Monthly Progress Report (19) March 2021

1. Major Activities of the Month

In March, three international consultants were actively engaged in activities in Bangladesh, namely Dr. Takeshi Kikukawa (Financial Sector Expert), Mr. Yasushi Iida (Chief Project Engineer) and Ms. Mari Iwata (Capacity Development Expert).

1.1 IFIs trainings

1.1.1 IDCOL

SREDA and IDCOL jointly conducted a training session for IDCOL staffs for financing EE&C projects on Monday 15th March 2021. The objectives for the session include; (a) to review the progress of the Project, (b) to provide a viewpoint for EE&C financing from the PI Consultant Team, and (c) to exchange information and views with the IDCOL staffs including those who are not directly involved in the Project. SREDA chairman expressed his gratitude for the collaboration with IDCOL in implementing EECPFP, and addressed the importance of improving the energy efficiency for industry sector. The Project Director (PD) opened the training session by reiterating the significance of extending the financial facilities to end-users through IDCOL.

IDCOL’s presenter summarized the current status of the lending performance by IDCOL. The overview has shown the solid and steady progress of the Project. The PI Consultant Team also provided the presentation on the improvement of the textile and garment industries and explained the positions of energy efficiency in improving the corporate performance of the end-users. The points of the discussions at the session were;

1. The newly approved list of eligibility equipment is expected to accelerate the project implementation.
2. Since the end-users’ needs still vary depending on the industry type and investment size, the Project could also address the specific needs for procurement of equipment and facility to improve the energy efficiency.
3. The constraint on one loan application for one company could also be reviewed as per the previously raised by IDCOL for instance.
4. The coordination between SREDA and IDCOL is important.
5.  While the L/C is usually opened by commercial banks, IDCOL would assist the process by issuing the letter of comfort.

1.1.2 BIFFL

SREDA and BIFFL also jointly conducted a training session for BIFFL staffs for financing EE&C projects on Tuesday 16th March 2021. The objectives of the session are similar to those for IDCOL; (a) to review the progress of the Project, (b) to provide a viewpoint for EE&C financing from the PI Consultant Team, and (c) to exchange information and views with the BIFFL staffs including those who are not directly involved in the Project. SREDA chairman expressed his gratitude for the collaboration with BIFFL in implementing the EECPFP, and addressed the importance of improving the energy efficiency for industry sector. The PD opened the training session by reiterating the significance of extending the financial facilities to end-users through BIFFL.

The PI Consultant Team also provided the presentation on the improvement of the textile and garment industries, and the cement industry. One of the messages to BIFFL staff was to acknowledge the positions of energy efficiency in improving the corporate performance of the end-users. The points of the discussions at the session were;

1. The newly approved list of eligibility equipment is expected to accelerate the project implementation.
2. The cost saving would need to be assessed not just the percentage of the energy efficiency gain, but also from the viewpoints of improving the production efficiency improvement and the profitability gain.
3. There would also be other positive impacts on the corporate business, which would also need to be identified and quantified in audit process.
4. While the current audit rule plans to handle 25% of the sub-projects, other sub-projects could also be reviewed by information and data gathered from the end-users.
5. The Project could also review the requests from some of the end-users on the after-sales services and equipment maintenance since some of the suppliers may not have extensive service network in Bangladesh.
6. BIFFL expressed the gratitude for the support on the project implementation by SREDA and the PI Consultant Team.

1.2 GoB training (Textile and garment industries)

SREDA conducted a two-day GoB training session for textile and garment industries for improving the EEC performance on Monday 8th March 2021 and Tuesday 9th March 2021. The objectives for the session include;

• to share information on the SREDA’s EECPFP and review the progress particularly for the textile and garment industries,
• to transfer knowledge and information on energy efficient technologies and equipment for the textile and garment industries,
• to work on the case studies on EE&C improvement for the participants’ factories based on the knowledge gained through the seminar, and
• to discuss the findings in the case studies and summarize the next steps for further EE&C improvement.

