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Assignment for PGPM 24

1.0

INTRODUCTION Energy is an essential input for the economic development of a country in improving the quality of life of its people. For meeting the growing energy needs of the society at a reasonable cost, power development in India started at the end of the 19th century. To contribute significantly to the overall energy availability in the country, sustained attention is being given to develop and promote non conventional, alternate and renewable sources of energy as also for the development of nuclear energy. Today the installed power generation capacity in the country has increased from 1,!"" #$ in 19!% to 1,"!,91%.&" #$ at the end of '""1 "' comprising '(,'(1.'' #$ hydro, %!,!').)' #$ thermal *including gas and diesel+, 1,&"%.!( #$ wind and '%'" #$ nuclear. In spite of this increase in installed capacity, the energy shortage in India is of the order of appro,imately 9 per cent. The pea- shortage of power averages almost 1& per cent. The per capita consumption of the power in the country is only .&" units much below the consumption levels in development countries. In order to provide power to all by '"1', additional capacity of 1"",""" #$ will have to be set up in the ne,t decade. /apacity addition plans for !1,11" #$ have been finali0ed 1tate wise and pro2ect wise for the Tenth 3lan period *'""' "%+. In the central sector, 1tate sector and private sector the capacity addition would be '',).' #$, 11,1&% #$ and %,1'1 #$ respectively. For the year '""' "., a capacity addition programme of !1"9.1" #$ has been fi,ed. The power generation during '""1 "' was &1&.'%1 456s comprising !''.""1 456s thermal, %..99' 456s hydro and 19.'%) 456s nuclear. The target of power generation for '""' ". has been fi,ed at &!&.&&' 456s. The plant load factor has shown a steady improvement over the years and has improved from &'.) per cent in 199" 91 to (9.9 percent in '""1 "'. To achieve the target of providing power to all by '"1', the /enter has initiated a number of steps with the help of the 1tates. These include a programme initiated by the power #inistry for accelerated and planned hydro development after an overall assessment and prioriti0ation with a view to
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Assignment for PGPM 24

harness an unharnessed estimated hydro potential of more than 1&",""" #$ and attain the ideal hydro thermal mi, ratio of !"7(" which is presently '&7%". In central sector, various hydro schemes with a capacity of over ')""" #$ are under different stages of development. The outlay for power sector during the 8th 3lan period was enhanced to about 9s. 1!.,""" crore which is appro,imately '1! per cent higher than I8 plan :utlay. For a phased development of ;ational 3ower <rid a number of schemes have been planned such as interconnections lin- to the northern, western, southern and eastern regions in addition to the e,isting interconnections. Today the inter regional power transfer capacity is !,)&" #$. It has been planned to enhance to the level of .",""" #$ by '"1' through various interregional lin-s along with transmission highways. 5nited load dispatch centers are being commissioned for northern and southern regions to help regulate the respective grids. The government is pursuing reform measured e,peditiously. The /entral Electricity 9egulatory /ommission, formed under the previsions of Electricity /ommission =ct, 199) has been made fully functional. The commission has passed orders on availability based tariff and has also notified terms and conditions for determination. 2.0 INDIAS ENERGY SECTOR Energy has been universally recogni0ed as one of the most important inputs for economic growth and human development. There is a strong two way relationship between economic development and energy consumption. :n one hand, growth of an economy, with its global competitiveness, hinges on the availability of cost effective and environmentally benign energy sources, and on the other hand, the level of economic development has been observed to be reliant on the energy demand. 2.1 An Overview

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Assignment for PGPM 24

The energy intensity of India is over twice that of the matured economies, which are represented by the :E/> *:rgani0ation of Economic /o operation and >evelopment+ member countries. India6s energy intensity is also much higher than the emerging economies?the =sian countries, which include the =1E=; member countries as well as /hina. @owever, since 1999, India6s energy intensity has been decreasing and is e,pected to continue to decrease. The indicator of energyA<>3 *gross domestic product+ elasticity, that is, the ratio of growth rate of energy to the growth rate <>3, captures both the structure of the economy as well as the efficiency. The energyA<>3 elasticity during 19&.A'""1 has been above unity. @owever, the elasticity for primary commercial energy consumption for 1991A'""" was less than unity *3lanning /ommission '""'+. This could be attributed to several factors, some of them being demographic shifts from rural to urban areas, structural economic changes towards lesser energy industry, impressive growth of services, improvement in efficiency of energy use, and inter fuel substitution. The energy sector in India has been receiving high priority in the planning process. The total outlay on energy in the Tenth Five year 3lan has been pro2ected to be !.". trillion rupees at '""1B"' prices, which is '(.%C of the total outlay. =n increase of )!.'C is pro2ected over the ;inth Five year 3lan in terms of the total plan outlay on energy sector. The <overnment of India in the mid term review of the Tenth 3lan recogni0ed the fact that under performance of the energy sector can be a ma2or constraint in delivering a growth rate of )C <>3 during the plan period. It has, therefore, called for acceleration of the reforms process and adoption of an integrated energy policy. In the recent years, the government has rightly recogni0ed the energy security concerns of the nation and more importance is being placed on energy independence. :n the eve of the &9th Independence >ay *on 1! =ugust '""&+, the 3resident of India emphasi0ed that energy independence has to be
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Assignment for PGPM 24

the nation6s first and highest priority, and India must be determined to achieve this within the ne,t '& years.

2.2

Demand and supply scenario

In the recent years, India6s energy consumption has been increasing at one of the fastest rates in the world due to population growth and economic development. 3rimary commercial energy demand grew at the rate of si, per cent between 19)1 and '""1 *3lanning /ommission '""'+. India ran-s fifth in the world in terms of primary energy consumption, accounting for about ..&C of the world commercial energy demand in the year '"".. >espite the overall increase in energy demand, per capita energy consumption in India is still very low compared to other developing countries. India is well endowed with both e,haustible and renewable energy resources. /oal, oil, and natural gas are the three primary commercial energy sources. India6s energy policy, till the end of the 19)"s, was mainly based on availability of indigenous resources. /oal was by far the largest source of energy. @owever, India6s primary energy mi, has been changing over a period of time. >espite increasing dependency on commercial fuels, a si0eable quantum of energy requirements *!"C of total energy requirement+, especially in the rural household sector, is met by non commercial energy sources, which include fuelwood, crop residue, and animal waste, including human and draught animal power. @owever, other forms of commercial energy of a much higher quality and efficiency are steadily replacing the traditional energy resources being consumed in the rural sector. 9esource augmentation and growth in energy supply has not -ept pace with increasing demand and, therefore, India continues to face serious energy shortages. This has led to increased reliance on imports to meet the energy demand. 2.3 Coal

