nama proposal for the steel sector in bangladesh. - ndf · opment of a nama in the steel sector and...

15 August 2014

NAMA PROPOSAL FOR THE STEEL

SECTOR IN BANGLADESH.

NIRAS A/S

Sortemosevej 19

3450 Alleroed, Denmark

Reg. No. 37295728 Denmark

FRI, FIDIC

www.niras.com

P: +45 4810 4200

F: +45 4810 4300

E: [email protected]

D: +45 48104200

Picture 1: Front page. Melting process at Vikrampur, Bangladesh

PROJECT NAMA proposal for the steel sector in Bangladesh

NCF and Danish Embassy:

NAMA proposal for the steel sector in Bangladesh

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1 ACROCYM, PARAMETERS AND VALUES .............................................. 5

2 EXECUTIVE SUMMARY ............................................................................. 9

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

5 STEEL IN A GLOBAL PERSPECTIVE .................................................... 28

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

7 LESSONS LEARNED FROM CDM, VOLUNTARY MARKET AND

EMISSION TRADING SCHEMES ....................................................................... 41

7.1 Experience and lessons learned from CDM ............................................. 41

7.2 Experience and lessons learned from the voluntary carbon market ........ 44

7.3 Experience and lessons learned from Emission Trading Schemes ......... 45

8 POTENTIAL ENERGY AND ENVIRONMENTAL PROJECTS ................ 49

8.1 Introduction ............................................................................................... 49

8.2 Reference mill ........................................................................................... 50



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8.3 Optimisation of the melting process – Waste heat recovery from the

induction furnace ...................................................................................... 51

8.3.1 Introduction ............................................................................... 51

8.3.2 Project description .................................................................... 52

8.3.3 Example of savings ................................................................... 52

8.3.4 Co-benefits ................................................................................ 53

8.3.5 Measurements and monitoring ................................................. 53

8.3.5.1 Electricity .................................................................................... 54

8.3.5.2 Batch Time ................................................................................. 54

8.3.5.3 Scrap .......................................................................................... 54

8.3.5.4 Additives .................................................................................... 55

8.3.5.5 Slag ............................................................................................ 55

8.3.5.6 Product losses ........................................................................... 55

8.3.5.7 Product ....................................................................................... 55

8.3.5.8 Visual monitoring of quality: ....................................................... 55

8.3.5.9 Measuring program and activities .............................................. 56

8.3.6 Investment and maintenance costs .......................................... 58

8.3.7 Barriers ..................................................................................... 59

8.3.8 Toolbox ..................................................................................... 59

8.4 Optimisation of the reheating process – Waste heat recovery from the

reheating furnace ...................................................................................... 60

8.4.1 Introduction ............................................................................... 60



8.4.4 Co-benefits ................................................................................ 62



8.4.7 Barriers ..................................................................................... 63

8.4.8 Toolbox ..................................................................................... 63

8.5 Combustion and feed control system ....................................................... 64

8.5.1 Introduction ............................................................................... 64



8.5.4 Co-benefits ................................................................................ 65



8.5.7 Barriers ..................................................................................... 66

8.5.8 Toolbox ..................................................................................... 66

8.5.9 Other ways of optimising the reheating furnace. ...................... 66

8.5.9.1 Optimising existing air preheating systems ............................... 66

8.5.9.2 Regenerative burner .................................................................. 66

8.5.9.3 Oxyfuel burners.......................................................................... 67

8.5.9.4 Product preheat ......................................................................... 67

8.5.9.5 Minimising heat losses from the reheating furnace ................... 67

8.6 Training program ...................................................................................... 68



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8.6.1 Introduction ............................................................................... 68


8.6.3 Example of a training program.................................................. 69

8.6.4 Co-benefits ................................................................................ 71



8.6.7 Barriers ..................................................................................... 72

8.6.8 Toolbox ..................................................................................... 72

9 BASELINE ................................................................................................. 73

10 COST ESTIMATES AND ECONOMIC ANALYSES IN THE STEEL

SECTOR .............................................................................................................. 75

10.1 Introduction ............................................................................................... 75

10.2 Economic analyses ................................................................................... 76

10.2.1 Data assumptions ................................................................... 77

10.2.2 Budget and financing ................................................................ 78

10.2.3 Results ...................................................................................... 79

11 OVERVIEW MITIGATION POTENTIAL AND COST ESTIMATES

BASED ON THIS SURVEY ................................................................................. 81

12 INCENTIVE STRUCTURE ........................................................................ 82

12.1 Introduction ............................................................................................... 82

12.2 Discussion................................................................................................. 82

12.3 Recommendation ...................................................................................... 83

13 MRV SYSTEM ........................................................................................... 84

13.1 Introduction ............................................................................................... 84

13.2 Discussion................................................................................................. 84

13.3 Recommendation ...................................................................................... 86

14 FINANCIAL SUPPORT AND MECHANISMS .......................................... 87

Financing for implementation of NAMA .............................................................. 88

15 DISCUSSIONS AND ANALYSES ............................................................ 89

15.1 Organisation of NAMA work in Bangladesh ............................................. 89

15.2 NAMA Steel building blocks...................................................................... 89

15.3 NAMA models in the steel sector ............................................................. 92

15.4 Can the NAMA steel in Bangladesh be developed as a stand-alone

system ? .................................................................................................... 94

15.5 NAMA seeking support for implementation .............................................. 95

16 CONCLUSIONS ........................................................................................ 96

16.1 Summary of conclusions ........................................................................... 96

16.2 Recommendation of next actions ............................................................. 97



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18 ANNEX A – QUESTIONNAIRE STEEL MILLS ...................................... 100

19 ANNEX B – SUPPLEMENTARY PROPOSAL OF POTENTIAL

INITIATIVES IN THE STEEL SECTOR ............................................................. 104

20 ANNEX C ECONOMIC MODELLING .................................................... 107

20.1 Optimisation of the reheating process – Waste heat recovery ............... 107

20.2 Optimisation of the reheating process – Waste heat recovery from the

reheating process ................................................................................... 108

20.3 Combustion and feed control system ..................................................... 109

20.4 Training program .................................................................................... 110

21 Annex D. Support letter from Bangladesh Auto Re-Rolling &

Steel Mills Association .................................................................................... 111

22 Annex E. Support letter from Bangladesh Steel Mill

Owners´Association ........................................................................................ 112

23 Annex F. Support letter from Bangladesh Re-Rolling Mills

Association ....................................................................................................... 113

24 REFERENCES ........................................................................................ 114

5 NCF and Danish Embassy:


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1 ACROCYM, PARAMETERS AND VALUES

ACRONYMS

AAU Assigned Amount Unit

BARSMA The Bangladesh Auto Re-Rolling & Steel Mills Associa-

tion

BAU business-as-usual

BCF Billion Cubic Feet

BOI Board of Investment

BRMA Bangladesh Re-Rolling Mills Association

BSEC Bangladesh Steel and Engineering Corporation

BSMOA Bangladesh Steel Mill Owners´Association

BTA Bangladesh Taka

BUR Biennial Update Report

CAPEX Capital Expenditure

CCTF Climate Change Trust Fund

CDM Clean Development Mechanism

COP Conference of Parties

DNA Designated National Authority

DOE Department of Environment

EAF Electric Arc Furnace

EMS Environmental Management Systems

ERD Economic Relations Division

EU European Union

EU-ETS European Union – Emission Trading Scheme



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FVA Framework for Various Approaches

GDP Gross domestic product

GHG Greenhouse gases

HAL Historical Activity Level

ICA international consultation and analysis system.

IF Induction Furnace

LGED Local Government Engineering Department

MoEF Ministry of Environment and Forests

MoI Ministry of Industries

MPEMR Ministry of Power, Energy and Mineral Resources

MRV Measurable, Reportable, Verifiable

NAMA National Appropriate Mitigation Action

NCF Nordic Climate Facility

NDF Nordic Development Fund

NEFCO Nordic Environment Finance Corporation

OPEX Operational Expenditure

PLC Programmable Logic Controller

QA Quality Assurance

SEC Specific Energy Consumption

SNC Second National communication

SREDA Sustainable & Renewable Energy Development Authority

TCF Trillion Cubic Feet

UNFCCC United Nation Framework Convention on Climate Change

USD US Dollar



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WHR Waste Heat Recovery

Table 1. Acronyms

PARAMETERS

mair Mass of air, [kg]

mng Mass of natural gas, [kg]

cpair Specific heat capacity of air, [kJ/(kg·K)]

ρng Density of natural gas, [kg/m3]

ΔT Temperature difference of two mediums

LHV Lower heating value of natural gas, [MJ/Nm3]

Qyear Yearly quantity

Table 2. Parameters

Exchange rates

The currency used in this study is euro and taka. The exchange rates are from

October 2013:

I USD (US dollar) 0.74 Euro

1000 BDT (Bangladesh Taka) 9.48 Euro

1000 BDT (Bangladesh Taka) 12.86 USD

Table 3. Exchange rates.

Values

Grid factor Natural gas Bangladesh

(base on LHV)xxii

0.2 kg CO2e/kWh

Grid factor electricity Bangladesh:xv

0.67 kg CO2e/kWh



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Natural gas price (BDT/Nm3)1 : 4.2 BDT/Nm

3

Natural gas price (Euro/Nm3): 0.05 Euro/Nm

3

Electricity price (BDT/kWh)1 : 6.71 BDT/kWh

Electricity price (Euro/kWh) 0.06 Euro/kWh

LHVxxii

: 9,72 kWh/Nm3

Scrap price 317 Euro/ton

Table 4. Values

1 The prices of natural gas and electricity are based on actual invoices from Vikrampur

Steel ltd



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2 EXECUTIVE SUMMARY

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 Owners´Association 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.

A supported NAMA is a priority and a detailed MRV system should be

developed. The MRV system should include both CO2 emissions and co-

benefits.

The supported NAMA should include an option for crediting or trading of

CO2 emission reductions.

The development of the baseline should be the required/recommended

electricity or natural gas /tons steel produced.

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-



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cess, it could be considered to involve for instance the World Steel As-

sociation.

The steel sector in Bangladesh consists of very different levels of steel

mills, from basically just a steel mill with one furnace to fully large au-

tomatized steel mills. This will be a challenge when developing a NAMA

covering the entire sector

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 focus in the NAMA development should be an incentive structure ra-

ther than a penalty system.

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.

Finally it should be noted that there is a strong commitment to do an effort in the

steel sector. It should be pointed out that this NAMA report is based on four mis-

sion of less than 1 week each and having mind that it is a complex sector with

limited available data and most steel mills have limited experience in working



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international, several of the discussion and conclusions should be considered

preliminary and as an input to further clarification and input to the full scale im-

plementation of the NAMA. This report can be considered as a draft pre-

feasibility study for a NAMA project in the steel sector in Bangladesh.



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3 INTRODUCTION

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.

One of the measures to tackling these concerns is through energy efficiency

measures in energy intensive sectors, to limit energy consumption per unit pro-

duced product, thus guaranteeing a good balance between all three dimensions.

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 People’s 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

The National Appropriate Mitigation Action (NAMA) concept is a high priority in

the international climate negotiation and by the Government of Bangladesh. The

NAMA concept will be described and discussed in later sections of the NAMA

proposal in this report.

