coolant, but at the same time there must be enough oxygen
present the secure a complete combustion of all combustibles. The oxygen will
be drafted from lot between the basket and the furnace rim. This combustion will
take place just outside the opening where the combustibles react with the oxy-
gen in the air creating heat.
In order to get a good heat transfer in the transporting system it is of great im-
portance that scrap size is optimised, meaning an increase in the surface area
between the scrap and fume gas and that all impurities are removed. The pre-
sent of impurities also contributes to a higher energy consumption in the melting
process and an increase in the amount of slack, which again increase the heat
loss.
At present different pre-heating systems has been developed for different types
of furnaces. Among others the following can be mentioned:
Charging buckets
Fuchs Shaft preheater
BBS Brusa Process
Consteel Continuous Scrap Preheater
Calculations can show the following heat transfer elements contribute to pre heat
the scrap:
Radiation 31 kWh/ton
Natural conviction 2 kWh/ton
Forced conviction 4 kWh/ton
Combustion 53 kWh/ton
In practice approximately 40- 50% of the theoretically possibly can within reason
be utilised.
[ ] [ ] [ ]
The grid factor is a generally grid factor for Bangladesh. Often the electricity is
produced on site and therefor local conditions will affect the grid factor.
8.3.4 Co-benefits
The preheating will also have a positive effect on the following parameters:
From each batch the value of the specific electricity consumption must be deter-
mined (kWh/ton of scrap). Many different parameters influence the electricity
consumption, and therefore these parameters must be taking in to account when
making the measurements.
Due to the variety of the different parameters then the measurements must be
conducted over a period of 3 days for both the baseline and the situation after
the implementation of the heat recovery system, in order to get as representa-
tively picture of the consumption as possible.
The selection of the specific measuring period must be made together with the
site, in order to get as good a representative picture of the production as possi-
ble.
In the sections below the different parameters that need to be measured or regis-
tered are described.
8.3.5.1 Electricity
The electricity consumption must be measured on the furnace (all included, eg.
on the high voltages side of the transformer). The measurements must as a min-
imum contain the effect in kW, the time in seconds and the integrated effect the
energy consumption in kWh. All the data must be stored (locked) for a period of
time that is at least as long at the measuring period (three days). Based on the
data then it should be possible to generate specific data for a batch (kWh/batch)
and for at tone of steel (kWh/ton steel).
8.3.5.3 Scrap
The mass of each batch must be measured. The measurements must be made
on a calibrated scale and the measurements must be made in kg. A truck on the
site can be used to measure a batch (eg. the truck that delivers the scrap). The
truck can use the scale onside which is used on a daily bases if measuring the
incoming scrap. Measured batched of scrap must be made ready in an area only
allocated for the purpose, in order to secure a complete control to the batch con-
tent. The batch must be made approximately 25 % bigger then what is normally
expected in order to secure that the furnace can by 100 % full. The surplus of
scrap must then afterwards bed measured on the scale again and then the sur-
Pictures of the incoming scrap (each batch) must be taken in order to quantify
the composition of the scrap charge to the furnace in each batch.
8.3.5.4 Additives
The mass of all the additives must be measured. The measurement must be
made on a calibrated scale and the mass of the additives must be related to
each batch. The measurements must be made in kg and the scale must be
placed close to the furnaces, in order to ease the measurements.
8.3.5.5 Slag
The mass of all the slag that are removed from the batch during the specific melt
must be measured. The measurements can be done on the same truck as the
batch is measured. Then all the slag must be collected in a slag pot and meas-
ured when the slag is cooled down. Alternative the measurement must be made
on a calibrated scale which is placed close to the furnace.
8.3.5.7 Product
The mass of the casted product must be measured. It is suggested to use the
trucks to transport the product to the truck scale for the measuring of the mass.
The measurements must be made in kg.
For all the mass measurements a recording of the results is preferred (if possi-
ble).
The tables below (13-15) shows and example on how data from each batch can
be collected.
Because the energy consumption is related to the mass then the specific value
of energy per mass of output must be calculated. This value can also be used to
bench mark with similar productions.
By collecting a sample of batches then the mean values for the previous and
new situation can be compared on a specific basis. The deviation of the specific
values must then med used to calculate the savings and other co-benefits.
Investment:
As can be seen from the above figures the potential for heat recovery is even
higher. It is expected that the recovery system can be improved further towards
the theoretically possible. The investment is expected to decrease if the system
will be produced on a commercial basis and in a standard setup. The project
have an expected lifetime on 10 to 15 years depending on the level of maintains.