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Assignment for PGPM 24

India now ran-s third amongst the coal producing countries in the world. 4eing the most abundant fossil fuel in India till date, it continues to be one of the most important sources for meeting the domestic energy needs. It accounts for &&C of the country6s total energy supplies. Through sustained increase in investment, production of coal increased from about %" #T *million tonnes+ *#o/ '""&+ in early 19%"s to .)' #T in '""!B"&. #ost of the coal production in India comes from open pit mines contributing to over )1C of the total production while underground mining accounts for rest of the national output *#o/ '""&+. >espite this increase in production, the e,isting demand e,ceeds the supply. India currently faces coal shortage of '..9( #T. This shortage is li-ely to be met through imports mainly by steel, power, and cement sector *#o/ '""&+. India e,ports insignificant quantity of coal to the neighbouring countries. The traditional buyers of Indian coal are 4angladesh, 4hutan, and ;epal. The development of core infrastructure sectors li-e power, steel, and cement are dependent on coal. =bout %&C of the coal in the country is consumed in the power sector *#o/ '""&+. 2.4 ower

=ccess to affordable and reliable electricity is critical to a country6s growth and prosperity. The country has made significant progress towards the augmentation of its power infrastructure. In absolute terms, the installed power capacity has increased from only 1%1. #$ *megawatts+ as on .1 >ecember 19&" to 11) !19 #$ as on #arch '""& */E= '""&+. The all India gross electricity generation, e,cluding that from the captive generating plants, was &1"% <$h *gigawatt hours+ in 19&" and increased to &(& 1"' <$h in '"".B"! */E= '""&+. Energy requirement increased from .9" 4-$h *billion -ilowatt hours+ during 199&B9( to &91 4-$h *energy+ by the year '""!B"&, and pea- demand increased from (1 <$ *gigawatts+ to )) <$ over the same time period. The country e,perienced energy shortage of %..C and pea- shortage of 11.%C during '"".B"!. Though, the growth inelectricity consumption over the past

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Assignment for PGPM 24

decade has been slower than the <>36s growth, this increase could be due to high growth of the service sector and efficient use of electricity. 3er capita electricity consumption rose from merely 1&.( -$h *-ilowatt hours+ in 19&" to &9' -$h in '"".B"! */E= '""&+. @owever, it is a matter of concern that per capita consumption of electricity is among the lowest in the world. #oreover, poor quality of power supply and frequent power cuts and shortages impose a heavy burden on India6s fast growing trade and industry. 2.5 Oil and Na!ural Gas

The latest estimates indicate that India has around ".!C of the world6s proven reserves of crude oil. The production of crude oil in the country has increased from (.)' #T in 19%"B%1 to ....) #T in '"".B"! *#o3;< '""!b+. The production of natural gas increased from 1.! 4/# *billion cubic metres+ to .1.9( 4/# during the same period. The quantity of crude oil imported increased from 11.(( #T during 19%"B%1 to )1 #T by '"".B"!. 4esides, imports of other petroleum products increased from 1 #T to %.. #T during the same period. The e,ports of petroleum products went up from around ".& #T during 19%"B%1 to 1! #T by '"".B"!. The refining capacity, as on 1 =pril '""!, was 1'&.9% #T3= *million tonnes per annum+. The production of petroleum products increased from &.% #T during 19%"B%1 to 11" #T in '"".B"!. India6s consumption of natural gas has risen faster than any other fuel in the recent years. ;atural gas demand has been growing at the rate of about (.&C during the last 1" years. Industries such as power generation, fertili0er, and petrochemical production are shifting towards natural gas. India6s natural gas consumption has been met entirely through domestic production in the past. @owever, in the last !B& years, there has been a huge unmet demand of natural gas in the country, mainly required for the core sectors of the economy. To bridge this gap, apart from encouraging domestic production, the import of D;< *liquefied natural gas+ is being considered as one of the possible solutions for India6s e,pected gas shortages. 1everal D;< terminals have been planned in the country. Two D;< terminals have already been

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Assignment for PGPM 24

commissioned7 *1+ 3etronet D;< Terminal of & #T3= *million tonnes per annum+ at >ahe2, and *'+ D;< import terminal at @a0ira. In addition, an in principle agreement has been reached with Iran for import of & #T3= of D;<. 2.6 Renewa"le Ener#y Sources

9enewable energy sources offer viable option to address the energy security concerns of a country. Today, India has one of the highest potentials for the effective use of renewable energy. India is the world6s fifth largest producer of wind power after >enmar-, <ermany, 1pain, and the 51=. There is a significant potential in India for generation of power from renewable energy sources?, small hydro, biomass, and solar energy. The country has an estimated 1@3 *small hydro power+ potential of about 1& """ #$. Installed combined electricity generation capacity of hydro and wind has increased from 19 19! #$ in 1991B9' to .1 99& #$ in '"".B"!, with a compound growth rate of !..&C during this period *#oF '""&+. :ther renewable energy technologies, including solar photovoltaic, solar thermal, small hydro, and biomass power are also spreading. <reater reliance on renewable energy sources offers enormous economic, social, and environmental benefits. The potential for power production from captive and field based biomass resources, using technologies for distributed power generation, is currently assessed at 19 &"" #$ including .&"" #$ of e,portable surplus power from bagasse based cogeneration in sugar mills *#;E1 '""&+. 2.7 $u!ure scenario

Increasing pressure of population and increasing use of energy in different sectors of the economy is an area of concern for India. $ith a targeted <>3 growth rate of )C during the Tenth Five year 3lan, the energy demand is e,pected to grow at &.'C. >riven by the rising population, e,panding economy, and a quest for improved quality of life, the total primary energy consumption is e,pected to about !1' #T:E *million tonnes oil equivalent+ and &&! #T:E in the terminal years of the Tenth and Eleventh 3lans, respectively *3lanning /ommission 1999+.

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Assignment for PGPM 24

The International Energy :utloo- '""& *EI= '""&b+ pro2ects, India6s gas consumption to grow at an average annual rate of &.1C, thereby reaching '.) trillion cubic feet by '"'& with the share of electric power sector being of %1C by that time. /oal consumption is e,pected to increase to .1& #T over the forecast period. In India, slightly less than ("C of the pro2ected growth in coal consumption is attributed to the increased demand of coal in the electricity sector while the industrial sector accounts for most of the remaining increase. The use of coal for electricity generation in India is e,pected to increase by '.'C per annum during '""'A'&, thus requiring an additional &9 """ #$ of coal fired capacity. :il demand in India is e,pected to increase by ..&C per annum during the same time. It is quite apparent that coal will continue to be the predominant form of energy in future. @owever, imports of petroleum and gas would continue to increase substantially in absolute terms, involving a large energy import bill. There is, therefore, an urgent need to conserve energy and reduce energy requirements by demand side management and by adopting more efficient technologies in all sectors. 3.0 O%E SECTOR & RESENT SCENARIO 3.1 Genera!ion

India has the fifth largest generation capacity in the world with an installed capacity of 1&' <$ as on ." 1eptember '""9, which is about ! percent of global power generation. The top four countries, vi0., 51, Eapan, /hinaand 9ussia together consume about !9 percent of the total power generated globally. The average per capita consumption of electricity in India is estimated to be %"! -$h during '"") "9. @owever, this is fairly low when compared to that of some of the developed and emerging nations such 51 *F1&,""" -$h+ and /hina *F1,)"" -$h+. The world average stands at ',."" -$h. The Indian government has set ambitious goals in the 11th plan for power sector owing to which the power sector is poised for significant e,pansion. In order to provide availability of over 1""" units of per capita electricity by year '"1', it has been estimated that need based capacity