It has been decided by the Government of Bangladesh in close cooperation with

the Nordic Climate Facility (NCF) and the Danish Embassy in Dhaka to initiate a

project which can support the development of the steel sector in Bangladesh.

The project mentioned below has been initiated.

3.2 The project – organisation and set-up.

“The NAMA and Innovative Optimisation in the Steel Sector in Bangladesh Pro-

ject” (hereafter, the Project), originated from the need to identify technology,

capacity, policy and financial needs to enhance energy efficiency actions and

development in the steel sector. The output from this NAMA project phase

should contribute to clarify whether the NAMA concept is realistic and operation-

al in a Bangladesh context. The point of departure is to establish a NAMA cover-

ing the steel industry in Bangladesh.



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The Project is developed under the scope of the Nordic Climate Facility (NCF),

which is a Nordic climate initiative financed by the Nordic Development Fund

(NDF) and implemented jointly with the Nordic Environment Finance Corporation

(NEFCO).

The Royal Danish Embassy in Dhaka secured supplementary financing to guar-

antee a consistent financial package for the project, which counts as well with

co-financing from other sources.

The Project is expected to be finalized in 2014, and is jointly implemented by

Danish and Bangladeshi companies, and with the in-kind support of the Gov-

ernment of Bangladesh.

The main actors of the Project are listed in Figure 1.

Figure 1 Main actors during the implementation of the Project.

Morten Pedersen, Mads Glent Abildgaard and Rune Jørgensen from NIRAS A/S

and Fridolin Müller Holm and Christian Risborg from Viegand Maagøe 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.

Project actors

Bangladesh

Vikrampur Steel Ltd.

----------------

Owners of the steel facility

where the pilot project will be

developed

Modern Erection

(MEL)

----------------

Engineering company

responsible for constructing the

new heat recoveery system

components

Department of Environment of the Ministry of

Environment and Forests of

Bangladesh

----------------

In-kind support to the

implementation of the Project and

coordinating NAMA actions

Denmark

Viegand & Maagøe A/S

----------------

Engineering consultancy

company responsible for

the design of the new heat

recovery system and capacity

building activities

NIRAS A/S

----------------

Engineering consultancy

company leading the development of the NAMA for the steel sector



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MEL has also contributed with technical input to this report and facilitated meet-

ings, on site visit etc. Representatives from the steel sector have contributed with

knowledge of the steel sector and potential investments and future initiatives.

3.3 The project – objective and structure

The Project was formulated along three streams which complement each other,

and intend to promote the investment in innovative technical solutions for energy

efficiency in the steel industry, as well as, improving technical competences

among steel workers and, and also contribute to the whole development and

attracting new investments in the steel sector. Furthermore at a higher level it is

the ambition to identifying feasible mitigation measures under the framework of

Nationally Appropriate Mitigation Actions (NAMAs), being discussed at the Unit-

ed Nations Framework Convention on Climate Change (UNFCCC).

The three streams are defined in figure 2.

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;

NAMA and Innovative Optimisation in the Steel Sector in Bangladesh

Technology

Implementation of heat recovery system in identified pilot sites

Capacity Building

Conduction of training workshops for the staff in

the steel production facilities

NAMA

Preparation of a sector specific NAMA, with

elements from the two other streams



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The overall goal of this NAMA preparatory work is to present appropriate mitiga-

tion options within the steel sector in Bangladesh and to suggest relevant incen-

tives to enhance implementation of nationally appropriate mitigation actions, in

line with the country’s national development priorities and climate change strate-

gies and, in general, to shed further light into the on-going international discus-

sions (under the UNFCCC) around this topic.

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.

3.4 Stakeholder mapping

Part of the project has also been to work in a transparent and inclusive manner

and an important part of this is to have extensive stakeholder consultations and

communication with stakeholders based on bilateral meetings.

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.

No. Stakeholder Function Role in the project

1 Department of

Environment

Coordinating and

regulatory authori-

ty of environmen-

tal issues. Focal

point for UNFCCC

Facilitating and coordinat-

ing this project in Bangla-

desh



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2 Ministry of Power,

Energy and Min-

eral Resources

(MPEMR)

Responsible for

developing now

policies and strat-

egies.

Managing the

power utilities

New energy efficiency initi-

atives.

Stable and affordable gas

and electricity supply.

3 Ministry of Indus-

tries (MoI)

Responsible for

developing new

policies & strate-

gies for promo-

tion, expansion

and sustainable

development of

Industrial sector

of the country.

Should be involved as re-

sort Ministry

4 Ministry of Fi-

nance (MOF)

Managing dis-

bursements and

recurrent expendi-

tures of the whole

state economy.

MOF is together with

MOEF (DOE) responsible

for the mobilization and

allocation of budgets to

climate change programs

and projects.

5 Vikrampur Steel

Ltd

A steel work

placed roughly 60

km north from

Dhaka. and

Vijkrampur Steel

Ltd has a medium

sized steel mill.

Vikrampur has been in-

volved in identifying the

NAMA in the steel sector

and should also be a part-

ner in the continuation of

the development of this

NAMA together with other

steel works

6 Bangladesh Auto

Re-rolling & Steel

Mills Association

(BARSMA),

BARSMA repre-

sents 15 of the

larger steel pro-

ducers in Bangla-

desh.

BARSMA will be instru-

mental with regard to mobi-

lizing its members for the

planned outreach

measures in the context of

technology deployment and

promotion, training and up-

scaling to reach mitigation

potential at scale through-

out the sector.



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7 Bangladesh Steel

Mill Owners’ As-

sociation

(BSMOA),

BSMOA repre-

sents approxi-

mately 120 steel

producers in

Bangladesh.

BSMOA will be instrumen-

tal with regard to mobilizing

its members for the

planned outreach

measures in the context of

technology deployment and

promotion, training and up-

scaling to reach mitigation

potential at scale through-

out the sector.

8 Bangladesh Re-

Rolling Mills As-

sociation (BRMA),

BRMA represents

approximately

140 companies in

the Bangladesh

steel sector.

BRMA will be instrumental

with regard to mobilizing its

members for the planned

outreach measures in the

context of technology de-

ployment and promotion,

training and up-scaling to

reach mitigation potential at

scale throughout the sec-

tor.

9 Danish Embassy Danish Embassy,

Bangladesh, sup-

ported the first

phase of the

NAMA develop-

ment ( sponsor)

The Embassy can provide

liaison and other support

functions using its bilateral

relations with the Bangla-

desh government and net-

works.

Maybe the Embassy can

also in the future support

the implementation of the

project with funds

10 NDF Sponsor NDF could consider to

support the implementation

phase

11 NEFCO Administration of

the funds alloca-

ted by NDF

Could support NDF in the

administration in case of

future support

12 Modern Erection

Limited (MEL)

Engineering com-

pany based in

Dhaka, Bangla-

Modern Erection will play

the role as one of the local

technology provider and



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desh. The com-

pany possesses

full-fledged facili-

ties to undertake

any metal fabrica-

tion works.

will be in charge of the site

installation and have the

contact to the site.

13 Viegand Maagøe

(VM)

Danish Consul-

tancy Company

Specialist in

providing energy

audits, analyses,

feasibility studies,

financial and

technical decision

Support with technical ex-

pertise.

14 NIRAS NIRAS A/S is a

multidisciplinary

international con-

sultancy compa-

ny.

Support with NAMA and

MRV expertise

15 Bangladesh De-

velopment Bank

Ltd

A state owned

Bank with normal

banking opera-

tions. Administrat-

ing loans from

abroad

Could be part of a future

financial scheme.

Table 5. Stakeholders



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Schematic presentation

O

Figure 3 Overview of key stakeholder interactions..

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.

3.5 Stakeholder consultations

Part of the project has also been to work in a transparent and inclusive manner.

This has been a focus area for the DOE and several interactions with potential

stakeholders have been arranged during the project period.

Two larger stakeholder consultations have been performed one in March 2014

and one in May 2014.

At the stakeholder meeting 12th 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 Owners´Association (BSMOA) and the Bangladesh Re-Rolling Mills Associa-

tion (BRMA) and individual steel mills (see picture 2). The steel mills and steel

DOE

Steel Association

Steel Mills

MPEMR

MoI

NIRAS/VM/MEL

MOF Banks and Sponsors



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association have shown very strong interest and several follow up meetings have

been held.

The stakeholder meeting 21st 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)

Picture 2. Stakeholder meeting March 2014



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Picture 3. Stakeholder meeting, May 2014




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4 NAMA

4.1 What are NAMAs ?

A NAMA is a voluntary measure for mitigating GHG emissions. NAMAs can be

implemented in all countries, including developing countries, like Bangladesh.

There is no internationally agreed definition of NAMAs and therefore it is to a

high degree up to the individual country to define this. Therefore NAMAs will

probably not be limited as long as they are in line with national development

plans, result in mitigation of GHG emissions, and have an impact that can be

measured, reported and verified.

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 COP 17 in Durban it has been decided to set-up a prototype NAMA Registry.

Furthermore international guidelines for the reporting and verification of develop-

ing Countries GHG emissions at the national level have been put in place

through the “biennial update report” (BUR) and “international consultation and

analysis (ICA) system. It should be noted that no international agreement on

MRV guidelines at NAMA level has been reached.

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



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could also partly be defined a NAMA. It is generally thought of as a market-

based mechanism with baseline and credit approach (with an almost similar

basic principal as the CDM but potentially on a sector basis). NMM should func-

tion under the guidance of COP. In parallel the possibility for more bottom-up

and country-driven mitigation action has been opened through the Framework for

Various Approaches (FVA) which will function less UNFCCC-centric. Both are

possible means of receiving finance for achieved emission reductions in the

NAMA framework, for instance for the steel sector. Therefore the focus in this

assignment will still be the NAMA concept.

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.

4.2 NAMA models

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.

In case of a carbon market, above NAMA types could receive complementary

funding in the form of carbon credits for emission reductions (often called “NAMA

crediting”. It should be noticed that the credited NAMAs has not been

acknowledge in the COP decisions.

A credited NAMA could as example be structured in two ways 1) sector crediting

or 2) sector trading.

Sector crediting

Sector crediting would be based on an agreed emissions threshold or “no-lose

target” at sector level. That is, countries would agree on a level of emissions for

a sector. This threshold could be either in terms of absolute emissions or intensi-

ty-based, for example in terms of emissions per unit of GDP, emissions per unit

of electricity generated, etc. The developing country could then undertake ac-

tions to reduce its emissions to the agreed level, either unilaterally or with some

international support. If emissions are reduced below the target, the developing

country would receive credits. If the target is not achieved, there would often be

no penalties.i But a model with penalties could be established.

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-



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able units ex ante, essentially equivalent to the assigned amount units (AAUs)

industrialised countries receive under the Kyoto Protocol. If the country manages

to reduce its emissions below its target, it would thereby achieve a surplus of

trading units which it could sell. If the country does not achieve the sector target,

it would need to buy trading units to cover the shortfall.

NAMA Overview

In the below table is an overview of the different NAMA types adjusted.

International recognised NAMAs

Unilateral supported NAMAs This is solely a domestic administrated

and supported system

International supported NAMAs This is international supported system

with different type of support.