SREDA chairman opened the session by addressing the importance of improving the energy efficiency for industry sector. The PD, together with the PI Consultant Team, presented the current status of the Project. The first presentation by the PI Consultant, Dr. Takeshi Kikukawa, overviewed the current cost components of the textile and garment production and the possible impacts of the EE&C investment on the costs and financial performance. The future competition and challenge would not be limited to the production costs and pricing, but also the added value of the products such as quality, timeliness, design, waste management, environmental, social and governance (ESG) and marketing. It is expected that the investment on EE&C equipment would trigger the efforts for improving the corporate performance beyond the EE&C gain.

The participants, from the engineering and energy management backgrounds, would therefore be expected to discuss the issues with the corporate management. The program also provided the sessions on technologies and equipment for energy efficiency by the university professors. The participants also had an opportunity to learn the financing facility funded by JICA to support the energy efficiency investment.

The PI Consultant Team’s national energy experts, Mr. Md. Masoodur Rahman Khan, Mr. Md. Ershed Jaman Khan, and Mr. Muhammad Zakir Hossain, facilitated the case study discussions among the participants on how to implement the energy efficiency improvement project. The findings at the case study discussion can be summarized in the following table. The PI Consultant Team’s Project Administrator, Mr. Md. Jahangir Hasan Talkuder, made a presentation on EECPFP loan application procedures.

Through the training sessions, the participants are expected to be equipped with the knowledge and expertise to implement the energy efficiency project at their own facilities. The program ends with the closing remarks by PD.

1.3 SREDA capacity development training for SREDA staff

1.3.1 EEC financing

The PI Consultant, Dr. Takeshi Kikukawa, conducted capacity development training session for the SREDA staffs titled “Financing for Energy Efficiency and Conservation (EE&C) Project – Lessons from good practices for energy efficiency financing in the world & Way forward –“, twice with the first being on Thursday 11th March 2021 for SREDA EE&C Wing, and the second on Monday 22nd March 2021 for the entire SREDA staffs.

The objectives for the session include; (a) to understand the concept of designing the EE&C financing project, (b) to overview the similar practices in the world, and (c) to exchange views on the way forward beyond the EE&C financing in Bangladesh.

SREDA chairman opened the session by addressing the importance of improving the energy efficiency for industrial sector. The PD introduced the current status of the Project. As the country’s 50th Independence Day was approaching, the PI Consultant Team, before the presentation, expressed their sincere respect for the commemorative day.

The presentation by Dr. Takshi Kikukawa covered the wide-ranging aspects of the EE&C financing such as (a) design concept and procedure for EE&C financing, (b) international practices for EE&C financing and implication for Bangladesh, (c) beyond EE&C financing and SREDA business. The points of the discussions at the session were;

1. While some of the international examples many not be directly applicable in Bangladesh, they would be useful information in the future.
2. SREDA’s strategic role in promoting EE&C improvement has been revisited and confirmed.
3. The collaboration with the financial institutions would be a key for the expansion of project activities since the financing instruments will also play a significant role.
4. SREDA could review the other aspects of the EE&C improvement efforts beyond the energy efficiency gain.
5. The upcoming training session will address the above-mentioned issues. The training is being planned in collaboration with Bangladesh Bank and SME foundation for commercial banks in Bangladesh.

1.3.2 Economic and Energy Demand Analysis in PSMP 2016 and Energy Balance

The PI Consultant Team members, Mr. Yasushi Iida and Ms. Mari Iwata, conducted a capacity development training session for SREDA staffs titled “Economic and Energy Demand Analysis in PSMP 2016 and Current Status of Energy Balance Statistics Work“ on two occasions: first, on 28th March 2021 for SREDA EE&C Wing, and the second, on 31st March 2021 for the entire SREDA staffs. In the lectures, PI Consultant Team’s past experiences were presented in making a long-term forecast of GDP growth and total energy demand (not limited to electricity) up to 2041, as a part of developing the Power System Master Plan (PSMP) 2016 in Bangladesh, which was sponsored by JICA. The main objective was not to present the calculated results of PSMP, but to share the key points to be considered in making a long-term energy supply-demand plan. Especially in countries like Bangladesh, where the national economy just started to grow rapidly, drastic changes of economic structure are expected to occur in the next 20 years. Energy demand in the future will also change to reflect this economic development.