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Assignment for PGPM 24

addition of more than 1"",""" #$ would be required. This has resulted in massive addition plans being proposed in the sub sectors of <eneration Transmission and >istribution 3.2 Transmission

The current installed transmission capacity is only 1. percent of the total installed generation capacity. $ith focus on increasing generation capacity over the ne,t ) 1" years, the corresponding investments in the transmission sector is also e,pected to augment. The #inistry of 3ower plans to establish an integrated ;ational 3ower <rid in the country by '"1' with close to '"",""" #$ generation capacities and .%,%"" #$ of inter regional power transfer capacity. /onsidering that the current inter regional power transfer capacity of '",%&" #$, this is indeed an ambitious ob2ective for the country. 3.3 Dis!ri"u!ion

$hile some progress has been made at reducing the Transmission and >istribution *TG>+ losses, these still remain substantially higher than the global benchmar-s, at appro,imately .. percent. In order to address some of the issues in this segment, reforms have been underta-en through unbundling the 1tate Electricity 4oards into separate <eneration, Transmission and >istribution units and privati0ation of power distribution has been initiated either through the outright privati0ation or the franchisee routeH results of these initiatives have been somewhat mi,ed. $hile there has been a slow and gradual improvement in metering, billing and collection efficiency, the current loss levels still pose a significant challenge for distribution companies going forward.

4.0

GRO%T' O$ O%ER SECTOR

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Assignment for PGPM 24

The power sector has registered significant progress since the process of planned development of the economy began in 19&". @ydro power and coal based thermal power have been the main sources of generating electricity. ;uclear power development is at slower pace, which was introduced, in late si,ties. The concept of operating power systems on a regional basis crossing the political boundaries of states was introduced in the early si,ties. In spite of the overall development that has ta-en place, the power supply industry has been under constant pressure to bridge the gap between supply and demand. 3ower development is the -ey to the economic development. The power 1ector has been receiving adequate priority ever since the process of planned development began in 19&". The 3ower 1ector has been getting 1) '"C of the total 3ublic 1ector outlay in initial plan periods. 9emar-able growth and progress have led to e,tensive use of electricity in all the sectors of economy in the successive five years plans. :ver the years *since 19&"+ the installed capacity of 3ower 3lants *5tilities+ has increased to )9"9" #$ *.1...9)+ from meagre 1%1. #$ in 19&", registering a &'d fold increase in !) years. 1imilarly, the electricity generation increased from about &.1 billion units to !'" 4illion units A )' fold increase. The per capita consumption of electricity in the country also increased from 1& -$h in 19&" to about ..) -$h in 199% 9), which is about '. times. In the field of 9ural Electrification and pump set energisation, country has made a tremendous progress. =bout )&C of the villages have been electrified e,cept far flung areas in ;orth Eastern states, where it is difficult to e,tend the grid supply. In >ecember 19&" about (.C of the installed capacity in the 5tilities was in the private sector and about .%C was in the public sector. The Industrial 3olicy 9esolution of 19&( envisaged the generation, transmission and distribution of power almost e,clusively in the public sector. =s a result of this 9esolution and facilitated by the Electricity *1upply+ =ct, 19!), the electricity industry developed rapidly in the 1tate 1ector. In the /onstitution of India IElectricityI is a sub2ect that falls within the concurrent 2urisdiction of the /entre and the 1tates. The Elec!rici!y (Supply)

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Assignment for PGPM 24

Ac!* +,-., provides an elaborate institutional frame wor- and financing norms of the performance of the electricity industry in the country. The =ct envisaged creation of S!a!e Elec!rici!y /oards (SE/s) for planning and implementing the power development programmes in their respective 1tates. The =ct also provided for creation of central generation companies for setting up and operating generating facilities in the /entral 1ector. TheCen!ral Elec!rici!y Au!0ori!y constituted under the =ct is responsible for power planning at the national level. In addition the Electricity *1upply+ =ct also allowed from the beginning the private licensees to distribute andBor generate electricity in the specified areas designated by the concerned 1tate <overnmentB1E4. >uring the post independence period, the various 1tates played a predominant role in the power development. #ost of the 1tates have established 1tate Electricity 4oards. In some of these 1tates separate corporations have also been established to install and operate generation facilities. In the rest of the smaller 1tates and 5Ts the power systems are managed and operated by the respective electricity departments. In a few 1tates private licencees are also operating in certain urban areas. From, the Fifth 3lan onwards i.e. 19%! %9, the <overnment of India got itself involved in a big way in the generation and bul- transmission of power to supplement the efforts at the 1tate level and too- upon itself the responsibility of setting up large power pro2ects to develop the coal and hydroelectric resources in the country as a supplementary effort in meeting the country6s power requirements. The Na!ional !0ermal ower Corpora!ion (NT C) and Na!ional 'ydro1elec!ric ower Corpora!ion (N' C) were set ower Corpora!ion

up for these purposes in 19%&. Nor!01Eas!ern Elec!ric

(NEE CO) was set up in 19%( to implement the regional power pro2ects in the ;orth East. 1ubsequently two more power generation corporations were set up in 19)) vi0. Te0ri 'ydro Developmen! Corpora!ion (T'DC) andNa!0pa 20a3ri ower Corpora!ion (N2 C). To construct, operate and maintain the ower inter 1tate and interregional transmission systems the Na!ional renamed as O%ER GRID in 199'.

Transmission Corpora!ion (N TC) was set up in 19)9. The corporation was

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Assignment for PGPM 24

The policy of liberalisation the <overnment of India announced in 1991 and consequent amendments in Electricity *1upply+ =ct have opened new vistas to involve private efforts and investments in electricity industry. /onsiderable emphasis has been placed on attracting private investment and the ma2or policy changes have been announced by the <overnment in this regard which are enumerated below7 The Electricity *1upply+ =ct, 19!) was amended in 1991 to provide for creation of priva!e #enera!in# companies for setting up power generating facilities and selling the power in bul- to the grid or other persons. Financial Environment for private sector units modified to allow liberal capital structuring and an attractive return on investment. 5p to 0undred percen! (+445) 6orei#n e7ui!y participation can be permitted for pro2ects set up by foreign private investors in the Indian Electricity 1ector. =dministrative G Degal environment modified to simplify the procedures for clearances of the pro2ects. 3olicy guidelines for private sector participation in the renova!ion 8 modernisa!ion of power plants issued in 199&. In 199&, the policy for 9e#a power pro:ec!s of capacity 1""" #$ or more and supplying power to more than one state introduced. The #ega pro2ects to be set up in the regions having coal and hydel potential or in the coastal regions based on imported fuel. The #ega policy has since been refined and ower Tradin# Corpora!ion ( TC) incorporated recently to promote and monitor the #ega 3ower 3ro2ects. 3T/ would purchase power from the #ega 3rivate 3ro2ects and sell it to the identified 1E4s. In 199& <:I came out with li7uid 6uel policy permitting liquid fuel based power plants to achieve the quic- capacity addition so as to avert a severe power crisis. Diquid fuel lin-ages *;aphtha+ were approved for about 1'""" #$ 3ower plant capacity. The non traditional fuels li-e condensate and orimulsion have also been permitted for power generation.