Possible future credited NAMAs

Sector crediting

Sector crediting would be based on an

agreed emissions threshold or “no-

lose target” at sector level.

Sector trading Sector trading would follow the cap-

and-trade approach

Table 6. Different types of NAMA

4.3 Advantages and disadvantages of sector NAMA

The purpose of the section is to present an overall view of possible advantages

and disadvantages for developing a NAMA in the steel sector. The idea is mainly

to secure that this is taken into consideration when developing a NAMA. De-

pendent of the specific model of implementation a disadvantage and due to for

instance policy measures be implemented as an advantage.

Advantages :

Can address issues of competitiveness (if all competitors are

included)

Promotes technologies/actions with low greenhouse gas emission

May help tailor and channel financial assistance/investment



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Bangladesh can be the lead in forming the new market mechanism,

NAMA steel.

Disadvantages :

May advantage richer countries with capacity to meet standards, tilting

balance away from low income countries

May advantage richer companies with capacity to meet standards, tilting

balance away from poorer companies.

May require countries/companies with advanced technologies to give up

their competitive edge

Scaling to global solution requires multiple agreements, and will not be

limited to steel sector.

Under a sector mechanism with a no-lose target, emitters reducing emissions

cannot be sure that their efforts will not be invalidated by other emitters who

increase their emissions above the baseline level. Setting baselines for sector

emissions and policy implementation is notoriously difficult, especially if having to

be negotiated politically. ii

4.4 Bangladesh climate mitigation actions and efforts relevant for steel

sector

International climate negotiations

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

Mitigation Actions. Bangladesh has not forwarded any pledges. ”iii

Bangladesh is an active participant in the Cartegena Dialogue for Progressive

Actions including binding targets for developing countries.

UNFCCC – reporting

The Bangladesh Initial national communication to the United Nations Framework

Convention on Climate Change has been published by UNFCCC the 1 Decem-

ber 2002. ”iv The initial national communication do not describe the steel industry

as a priority for mitigation actions. As mitigation action is Environmental Man-

agement Systems (EMS) in industries described.



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The Second National Communication of Bangladesh to the UNFCCC has been

finalized in October 2012. ”v The steel sector has been identified as an important

sector for GHG mitigation actions, mainly for re-rolling mills.

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:

Abatement measure Rehabilitation, steel mill

$ US/ton CO2 -10.74

Unit type 7500 ton of steel

Emission reduction, ton CO2/ Unit 372

Unit penetration by 2030 750,000 ton of steel

Emission reduction, ton CO2 /year 37000

Table 7. Abatement costs in the Steel Sector, Bangladesh

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.

Establishment of national initiatives

In the Interim Action Plan for Improvement of Energy Efficiency & Conservation

of 14 October 2012vi 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.

4.5 NAMAs in the steel sector from other countries

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.



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5 STEEL IN A GLOBAL PERSPECTIVE

Global overview

Over 1.5 billion tons of crude steel are produced and used every year. Currently

most steel is produced and used in China.vii

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

every year there is an annual increase in the crude steel production viii

.

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.

World Steel Association

The World Steel Association members have agreed on a framework to reduce

the carbon footprint associated with the manufacture and use of steel. The idea

is that in order to reduce the carbon emissions from steel’s life cycle, it is essen-

tial to take a full life cycle approach. This approach not only considers the emis-

sions associated with the manufacture of steel products, but also the reduction in

energy consumption associated with the use of new generation-steels in lighter



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and stronger products. Further, the inherent recyclability of steel must be given

prominent consideration in the search for sustainable materials for the future.

The World Steel Association has a framework for a lower carbon development

consisting of four building blocks:

1. Development and application of new steels to improve energy efficiency

of steel-using products

2. Research and development of new steelmaking technologies

3. All steel mills use best available technologies through benchmarking and

technology transfer.

4. Common measurement and reporting system for steel plant CO2 emis-

sions. The reporting system uses a common agreed methodology and

the World Steel Association is working on having this methodology as an

ISO standard

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

the GHG Protocol ix. A user guideline for CO2 emissions data collection has also

been developed x

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.



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6 BANGLADESH

6.1 Overview and Strategy

Bangladesh is already one of the most vulnerable countries in the world to

weather and natural disasters. Floods, tropical cyclones, storm surges and

droughts are predicted to become more frequent and severe in the coming

years. The government thus recognises that climate change is a development as

well as an environmental priority, and is committed to developing and incorporat-

ing potential response measures that reduce the impacts of climate change into

the overall development planning process. Bangladesh is focusing primarily on

building a platform for climate-resilient growth through adaptation measures, but

is also taking steps to pave the way for mitigation and low carbon growth.

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

poverty and to achieve national economic and social wellbeingxi 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-

opment and Bangladesh Climate Change Strategy and Action Plan xii

. In 2009

the Bangladesh Climate Change Strategy and Action Plan has been updated

and approved by the Government of the People´s Republic of Bangladesh.xiii

.

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.

6.2 Overview of the CDM procedure and specific CDM projects

CDM procedure



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On 13 October 2003, Bangladesh government established a Designated Nation-

al Authority (DNA) for approving CDM projects in Bangladesh. It is a two tier

approval process through both the (1) National CDM Board and (2) National

CDM Committee. The structure of the two boards are presented below in figure 4

and figure 5.

Figure 4 Structure of the National CDM Board.

Figure 5 Structure of the National CDM Committee

National CDM Board

Chairperson

Secretary, Ministry of Environment and Forests

Members

Planning Commission, Ministry of Environment and Forests, Industries,

Agriculture, Foreign Affairs, Communications, Science information and

Communication Technology, Power,

Energy & Mineral Resources, ERD, LGED, BOI, Bangladesh Bank,

Department of Environment and others

Member Secretary

Director (Technical) Department of Environment

National CDM Committee

Chairperson

Principal Secretary to the Prime Minister

Members

Planning Commission

Secretary/Secretaries of the Relevant Ministries

including the Ministry of Environment and Forests

Member Secretary

Director General, Department of Environment



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Sustainable development criteria to approve CDM projects

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.

There is no experience working with CDM in the steel sector in Bangladesh.

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



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other sectors, for instance the lower number of emission reductions than ex-

pected. But it is in general difficult to take the experience from steel works iin

other countries as they are most often much larger than a steel work in Bangla-

desh.

6.3 Overview of the Gold standard procedure and specific Gold Stand-

ard projects

Among the voluntary carbon market programmes the Gold Standard”xiv

is the

most relevant for potential steel projects.

In the Gold Standard programme there is no formal requirement of host country

approvals and therefore the Bangladesh authorities have not set-up a formal

system approval system for Gold Standard projects. The DNA and CDM national

committee have until now a voluntary basis forwarded recommendation to Gold

Standard projects if considered relevant.

The DNA does not follow the Gold Standard project closely.

There are no Gold Standard steel projects in Bangladesh.

6.4 Baselines, Standardised Baselines and grid emission factors

According to the DOE the actual grid emission factor for electricity is 0.67 kg

CO2e/kWh for projects in Bangladesh.xv

and for natural gas it is 0.2

CO2e/kWhxxxi

.

6.5 Overview of the key characteristics of the industrial sector

According to the Second National Communication the different industrial indus-

tries have developed differently during recent years. Especially the garment in-

dustry has had a significant and positive development, but also the beverages,

pharmaceutical and cements industries have performed well. The agro-

processing industry has not had a positive development.

The development in the steel sector has not been described in the Second Na-

tional Communication and really no systematic overview exist.



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6.6 Overview of the key characteristics of the steel sector

Overview of the steel mills

Bangladesh has about 300 operating steel re-rolling millsxviii

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

melted in induction furnaces. xvi

Supplementary to the above 300 mills there are supplementary approximately 15

mills which are larger and have automatisation to a high degree and these are

also organised in own association.xviii

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.

In the steel production in Bangladesh there is potential for introduction of new

technologies, reduce energy consumption, improve the working conditions and

increase the production.

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 country’s infrastructure many of

these will be small and medium-sized.



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The supply of raw material to the steel mills is scrap from all over Bangladesh

and scrap are from ships.

Bangladesh does not have any production of steel based on iron ore.

Organisation of the Steel sector

The Bangladesh Re-Rolling Mills Association (BRMA) has 140 member compa-

nies xvii

Bangladesh Steel Mill Owners' Association (BSMOA) has approximately 120

member companies.xviii

Bangladesh Auto Steel and Re-Rolling Mill Association (BARSMA) has approxi-

mately 15 member companies .xviii

Bangladesh Steel and Engineering Corporation (BSEC) is established with the

objective to contribute to the development of infrastructural facilities of the coun-

try, create the base for industrial growth, make human and material movement

faster and easier, and help utilize sea and river transportation system. xix

Permits and annual monitoring and clearance.

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.

Each company in operation will have an obligation to follow an environmental

management plan. The steel mill shall prepare an annual monitoring plan and

the DOE shall issue an Environmental Clearance Certificate.

Other environmental issues

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.



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6.7 Energy production, consumption and supply in Bangladesh

According to the Second National Communication of Bangladesh to the United

Nations Framework Convention on Climate Change the energy sources are Nat-

ural gas, diesel, kerosene, gasoline, jet fuel, lubricants, furnace oil, LPG, natural

gas liquids, coal and biomass.

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.

Furnace oil is used in furnaces in various industries.

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

electricity growth rate at a factor of 1.5 of the GDP growth rate.xx

If the growth

rate in GDP continues this trend, it is plausible that the growth in consumption of

electricity also will continue.

Figure 6. Net consumption of electricity in billions of kWh, Bangladesh.xxi

0

5

10

15

20

25

30

35

40

45

1980 1985 1990 1995 2000 2005 2010

Bio

llio

ns

of

KW

H



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The proven plus probable reserve of gas as on December 2008 stood at 12.2

TCF while the gas production in the year 2008-09 was 0.65 TCF. This gives a

static Reserve/Production ratio of 20 years; with increasing gas consumption the

depletion time would be less than 10 years. Since 1998 there has been very little

exploration activity, and only a small gas field (Bangura, 0.44 TCF) was discov-

ered in 2004. As a result of rapid growth of energy demand and limited explora-

tion activities the country is facing and will face a shortage of natural gas. ”xxii

Unless changes are made, Bangladesh will need to import both oil and gas. This

will lead to an increase in the cost of making electricity.

Figure 7 Electricity production (kWh) distributed among sources

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.

0

10.000.000.000

20.000.000.000

30.000.000.000

40.000.000.000

50.000.000.000

1980 1985 1990 1995 2000 2005 2010

Coal Hydroelectric Natural gas Oil



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Figure 8 Total CO2 emission from Bangladeshxxiv

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 CO2

emissions in the industrial sector.

6.8 Electricity produced on Gas engine VS electricity from grid

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.

0

10000

20000

30000

40000

50000

60000

1980 1985 1990 1995 2000 2005 2010

CO

2 e

mis

sio

n (

kt)



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Engine

Natural gas

Elektricitet

Loss

Factory

Electricity grid

Possibility to deliver to grid

Figure 9. Electricity supply in the steel factory

6.9 Electricity prices

This section briefly describes the relationship between electricity from the grid

and electricity from own gas engine. Viegand Maagøe have seen several steel

factories in Bangladesh and some of them have their own gas engine producing

electricity from natural gas. Many of the small producers, however, do not own

engines and rely on power from the grid. The figure below shows the overall in

the engine:

Engine

Natural Gas

Electricity

Heat Loss

Figure 10. Production of electricity

Natural gas is burned in the engine, which produces electricity and heat is emit-

ted from the engine. The different steel factories Viegand Maagøe 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 Maagøe has estimated to

40%. This based on estimations and discussion with experts within the field.



