ARTICLE IN PRESS

Energy Policy 32 (2004) 801–810

Biomass energy technologies for rural infrastructure and village

power—opportunities and challenges in the context of global climate
change concerns
V.V.N. Kishore, Preety M. Bhandari*, Pratul Gupta
Tata Energy Research Institute, Darbari Seth Block, Habitat Place, Lodhi Road, New Delhi 110003, India

Abstract

The potential and role of biomass resources in developing countries for addressing global climate change concerns are highlighted
using India as a case study. Promotion of technologies, which use biomass more efficiently, is seen as a key strategy to integrate the
concerns of both developing countries and developed countries. The role of various biomass technologies for improving rural
infrastructure and village power is discussed in detail. A vision of establishing and running a chain of rural energy service companies,
operating with a basket of devices and technologies, under the general provisions of CDM, is examined for commercialization and
mainstreaming of biomass technologies which have achieved reasonable levels of maturity.
r 2003 Elsevier Science Ltd. All rights reserved.

Keywords: Rural infrastructure; Biomass; Decentralized power generation; Climate change concern

1. Introduction This helped in formulating and implementing projects

In recent years, global climate change considerations
provided a ‘raison d’etre’ for renewable energy technol-
ogies, which, after the initial surge given by a temporary
energy crisis in the 1970s, had been waning steadily. The
UNFCCC provided a broad platform by committing all
parties to ‘‘promote and cooperate in the development,
application and diffusion, including transfer, of tech-
nologies, practices and processes that control, reduce or
prevent anthropogenic emissions of greenhouse gases
not controlled by the Montreal Protocol in all relevant
sectors, including the energy, transport, industry,
agriculture, forestry and waste management sectors’’
(Article 4.1 (c)). The Kyoto Protocol specifically
mentions that each party included in Annexure 1 shall
implement and/or further elaborate policies and mea-
sures such as ‘‘Research on, and promotion, develop-
ment and increased use of new and renewable forms of
energy, of carbon dioxide sequestration technologies
and of advanced and innovative environmentally sound
technologies’’ (Article 2.1 (a) (iv)).
*Corresponding author. Tel.: +91-11-24682100; fax: +91-11-
24682144.
E-mail address: preetyb@teri.res.in (P.M. Bhandari).
aimed at higher penetration of renewable energy in
developing countries through global environmental
facility (GEF), World Bank and other organizations.
However, technologically more mature products such as
wind electric turbines and PV systems have been
relatively more successful in this regard, though they
have higher carbon abatement costs (Table 1).
In order to offset the high costs and with a hope that
volume production and increased market penetration
will ultimately bring down the costs, a variety of
incentives such as capital subsidies, interest subsidies,
accelerated depreciation, tax benefits etc. are being
offered to selective technologies. This kind of market
catalyzation did yield results in some cases. For
example, the wind power installation in India rose at a
rapid rate from 32 MW in 1990 to over 1500 MW in
2001.
However, following the introduction of a minimum
alternate tax (MAT) and a general cash crunch in the
industry, the rate of installation decreased since 1996
and the future growth of wind power is likely to be
rather slow. Similarly, sale of photovoltaic systems like
solar water pumps, home power systems and solar
lanterns has not been very encouraging.
On the other hand, carbon abatement costs of
biomass based technologies such as biomass power