The PI Consultant Team pointed out the possibility of a huge growth of energy consumption, especially in the industry sector and the transport sector. As for the industry sector, the PI Consultant Team showed that the historical trend of industry sector’s energy consumption per sectorial value added, which indicates how much energy is used in the industry sector for the sector to generate 1 USD value added, has been constantly growing in Bangladesh.

This is caused by the industrialization of economy, i.e. shifting from labour-intensive light industry to energy-intensive heavy industry. Assuming that this trend will continue (at least up the same level of the ASEAN countries), and that GDP will also grow rapidly, the industry sector’s energy consumption is expected grow exponentially. The PI Consultant Team also explained that, in order to sustain a long-term economic growth, Bangladesh needs to take appropriate economic policy to meet each stage of economic development, such as bringing up highly skilled labour to be capable of more value-added industry.

The PI Consultant also explained that the future growth of transport sector’s energy consumption also needs to be noted. In general, car ownership (number of cars per population) starts to increase rapidly when the GDP capita exceeds USD 5,000 (in PPP: purchasing power parity), and Bangladesh is expected to reach this level by late-2020s. Dhaka urban area already suffers from chronical traffic jam, but the number of registered passenger vehicles outside Dhaka is still limited, and the car ownership is expected grow fast in suburban and rural areas.

Bangladesh needs to consider how to address such high growth of transport sector. One is to develop a modern public transport system to mitigate the increase of private passenger vehicles. Another is to formulate a long-term plan of energy supply for the transport sector, taking into account the future energy mix of the country, where the policy to promote CNG conversion has become inappropriate.

As a result of huge growth of energy consumption, especially in industrial and transport sector, the forecast in PSMP 2016 showed that the energy intensity, which is the ratio of energy consumption per GDP, will turn upwards from late-2020s in the BAU (business as usual, without EE&C measures) scenario. The PI Consultant Team stressed the importance of taking strong measures of EE&C to avoid this trend.

There were comments from participants after the presentation, such as the necessity to promote electric vehicles (EVs) and renewable energy (RE) to address the energy demand growth in the future. The PI Consultant replied that these are important points and should be discussed more in depth in developing the next EE&C masterplan.

1.4 Energy audit equipment procurement

The PI Consultant team, prepared the list of energy audit equipment to be procured in the project, as shown in the following table:

The equipment list has already been presented to SREDA’s technical officers. Following the SREDA technical officers’ non-objections, the PI Consultant Team consulted with the following two local electronics distributors to request for the quotations for these products:

• Power Tech Electric (official sales agent of HIOKI)
  165 Nawabpur Road, Dhaka-1100. Bangladesh
• Express Systems Limited (official sale agent of FLIR Systems)
  Road-1, Shaymoli, Dhaka-1207

The PI Consultant Team is currently conducting a final review of the quotations as well as making registration of suppliers in MRI’s procurement system. The procurement list already had a preliminary consensus of SREDA’s technical officers, and after clearing the above procedures, it will gain SREDA’s final approval before officially placing an order. According to the distributors, it will usually take 5 to 6 weeks from purchase order to delivery. After the trainings on the usages of these devices, their ownership will be transferred to SREDA.