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Calculation of electricity price from engine:

Effeciency (ɳ) = 40 %

The electricity from combustion om 1 Nm3 natural gas en the engine can be

calculated from:

The price for the electricity produced on the engine is then:

Electicity from the grid. The electricity price is:

Electricity,grid = 6,71 BDT/kWh = 0,06 Euro/kWh



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7 LESSONS LEARNED FROM CDM, VOLUNTARY MARKET AND

EMISSION TRADING SCHEMES

7.1 Experience and lessons learned from CDM

CDM is well-known and therefore a general introduction is not needed. Only the

main conclusions of the experience will be highlighted in the general CDM sec-

tor. In the following sub-sections more specialised topics relevant for the steel

sector will be considered – Suppressed demand, standardised baselines and co-

benefits.

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.

A system with UNFCCC accreditation system with Designated Operational Enti-

ties is a slow and costly exercise.

The Bangladesh and international experience with CDM can be summarised in

the following bullet points:

- Important to establish a simple national approval system to avoid unnec-

essary bureaucracy and delay.

- High upfront costs, the PDD costs, validation and verification are consid-

ered very high

- The pay-back time of an investment is long.

- Low number of CERs from a project in Bangladesh and therefore not at-

tractive in a global market.

- Limited experience due to the limited number of projects.



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These are important issues which should be considered when developing a

NAMA.

CDM steel sector

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

Under the CDM, suppressed demand is defined as a “Scenario where future

anthropogenic emissions by sources are projected to rise above current levels,

due to the specific circumstances of the host Party”. CDB-EB has at EB meeting

68 prepared guidelines for having suppressed demand in CDM methodologies.

The concept of suppressed demand is included in some CDM methodologies to

consider situations where key services such as lighting and heating, water sup-

ply, waste disposal and transportation are only available in quantities that are

insufficient to meet basic human needs before the implementation of a CDM

project activity. This can be due to low income and lack of technolo-

gies/infrastructures or resources for its implementation.

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



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The steel sector has not been a priority for the CDM when developing sup-

pressed demand methodologies.

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 the establishment of sector specific standardised baselines (EB 65

A 23) – November 2011

Guidelines for Quality Assurance and Quality Control of data used in the estab-

lishment of standardised baselines (EB 66 A 49) – February 2012

Procedure for the submission and consideration of standardised baselines (EB

68 A 32) – July 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.

‘The development of standardized baselines is a data-intensive process, but

many of these parameters mentioned could be standard in the development of

the MRV system in a NAMA.

As no real experience in using the standardized baseline on project level, it is

unknown how the standardized baseline will work in practice.

Until now Bangladesh has no experience in developing stardardized baselines

within CDM. A draft proposal is under development by a group of the Bangla-

desh Consultant.

Conclusion

It seems that it has not been a priority to develop a standardized baseline for the

steel sector yet.



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It should be considered to incorporate elements from CDM when establishing

and managing the baseline and baseline emissions from the steel sector.

Co-benefit

Description

Under EB 70 meeting report in November 2012 it is mentioned “The Board ap-

proved the voluntary tool for describing sustainable development co-benefits of

CDM project activities and PoAs, in response to a request from the CMP in its

decision 8/CMP.7. The tool is available to view on the UNFCCC CDM website at

<http://cdm.unfccc.int/Reference/volSDtool/index.html>. The Board took note

that the voluntary tool will be available for use by project participants and coordi-

nating managing entities in 2013 and that the secretariat will inform the Board

and the public when the voluntary tool is operational.”xxv

It means that UNFCCC and EB have recognised the importance of co-benefits,

but due to the recent decision there is no lessons learned.

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.

For “small” industries two methodologies have been developed in 2013.

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



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beyond pre-project levels. Among others, the following activities are explicitly

included in this methodology: Installation of new equipment (either on a new site

or as capacity expansion) based on renewable energy technology to provide the

energy required for all or part of the food preservation process for new or existing

project sites. The suppressed demand approach is based on nutrition level ,

2100 kcal/person and this cannot be transferred to the steel industry.

2) GS Suppressed demand small-scale energy use for the processing of agricul-

tural products.

Conclusions

These newly developed suppressed demand Gold Standard methodologies

gives a trend that an increased capacity and production have been taken into

consideration when calculating the number of potential CO2 emission reductions.

The industrial plants, like steel production, have not been the focus in this devel-

opment.

7.3 Experience and lessons learned from Emission Trading Schemes

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-

marking. ”xxvi

. xxvii

. 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

also a decision on the free allocation of allowances for steel xxviii

. The guidance

document is part of a group of documents, which are intended to support the EU



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Member States in the coherent implementation throughout the EU of the new

allocation methodology for Phase III of the EU ETS (2013-2020)

The guidance document gives and requires the following information for each

product referred to by a product benchmark:

Relevant information for a product benchmark

Value of the product benchmark

Carbon leakage exposure

Definition of the unit of production

Definition and explanation of products covered

Definition and explanation of processes and emissions covered

Calculation of preliminary allocation

Determination of the historical activity level

Table 8. Information for a product benchmark

In the EU Guidance Document n°9 on the harmonized free allocation methodol-

ogy the steel sector has also been evaluated, mainly for Electric Arc Furnaces

(EAF).

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.

In the EU Guidance Document n°9 on the harmonized free allocation methodol-

ogy has been developed for both EAF carbon steel and EAF high alloy steel.

For EAF carbon steel the following is valid:

EAF carbon steel

Value of the product bench-

mark

0.283 allowances/tonne (one allowance is 1

tonnes CO2e)

Carbon leakage exposure Exposed

Definition of the unit of produc-

tion

Tonne of crude secondary steel ex-caster

Definition and explanation of Steel containing less than 8% metallic alloying



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products covered elements and tramp elements to such levels

limiting the use to those applications where no

high surface quality and processability is re-

quired.

Definition and explanation of

processes and emissions cov-

ered

All processes directly or indirectly linked to the

process units 1) electric arc furnace 2) second-

ary metallurg,3) casting and cutting, 4) post-

combustion unit, 5) dedusting unit, 6) vessels

heating stands 7) casting ingots preheating

stands, 8) scrap drying and 9) scrap preheat-

ingare included.

For the determination of indirect emissions, the

total electricity consumption within the system

boundaries shall be considered.

Processes downstream of casting, e.g. rolling

and reheating for hot rolling, are not included.

Calculation of preliminary allo-

cation

The product benchmark for EAF carbon steel is

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.

Determination of the historical

activity level (HAL)

Median annual production in the baseline peri-

od as determined and verified in the baseline

data collection (expressed in units of product).

Table 9. EAF Carbon Steel

For EAF high alloy steel the following is valid:

EAF high alloy steel

Value of the product bench-

mark

0.352 allowances/tonne (one allowance is 1

tonnes CO2e)

Carbon leakage exposure Exposed

Definition of the unit of produc-

tion

Tonne of crude secondary steel ex-caster

Definition and explanation of Steel containing 8% or more metallic alloying



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products covered elements or where high surface quality and

processability is required.

Definition and explanation of

processes and emissions cov-

ered

All processes directly or indirectly linked to the

following process units 1) electric arc furnace,

2) secondary metallurgy, 3) casting and cutting,

4) post-combustion unit, 5) dedusting unit, 6)

vessels heating stands, 7) casting ingots pre-

heating stands, 8) slow cooling pit, 9) scrap

drying and 10) scrap preheating are included.

For the determination of indirect emissions, the

total electricity consumption within the system

boundaries shall be considered.

The process units FeCr converter and cryogen-

ic storage of industrial gases are not included.

Processes downstream of casting, e.g. rolling

and rehearing for hot rolling, are not included

either.

Calculation of preliminary allo-

cation

The product benchmark for EAF carbon steel is

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.

Determination of the historical

activity level (HAL)

Median annual production in the baseline peri-

od as determined and verified in the baseline

data collection (expressed in units of product).

Table 10. EAF high alloy steel

For both the EAF carbon steel and EAF high alloy steel the annual allocation can

be calculation based on this formula.

Annual allocation = I((direct emission + heat import in emissions)/( direct emis-

sion + heat import in emissions + indirect emission )) * benchmark * HAL

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.



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8 POTENTIAL ENERGY AND ENVIRONMENTAL PROJECTS

8.1 Introduction

During the preparation of Second National Communication of Bangladesh (SNC)

different mitigation options have been analysed based on 6 different parameters.

Based on this investigation energy efficiency at steel re-rolling mills should be

one of the priorities.

Furthermore the cost-effectiveness of 21 mitigation actions in Bangladesh has

been analyzed. Rehabilitation of steel mills has been the seventh most financially

attractive mitigation action.

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-

ance. xxix

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:

Priority proposed by the Steel Mills Owners Association

1 To erect modern technology

2 To minimize wastage

3 To reduce the gas and electric consumption

4 To improve the management system

5 To control and reduce air and water pollution

6 To develop a material transport system

7 To minimize labour by using modern technology

8 To improve quality of products relative to other developing countries

9 To increase quality of projects including establishing laboratory, to

secure in accordance with international standards.

10 To secure supplies of equipment are from a diversity of countries.

Table 11. Priority list prepared by SMOA



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The consultant team has in close cooperation with the stakeholder identified

where an effort could be done immediately

Below is a presentation of the 4 very important environmental and energy pro-

jects in the steel sector in Bangladesh. Other important environment and energy

projects are shortly described in Annex B. All ideas could be considered as an

integrated part of the NAMA, but the focus at this stage has been to focus on the

4 selected ideas in development of the steel sector and the NAMA in Bangla-

desh. For each potential project the background information and relevance for

Bangladesh is described, and a concrete example is presented with calculation

of both technical and economical characteristics, co-benefits and also potential

barriers.

For each solution a toolbox, a summary table, with the focus on three parame-

ters 1) CO2 emission reduction 2) Cost and 3) Pay-back time2. 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.

8.2 Reference mill

In order for the plant descriptions and example of calculations to be consistence

and comparable then a reference plant is defined. The plant is categorized as a

medium size plant in a Bangladeshis context. The plant is deviated in to two

production lines, one scrap melting line and one re-rolling line (only one of each

line).

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



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Re-rolling:

The plant capacity is estimated to be 50 ton per day and with 320 production

days, then the yearly production will be 16,000 tones.

The specific gas consumption is assumed to be 615 kWh/ton.

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.

Weak power disruption

Unstable gas supply

Unstable raw material supply

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

input, which is equivalent to 130 kWh/ton of produced steelxxx

.

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.



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8.3.2 Project description

The scrap is preheated by thermal radiation from the furnaces opening, a con-

vective heat transfer from the off gasses (natural and forced) and by a combus-

tion process taking places in the incoming scrap.

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

Fuch’s Shaft preheater

BBS Brusa Process

Consteel Continuous Scrap Preheater

8.3.3 Example of savings

A theoretical example is given on a pre-heating system for a 7 ton furnace, which

produces 5 batches per day; 320 day per year. The example is based on a me-

dium size plant with a typical production pattern. In the example focus will be on

energy and carbon dioxide.