8.3.7 Barriers
The following barriers have been identified for this specific type of project pro-
posal:
Conservative sector
Pilot technology
8.3.8 Toolbox
Description pro- Heat recovery on induction furnace. The purpose of this
posed initiative project is to recover heat from the furnace opening to
preheat the incoming scrap. The scrap is transported
counter flow to the fumes from the furnace. The hot fumes
are heating up the cold incoming scrap.
CO2 emission re- If implemented on all the melting shops (approx. 300) the
duction savings will be in the magnitude of 91,000 tonne of CO2
per year.
Pay-back time The simple payback with the current figures will be 2.78
years.
8.4.1 Introduction
The purpose of this project is to utilise the energy content in the off gas from the
reheating process to preheat the incoming combustion air. In Figure an illustra-
tion of a combustion air preheating system is shown. These systems are often
referred to as regenerative heat exchanger. This type of system has been intro-
duced in Bangladesh through different initiatives funded by various international
donors. According to (ref: Bangladesh, Roadmap for Energy Efficiency Improve-
ments and Demand Side Management, Dhaka, September 2009) only a very
small part of the reheating furnaces are modern mill, which indicate that there
are room for further improvements.
Figure 11. Air preheating with recovered heat from off gas
By letting off gas pass through a heat exchanger counter flow to the combustion
air. Then waste energy is used to heat up the passive components and the sur-
plus of oxygen to a certain temperature, which will then reduce the consumption
of natural gas for that purpose.
With the following assumptions the magnitude of energy saving can be calculat-
ed:
Stoichiometric combustion
Air preheat to T = 400 C
Ambient air temperature of 20 C
( )
Study one
The study states that a saving of 28-33% can be achieved by installing the air
preheating system. The savings result in a reduction in gas consumption of 25
3
Nm /ton, which is equivalent to 243 kWh/ton. The investment is estimated to be
euro 14,894 (USD 20,000).
Study two
This study states that a saving of 31 % can be archived by installing the air pre-
heating system. In the cases shown in the article this is equivalent to an averag-
3
es saving of 19.8 Nm /ton, which is equivalent to193 kWh/ton. The investment is
estimated to be euro 4,692 (USD 6,300).
By looking at the information above and using average values, then the potential
savings is in the magnitude of 30 % which is equivalent to 218 kWh/ton steel and
12 kg CO2/ton steel. With the reference production this will have a yearly carbon
saving 192 ton, an energy cost saving of euro 29,000 and an investment of euro
9,800. In both the cases above the simple payback will be less than one year.
8.4.4 Co-benefits
Besides the obvious energy and carbon savings there are also a relative big
saving in product due to the reduction of scale losses. The scale losses have an
estimated economic value in the same magnitude as the energy savings.
Investment:
8.4.7 Barriers
See the chapter about barriers and bottlenecks
8.4.8 Toolbox
Description pro- Installing at air preheating system on the reheating fur-
posed initiative nace.
Actual situation Some of the companies have installed air preheating sys-
tems, but here are still sites without.
CO2 emission re- If the savings is archived on all 300 sites in Bangladesh
duction then the yearly carbon saving will be 57,721 ton. Because
the air preheating systems is already installed on some
sites the saving will be less.
8.5.1 Introduction
Often there are no control or regulation systems on the reheating furnace. The
reheating furnaces parameters are regulated once and then the system is run-
ning with fixt parameters. If the system is trimmed properly form the beginning
then the system is running optimally until some of the parameters for some rea-
son are changed. The changes will decrease the optimised trim of the system.
8.5.4 Co-benefits
By installing feed control then the capacity of the reheating furnace then the ca-
pacity of the furnace will increase, because the production time will be reduced.
A reduction in production time will also reduce the scale losses. Scale losses can
be as high as 6 %, which can be reduced with op to 32 % which in our reference
example will give a yearly cost saving about euro 98,000.
Investment:
The maintenance costs is assumed to be in the same magnitude as the air pre-
heating project which is euro 1,560 per year.. If the other benefits shuts as scale
8.5.7 Barriers
See the chapter about barriers and bottlenecks.
Besides the listed bottlenecks the installation and trimming of the control system
requires special skills in programming and combustion techniques.
8.5.8 Toolbox
Description pro- Installation of feed control system that secure minimum
posed initiative gas consumption, a maximum production capacity and an
optimal combustion.
CO2 emission re- If the savings is archived on all 300 sites in Bangladesh
duction then the yearly carbon saving will be 16,285 ton.
NOx levels can also be kept low, as there is no nitrogen in the oxy-fuel combus-
tion process.