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Assignment for PGPM 24

<:I has promulgated Elec!rici!y Re#ula!ory Commission Ac!* +,,. for setting up of Independent 9egulatory bodies both at the /entral level and at the 1tate level vi0. The Cen!ral Elec!rici!y Re#ula!ory Commission (CERC) and the S!a!e Elec!rici!y Re#ula!ory Commission (SERCs) at the /entral and the 1tate levels respectively. The main function of the /E9/ are to regulate the tariff of generating companies owned or controlled by the /entral <overnment, to regulate the tariff of generating companies, other than those owned or controlled by the /entral <overnment, if such generating companies enter into or otherwise have a composite scheme for generation and sale of electricity in more than one 1tate to regulate the inter state transmission of energy including tariff of the transmission utilities, to regulate inter state bul- sale of power and to aid G advise the /entral <overnment in formulation of tariff policy. The /E9/ has been constituted on '!.%.199). The main functions of the 1E9/ would be to determine the tariff for electricity wholesale bul-, grid or retail, to determine the tariff payable for use by the transmission facilities to regulate power purchase and procurement process of transmission utilities and distribution utilities, to promote competition, efficiency and economy in the activities of the electricity industries etc. 1ubsequently, as and when each 1tate <overnment notifies, other regulatory functions would also be assigned to 1E9/s. The Elec!rici!y ;aws (Amendmen!) Ac!* +,,. passed with a view to ma-e transmission as a separate activity for inviting greater participation in investment from public and private sectors. The participation by private sector in the area of transmission is proposed to be limited to construction and maintenance of transmission lines for operation under the supervision and control of /entral Transmission 5tility */T5+B1tate Transmission 5tility *1T5+. :n selection of the private company, the /T5B1T5 would recommend to the /E9/B1E9/ for issue of transmission licence to the private company.

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Assignment for PGPM 24

The Electricity Daws *=mendment+ =ct, 199) provides for creation of /entral and 1tate Transmission utilities. The function of the Cen!ral Transmission U!ili!y shall be to underta-e transmission of energy through inter state transmission system and discharge all functions of planning and coordination relating to inter state transmission system with 1tate Transmission 5tilities, /entral <overnment, 1tate <overnments, generating companies etc. 3ower <rid /orporation of India Dimited will be /entral Transmission 5tility. The function of the S!a!e Transmission U!ili!y shall be to underta-e transmission of energy through intra state transmission system and discharge all functions of planning and coordination relating to intra state transmission system with /entral Transmission 5tility, 1tate <overnments, generating companies etc. 5.0 IN<EST9ENT IN O%ER SECTOR 5.1 Inves!men! Oppor!uni!ies in T0ermal ower Developmen! %"C of the countryJs total installed capacity and more than )"C of the total electricity generation is contributed by thermal power. /oal continues to be the main source of for thermal generation. The ma2or thrust in thermal generation could be fructified through significant 2ump in unit si0e and steam parameters resulting in higher efficiencies and better economics. The largest unit si0e in the country at present is &"" #$ and ("" #$ super critical units are in the pipeline. The pro2ected future unit si0e is )"" 1""" #$ with still higher super critical parameters which will have low cost of generation, higher efficiency and are environment friendly. $ith the identification of new gas sources and availability in international mar-et, there is renewed thrust in gas based combined cycle plants. 1uch //<T plants are increasingly becoming techno economical viable with advancements in efficient gas turbine technologies and their environmental benefits.

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Assignment for PGPM 24

The post Electricity =ct '"". scenario provides for the opportunity for any generating company to establish, operate and maintain a thermal generating station without the need of a license, thus providing a free hand in setting up of a thermal generating plant.

1trong supportive factors conducive to investment opportunity such a vibrant strong and stable economy, low cost indigenous fuel, availability of s-illed manpower, indigenous power plant manufacturing capability, presence of independent power producers and power sector reforms initiatives as confidence building measures for prospective investors.

Thrust to 9G# B life e,tension activities with large investment potential for improving the performance of old thermal power stations. The 1" 3lan *'""' "%+ is targeted towards &% units *1!'%" #$+ for 9G# wor-s and 1"( units *1"!1. #$+ with anticipated total cost of more than 9s.1"""" crores.

5.2

Inves!men! Oppor!uni!ies in 'ydro ower Developmen! The 1" 3lan program envisages capacity addition of 1!.9. #$ from hydel pro2ects in the total capacity addition of !111". The <ovt. has initiated advance action for ta-ing up new hydro pro2ects. = &",""" hydro initiative has been launched and pre feasibility reports for 1(' pro2ects prepared. In the second phase of this programme, >39s for about .",""" #$ are under preparation for eventual implementation through both public G private sector agencies.

<ovt. would ta-e up for e,ecution, all the /E= cleared pro2ects and ta-e steps to up date and obtain clearance for pending >391. 1urvey and investigations for new green field sites. 9estart and activate the pending hydro pro2ects for want of fundsBinter state issues. 3romoting small and mini hydel pro2ects by simple design of turbines, generators and the civil wor-s and in a shorter period.

5.3

Inves!men! Oppor!uni!ies in Transmission Sc0emes

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Assignment for PGPM 24

The high capacity inter regional transmission lin-s, forming the bac- bone of the ;ational 3ower <rid would require an investment of the order of 9s. !",""" crores of which about &"C would be needed during the Tenth 3lan period and the balance during the Eleventh 3lan period. 1imultaneously, strengthening of the regional system for meeting the increased transmission needs on account of increased inter regional transactions as well as for evacuation, transmission and dispersal of power from generation resources within the regions would have to be continued and the transmission and distribution system in the 1tate sector would also need to be strengthened. The requirement of funds for transmission and distribution system in the country corresponding to the programme of 1,"",""" #$ of generation addition in the ne,t ten years has been estimated to be of the order of 9s..,"",""" /rores as per the following brea- up7 = lan ;ational <rid 1ystem including Inter 9egional and 9egional Transmission 1ystem 1tate6s Transmission 1ystem 1ub transmission and >istribution 1ystem To!al 5.4 !",""" '",""" )",""" +*-4*444 =I lan &",""" '",""" 9",""" +*>4*444 =II lan 9",""" !",""" 1,%",""" ?*44*444

Inves!men! Oppor!uni!ies in riva!e Sec!or ar!icipa!ion in

Transmission Sc0emes The <overnment made enabling provision for private sector participation in transmission sector way bac- in 199) by amending the then e,isting Electricity =ct 19!). <eneration of electricity was opened for private sector in 1991. In the newly enacted Electricity =ct '""., any private player can see- license from the =ppropriate /ommission to carry out business in transmission of electricity. <overnment of India envisages two routes for private sector participation in transmission ventures. I TC rou!e A provides 1""C fund mobili0ation by private entrepreneurs as I n d e p e n d e n t 3 r i v a t e Transmission /ompany. =nd 2<C rou!e provides formulation of a Eoint Kenture /ompany *EK/+ with /T5B1T5 by selecting a private investor as 2oint venture partner.
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Assignment for PGPM 24

To start with, /entral Electricity 9egulatory /ommission granted transmission license on 1. 11 '"". to #Bs 3owerlin-s Transmission Dimited, a 2oint venture company of the 3ower <rid /orporation of India Dimited and Tata 3ower. This Eoint Kenture *EK+ pro2ect is first of its -ind in India and is being promoted by <overnment of India as a pilot pro2ect under its policy of encouraging private sector participation in transmission of electricity.