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



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Total 90 kWh/ton

In practice approximately 40- 50% of the theoretically possibly can within reason

be utilised.

With this assumptions the yearly saving can be achieved are:

[

] [

] [

]

The above mentioned number can be typical for a company in Bangladesh.

In Bangladesh the grid factor is 0.67 ton CO2/MWhxv

by using the grid factor the

specific saving will be 0.027 ton CO2/ton steel, which is equivalent to a yearly

saving of 304 tons CO2.

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:

Reduction of production time: Less time to heat

o Increased the production capacity: Due to the reduction in pro-

duction time.

Reduction in the slag amount: Better pre-treatment (sorting of the scrap),

will reduce the amount of slag.

Improved environmental impact

o Reduction of carbon emission: Related to energy saving and

better pre-treatment of the scrap.

o Reduction of dust particles: The scrap will act a filter, drawing

the dust back to the furnace.

Improved working environment

o Reduction of toxic fumes: To a great extent the scrap and fume

gas will be treated in a closed system.

o Reduction of exposure to high temperatures. The scrap will be

feed into the system away from the furnace, where the tempera-

ture is significantly reduced.

8.3.5 Measurements and monitoring

In this section an example is given on how the measuring must be conducted,

both in relation to the baseline measurements and in relation to the situation after

the installation of the heat recovery system. It is important that the two set of



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measurements is conducted in the same way and under conditions that are

comparable.

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).

8.3.5.2 Batch Time

The time for each batch must be measured in order to determine if there is an

improvement in production capacity. This measure will properly come together

with electricity measurements.

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-



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plus will be deducted from the total mass in order to find the exact mass of the of

there measuring period .

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.

8.3.5.6 Product losses

In the casting process losses are related to the runners, bars and casting sys-

tem. In order to determine the losses all the runners and cut offs from the bars

must be collected and measured. The measurements can be made manually on

a scale after steel has cooled down. The measurements must be made in kg and

can be done on the same scale as slag (can be done together with the slag).

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).

8.3.5.8 Visual monitoring of quality:

In order to determine the quality of the scrap, then s visual evaluation must be

made. The evaluation must be made on the following parameters:

Quality (The quality can be determined by sorting and describing the

content of the scrap. Eg. distribution of metal, impurities, type of metal

and type of impurities).

Density (The density of the scrap can be determined by weighing the

scrap in a controlled volume).



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Size (size need to be described by weight, geometry and other charac-

ter).

.

8.3.5.9 Measuring program and activities

Time line Description of the activity

Project preparation The project must secure that all relevant part-

ners are informed about the activities.

The project must assist the site preparing for the

measurements.

The project must make a logistic plan together

with the site for the measuring period is going to

be conducted.

Site preparation All workers involved direct or indirect in the

measurement must be informed about the activ-

ities.

The workers must be prepared for that the pro-

duction time can be extended on the days of the

measurements.

A scale must be installed on the furnace roof to

measure the additives.

A scale must be installed on the casting floor to

measure the losses and the slag.

There must made room on the furnace roof for

the batches to be measured.

Installation/preparation

of measuring equip-

ment

An electrical meter must be installed on site by

an external company. The meter must as a min-

imum measure the effect [kW], time [s] and en-

ergy [kWh]. The company must prepare a report

that contains the effect over time and the total

energy consumption for each batch.



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Day one-four (prepara-

tion)

All workers must be instructed.

Equipment must be installed.

Arias for scrap batches must be cleared.

Batched for the first measuring day must be

prepared.

The furnace roof must be cleared so only the

actual batch can be positioned.

Day five

(measuring)

Measurements on 75 % of full production must

be conducted

Batched for the second measuring day must be

prepared

Day six

(measuring)


be conducted

Batched for the third measuring day must be

prepared

Day seven

(measuring)


be conducted

Day eight

(Rea-establishing site)

All the temporary installations etc. is being re-

established

Table 12. Proposal measuring programme.

The tables below (13-15) shows and example on how data from each batch can

be collected.



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The tables 13 to 15 are examples of 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.

8.3.6 Investment and maintenance costs

In Bangladesh there is no tradition for heat recovery and therefore the total

budget costs for the systems are not yet known. Budgets for the pilot project heat

recovery system will be used as an indicator for the project costs.

Investment:

Consultancy services for preparation and implementation: 6,500 Euro

Construction work and equipment: 65,000 Euro

Yearly operational and maintenance costs:

Consultancy services for operation and maintenance: 150 Euro/year

Maintenance costs 3,000 Euro/year

Yearly savings(if the production is based on electricity) 28,254 Euro/year

Simple payback (electricity) 2,78 years



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With a total number of steel producers in Bangladesh of 300 and assuming that

the above case is a representative case of an average steel producer in Bangla-

desh, then the total investments and savings will be:

Investment 21.45 mio. Euro

Yearly savings 7.3 mio. Euro

91,000 tons CO2

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

Change of focus from direct financial return to indirect financial return in

terms of energy and environment.

Probably a need to optimize laws and regulation

8.3.8 Toolbox

Description pro-

posed initiative

Heat recovery on induction furnace. The purpose of this

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.

Actual situation Heat recovery system on induction furnaces is not used in

any of the many melting shops in Bangladesh. The main

reason for this is that the melting technique is a relative

old and inefficient method and therefore no recovery sys-

tems has been develop for that melting method.

CO2 emission re-

duction

If implemented on all the melting shops (approx. 300) the

savings will be in the magnitude of 91,000 tonne of CO2

per year.



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Cost If implemented on all the melting shops (approx. 300) the

total investment will be in the magnitude of 19.5 mio. Eu-

ro.

Pay-back time The simple payback with the current figures will be 2.78

years.

Table 16. Heat Recovery on Induction Furnace

8.4 Optimisation of the reheating process – Waste heat recovery from

the reheating furnace

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


When a combustion process is taking place, then a part of the energy content

released by the combustion process is used to heat up the passive components

in the combustion air (all others then oxygen). By preheating the combustion air

then these components, takes up less amount of energy from the combustion

process.



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The amount of passive components in air accounts for approximately 79 vol-%,

meaning that 79 vol-% of the volume flow don’t contribute to the release of ener-

gy, but are only passing through the reheating furnace. To secure a full combus-

tion the combustion is normally run with an over stoichiometric combustion,

which result in an extra flow of passive components, but also of oxygen that is

not being burned.

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.


Theoretical example of an air pre-heating systems

When looking at the mass stoichiometric ration between air and natural gas then

it is approximately 17. So for a stoichiometric combustion of 17 kg natural gas 17

kg of atmospheric air is needed (it is often seen that the combustion process is

over stoichiometric which means that the process runs with an air surplus). With

an over stoichiometric combustion the additional air will be heated without any

positive output and therefor this will also contribute to the additional heat losses

through the chimney.

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

( )

Base on the above assumption it is possible reach an energy saving of approxi-

mately 13 %. There is a potential that the energy saving can be increased even

further, partly because the process is likely over stoichiometric and partly be-

cause that in most cases there is a potential of preheating the air to a higher

temperature because the off gas temperature is in the range of 650 - 750 °C and

in some cases even higher.

Practical example of an air pre-heating systems



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Two studies have been made in Bangladesh, with regards to air preheat. One is

a general study (study one)xxii

and one is based on experience from 14 installa-

tions (study two)xxxi

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

Nm3/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-

es saving of 19.8 Nm3/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.

Specific saving Unit

Energy 218 kWh/ton steel

Carbon 0,012 Ton CO2/ton steel

Table 17. Estimated savings with product preheat

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.


In order to measure and monitor the savings one must be able to measure the

product and the gas consumption both before and after the installation of the air

preheating system. Individual meters are not common and therefore it must be

expected that permanent meters should be installed. By having the permanent

meters it is possible measure on one specific batch in order make detailed inves-

tigations and it is also possible to monitor the system over a period of time.


The investment are in the two studies varying from euro 4,692 to euro 14,894.

Compared to the savings both investments have a simple payback less than one

year. The air preheating system is thermodynamic systems with no additional

moving parts. The performance of the system is depending on the performance



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of the heat exchanger, which is affected by fouling, corrosion and other defects.

This can be monitored by the following the specific gas consumption. The added

heat exchanger could increase maintenance cost. It is estimated that a service

check must be performed with an interval of 6 month to a year or if the specific

consumption decreases. The service check is estimated to cost euro 1,560 per

year.

Investment:

Estimated consultancy services for preparation and implementation: 1,489 Euro

Construction works and equipment: 4,692 – 14,894 Euro


Consultancy services for operation and maintenance: 100 Euro

Maintenance costs 1,560 Euro

Yearly saving 16,000 Euro/year

Sample payback (study two) 1.14 years

The lifetime for the project is expected to be 15 years.

8.4.7 Barriers

See the chapter about barriers and bottlenecks

8.4.8 Toolbox

Description pro-

posed initiative

Installing at air preheating system on the reheating fur-

nace.

Actual situation Some of the companies have installed air preheating sys-

tems, but here are still sites without.

CO2 emission re-

duction

If the savings is archived on all 300 sites in Bangladesh

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.

Cost The total investment will be euro 4,915,000 if installed on

all 300 sits.

Pay-back time The simple payback is 1.15 year

Table 18. Installation of a preheating system



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8.5 Combustion and feed control system

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.


The purpose of this project is to introduce a control system that can control the

process as a function of the input and output parameters and then optimise the

process accordantly. The input parameters are:

Product feed

Gas flow

Air flow

Oxygen content in the off gas

Off gas temperature

Furnace temperature

Based on the input and a number of boundaries then an iterative process is

started in order to adjust the product feed, gas and air flow into an optimal ratio.

An illustration of the system can be seen in the following figure.

Figure 12 combustion and feed control


By implementing combustion and feed control systems the saving is estimated to

approximately 10 %, depending on the individual site conditions. In this example

it is assumed that variable speed drive is installed on the product feed screw and

the air blower and a control system including all measuring system. It is assumed

that the existing burner can modulate the gas flow and additional oxygen is not

included.



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The 10 % is equivalent to 61 kWh per ton of product, which is equivalent to a

yearly saving of 8,170 euro per year. The investment is estimated to eu-

ro18.900.xxii

.

Specific saving Unit

Energy 61 kWh/ton steel

Carbon 0,012 Ton CO2/ton steel

Table 19. Estimated savings with product preheat

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.


The control system must be able to read out key point indicators (KPI) for the

system. The indicators must show gas consumption per product, oxygen content

in the off gas. Thiess KPI’s can vary with in a defined boundary and if the KPI’s

exceeds thesis boundaries then action must be taken in order to trim the system.


Investment:

Estimated consultancy services for preparation and implementation: 1,890 Euro

Construction works and equipment: 18,900 Euro



Operational and Maintenance costs 1,560 Euro

Yearly savings 4,036 Euro/year

Sample payback 8.75 years

The expected lifetime for the project is 15 years.

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



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losses and increased production are included then the simple payback will be

less than one year.

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-

posed initiative

Installation of feed control system that secure minimum

gas consumption, a maximum production capacity and an

optimal combustion.