Furnace control is good, and the flame temperature of modern oxyfuel burner
technology is lower.
Oxy-fuel installations are powerful and space-efficient and are thus easy to retro-
fit in any existing furnace, requiring less maintenance compared to air-fuel sys-
tems with ventilator fans, bulky flue gas systems and recuperators.
8.6.1 Introduction
The purpose of the training program is to educate staff at different level on how
to optimise the production in terms of energy efficiency, environment, health &
Safety and capacity.
Managing director
The managing director approached to new changes is how much will it costs
and what are the benefits. The managing director needs to be involved in the
overall decisions for the planned activities and possible investments. It is im-
portant that he backup all the initiatives.
Initially it is suggested that the site managing director should spend a day on the
site together with the training project team showing the workers and the site
manager that he/she is involved in the training program.
When the training program is finished it is important to discuss all measures with
the managing director and show them any benefits and investments. The man-
aging director are the only one who can decide which measures that can be
implemented afterwards therefore the site managers are the most important
player in the program and they need to be secure in the program and savings.
Site manager
The site manager must be presented with simple drawings illustrating why the
activity is done and how.
Workers
The workers approached to new changes are how to do it. The daily workers
are the peoples with the lowest level of education many of them have never
been to school. Therefore it is important that they understand precise what to do.
It is important that the actives are presented directly at site and shown by the site
manager supervised by the training team.
The new changes in routines and/or new equipment must be presented to the
workers by illustration and by training on site.
Training team
The training team must consist of experienced training team leader from a local
or international (if an international consultant is leading the team, then a local
consultant partner is needed) consultant company and one or two staff members
from the steel company (at a site manager level).
Preparation stage
Step 1: Site visit is conducted and a screening list is developed on the
basis of that.
Participants: Training team
Step 2: Draft training program is developed.
Participants: Training team
Step 3: Draft training program and potential investments is presents to the
managing director and adjustments are made in order to meet the
steel companies ambitions.
Participants: Training team and managing director
Step 4: The details of the training program and investments are planned.
Participants: Training team
Step 5: Training program and investments are presented to the site man-
ager
Participants: Training team, managing director and site manager
Making investments
Step 6: Investments are been made, under supervision from the training
team and local suppliers.
Participants: Training team, managing director and site manager
Evaluation of training
Step 9: Evaluating the outcome of the training activities
Participants: Training team
The outcome of the training program is difficult to predict because of the variation
in the conditions from site to site. In the table below are listed different activities
an impact on the different measures.
8.6.4 Co-benefits
Besides the direct measurable benefits then the staff level of education will be
raised. The mind-set of the staff will be change in a way that they will start to
think about the positive effects of improvements. In a long terms perspective this
will secure that the optimisation initiative is maintained and maybe others are
developed and conducted.
Investment:
3
Simple payback 1.07 years
For gas-based production the yearly operational cost exceeds the yearly sav-
ings.
8.6.7 Barriers
See the chapter about barriers and bottlenecks.
The educational level is also low and some of the staff has never been given any
education. This can give some educational challenges.
8.6.8 Toolbox
3
The simple payback is calculated based on the maximum estimate for investment and
Yearly operational and maintenance costs
The situation is made more complex by the existence of the concept of base-
line that is often used interchangeably with BAU. We follow this usage while
acknowledging that Although the definition of BaU scenario and baseline may
differ under particular circumstances (e.g. when the baseline is more stringent
than BAU, for example in the context of market mechanisms ).
In this study it will not be possible to define the baseline as this will require an in-
depth study and a high-level political process in Bangladesh.
Therefore at this stage there can only be few recommendation which could be
the starting point when setting up a proper baseline.
The first issue should be transparency. The baseline scenario could be defined
as a scenario that describes future greenhouse-gas emissions levels in the ab-
sence of future, additional mitigation efforts and policies , while the United Na-
tions Framework Convention on Climate Change (UNFCCC) defines the base-
line scenario - for Clean Development Mechanism (CDM) and Component Pro-
ject Activities (CPA) projects - as a scenario that reasonably represents the
anthropogenic emissions by sources of GHG that would occur in the absence of
10.1 Introduction
During this preliminary study it can only be a very rough estimate of the potential
in the CO2 emission reductions partly due to limited information of the number
and specific characteristics of the individual steel mill. Furthermore the mitigation
actions at a site is very dependent on the characteristics of the specific mill.