=s a first pro2ect to be underta-en under the I3T/ route, the <overnment has already identified the 4ina ;agda >ehgam !""-K >ouble /ircuit transmission line of about %"" L# route length to be ta-en up for private sector participation.

:pportunity of massive investment in Transmission e,ists and it is envisaged that upto 9s. 9,""" crores can be invested by the private sector by the end of 8th Five Mear 3lan.

5.5

Inves!men! Oppor!uni!ies in Dis!ri"u!ion Sc0emes

Accelera!ed ower Developmen! Re6orm ro#ramme& The >istribution 1ector could not grow with the required pace due to paucity of funds and therefore,>istribution 9eforms were initiated by the <overnment. #o5s and #o=s were signed with the 1tates for lin-ing the support of <overnment of India through =3>93 which is ambitious plan for upgradation and strengthening of sub transmission and distribution system with the ob2ective of reducing the =TG/ losses to around1&C.

Si@ ;evel In!erven!ion S!ra!e#y& In order to achieve commercial viability #inistry of 3ower has formulated si, level intervention strategy that encompasses initiatives at ;ational level, 1tate level, 1E4B5tility level, >istribution /ircle level, Feeder level and the consumer level.

An!i1T0e6! 9easures& 1everal 1tates vi0. =ndhra 3radesh, Larnata-a, #adhya 3radesh, 5ttar 3radesh, $est 4engal, #aharashtra, Lerala and <u2arat have ta-en number

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of initiative to curb the theft of power which have shown improvement in collection of revenue by the 1E4sB5tilities. The Electricity =ct, '"". provides a legal framewor- for ma-ing theft of electricity a cogni0able offence. 5nder 1ection 1.& of the Electricity =ct, '""., whoever dishonestly taps lines or cables or service wires, tampers, damages or destroys meters etc. shall be punishable with imprisonment for a term which may e,tend to three years or with fine or with both. +445 9e!erin# ro#ramme& = programme of 1""C metering has been ta-en up by 1tates subsequent to 3ower #inistersB/hief #inisters conference held on '(.'.'""". =s on ."th 1eptember, '""!, 9&C and )%C metering have been achieved in respect of 11 -K feeders and consumer feeders respectively. Consumer Care Cen!re& To address consumer grievances various 1tates have ta-en initiatives by setting up consumer care centres and these centers are effectively operating at @yderabad, Kadodara, 4angalore, Faridabad, >elhi and almost all 1tates are ta-ing steps for implementing the consumer care centres for large towns of the 1tates 5.6 $u!ure Inves!men! Re7uiremen!

Even after investment made by the 5nion <overnment through =3>93 in 1TG> system, the distribution sector needs further investment considering the growth rates of various segments of the distribution system the pro2ections by the end of '""( "% are as follows7

;ine ((-K ..-K

C3! 3m !(9!% .!(..(

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Assignment for PGPM 24

11-K DK

''%"9)! !!)(1%(

=n investment of 9s. )(.&% crores was assessed by the $or-ing <roup on 3ower at the beginning of the Tenth 3lan. @owever the same has gone to 9s. 1,"","""B crore as on today for the entire 1"th 3lan period *'""' "%+. Researc0 And Developmen! (R8D) And New Tec0nolo#ies& =ccording to the ;ational 3erspective 3lan on 9G> in Indian 3ower 1ector up to '"1&, distribution sector was identified as the -ey area for ta-ing up the 9esearch and >evelopment *9G>+ in this sector. The identified areas are7 @igh voltage distribution system *@K>1+ >emand side management /ustom power devices /ompact transformation devices >istribution automation #etering Auali!y o6 ower Supply and Cus!omer Sa!is6ac!ion& $ith the enactment of the Electricity =ct, '"". the emphasis has been given on providing quality and interruption free supply to customers. Leeping this ob2ective in view /entral Electricity =uthority */E=+ has started monitoring of reliability inde,, average tripping per month in respect of 11 -K feeders in respect of towns having population of more than ) la-hs. This will facilitate in bench mar-ing various indices for the annual frequency and duration of tripping. Karious 1tate Electricity 9egulatory /ommissions *1E9/s+ are also in the process of ma-ing regulations for standard of performance in compliance to various provisions of the Electricity =ct, '""..

Re#ula!ion on Ins!alla!ion and Opera!ion o6 9e!ers& In compliance to provision of 1ection && of the Electricity =ct, '""., /E= is ma-ing regulation on installation and operation of meters. This will facilitate in

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Assignment for PGPM 24

uniformity of approach for location of meters, selecting type of meters and their specification, new investment opportunities. The Finance #inister of India 1h. 3ranab #u-her2ee in an article on march "1, '""9 mentioned that 7 $ith the country6s power requirement e,pected to touch ),"",""" #$ by '".1 .', India would need an investment of 9s(,"",""" crore, This investment is possible only by attracting foreign direct investment and public private participation in the power sector, @e said at a function to lay the foundation stone for the 1,""" #$ Tuticorin power pro2ect of ;D/ Tamilnadu 3ower Dtd, a 2oint venture of the ;eyveli Dignite /orporation and Tamil ;adu Electricity 4oard. /laiming that despite odds, the power sector in the country had made a turnaround, he said NIt is time we move ahead and improve our performance by 2oining together. $e should ensure the power shortage is the story of the past and the people got quality power at a competitive price,O he said. The government should ma-e efforts to generate power through various sources by fi,ing targets, he added. =t present, the energy shortage in the country was estimated at 1"C and it touches 1.C during pea- seasons. There are states, where the energy shortage is '&C. NThis is a serious impediment in the way of industrial development and economic process. 1o we need a crash pro2ect for capacity building and eliminate power shortage by '"1',O he said.