Actual situation Only modern sites have this application today.

CO2 emission re-

duction

If the savings is archived on all 300 sites in Bangladesh

then the yearly carbon saving will be 16,285 ton.

Cost The total investment will be euro 6,237,000 if installed on

all 300 sits.

Pay-back time The simple payback is 8.75 year

Table 20. Installation of feed control system.

8.5.9 Other ways of optimising the reheating furnace.

In the following section a number of different ways of optimising the reheating

furnace is listed and shortly described.

8.5.9.1 Optimising existing air preheating systems

During several visits to different sites in Bangladesh, it has been discovered that

some of the existing air preheating systems where not running optimally. This

was discovered because at high temperature in off gas chimney where meas-

ured (130-180°C).This indicates that there is still room for improvements.

The following activities can improve the efficiency of the system:

Cleaning the system so fouling in the heat exchanger is reduced.

Inspection of leakages in the heat exchanger and repairing if any

Extending the heat transferring area

Evaluating the ration between air, gas and product

8.5.9.2 Regenerative burner

As an alternative to the air preheating system a regenerative burner can be in-

stalled. The regenerative burner has two ceramic regenerators that are heated

up by the exhaust gas. During the combustion one side of the burner combust

fuels while the other side accumulates the exhaust heat into the heat recovery

generator. After a period of time then the burner switch so the one accumulating



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heat combusts the fuel and the other now accumulates the exhaust heat. An

illustration of the burner can be seen in Figure .

Figure 13. Regenerative burner

8.5.9.3 Oxyfuel burners

An Oxyfule system is a system where nitrogen is eliminated as ballast in the

combustion and heat transfer process by replacing the air with industrial grade

oxygen. By using oxygen then the fossil fuel consumption can be reduced by up

to 50 percent and reduces CO2 levels correspondingly.

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.

Furnace throughput can be boosted by up to 50 percent, providing extra produc-

tion capacity, which can be used to concentrate production and better accom-

modate peak volumes and maintenance activities.

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.

8.5.9.4 Product preheat

The idea of the project is to use the off gas to preheat the incoming bar or plates

(could also be used after the air preheater). The bars and plates are reheated

from ambient temperature to etc. 600 °C. The off gas temperature from the re-

heating furnaces can be as high as 400 °C.

The saving potential can be estimated to about 5 % of the natural gas consump-

tion in the reheating furnace.

8.5.9.5 Minimising heat losses from the reheating furnace

The idea here is to minimize the heat losses from the furnaces by improving the

insulation and reducing openings. During several investigations in Bangladesh it



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was found that the insulation of the furnaces where in a bad condition or not

existing. Furthermore there were found several direct openings to the furnace

chamber. Reducing the heat losses for the furnace is relatively easy and the

investment is limited.

8.6 Training program

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.


Each training program must be tailor made for each site because there is a varia-

tion in how the production is handled and the state of the equipment from site to

site. Many of the improvements that will be implemented can be replicated from

site to site, if they are adjusted to the individual site conditions.

The training program must be made at different levels which addresses staff at a

level where there decisions effects the production. Each level of staff must be

addressed with a different approach in order for them to be able to relate and

adapt to the content of the training. It is crucial for the long term success of the

training program that the training is presented in a way that the staff understand

the purpose of conducting the different activities and therefore the staff must be

approached in different ways. The staff can be categorised in three different

categories:

1. Managing director

2. Site manager

3. Daily workers

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.

The managing director must be presented with recommendations that is sup-

ported with figures savings (and other benefits) and investments.

Site manager



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The site managers approached to new changes is “why do it”. The site manager

is in charge of the daily operation on site. The site manager plays an important

role because their job is to make sure that the workers are following the different

activities in the daily work. The site manager doesn’t need to know the exact

savings potentials but need to understand why this measure should be done. For

instance; they need to know that it is essential to wear a helmet to improve

health and safety.

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).

8.6.3 Example of a training program

If the training program should be successfully conducted it is important that all

three partners in the training team work together as a team.

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.


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.


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.




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Conducting training program

Step 7: Training of the site manager is being conducted

Participants: Training team and site manager

Step 8: Training of the workers

Participants: Training team, site manager and workers

Evaluation of training

Step 9: Evaluating the outcome of the training activities


Step 10: Presenting the evaluation and giving recommendations to future

activities.


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.

The effect of each measure

Measure no. Health &

Safety

Environ-

ment Capacity Energy

General

Using safety equipment X

Dividing the working area in two

zones with different requirements

regarding safety.

X

Introducing routine’s for evaluat-

ing different parameters with a

certain frequency (Year wheel)

X X X X

Scrap year

Using the magnet to sort the

scrap X X X

Sorting the scrap and organizing

the scrapyard X X

Melting and casting

Collecting and reuse of oil for

greasing the casting molds X

Optimizing the control of the fur-

nace X X X

Off gas cleaning system (scrub-

ber system installed primo De-

cember 2013)

X X

Continuous casting process X X

Decrease the number of minutes

between every tap X X



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Moving the blower on top of the

furnace X X

Installing a shredder or a Share to

size the scrap to optimal heat

recovery and capacity.

X X

Adjusting the fan motor in the

suction pipe the actual demand X

Utilization of water cooling

Feed stock control system X X

Re-rolling

Feed control X X

Reducing heat losses X X

Installing or optimizing existing

heat recovery system X X

Table 21. Suggested measures

During an evaluation on a production site it was estimated that a training pro-

gram will result in a saving that is equivalent to half of the specific savings that

can be archived by the scrap preheating. This is equal to 325,000 kWh/year,

which is equivalent to a financial saving of 20,674 euro/year. Depending on the

extent of the training programme and whether international consultancy is in-

volved then the cost of the training program will cost EURO 5,000 - 15,000..

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.


Depending on the specific activities that are conducted then specific measuring

and monitoring setups will be conducted. As an overall measurements the spe-

cific consumptions can be measured on a site level, eg. Nm3 gas per ton product

and kWh electricity per ton product.


In order to secure that a high performance is kept then the training program must

be repeated with a certain frequency. This must be done to educating new staff

and also to evaluate the site in the light of new technology and/or boundary con-

ditions. The cost of repeating the training program is in the order of 3,000 to

5,000 euro depending on whether national or international consultants are used.

For the estimates below it is assumed that the training is conducted by interna-

tional consultants once every year.

Investment:



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Consultancy services for preparation and implementation: 1,500 Euro

Construction works and equipment: 5,000 – 15,000 Euro



Maintenance costs 3,000 – 5,000 Euro

Yearly savings for electricity based production 20,674 Euro/year

Simple payback3 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 steel sector in Bangladesh is a conservative sector and therefore it can be

difficult to introduce new ideas and technology.

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

Description pro-

posed initiative

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.

Actual situation Training of staff is very limited. It is often learning by do-

ing.

CO2 emission re-

duction

Depending on the actives

Cost Depending on the actives

Pay-back time Estimated to 1.07 years.

Table 22. Training programme

3 The simple payback is calculated based on the maximum estimate for investment and

Yearly operational and maintenance costs



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9 BASELINE

The basis for setting up a proper baseline is to have a well-developed strategic

planning and political decision making on climate change mitigation. Furthermore

it needs to be based on robust analysis of currents past development and future

trends of the greenhouse gases (GHG) emissions. In order to calculate the

emissions reductions from a NAMA, a business-as-usual (BAU) scenario needs

to be developed that covers the entire period for which the NAMA is scheduled to

be implemented. The BAU scenario would reflect the development of GHG

emissions in the absence of the NAMA.

At the time of writing, there is no officially widely accepted definition of BAU

scenarios for NAMAs. This is due to the fact that there are no rules for NAMA

development defined by the United Nations Framework Convention on Climate

Change (UNFCCC), and thus every government developing a NAMA is free to

choose its BAU scenario as it wishes, and to report it in their National Communi-

cations and the forthcoming Biennial Update Reports. Therefore it is needed to

discuss different definitions of BAU that have been used in international climate

policy in order to derive an approach to BAU definition for the NAMA in the steel

sector in Bangladesh.

According to the Intergovernmental Panel on Climate Change (IPCC), an a

(BAU) emission scenario is “a plausible representation of the future development

of emissions of substances that are potentially active based on a coherent and

internally consistent set of assumptions about driving forces (such as demo-

graphic and socioeconomic development, technological change) and their key

relationships” (IPCC, 2006).

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



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the proposed CDM project activity or CPA. This definition does not really clarify

the approach, but fortunately, over time the following principles for baseline set-

ting could be: Transparency, Conservativeness, Internal consistency, Appropri-

ateness and adequacy of calculations/assumptions, Accuracy, measurability and

reliability of data and Limitation of uncertainties

The second point could be conservativeness which tries to prevent an overesti-

mate of key parameters it does not resolve the problem that development of any

parameter is difficult to predict, especially in the long run. A forecast that is seen

as conservative by one observer might be seen as highly optimistic by another

one. Therefore, a credible process of selecting the sources of parameter values

is crucial. Parameters could be:

- defined by official development plans of the government (which

often might be too optimistic)

- forecast by international institutions (which are less likely to be too

optimistic, but might be unrealistic due to lack of specific country knowledge)

- forecast by independent stakeholders in the country (researchers,

local financial institutions), which may be the least biased source.

The steel sector is expected to be booming in the coming years, so there is a

potential for higher CO2 emissions in a future scenario and therefore it should be

decided which scenarios should be developed and to set-up the baseline trends

in future scenarios, for instance 2020, 2030 and 2050.

Setting a baseline for a NAMA is an eminently political exercise. Choice of a

stringent baseline will mean that the NAMA generates less greenhouse gas miti-

gation than if a lenient baseline is chosen. However, a lenient baseline may low-

er the credibility of the host country and reduce the likelihood that the NAMA

receives support from industrialized countries or that it could generate emissions

credits under the new market mechanism/framework for various approaches.

The government should therefore assure that BAU development is done in a

conservative and transparent way.



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10 COST ESTIMATES AND ECONOMIC ANALYSES IN THE STEEL

SECTOR

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.

In the Bangladesh Roadmap for Energy Efficiency Improvements and Demand

Side Management pages 50-51 and 62 the mitigation potential and a cost esti-

mate has been done for part of the steel sector and only part one steel 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-

pected that the retrofit would result in reducing the SEC by 25 m3 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.

Option Steel Re-rolling Mill (50 mills)

Investment (Million US$) 2.5

Project Life (Year) 15

Energy Saving per Year 0.353 BCF



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CO2 Reduction (Ton/year) 19,000

CO2 Reduction over Project Life (Ton) 285,000

$/Ton-CO2 8.77

Potential per Year 1.06 BCF

Table 23. Results – study re-rolling mills.

The above study is the most developed in the steel sector in Bangladesh.

10.2 Economic analyses

This section assesses the economic flow on a pre-feasibility level. Based on the

preliminary findings, the section includes estimates for the total capital (CAPEX)

and operational (OPEX) expenditures, and the generated savings presented in

section 8.

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.

.



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10.2.1 Data assumptions

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

10 %. real discount rate is used4.

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”



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Figure 14. Financial flow of the first waste heat recovery project.

All these assumptions are subject to a high degree of uncertainty, therefore

these following sensibility analysis are made:

A 20 %. increase in the electricity price

20 %. increase in both CAPEX and OPEX costs

10.2.2 Budget and financing

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.