Through above roadmap the technology used for steel rod making the following
interventions have been identified to increase energy efficiency: 1)Installing a
recuperator 2) Increasing insulation on furnace and 3) Installing flue gas analyzer
and Programmable Logic Controller (PLC) control. A recuperator is basically a
gas-gas heat exchanger that utilizes heat of the exhaust gases from the reheat-
ing furnace to preheat the air used in the combustion of natural gas in the fur-
nace. Thus, the recuperator functions as a heat recovery unit. High quality insu-
lation helps to cut down radiation losses from the furnace wall. A flue gas ana-
lyzer determines the excess air level of the exhaust gas. Along with a program-
mable logic controller the flue gas analyser helps in optimizing the air-fuel ratio
so that complete combustion at minimum excess air can be obtained. It is ex-
3
pected that the retrofit would result in reducing the SEC by 25 m per Ton of
steel rod.
A project that will retrofit 50 steel re-rolling mills by installing the above men-
tioned items is envisaged. The investment required to retrofit a typical mill is
given below: Recuperator with all piping - $ 20,000 Insulation - $ 10,000 Measur-
ing equipment and Controllers - $ 20,000 Investment for one mill: $ 50,000; The
total investment cost for the 50 steel re-rolling mills $ 2.5 million.
$/Ton-CO2 8.77
The above study is the most developed in the steel sector in Bangladesh.
Based on this, the preliminary value of the project in terms of the net present
value (NPV) and internal rate of return (IRR) are calculated. A baseline analysis
is carried out along with different sensitivity analysis for installation in a single
mill. For the Waste heat recovery from the reheating furnace and the Combus-
tion and feed control system projects, the cost and NPV for the investments are
also calculated on a sector level. For the Waste heat recovery form induction
furnace project and the Training program the NPV and IRR are only calculate in
the case where electricity form the grid is used. The case with own power pro-
duction will be addressed below, but not calculated. The 15 auto mills are not
included in this analysis. The gas and electricity price are subject to some uncer-
tainty - especially the electricity price for electricity form own power production.
Therefor the NPV and IRR for Waste heat recovery form induction furnace and
training program are only calculated for mills without own power production.
The NPV and financial flow for the single investments and all four investments
together can be found in annex C.
The calculations are based on constant prices of 2013 in Euro. This implies an
inflation-free analysis. Taxes, customs and duties are included in the analysis. A
4
10 %. real discount rate is used .
For the economic analysis the cost estimate from Vikrampur is used. In the base-
line the costs for all mills are identical to the cost of Vikrampur.
Financing plan: The analysis contains two different financing scenarios. In the
baseline case the projects are assumed to be 100 % self-financed, whereas the
second scenario assumes that 80 % of CAPEX will be financed by loans. The
loan disbursal is done in the preparation and implementation period. The repay-
ment period follow the expected lifespan of the projects. A real interest rate at 5
%. are used. Principal repayments are assumed to be annual and divided equal-
ly over the term and to be made at the end of the year.
The CAPEX includes the investment costs described in section 8 for the 4 pro-
jects and the cost of technical assistance. The price of technical assistance is
assumed to 10 % of the investment costs.
OPEX includes the yearly cost described in section 8, and interest rate pay-
ments. For the training project it is assumed that it is necessary to conduct a
retraining every year to maintain the yearly saving in electricity.
The revenue consists only of the electricity and gas saved from the 4 projects.
Effects like increased capacity are excluded. The price of electricity and natural
gas is assumed to be at its current level. This is given in section 6.7 a rather
conservative estimate.
The projects are estimated to be developed over two years, starting with prepa-
ration in 2014, and implementation in 2015. The lifespan of the projects are set in
accordance with section 8. The financial flow of the first waste heat recovery
project is depicted in figure 14 below.
4
In accordance with the discount rate used by the Ministry of Environment and Forests in
the rapport Second National Communication of Bangladesh to United Nations
Framework Convention on Climate Change
Table 24, Project budget overview in EUR is illustrated in below table 24 and it
shows the total costs and savings for the 4 projects separately and for all the
projects in total, given that the projects are implemented on a single mill. A more
detailed spreadsheet overview of the cash flow of the four projects can be found
in annex C. For maintenance the most conservative estimate from section 8 are
always used.
10.2.3 Results
The table 25 below shows the financial performance of the four projects in a 100
% self-finance scenario. The Net Present Values are positive for all projects ex-
cept for combustion and feed control system project. The project has an IRR on
8 % which is just below the discount rate. It is worth noticing, that with a 20 %
increase in the gas price or a 20 % decrease in the CAPEX and OPEX the NPV
for the Combustion and feed control system turns positive.