6.0

CURRENT RO/;E9 IN O%ER SECTOR

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Assignment for PGPM 24

As the Indian power sector is embarking on increasing the generation and transmission capacities, key challenges lie ahead which also resulted the historical underperformance. >B+ ro:ec! E@ecu!ion C Needs !o "e e@pedi!ed

India has historically failed to meet its power sector targets by a significant margin and with tremendous opportunities ahead, the power sector continues to be affected by the shortfall both on generation as well as transmission side. For e,ample, for the current installed capacity of around 1&' <$, the inter regional transmission capacity is only about '" <$ *1. percent of the installed capacity+. The various proposals in generation and transmission are currently under different implementation stages. @owever, the power sector in India has been plagued with a set of problems for meeting the planned targets. =lthough measures have been defined by the policyma-ers and sta-eholders in a sense of complacency that the issues will indeed be resolved and India will plug the supply deficit of power to resolve the same but loo-ing at the past record, it can be estimated that the resolution measures may not be implemented. The biggest indicator of a poor trac- record is the inability to meet targets on the power generation capacity additions. Kariance with the target has been as high as &" percent in the past. For the 1"th Five year plan various reasons have been identified for slippage. They range from inadequate preparedness of pro2ects, shortage of equipment to the delay in financial closure. The shortage of equipment by 4@ED has been identified as a ma2or cause of delay in the timely completion of the power generation pro2ects. The target for the current 11th 3lan is ambitious, at %),%"" #$, but the first ' years have already seen a slippage. >BD $uel Availa"ili!y

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Assignment for PGPM 24

$hile additional gas supply from L< 4asin has eased shortage to a limited e,tend, supply constraints for domestic coal remain and are e,pected to continue going forward. /onsequently, public and private sector entities have embar-ed upon imported coal as a means to bridge the deficit. This has led to some Indian entities to ta-e upon the tas- of purchasing, developing and operating coal mines in international geographies. $hile this is e,pected to secure coal supplies it has again thrown upon further challenges. For e,ample, the main international mar-et for coal supply to India A Indonesia, poses significant political and legal ris-s in the form of changing regulatory framewor- towards foreign companies. 1imilarly, coal evacuation from mines in 1outh =frica is constrained by their limited railway capacity and the capacity at ports is controlled by a group of e,isting users ma-ing it difficult for a new entrant to ensure reliable evacuation9. In this case it is essential to manage the ris- of supply disruption by different options li-e A diversification of supply, due diligence on suppliers, unambiguous contracting and strict monitoring among others. The failure to achieve the planned target from the captive coal bloc-s presents itself as a ma2or challenge to the power sector, as only '! bloc-s have become operational out of the total '1". E,perts believe that the non operational status of ma2ority of these bloc-s is attributed to land acquisition *9G9+ issues, permit delays and infrastructure problems1". In addition, the developers who have been given the charge of captive bloc-s are not putting diligent efforts to e,pedite the mining operations due to their lac- of e,perience in coalmine development. /oal is the mainstay of the power production in India and is e,pected to remain so in the future. =dditional power generation is li-ely to require incremental amount of coal transportation by Indian 9ailways within the country and increasing unloading at ports in India for imported coal. In both cases India currently faces capacity shortage. @ence, a pro2ect developer has to account for and manage its logistics chain in a manner that minimi0es disruption to its fuel supply. In many cases this is li-ely to involve self development of relevant supply infrastructure which poses additional pro2ect
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Assignment for PGPM 24

e,ecution comple,ity for the developer. For e,ample, some imported coal based power plants are also forced to set up an unloading 2etty for coal carrying shipping vessels. This has to be ensured before the commissioning of a power plant which requires an alternate set of pro2ect e,ecution s-ills in the port sector. >B? E7uipmen! S0or!a#e

Equipment shortages have been a significant reason for India missing its capacity addition targets for the 1"th five year plan. $hile the shortage has been primarily in the core components of 4oilers, Turbines and <enerators, there has been lac- of adequate supply of 4alance of 3lant *4:3+ equipment as well. These include coal handling, ashhandling plants, etc. =part from these, there is shortage of construction equipment as well. The $or-ing <roup on 3ower for 11th 3lan has outlined the requirement for construction equipment for @ydro and Thermal power plants. To alleviate supply shortage of equipment two measures are being adopted A enhancement of domestic equipment manufacturing capability by establishing EKs between Indian and foreign suppliers and second measure is procuring equipment directly from international mar-ets. In both cases equipment sourcing needs to be managed effectively throughout the procurement cycle. For instance, it may be a challenge for new pro2ect owners to select a reliable supplier, monitor its performance and ensure the quality of supply on a sustained basis. =lso, the timelines for availability of additional domestic equipment supply has not been clearly defined. 6.4 ;and Ac7uisi!ion and Environmen! Clearance Power sector. Power plants and utilities face major

Land Acquisition poses an increasingly significant challenge in the Indian constraints and delays regarding the availability of land and obtaining the requisite environment and other clearances for the projects. he new !ill relating to land acquisition has continued to face political opposition. "hile it provides for acquisition by project

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Assignment for PGPM 24

development agencies to the e#tent of $% percent of the land required for a project, with the balance to be obtained by the &overnment. In addition, it has been reported that in some cases, even after land owners were asked to sell and handover their land in 'Public Interest(, the project was not completed for several years due to other delays, a fact that eroded the credibility of both the industry and the government. )onsequently there is a significant mismatch of e#pectations from the Project Affected Persons *PAP+. ,takeholders or other land owners may collectively object of the project e#ecution. In such cases, it is essential to proactively manage the environment and stakeholders( e#pectations. >BE $inancial

-apid build up of the generation capacity is being aided by setting up of .ltra /ega Power Projects *./PPs+ each of which is 0%%% /". 1owever, the e#ecution of the .ltra /ega Power Projects *./PP+ is a significant challenge as India has not witnessed an e#ecution of such a large scale power project before. 2urthermore, with each ./PP costing above I3- 45,%%% )rore, financing such a large project is a critical constraint for any developer. In addition, considering the high financial stake involved through private investments, delay in payments may put severe pressure on developers6suppliers to meet the performance commitments. >B> 9anpower S0or!a#e

There is a general consensus that shortage of talent in the construction sector is a long term problem and is li-ely to continue to push up pro2ect costs and ris-s. The flow of talent into construction and power sector has been gradually drying up as candidates have sought an alternative A and often more lucrative A career options. The <overnment, which is the biggest buyer of the capital pro2ects, has also not done enough to address this challenge. The education system is often not delivering the required number of specialists across pro2ect management, engineering, estimating, surveying and contract
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Assignment for PGPM 24

management. Facing a desperate game of catch up, the industry needs a genuine collaboration between pro2ect owners, contractors and governments to attract more school leavers and graduates. /ompanies should also see- to stay in touch with changing employee aspirations. 4y encouraging diversity in its employment practices and by offering greater fle,ibility in wor-ing hours, the sector can reach out to a wider potential audience that perhaps would not previously have considered such a career. Investment in e,isting employees is also crucial in order to offer better defined career structures, with a greater focus on training and higher salaries where possible. 6.7 Sc0edule Dependency on Transmission ;ines

1ignificant enhancement in construction activity is li-ely to be required to meet the 11th plan target of additional transmission capacity. = significant portion of this enhancement is li-ely to be in the ;orth Eastern region, 1i--im and 4hutan, which have difficult terrain reducing the margin of error for pro2ect e,ecution. =dditional transmission capacity is required to evacuate power from surplus regions to supply to deficit regions and to enable electricity trading. This is essential to meet the target of P3ower for all6. @ence, the criticality of implementing transmission pro2ects cannot be ignored. In this conte,t, it is imperative to establish sound pro2ect management principles to the sector to help ensure timely completion of pro2ects. From the perspective of power generation pro2ects, it is critical for pro2ect specific transmission pro2ects to be set up before the commissioning of the plant to enable timely evacuation of power. This adds another scheduling constraint for the pro2ect.