1.5 National Energy Balance Statistics

The PI Consultant Team identified (1) missing data and (2) data to be further clarified to develop energy balance. For the (1) missing data, the PI Consultant Team supported SREDA to prepare letters requesting data submission from relevant organizations (BCMCL, Petrobangla, HCU and BPA). For the (2) clarification on data, the existing data sources regarding the power supply and demand were reviewed. Though the statistics of BPDB’s annual reports cover many of the data necessary for grasping the flow of power supply and demand from upstream (generation) and downstream (end consumption), there are still some data that cannot be obtained from BPDB. It was found that the data from other sources may be sought for improving the accuracy of the statistics. Through the discussion with SREDA officers and local technical experts, these issues have become mostly clear. However, further work should continue, including meetings with BPDB, Power Cell and BERC.

1.6 Awareness raising activities

The PI Consultant Team actively worked on awareness raising for mainly three issues. Firstly, the PI Consultant Team developed a tri-fold leaflet to introduce the EECPFP, which will be widely distributed to the industries. Secondly, the PI Consultants Team drafted a newspaper advertisement, which will be published in some of the major English language newspapers. Thirdly, focal discussion meetings for the journalists were planned. However, they were postponed due to the rapid deterioration in COVID-19 infection status.

1.7 Environment and Social Performance Report (ESPR)

The PI consultant Team, having checked the submissions from the IFIs, identified some recent alterations made on the ESPR submitted by IDCOL. While IDCOL reported that Environmental Impact Assessment (EIA) was necessary for specified sub-projects in the previous quarterly report (covering Jun-Sep/2020), in the most recent quarterly report (covering Oct-Dec/2020), they reported that EIA was not required. The national environmental and social considerations experts looked into this issue and had a consultation meeting with IDCOL. Currently, IDCOL is still investing the issue, and the PI Consultant Team will further follow up.

1.8 MIS environment

MIS recently encountered quite a few times of server downtime, disabling users to access to the site. To solve the issue, the MIS has been successfully migrated to the new server environment on Sunday 28th March 2021.

1.9 First Project Steering Committee (PSC) Meeting at Power Division

On Monday 15th March, the first Project Steering Committee meeting for EECPFP was held. It was held on an online platform (Zoom meeting). The setup was entirely a Power Division’s project reporting meeting, held collectively for several of the ongoing projects, not exclusively for EECPFP. The PI Consultant Team’s Project Administrator, Mr. Md. Jahangir Hasan Talukder was among the 31 participants attending the meeting.

The PD briefly explained EECPFP activities including an outline of the project (approval dates, total project cost, project duration and source of funding etc.), financial mechanism, terms of loan, reviewed the progress physical and financial progress. He also explained the NOC issuing status, and annual energy saving potentials (Meghna Cement sub-project was given as an example). He also discussed the sector wise and equipment wise loan sanctions.

2. Appendices

Appendix 19-1: Training on Financing for Energy Efficiency and Conservation in Textile and Garment Industry for IDCOL (15/Mar/2021)

Appendix 19-2: Training on Financing for Energy Efficiency and Conservation in Textile and Garment Industry for BIFFL (16/Mar/2021)

Appendix 19-3: Mujib Borsho Special Training on EE&C in Textile and Garments Industry “Energy Consumption in Textile and Garment Industry
– The Benefits of Improving Energy Efficiency” (8/March/2021)

Appendix 19-4: Mujib Borsho Special Training on EE&C in Textile and Garments Industry ” Facilitation (Low-cost Finance)” (9/March/2021)

Appendix 19-5: Capacity Development lecture for SREDA staffs on “Financing for Energy Efficiency and Conservation (EE&C) Project – Lessons from good practices for energy efficiency financing in the world & Way forward – (11 and 22/March/2021)

Appendix 19-6: Capacity Development lecture for SREDA staffs on “Economic and Energy Demand Analysis in PSMP2016 & Current Status of Energy Balance Statistics Work -Implications for the next masterplan” (28 and 31/March/2021)

Appendix 19-7: Minutes of Meeting, First Project Steering Committee (PSC) Meeting at Power Division (15/March/2021)