The table 26 below shows the financial performance of the four projects, if they
are 80 % of the investment cost are financed by loan with a 5 % real interest
rate. Now all projects have a positive NPV even the Combustion and feed control
system with an IRR on 14 %. The project is sensible to a 20 % increase in
CAPEX and OPEX. It should be noted, if the interest rate moves closer to 10 %,
then the NPV in 80 % loan financed scenario moves closer to the NPV of the 100
%. self-financed scenario.
The below figure shows the savings per ton CO2 reduced for the projects exclud-
ing the training program, because the CO2 reduction for the training program is
difficult to quantify.
450
400
350
300
Euro/ton CO2
250
200
150
100
50
0
-50
-100
Waste heat Waste heat Combustion Total
recovery form recovery from and feed
induction the reheating control system
furnace furnace
Figure 15, Euros saved per ton CO2 reduced for the projects
The economic analyses in this study is limited to four important actions at a steel
works in Bangladesh.
Assuming that the four projects are implemented at all the 300 steel mills the
5
total yearly CO2-reduction will amount to 181,291 tonnes . This will lead to a total
investment cost of EUR 37.6 mio.. If the combustion and feed control system is
excluded from NAMA due to its long payback time and negative net present val-
ue, the yearly reduction in CO2 will amount to 165,000 tonnes with a total in-
vestment cost of EUR 31.3 mio. If the 4 project only are implemented on 200 out
of the 300 steel mills the yearly reduction in CO2 will be 120,860 tonnes and the
total investment cost EUR 25 mio The net present value for implementing the
four project at all the 300 steel mills is EUR 65 mio.
In case all the proposed project ideas in this report are implemented the costs
could be larger than EUR 100 mio.
5
Please note that this includes the CO2-reduction form the training program which is hard
to quantify.
12.1 Introduction
On a policy level there are a significant number of different incentive models
which can enhance the potential number of CO2 emission reductions. This can
best be illustration by a breakdown in sectors.
Sector Policy
Industrial energy use Carbon tax, energy tax, tax reduction for energy effi-
ciency
Waste Regulations
In the Steel sector several of these policy measures can be used when establish-
ing a NAMA.
One of the challenges in the steel sector is that it is a domestic sector with nearly
no export and therefore there will be limited international pressure to improve the
environmental and CSR values within the steel sector.
12.2 Discussion
Often the actual measurements and recordings of energy consumption is in the
lower end in Bangladesh compared to expectations. Probably a potential mech-
anism will grant support to a lower consumption per produced unit and therefore
it will not be an advantage to have reported low consumption at this stage. This
is positive to ensure the high credibility of the whole NAMA set-up in the steel
sector in Bangladesh. It can give incentive to offer more reliable data when cal-
culating the baseline for the NAMA in the steel sector.
vii
According to the Second National Communication the Bangladesh Government
has recently declared tax exemption for Solar panels. It should be considered
whether it could be a tool also to develop the steel sector.
vii
According to the Second National Communication page it is also mentioned
that the Bangladesh Government has established soft loan USD 15 million for
Furthermore the electricity price and natural gas price are low and lower then
often seen on the global market. It should be investigated further whether in-
creased tariffs, carbon tax, can be an incentive to install energy efficiency.
12.3 Recommendation
Several policy measures can be used to improve the steel mills in Bangladesh.
The following should be investigated further carbon tax, exemption of tax, green
credits lines, performance standard and regulation.
There is a significant need for investment funds also, so above initiatives should
be combined with credits lines, so-called green credit lines.
Maybe tax exemption could be a relative straight forward model to promote en-
ergy savings measures.
13.1 Introduction
As was agreed upon at COP 16 and further defined at COP 17, MRV is a central
component in frameworks for emissions mitigation actions through NAMAs in
developing countries. The key objective of MRV is to increase the transparency
of mitigation efforts made by the developing countries as well as build mutual
confidence among all countries.
13.2 Discussion
Organisation
When developing a monitoring system it should be the specific steel mill that
should perform the actual measurements and reporting at the specific mill.
Or
SREDA will broadly regulate and oversee the energy efficiency and conservation
activities in industrial, commercial and residential sectors. Furthermore SREDA
will have a possibility to verify energy efficiency measures.
The set-up in these two Ministries will have the following advantages and disad-
vantages.
Advantage Advantage
Disadvantage Disadvantage
According to the DOE it is most likely that MOEF will be the responsible organi-
sation. But it should be noted that no formal decision has been taken.
Boundary
The boundary could be the physical boundary of each steel production mill.