Waste heat recovery

form induc-tion fur-

nace

Waste heat recovery from the reheating furnace

Combustion and feed control system

Training program

Total

Consultancy services for prepa-ration and implementation

6.500 1.489 1.890 1.500 11.379

Construction work and equipment

65.000 14.894 18.899 15.000 113.793

CAPEX 71.500 16.383 20.789 16.500 125.172

Consultancy services for opera-tion and maintenance

150 100 100 250 600

Operation and maintenance 3.000 1.560 1.560 5.000 11.120



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Total OPEX 3.150 1.660 1.660 5.250 11.720

Annual electricity savings 28.854 - - 20.674 49.527

Annual gas savings - 15.966 4.036 - 20.002

Revenue 28.854 15.966 4.036 20.674 69.530

Table 24, Project budget overview in EUR

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.

Waste heat recovery form induc-tion fur-nace



Training program

Baseline NPV 70.900 76.266 -2.400 71.734

IRR 33% 81% 8% 106%

CAPEX and OPEX 20 % higher

NPV 55.775 71.446 -7.954 56.479

IRR 26% 67% 3% 68%

CAPEX and OPEX 20 % lower

NPV 86.025 81.086 3.154 72.647

IRR 43% 102% 14% 113%

Electricity and natural gas prices 20 % higher

NPV 100.205 96.339 2.675 85.559

IRR 41% 98% 13% 108%

Table 25, Financial Performance (EUR), Self-financed scenario

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.



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Waste heat recovery form induc-tion fur-nace



Training program

Baseline NPV 80.443 79.034 1.113 73.936

IRR 110% 306% 14% 405%

CAPEX and OPEX 20 % higher

NPV 67.226 74.768 -3.739 59.121

IRR 82% 252% -4% 248%

CAPEX and OPEX 20 % lower

NPV 93.659 83.300 5.965 74.408

IRR 151% 380% 37% 411%

Electricity and natural gas prices 20 % higher

NPV 109.748 99.107 6.187 87.761

IRR 143% 366% 32% 393%

Table 26, Financial Performance (EUR), 80 % loan 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.

Figure 15, Euros saved per ton CO2 reduced for the projects

-100

-50

0

50

100

150

200

250

300

350

400

450

Waste heatrecovery form

inductionfurnace

Waste heatrecovery fromthe reheating

furnace

Combustionand feed

control system

Total

Euro

/to

n C

O2



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11 OVERVIEW MITIGATION POTENTIAL AND COST ESTIMATES

BASED ON THIS SURVEY

The cost of implementing a NAMA is very much dependent on the boundary of

the NAMA and furthermore it is also very dependent on the number and type of

mitigation actions proposed.

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

total yearly CO2-reduction will amount to 181,291 tonnes5. 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.



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12 INCENTIVE STRUCTURE

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 processes Performance standards for electric motors, etc.

Industrial energy use Carbon tax, energy tax, tax reduction for energy effi-

ciency

Waste Regulations

Energy production Feed-in tariff, green credit lines etc

Transportation Fuel efficiency standard

Buildings Building codes, green credit lines, energy efficiency

certificates

Table 27. Policy level – incentive models.

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.

According to the Second National Communicationvii

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.

According to the Second National Communication page vii

it is also mentioned

that the Bangladesh Government has established soft loan USD 15 million for



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renewable energy projects. Soft loans will definitely support the development

steel sector.

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.

It could be considered to link an incentive to the Specific Energy Consumption

(SEC) in cubic meters of gas per Ton of steel produced. A support system could

be connected to the lower SEC value the higher the support. A threshold could

also be introduced and above/below consequences of the threshold could be

established. Efficient production can be promoted through this incentive model.

Several countries, including Denmark, have established a grant support system

for energy savings.

The establishment of an international carbon trading will attract financing oppor-

tunities for the steel sector and furthermore it will contribute to more focus on the

environment and CSR values.

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.

A more detailed investigation is needed to clarify whether performance standards

for different type of equipment could be a way forward.

It should also be investigated further whether a more controlled system of the

scrap collection could support environmental improvements and the energy per-

formance at the steel mills.

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.



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13 MRV SYSTEM

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.

In simple terms MRV with regards to the implementation of NAMAs, it is defined

as:

Measurement (M) collect relevant information on pro-

gress and impacts

Reporting ((R) present the measured information in a

transparent and standardised manner

Verification (V) assess the completeness, consistency

and reliability of the reported infor-

mation through an independent pro-

cess.

Table 28. Definition of MRV

13.2 Discussion

Organisation

For Bangladesh it is a priority to develop a MRV based on national authorities to

secure a transparent, reliable, efficient and cost-effective system.

When developing a monitoring system it should be the specific steel mill that

should perform the actual measurements and reporting at the specific mill.

The verification could be based in

1) the Ministry of Environment and Forest, Department of Environment and

the related regional offices of the Ministry.

Or

2) the Ministry of Power, Energy and Mineral Resources



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As stated earlier the Ministry of Power, Energy and Mineral Resources has es-

tablished a new unit and this unit has been named Sustainable & Renewable

Energy Development Authority (SREDA)

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.

MOEF, DOE MPEMR, SREDA

Advantage Advantage

An existing administrative set-up and

responsible for performing the annual

environmental certification at the steel

mills.

Will be responsible for energy efficien-

cy for instance in steel sector.

The Ministry is focal point in the

UNFCCC

Disadvantage Disadvantage

Lack of human resources. The administrative structure is under

establishment. Probably SREDA will

also lack human resources.

Will not have the authority to act for

instance in relation to toxic gases and

the working environment.

Table 29. Different models for an administrative set-up

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.

Penalties & pass/fail conditions

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



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failing to meet requirements, verification loses its purpose. However, the effects

of the pass/fail conditions can differ.xxxii

The specific measurements which could be included in the MRV system

In the presentation of the different mitigation options in chapter 8 possible mod-

els for measurements have been proposed. This should be an input to setting up

an concrete MRV system

It could be an obligation to measure the 1) The electricity consumption, 2) Natu-

ral gas consumption and 3) Tons steel produced. Furthermore it could be pro-

posed to measure the 1) amount of waste, 2) CSR value including working con-

dition, maybe on a voluntary basis. Whether it should be an obligation or volun-

tary need to scrutinized further.

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



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14 FINANCIAL SUPPORT AND MECHANISMS

This phase of the project is supported by NDF and The Danish Embassy, but it

only covers the initial steps in the NAMA development in the steel sector.

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 CO2 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.

Bangladesh should also focus on this opportunity in developing and supporting a

new market mechanism.

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 Maagøe 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.



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Financing for implementation of NAMA

It has been shown that several investments presented in this study are commer-

cial attractive and these can be implemented by having commercial loans. But

this is only happening to a very limited extent in Bangladesh due to different

barriers also presented in this study.

Therefore at this stage it should be considered to attract donor funding as part of

the financial package as an incentive to overcome the different barriers. So at

this stage a package of donor grants and commercial loan should be the most

realistic package. Probably the commercial loans should be administrated

through a set-up in Bangladesh, for instance different banks operating in Bang-

ladesh. Part of the grant component could be structured as a soft loan. A de-

tailed financial package can only be proposed when the NAMA has been further

developed.

Several potential sources administrated in Bangladesh have been investigated

further for pilot projects or maybe full scale implementation 1) Climate Change

Trust Fund (CCTF) and 2) Bangladesh Climate Resilience Fund. During the

stakeholder meeting in May 2014 the DOE evaluated that these opportunities

have limited possibilities due to the timing. Instead the Bangladesh Develop-

ment Bank Ltd) has established a credit line for energy efficiency measures. This

should be explored further in case it is decided to continue the project.

The UN Green Climate Fund must be an opportunity to promote NAMA struc-

tures for a future mechanism and also potential financing of concrete projects.

”xxxiii

. Bangladesh has an alternate Board member of the Green Climate Fund

As a grant component is needed potential financial sources, for instance Japan,

UNDP, Denmark, NDF, World Bank. KfW, and others should be investigated

further.



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15 DISCUSSIONS AND ANALYSES

15.1 Organisation of NAMA work in Bangladesh

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.

It should be recommended that Bangladesh Authorities clarify issue this in the

nearest future to avoid a delaying process at a later stage.

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.

15.2 NAMA Steel building blocks

Figure 16. Steel mill – supply streams and products.

Steel mill Electricity

supply

Gas supply

Steel pro-

ducts

By -

products

Carbon

footprint

Recycle

steel waste



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In Bangladesh the three main supply streams to a steel mill are recycle steel

waste (scrap), electricity supply and gas supply. The output from a steel mill can

be grouped in three: the steel products, the by-products and then carbon foot-

print in the end products.

The presentation of the building blocks can be an important input when develop-

ing the NAMA including setting up the project boundaries.

Electricity and natural gas consumption - Quality MRV system

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.

Recycle steel waste

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:

Waste from sorting the scrap

Slag from the melting production

Slag from the scrubber

Product waste

Waste from casting: Oil and casting moulds

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



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Other emissions, waste handling and workers environment. - Sustainability

criteria and co-benefits.

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.

Furthermore if other improvements at the mills, for instance installation of filters

on the fumes, Improved CSR values, and so on, it could also be reported to in-

crease the attention and hopefully most often a positive evaluation of the mills.

This should be part of a reporting either voluntary or binding.

These co-benefits should be described as part of the reporting, but it could be on

a voluntary basis, as under the CDM with the recent approved guidelines.

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.

The products are mentioned at this stage as it should be considered carefully

how this should be included in a NAMA as it is often overlook to considered

products when developing a NAMA.

Obligation and voluntary

A NAMA should be built up so part of the parameter should be monitored and/or

measured through a systematic detailed procedure and a part could be done on

a more lose and less formal basis.

Obligation Voluntary

The electricity consumption Minimizing the amount of waste

Natural gas consumption CSR value

Tons steel produced Working condition

Table 30. Proposal for measuring both as an obligation and on a voluntary basis



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Administration of MRV system.

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.

Administration of allocated allowances.

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.

Suppressed demand situation

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.

It means that a baseline could be establish based on a theoretical scenario hav-

ing an international function steel plant as a baseline.

Standardised baselines

The above established suppressed demand baseline could also be considered

as a standardised baseline.

15.3 NAMA models in the steel sector

Preferred NAMA approach

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.



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Many issues can be addressed to improve the conditions at a steel mill in Bang-

ladesh. It could be 1) the electricity consumption 2) natural gas consumption 3)

all the emissions 4) scrap handling system, and 5) improvements for the workers

environment.

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.

A NAMA model proposed by Bangladesh Authorities should have high transpar-

ency and integrity which can contribute as model for a future New Market Mech-

anism under for instance UNFCCC or as a bilateral arrangement, for instance

with Japan. This strong MRV model is the best to attract international buyers of

the CO2 emission reductions in any future regime or now as the supported

NAMA by attracting grant financing.

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

- Covering the entire steel production sector.

- The boundary of each steel production mill should be the physical

boundary of the production site.

- Based on this the baseline for the required/recommended electricity or

natural gas /tons steel produced should be established. This should be

an estimate based on the installation of new technologies, like WHR and

other initiatives.

- 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.