The most important cause of the problems being faced in the power sector is the irrational and unremunerative tariff structure. =lthough the tariff is fi,ed and reali0ed by 1E4s, the 1tate <overnments have constantly interfered in tariff setting without subsidi0ing 1E4s for the losses arising out of 1tate <overnments desire to provide power at concessional rates to certain sectors, especially agriculture. 3ower 1upply to agriculture and domestic consumers is heavily subsidi0ed. :nly a part of this subsidy is recovered by 1E4s through cross subsidi0ation of tariff from commercial and industrial consumers. The

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Assignment for PGPM 24

1E4s, in the process, have been incurring heavy losses. If the 1E4s were to continue to operate on the same lines, their internal resources generation during the ne,t ten years will be negative, being of the order of 9s.* + %%,""" crore. This raises serious doubts about the ability of the 1tates to contribute their share to capacity addition during the ;inth 3lan and thereafter. This highlights the importance of initiating power sector reforms at the earliest and the need for tariff rationali0ation.

7.0

DE9AND SU

;Y GA

It is evident that the deficit in power availability in India is a significant impediment to the smooth development of the economy. In this conte,t, bridging the gap in demand and supply has become critical and consequently, large pro2ects are being underta-en in different segments of the sectorH <eneration, Transmission and >istribution. =s India has not witnessed such a large scale of implementation before, there is a need to review and enhance pro2ect e,ecution capabilities to help ensure targets are met. This strongly necessitates employing a comprehensive pro2ect management structure to address the ma2or challenges of the power sector pro2ects and to be able to deliver them as per the planned targets. @istorical records also indicate the presence of a wea- pro2ect management structure which does not assess all the -ey pro2ect aspects. =s discussed initially, the overall intent of this paper is to highlight the opportunities and challenges of the power sector, and the pro2ect management drivers that are required to address these challenges. The table below summari0es the -ey implementation challenges and drivers for successfully achieving the implementation of power generation plans.

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Assignment for PGPM 24

Fey C0allen#es =ddition of significant generation capacity

9easures "ein# adop!ed 5#33

Resul!in# Issues Technical and financial capability to e,ecute such large pro2ects

Drivers 6or de!erminin# success 3ro2ect e,ecution /ost B /ash flow management 9is- #anagement strategy and planning 9is- management through effective contracting, supply diversification, etc /ontrol over supply infrastructure 9obust procurement management, vendor monitoring 3ro2ect scheduling

9is- Increase manifold

Ensuring fuel availability and quality

3urchase and development of coal mines abroad

9is- in operating in different geographies, Eg. A 3olitical ris-s

5ncertainties in logistics operation 3lant equipment shortage 3rocurement from abroad Kendor reliability

1etting up of new supply units Dand acquisition and environment clearances #anpower shortage 1peeding up processes

E,ecution timelines Inadequate communication with sta-eholders resulting in mismatch of e,pectations from pro2ect affected person

Environment and sta-eholders management

Enhance training

9esource planning and management

8.0 (i)

STRATEGIES TO AC'IE<E G O%ER $OR A;;H /Y A;TERNATE SOURCES O$ ENERGY /iomass as a Source o6 Ener#y The term biomass refers to all organic matter generated through photosynthesis and other biological processes. The ultimate source of this renewable biomass is the ine,haustible solar energy which is captured by plants through photosynthesis. It includes both terrestrial as well as aquatic matter such as wood, herbaceous plants, algae, aquatic plants and residues, li-e straw, hus-s, corncobs, cow dung, saw dust, wood shavings and other wastes li-e disposable garbage, night soil, sewage solids, industrial refuse etc. In spite of all these biomass resources available in India, they are not

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Assignment for PGPM 24

being properly utili0ed. In fact, a large amount of it is disposed off by burning in open fields causing serious air pollution. In order to utilise these resources properly, biomass should be converted to energy which can meet a si0eable percentage of the countryJs demands for fuel as well as energy. Three main approaches can be adopted for generation and proper utili0ation. 1. /ollection of agricultural and forest residues to produce fuels, organic manures and chemical feed stoc-. 2. /ollection of urban and industrial wastes as fuel in boilers and as a feedstoc- for producing methane and some liquid fuels. 3. <rowth of some specific energy plants for use as energy feed stoc- and cultivation of commercial forestry, aquatic and marine plants for different products. 4y a number of processes, the collected wastes can be converted into solid, liquid and gaseous fuels. The technologies include thermal, thermo chemical and bio chemical conversions. The actual processes in these technologies are combustion, pyrolysis, gasification, alcoholic fermentation, liquefaction etc. The main products of conversion technologies are energy *thermal, steam, electricity+, solid fuels *charcoal, combustibles+ and synthetic fuels *methanol, methane, hydrogen gas etc.+. These can be used for different purposes li-e coo-ing, lighting, heating, water pumping, electricity generation and as industrial and transport fuels. >epending on the nature and availability of these wastes and organic residues they can be utili0ed in different manners as described here. 1. $uel "iomass 4y some processes and procedures, biomass products li-e fuel gas, liquid fuels, gaseous fuels etc. are obtained, which are given here

Page 28 of 34

Assignment for PGPM 24

4iomass from plants or animal origin are directly burnt for coo-ing

and other purposes. #unicipal and sewage wastes, industrial wastes and agricultural wastes are converted to energy which can meet the demand for energy in rural sector. 3addy straw and rice hus- can be profitably converted to fuel gas

by thermal decomposition */ombustion+ Ethanol, which is used as a liquid fuel can be produced from

carbohydrates by alcoholic fermentation. $hen wood and agricultural residues are heated in the absence of

air *pyrolysis+, charcoal is the resultant product which can be used as a fuel more advantageously than wood. 4y the process of gasification, gas is evolved which can be used as

a fuel for engines. 4iogas, which is popular in rural areas is produced by anaerobic

fermentation from farm wastes. 2. $eed "iomass /onventionally, crop residues are used as cattle feed. @owever, some of them with high percentage of lignin or non digestible constituents need certain treatments such as soa-ing in water, al-aliBalcohol to ma-e their use as a fuel. The oil ca-es of various crop seed li-e cotton, rubber, tobacco etc. can also be used as a feed after e,traction of to,ic materials. 3. Or#anic 6er!iliIer "iomass >ry fermented slurry can be used as a direct organic fertili0er for crop land. 4. $i"re "iomass The fibrous agricultural wastes and residues are being profitably utilised for ma-ing pulp for cheap grade paper.