Existing schemes currently in place all have a pass/fail condition defined. With-
out these conditions, no effective MRV can exist. If there is no consequence of
13.3 Recommendation
The NAMA in the steel sector needs to be further defined before the MRV sys-
tem should be further developed. If possible the boundary should be the bounda-
ry of the steel mills
The project does not include a plan for the follow-up after this initial phase. This
section has been included to guide the project after this initial phase as further
financial support is needed.
It can be a long and cumbersome process to secure the financing for the full
scale implementation in one step. Therefore it is recommend to select the most
urgent tasks through bilateral funds which should secure the project is progress-
ing and securing the momentum is not lost. Furthermore it will contribute to a
more focused effort for the full scale implementation of the project.
In the actual carbon market with CDM and the voluntary market project, like Gold
Standard, the main part of the income to the projects have been after implemen-
tation and the projects have been in operation and CO 2 emission reductions
have been monitored and verified. I can be an important contribution in the oper-
ation and maintenance phase, but a mechanism is needed to secure support to
the investments.
The supported NAMA should only to a limited extent support project after they
have been implemented, but it should be noted that this has not been decided.
But having the future possibilities of traded or credited NAMAs in mind these
should also be investigated further.
In the UN climate negotiations it has still not been decided whether a traded or
credited NAMAs will be part of a future regime. In case these type of NAMAs will
be in force in a UN system it will only be after 2020.
For the steel sector it should be possible to quantify and measure actual emis-
sion reductions and therefore it is possible with CO2 trading schemes.
The NAMA in the steel sector in Bangladesh is characterised with a strong com-
mitment in Bangladesh. The project is supported by the DOE, the three steel
associations, Vikrampur and MEL. This gives a good foundation for attracting
funds for implementation in close cooperation with the international partners
Viegand Maage and NIRAS.
The first section below focus on pilots and second section focus on the securing
financing until the full-scale implementation of the NAMA in the steel sector. Both
pilots and full scale can be combined with crediting of CO2 emission reductions,
if suitable.
Until now there has not been taken a formal decision on how the NAMA admin-
istration should be organised in Bangladesh.
The future NAMA development is closely linked to UNFCCC process and there-
fore the NAMA could be link to MOEF, DOE as this institution acting as focal
point for part of the UNFCCC activities, like CDM. Maybe it will be most efficient
for Bangladesh to select only one focal point to coordination of communication
with UNFCCC and for instance individual countries or institutions to secure a
consistent approach from the Bangladesh Authorities.
For any NAMA in Bangladesh the DOE could be involved together all the rele-
vant resort Ministries or other relevant institutions. In case a working group is
established for a NAMA it could maybe be chaired by the DOE.
Maybe the model of CDM in Bangladesh with a two level administration both
National CDM board and National CDM Committee could be simplified to have
only one level as it must be more efficient and cost-effective.
The organisation of the work is very much the internal business of the public
administration and politicians in Bangladesh. The viewpoint shall only be consid-
ered as inspiration for an efficient administration.
Electricity By -
Steel mill
supply products
The presentation of the building blocks can be an important input when develop-
ing the NAMA including setting up the project boundaries.
The priority is to establish a NAMA with focus on CO2 emission reduction and a
well-functioning and transparent MRV system to ensure high credibility of the
emission reductions for this project.
Therefore on of the focus areas in the NAMA will be the improvement of the pro-
duction facility to less consumption of electricity or natural gas per produced
tonnes steel. The success and credibility of this type of NAMA is dependent on
the local willingness and interest for establishing a functioning Monitoring, Re-
porting and Verification (MRV) system.
In Bangladesh the raw material for the steel production is nearly 100% scrap. It
is important that all the initiatives initiated by the NAMA, also focus on the side
effect related to each initiative. Eg. if an off gas systems including waste heat
recovery and a scrubber is installed, then it is important address how to deal
with:
Product waste
Ect.
If these issues is not addressed then there is a risk that the problems just
move elsewhere.
To limited the handling and secure a high efficiency the as much waste as
possible must be recycled on site.
All the remaining waste streams from the production must be integrated in the
The focus on the production facility by improving the energy efficiency has also
significant co-benefits with less emission from the factory and directly improve-
ments in the working environment. Furthermore an improved production will also
minimise the amount of waste. These benefits are difficult to quantify and fur-
thermore the benefits are mainly not CO2 emission reductions. Therefore it is
recommended to report these benefits on a voluntary basis.
Reporting the voluntary co-benefits should be a model which could attract further
financing for implementing a supported NAMA and it could also increase the
value of any future traded CO2 emission reduction.
Products
As mentioned earlier the output from a steel mill can be grouped in three: the
steel products, the by-products and then carbon footprint in the end products.