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- The Government should also be obligated to establish legislation which

could promote introduction of new technologies.

- 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.

- The MRV cost can be relatively high

Model 2

- Covering the entire steel production sector.

- The boundary of each steel production mill should be the physical

boundary of the production site.

- 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 monitoring report should be done by the company and verified by

the the Department of Environment (DOE) or another appointed authori-

ty, for instance SREDA.

- The Government should also be obligated to establish legislation which

could promote introduction of new technologies.

15.4 Can the NAMA steel in Bangladesh be developed as a stand-alone

system ?

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.



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The steel products produced at steel mills in Bangladesh are nearly only for the

domestic market, so a stand-alone NAMA in the steel sector for Bangladesh will

only be limited dependent on NAMA or non-NAMAs from other countries.

Of course this is very dependent on the final design of NAMA.

15.5 NAMA seeking support for implementation

The UNFCCC has released four NAMA templates. ”xxxiv

. The four NAMA tem-

plates are 1) NAMA seeking support for preparation, 2) NAMA seeking support

for implementation, 3) Other NAMAs for recognition and 4) Information on sup-

port for NAMAs. Due to the stage of the development of this project it has been

agreed to fill in NAMA seeking support for implementation ”xxxv

.

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.

Even if UNFCCC template is filled in it will be crucial to contact potential donors

to avoid any delay in this successful started and important NAMA.

It should be highlighted that the data template is filled in by a preliminary estima-

tion. A more detailed survey should give a better result. Furthermore the pro-

posed financial package is the first proposal and it can be elaborated further by

the Bangladesh authorities.



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16 CONCLUSIONS

16.1 Summary of conclusions

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.

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 Owners´Association (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.

A supported NAMA is a priority and a detailed MRV system should be

developed. The MRV system should include both CO2 emissions and co-

benefits.



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The supported NAMA should include an option for crediting or trading of

CO2 emission reductions.

The development of the baseline should be the required/recommended

electricity or natural gas /tons steel produced.

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 steel sector in Bangladesh consists of very different levels of steel

mills, from basically just a steel mill with one furnace to fully large au-

tomatized steel mills. This will be a challenge when developing a NAMA

covering the entire sector

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 focus in the NAMA development should be an incentive structure ra-

ther than a penalty system. This is more in line with the proposed NAMA

model 2.

Furthermore it should be highlighted that further international support is needed.

This could be support to either pilot projects or the full-scale implementation. It is

a priority to continue the development of the NAMA without losing momentum

due to lack of financial resources.

16.2 Recommendation of next actions

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.



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The NAMA concept and the model for implementation could be presented and

facilitated through the UN Green Climate Fund in the future. But realistic it will

take some years before operational.

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 implementation of pilot projects at selected steel works could be a model to

secure real progress, concrete input to the details of the NAMA development and

the results from the pilot projects can be an important input to the international

climate negotiations.

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.

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.

NAMA IMPLEMENTATION AND OPERATION

International CLIMATE NEGOTIATIONS AND AGREEMENTS

PILOT

PROJECTS



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Some immediate actions could be considered for instance:

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:

Establish an overview of the steel industry in Bangladesh. A study

should be initiated and it can be started when funds are available. This

will be a fundamental study and can improve the final design and imple-

mentation of the NAMA in the steel sector.

Determination of an accurate baseline for the programme is crucial.

National Monitoring, Reporting and Verification (MRV) system needs to

be established. Such a MRV system could be inspired by the Danish

model for registering energy savings, for example. In this model the

amount of savings can be documented either by specific measurements

or by default values for a number of standardized solutions. This could

be a cost-effective solution for establishing a MRV system in a least de-

veloped country (LDC) context, here Bangladesh.

Development of an incentive system with policy and finance measures to

support and attract broader stakeholder engagement, in particular the

individual steel mills.

Investment analysis conducted as part of the first NAMA development

phase financed by the NCF showed positive NPVs and high IRRs for a

significant number of proposed activities/technologies. Some of these

activities will be implemented as pilot activities under the proposed next

phase of the NAMA in the 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.

In parallel with commencing the NAMA pilot activities capacity develop-

ment measures both with respect to institutional capacities and human

resources in the public and private sector need to be conducted, e.g. in

the Department of the Environment (DoE) and among private sector ac-

tors.



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18 ANNEX A – QUESTIONNAIRE STEEL MILLS

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.

National Appropriate Mitigation Action (NAMA) development in the

steel sector in Bangladesh

Questionnaire for Steel and re-rolling mills

1. General Information

Ref. No Question Answer

1.1 Name of com-

pany

1.2 Address

1.3 Contact person

1.4 Contact details

e-mail/phone

2. Company information


2.1 Year of establishment

company

2.2. Years of establishment

of main production

lines

2.3 Type of operation 1)

steel mill 2) re-rolling

mill or 3) steel and re-

rolling mill

2.4 Number of employees,

average in year 2012

2.5 Annual turnover in

2012 (or 2011)



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3. Environmental administrative information


3.1 Latest environmental certi-

ficate, date

3.2 DOE – district office, name

4. Energy consumption

Ref.No Question Answers

Consumption

2012

Consumption

2011

Consumption

2010

4.1 Annual elec-tricity con-sumption (kWh)

4.1.1. Annual elec-tricity con-sumption for rods (kWh)

4.1.2. Annual elec-tricity con-sumption for flat bars (kWh)

4.1.3 Annual elec-tricity con-sumption for ingots (kWh)

4.1.4 Annual elec-tricity con-sumption for other prod-ucts (kWh)

4.2 Annual natu-ral gas con-sumption (Nm

3)

4.2.1. Annual natu-ral gas con-sumption for rods (Nm

3)

4.2.2. Annual natu-ral gas con-sumption for flat bars (Nm

3)



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4.2.3. Annual natu-ral gas con-sumption ingots (Nm

3)

4.2.4. Annual natu-ral gas con-sumption other prod-ucts (Nm

3)

4.3 Furnace oil (fuel oil) (l)

4.4 Other

5 Energy production


Consumption

2012

Consumption

2011

Consumption

2010

5.1 Own annu-al electrici-ty produc-tion (kWh)

5.2 Own annu-al renewa-ble electric-ity produc-tion (kWh)

6 Raw material


Quantity

2012

Quantity 2011 Quantity

2010

6.1 Amount of mixed scrap (tonnes)

6.2 Amount of ship scrap (tonnes)

6.3 Total amount of raw material (tones)

7 Produced products



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Quantity

2012

Quantity 2011 Quantity

2010

7.1 Rods (ton-nes)

7.2 Flat bars (tonnes)

7.3 Ingots (ton-nes)

7.4 Other (ton-nes)

8 Recommendation of energy saving projects


8.1 Priority 1 ener-

gy saving pro-

ject

8.2 Priority 2 ener-

gy saving pro-

ject



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19 ANNEX B – SUPPLEMENTARY PROPOSAL OF POTENTIAL

INITIATIVES IN THE STEEL SECTOR

Overview of other potential initiatives which could be further develop and incor-

porated in the NAMA proposal

Title Description

Direct rolling and

Continuous casting

Another way of reducing the energy consumption in

the re-rolling part of the production is to make a direct

rolling of the melted scrap. Today scrap is melted (at

temperatures of up to 1600 °C) in the induction furnace

and a special moult.

The melted scrap is then set to cool down in the

moults. Afterwards the steel in the heated in a reheat-

ing furnace and processed in the rollers. It is possible

to save the whole heating in the reheating furnace by

rolling direct from the induction furnace.

In order to be able to do so the casting process needs

to be continuous. A continuous casting will contribute

to increase the possibility for a higher production, re-

duce the losses and decrease the specific consump-

tion on both the induction furnace and on the rolling

line.

Increase the produc-

tion capacity

In case the melting furnaces need to be changed or

need significant maintenance, it could be considered to

replace the furnaces with furnaces with higher capaci-

ty.

At Vikrampur it could for instance be considered to

replace the three 6 tons furnaces with two 15 tons

furnaces.

When a replacement of the furnace is considered then

the furnace technology should also be considered. The

EAF technology is much more efficient both with re-

gards to capacity and consumption. The EAF have

some other requirements for the power supply that

must be taking in to consideration.

Optimisation of the

re-rolling process –

rolling motors and

Re-rolling motors are used to roll the reheated steel in

to the size of the final product. Today many of the re-

roller motors use high voltages DC, with a gearing that



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gears matches the speed needed for the re-rolling job. The

DC typically has an overall efficiency in the magnitude

70 % (some cases even lower). If the DC is replaced

by an AC motor and a variable speed drive without

gearbox the overall inefficiency increases to 85 %.

Feed stock control

system

In many of the sites feed was manually operated in to

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.

In order to get more control of the melting procedure,

then the use of a shredder can be of great advantages.

The shredder cuts up all the scrap in to small bits. By

charging with more compact material then the capacity

increases, the consumption decreases and the lifetime

of the refractory is extended. All impurities from the

shredded scrap can be removed by using the magnetic

crane to sort the scrap – se next project description

below.

Sorting and scrap

yard organization

The scrap can have a large variation in the size and

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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can be made continues.

Hot boxes or insulation chambers can be used to pro-

mote heat retention in the steel and to provide a link

between the source of the hot stock and the furnace.

Semi-finished product, which cannot be charged im-

mediately are stored in unheated, heat-insulated box

instead of being stored in open stockyards.

Another method for preventing heat loss between the

furnace and the re-rolling mill is insulation shields (heat

retaining covers) installed between the furnace dis-

charge and the rolling stands.



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20 ANNEX C ECONOMIC MODELLING

20.1 Optimisation of the reheating process – Waste heat recovery



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20.2 Optimisation of the reheating process – Waste heat recovery from

the reheating process



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20.3 Combustion and feed control system



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20.4 Training program



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21 ANNEX D. SUPPORT LETTER FROM BANGLADESH AUTO RE-

ROLLING & STEEL MILLS ASSOCIATION



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22 ANNEX E. SUPPORT LETTER FROM BANGLADESH STEEL MILL

OWNERS´ASSOCIATION



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23 ANNEX F. SUPPORT LETTER FROM BANGLADESH RE-ROLLING

MILLS ASSOCIATION



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24 REFERENCES

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Wuppertal Institute.

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xvii http://www.brma-bd.com/members-profile.html

xviii Nafis Trade International Mr. Md Harun-or-Rashid

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http://databank.worldbank.org/data/home.aspx



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xxvii

COMMISSION DECISION of 27 April 2011 determining transitional Union-wide rules for harmonised free allocation of emission allowances pursuant to Article 10a of Di-rective 2003/87/EC of the European Parliament and of the Council (notified under document C(2011) 2772) (2011/278/EU)

xxviii Guidance Document n°9 on the harmonized free allocation methodology for the EU-ETS post 2012 Sector-specific guidance Final version issued on 14 April 2011 and updated on 29 June 2011, 3 August 2011 and 20 December 2011

xxix “The state-of-the-Art Clean Technologies (SOACT) for Steelmaking Handbook”, Asia-

pacific partnership for Clean Development and Climate, 2007.

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xxxiii http://gcfund.net/?id=10

xxxiv http://unfccc.int/cooperation_support/nama/items/6945.php

xxxv http://unfccc.int/cooperation_support/nama/items/6982.php

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