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Assignment for PGPM 24

5. C0emical "iomass @ighly siliconous agricultural residues li-e rice hus- and rice straw can be converted into useful chemicals li-e morphous silicon, silicate products and solar grade silicon. Furfural an another chemical can be produced from biogases, cotton seed hulls, corn cobs, fla, fibres, oat hulls etc., which is used as a solvent for some petroleum products. (ii) %ind as a source o6 Ener#y Today, people are reali0ing that wind power Iis one of the most promising new energy sourcesI that can serve as an alternative to fossil fuel generated electricity. $ith todayJs technology, wind energy could provide '"C of =mericaJs electricity *or about the amount nuclear power provides+ with turbines installed on less than 1C of its land area. =nd within that area, less than &C of the land would be occupied by wind equipment the remaining 9&C could continue to be used for farming or ranching. 4y the year '"'", 1" million average =merican homes may be supplied by wind power, preventing 1"" million metric tons of /:' emissions every year. Dessening our dependence on fossil fuels is critical to the health of all living things, and wind energy can do 2ust that. The . billion -$h of electricity produced by =mericaJs wind machines annually displace the energy equivalent of (.! million barrels of oil and avoid 1.(% million tons of carbon emissions, as well as sulfur and nitrogen o,ide emissions that cause smog and acid rain. In other words, Imore wind power means less smog, acid rain, and greenhouse gas emissionsI. $indmills may have been around for almost 1&"" years, but it was not imagined that wind power would become affordable enough to compete with fossil fuels. Indeed it has. In fact, many utility services around the world offer

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Assignment for PGPM 24

wind generated electricity at a premium of ' to . cents per -$h. If a household used wind power for '&C of its needs, it would spend only Q! or Q& dollars per month for it and the price is still dropping. /ompare this to !.) to &.& cents per -$h for coal or 11.1 to 1!.& cents per -$h for nuclear power. $ind energy is therefore Icheaper than any other new electric generation e,cept natural gas.RwhichS emits one pound of greenhouse gases for every -ilowatt hour of electricity it generates.I The success of this energy is in part due to the fact that its costs have gone Idown by more than )"C since the early 19)"s.I Even lower prices are e,pected, as Iindustry analysts see the cost dropping by an additional '" percent to !" percent by '""&I. $ind power is now the worldJs fastest growing energy source and has also become one of the most rapidly e,panding industries, with sales of roughly Q. billion in '""). #a2or offshore developments are li-ely in northern European waters in the early part of the ne,t century. This will be the ne,t ma2or step for this technology and will result in a dramatic increase in decentrali0ed electricity generation. :ffshore wind has the potential to deliver substantial quantities of energy at a price that is cheaper than most of the other renewable energies, as wind speeds are generally higher offshore than on land. =s of 1999, global wind energy capacity topped 1",""" megawatts, which is appro,imately 1( billion -ilowatt hours of electricity. ThatJs enough to serve over & cities the si0e of #iami, according to the =merican $ind Energy =ssociation. Five #iamis may not seem significant, but if we ma-e the predicted strides in the near future, wind power could be one of our main sources of electricity. I$ith todayJs technology, wind energy could provide '"C of =merica Js electricity *or about the amount nuclear power provides+ with turbines installed on less than 1C of its land area. =nd within that area, less than &C of the land would be occupied by wind equipment the remaining 9&C could continue to be used for farming or ranching.I 4y the year '"1", 1"

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Assignment for PGPM 24

million average =merican homes may be supplied by wind power, preventing 1"" million metric tons of /: ' emissions every year. ;essenin# our dependence on 6ossil 6uels is critical to the health of all living things, and wind energy can do 2ust that. IThe . billion -$h of electricity produced by =mericaJs wind machines annually displace the energy equivalent of (.! million barrels of oil and avoid 1.(% million tons of carbon emissions, as well as sulfur and nitrogen o,ide emissions that cause smog and acid rain.I In other words, Imore wind power means less smog, acid rain, and greenhouse gas emissions.I (iii) 9ini and micro 0ydroelec!ric pro:ec!sB $ater flowing downstream is a powerful force. $ater is a renewable resource, constantly recharged by the global cycle of evaporation and precipitation. The heat of the sun causes water in la-es and oceans to evaporate and form clouds. The water then falls bac- to Earth as rain or snow, and drains into rivers and streams that flow bac- to the ocean. Flowing water can be used to power water wheels that drive mechanical processes. =nd captured by turbines and generators, li-e those housed at many dams around the world, the energy of flowing water can be used to generate electricity. (iv) Solar power 1olar energy is the energy derived from the sun through the form of solar radiation. 1olar powered electrical generation relies on photo voltaics and heat engines. = partial list of other solar applications includes space heating and cooling through solar architecture, daylighting, solar hot water, solar coo-ing, and high temperature process heat for industrial purposes. 1olar technologies are broadly characteri0ed as either passive solar or active solar depending on the way they capture, convert and distribute solar energy. =ctive solar techniques include the use of photovoltaic panels and solar thermal collectors to harness the energy. 3assive solar techniques include orienting a building to the 1un, selecting materials with favorable thermal

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Assignment for PGPM 24

mass or light dispersing properties, and designing spaces that naturally circulate air.

(v)

Nuclear power #any researchers consider that harnessing the energy of the atom in fission reactions is the most important alternative energy resource that we have, for the simple fact of the immense power that it can generate. ;uclear power plants are especially Iclean burningI and their efficiency is quite staggering. ;uclear power is produced at )"C efficiency, meaning that the energy created by the fission reactions is almost equal to the energy put into producing the fission reactions to begin with. There is not a lot of waste material created by nuclear fission although, due to the fact that there is no such thing as producing energy without also creating some measure of waste, there is some. The apprehensions of people such as environmentalists regarding using nuclear power as an alternative energy source are based on this waste, which are radioactive gases that must be contained.

The radiation from these gases lasts for an e,tremely long time, so it can never be let out once contained and stored. @owever, the volume of this waste gas generated by the nuclear power plants is small in comparison to the volume of ;:, *nitrous o,ide that is, air pollution+ that is attributable to one dayJs worth of rush hour commuter traffic in Dos =ngeles. $hereas the radiation is certainly the more deadly by far of the two waste products, the radiation is also by far the simpler of the two to contain and store. In spite of the concerns of the environmentalists, nuclear power is actually environmentally friendly alternative power, and the ris- of the enclosed radiation getting out is actually lower than you would e,pect. $ith a relatively low volume of waste material created, it should not be a difficult thing at all for storage and disposal solutions for the long term to be formulated as technology advances.

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Assignment for PGPM 24

The splitting of an atom produces energy in the forms of both heat and light. =tomic power plants control the fission reactions so that they donJt lead to the devastating e,plosions that are generated by atomic and hydrogen bombs. There is hardly any chance of an atomic power plant e,ploding similar to a nuclear bomb, as the speciali0ed conditions and the pure 3lutonium utili0ed to unleash an atomic bombJs vicious force 2ust simply donJt e,ist inside a nuclear power plant. The ris- of a ImeltdownI is very low. =lthough this latter event has changed a couple of times, when one considers that there are over !." nuclear reactors spread out across .. nations around the world, and that nuclear reactors have been used since the early 19&"s, these are rare incidents, and the events a-in to that which have ta-en place were the fault of outdated materials which should have been properly maintained. Indeed, if nuclear energy could become a more broadly accepted form of alternative energy, there would be little question of their up-eep being maintained. 3resently, si, states in =merica generate more than half of all their electrical energy needs by way of nuclear power, and the media are not filled with grim horror stories of the power plants regularly having difficulties.

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