Obligation Voluntary
Table 30. Proposal for measuring both as an obligation and on a voluntary basis
The only realistic set-up for monitoring and reporting should be done by the in-
volved steel mill. The data should be gathered by the national authorities with the
mandate to monitor, report, verify and enforce. Using the existing structures this
fits best with DOE , but in the future it can be an advantage to SREDA involved
as it will of the main tasks for SREDA in the future.
If a third party verify is needed this could be done by the World Steel Association
as they have an already established infrastructure. This should be clarified with
the World Steel Association whether it is a realistic opportunity.
After the estimation of the amount of allowances for each steel mill, Bangladesh
could decide a model for allocation and actual distribution of allowances to each
company. Different models can be considered 1) free allocation and 2) auction-
ing.
The allocation model is a country approach and not limited to one specific sector.
This should be addressed in a national context and the same approach should
be for all potential NAMAs in Bangladesh.
The steel mills in Bangladesh are operating under suppressed demand condi-
tions, for instance due to unstable electricity supply. This should be taken into
consideration when preparing the baseline.
Standardised baselines
The point of departure is to establish a supported NAMA for the steel sector in
Bangladesh. Maybe with potential for developing the NAMA into a sector credit-
ing or sector trading NAMA.
It should be a priority to address the main part of the abovementioned issues, but
it should be noted that some issues are better and more efficient to address in a
NAMA than others in order to ensure credibility and an efficient administrative
system. Therefore the focus should be to establish NAMA with a reliable and
relatively easy quantifiable MRV system.
NAMA Models
During the development of this phase of the project at least two models for
NAMA development have been proposed. The characteristics are presented
below.
It should be noted that further model for a future regime in Bangladesh should be
developed and evaluated. But the two models are an input to further dialogue.
Model 1
- The steel mills could be forced to work to achieve this threshold, for in-
stance through penalties or it could be a voluntary target .
- In case a company is below the baseline, then they can maybe receive
tradeable units which can be sold to other Bangladesh steel mills which
have not fulfilled the target and/or also to the international market.
- The emission factors for establishing the CO2 emission baseline should
be the actual grid emission factor and/or the factors for natural gas. In
case other fuel are used the factors for these fuels should be included.
- The monitoring report should be done by the mill and verified by the De-
partment of Environment (DOE) or another appointed authority, for in-
stance SREDA.
Model 2
- The actual electricity consumption and/or natural gas per produced tons
steel should be the baseline and this can be based on actual purchasing
of electricity and natural gas and the actual selling of steel products. Any
improvement of this meaning a lower electricity consumption per pro-
duced tons steel should be credited in one way or another. It could be a
tradeable unit for instance to the international community or internally in
Bangladesh.
- The emission factors for establishing the CO2 emission baseline should
be the actual grid emission factor and/or the factors for natural gas. In
case other fuel are used the factors for these fuels should be included.
The main question is whether it possible to have a NAMA in the steel sector in
Bangladesh, if the neighbour countries, like India is not part of the NAMA also.
It should be noted that one of the key design elements of the templates are flexi-
bility and there is basically not developed any guidance documents. This flexibil-
ity gives an opportunity, but also an obligation, to fill in these documents carefully
so it suits both Bangladesh and also potential donor countries.
Bangladesh is in the forefront with the development of a NAMA in the steel sec-
tor and is in the position to set an example and pilot a NAMA in such an im-
portant sector with regard to reducing global greenhouse gas (GHG) emissions.
The development of a NAMA in the steel sector is a priority for the Bangladesh
Government and this NAMA is coordinated by the Department of Environment.
The NAMA development is strongly supported by the three steel associations 1)
Bangladesh Auto Re-Rolling & Steel Mills Association (BASMA), 2) Bangladesh
Steel Mill OwnersAssociation (BSMOA) and 3) the Bangladesh Re-Rolling Mills
Association (BRMA). The support letters from the steel associations are en-
closed as annexes D-F.
Bangladesh will go for a supported NAMA for the Steel sector with an option to
extended it to a crediting NAMA or trading NAMA. In case of any kind of trad-
ing/crediting international it should be the voluntary market. It should be high-
lighted that the key focus shall be to develop a full scale implementation of a
supported NAMA. The precise model will currently be developed and adjusted
due to the development in the UNFCCC climate negotiation. To some extent the
development is also dependent on the interest of the potential sponsors.
Based on the field studies in the steel sector several very attractive projects have
been identified. The projects have both a direct savings with regards to energy
and CO2 but they also have indirect benefits in terms of capacity and working
environment. The indirect benefits can have savings that in some cases are
larger than the direct savings. Many of the projects are estimated to have so
attractive paybacks so they can be self-financed. A part of the project proposals
needs support eg. in terms of low interest rates or other incentive support. It is
important to point out that the site conditions very from site to site and that the
conditions will have a high influence on the benefits and investments.
The following key findings should be including in the NAMA development and
implementation.
In the climate space the CDM and voluntary market have developed
methodologies, initiated standardised approach and suppressed demand
approach. These should be integrated to highest possible degree to se-
cure the NAMA is in line with international standard.
The monitoring should be done by the company and verified by the De-
partment of Environment (DOE) or another appointed authority, for in-
stance SREDA. It is crucial to have a national validation and verification
system to avoid costly international system, like CDM. In case it will be
decide to involve an international institution/association in the verification
process, it will be considered to involve for instance the World Steel As-
sociation.
The actual knowledge and overview of the steel sector is limited and an
effort should be done to prepare an inventory for this sector. Only based
on the full-scale inventory covering the steel sector a final decision of
how to develop a NAMA can be decided.
The NAMA proposal for the steel sector in Bangladesh is one of the most ad-
vanced for NAMAs in the steel sector in a global context and therefore it should
be developed further so it can be used by other countries and in the same as an
input to the international climate negotiations. The implementation of this NAMA
can make a huge difference for the steel sector in Bangladesh.
The full scale implementation could be in one package, but it could be time-
consuming to have progress here. But small minor studies and investment pro-
ject could be handled separately and in parallel with this to secure progress of
the full scale financing and implementation. This could for instance be further
support from different Nordic funds and countries and it could also be German
funds.
The concrete experience from the pilot projects can in may phases of both the
NAMA development and the climate negotiations.(see figure 17) It will for sure
also contribute to a higher degree of ownership to the whole process by the steel
works as the climate negotiations to some extent from distance can be seen
hypothetical and unpredictable. This is important as the steel sector has to invest
resources into this whole process.
PILOT
PROJECTS
Figure 17. The link between pilot projects, NAMA implementation in Bangladesh
and the international climate negotiations.
There are very limited resources in the Ministry to process documents for moving
the NAMA forward, for instance clarification of who is responsible for the NAMA,
set-up a monitoring system, agreed baseline for all the steel mills. This need to
be addressed when discussions are made on the real implementation.
The following issues need to be tackled and related key actions have been iden-
tified to continue with the initiated activities under the NAMA framework towards
innovative, sustainable and low-emission development in the Bangladesh steel
sector:
More accurate cost estimates will result from energy and investment au-
dits to get a more accurate picture of the required investment costs for
the implementation of energy efficiency measures and related technolo-
gy deployment at scale.
The questionnaire has been forward to MOEF, DOE in February 2013 to start
facilitating the gathering of information from the specific steel mills. Probably the
main part of the data will only be gathered when it is decided to make a full-scale
implementation.
1. General Information
2. Company information
4. Energy consumption
5 Energy production
6 Raw material
7 Produced products
Overview of other potential initiatives which could be further develop and incor-
porated in the NAMA proposal
Title Description
Optimisation of the Re-rolling motors are used to roll the reheated steel in
re-rolling process to the size of the final product. Today many of the re-
rolling motors and roller motors use high voltages DC, with a gearing that
Feed stock control In many of the sites feed was manually operated in to
system the furnace, with no indication of the efficiency of the
melting process. The melting process is affected by a
number of parameters for example Magnectic fields,
meniscus shape (geometry of melt), velocity of feed
etc. By knowing these parameters it is possible to ad-
just the feed of scrap and additives to the energy in-
duced in the furnace. Besides saving energy it also
improve the quality of the product, reduces the losses
and reduce the production time.
Sorting and scrap The scrap can have a large variation in the size and
yard organization composition. By sorting the scarp an estimate of 5-10
% of the irrelevant scarp can be removed, the particle
size of the scarp can be optimized and the handling
can be facilitated. By using cleaner scarp, the produc-
tion yield will improve, the quantity of the slag will be
reduced, and a certain reduction of dust emission will
also happen. The energy consumption will also be
reduced due to a smaller amount of slag being heated.
Heat conversion The product is often stored between the furnace and
the rolling lines. This gives a certain degree of freedom
in order to plan the production on the two production
lines, during this storage time the product will cool
down. This will led to a loss in energy because the
product will have to be reheated before it can be rolled.
To reduce the loss of energy the product can be ther-
mal insulated from the surrounding or the production
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