0301-4215/04/$ - see front matter r 2003 Elsevier Science Ltd. All rights reserved.
doi:10.1016/S0301-4215(03)00002-8
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802 V.V.N. Kishore et al. / Energy Policy 32 (2004) 801–810
Table 1
Comparative costs of abatement
Technology Cost effectiveness
(1990 $/t CO2)
PV pump 1602
Solar thermal 593
PV 542
Wind farm 258
Source: Asia least cost greenhouse gas abatement strategy (ALGAS-
India), Manila, ADB, 1998.
Note: Cost effectiveness reflects the effectiveness of total investment in
mitigating a ton of CO2. It may be noted that these estimates relate to
total investment and not incremental investment from base technology.
plants, biomass briquetting, gasification, bagasse cogen-
eration etc. tend to be much lower, but many of these
have not yet achieved the desired levels of reliability,
material life and technology maturity and are in need of
quality R&D inputs. Further, there is a need to widen
the manufacturing base and marketing network of some
of the more established biomass-based enterprises. The
question thus boils down to prioritization in the
renewable energy sector, which will be very specific to
the context in each country. This paper attempts to
examine the case for biomass based technologies under
the CDM. But before that it is important to critically
look at issues such as biomass availability, end use
efficiency, anthropogenic emissions from biomass com-
bustion etc.
2. Biomass in India: resource base, end use efficiency and
emission characteristics
Most developing countries depend heavily on biomass
for their energy needs and India is no exception. An
estimated 220 million tons (mt) of firewood is used for
cooking in rural areas and about 160 million tons of
‘non-fodder’ agricultural residues are produced every
year in the country. Firewood consumption trends
suggest that the consumption is, in fact, increasing
steadily. Questions of sustainability of such high
consumption levels had been raised in the past, but it
appears that most firewood comes from a variety of
local trees and shrubs, chiefly Prosopis juliflora, grown
on private land, community lands, roadsides and
wastelands. Though deforestation due to high depen-
dency on firewood for cooking is of concern in select
areas in the country, there is little evidence to suggest
that firewood use is contributing significantly to forest
loss at the national level. In fact, satellite data shows
that forest cover has increased marginally in recent
years, probably due to increased regulation, better forest
management and afforestation programmes such as
Joint Forest Management.
Thus the current solid fuel resource stands at about
380 million tons/year. In comparison, the coal produc-
tion is about 322 million tons and lignite production is
20 million tons, adding up to about 342 million tons of
($/t C)
solid fossil fuel production per annum. Considering that
5874 the calorific values of several biomass residues are
2174 comparable to those of high-ash coals produced
1987
predominantly in India, it can be said that the solid
946
biofuel resource is at least as big as the solid fossil fuel
resource.
Another bio-resource in India is cattle dung. Nearly
600 million tons of wet dung is produced annually from
a livestock population of about 270 million. This means
that the wet dung would be available as a sustainable
resource. If all this dung can be converted into biogas,
the gas production would be 36 billion cubic meters
(bm3) per year. If organic wastes such as sewage,
municipal solid waste, distilleries etc. can also be taken
as feedstock for gas production, the total biogas
potential would be 36.8 billion cubic meters per year.
In comparison, 22.7 billion cubic meters of natural gas
(excluding gas for LPG shrinkage) and 7.3 million tons
of LPG were consumed in 2001/02. In terms of heat
energy, this amounts to 1.08 exa joules (1 EJ=1018 J)
per year, whereas the biogas production potential is
0.693 EJ/year. Thus the biogas potential, at nearly 70%
of the current gaseous fossil fuel consumption levels, is
too large to be ignored. Biomethanation, would also
produce about 96 million tons of manure. In compar-
ison, the chemical fertilizer consumption in 2001/02 was
19.4 million tons. The bio-resource base of India is
summarized in Table 2.
One major drawback of biofuel use is that these fuels
are used in traditional stoves and furnaces, which are
inherently inefficient. It is well known that conventional
mud stoves operate with thermal efficiencies of the order
of 10% or less. The National Programme on Improved
Chulhas (NPIC) of the Ministry of Non-conventional
Energy Sources (MNES) has not resulted in significant
improvement in energy use efficiency at the national
level (Kishore and Ramana, 2002). An estimated 20
million tons biomass is also used in traditional and rural
enterprises (Kishore, 1999). Survey of some biomass
using enterprises (Kishore and Rastogi, 1987; Mande
et al., 1999, 2000) and available data show that the end
use efficiencies of devices used in such enterprises is also
quite low. A partial list of biomass using enterprises is
shown in Table 3.
Thus, though the bio-resource base of India is
substantial, its contribution to useful energy is low. An
indirect consequence of the low energy use efficiency is
that the carbon emissions would be high. The ratios of
carbon content to calorific value of several fuels,
including biofuels and bio-derived fuels are shown in
Fig. 1(a) and it is apparent that, except for hydrogen
rich fuels like natural gas, the carbon emitting potential
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V.V.N. Kishore et al. / Energy Policy 32 (2004) 801–810 803

Table 2
Bio-resource base of India

Conventional fuels Biofuels

Coal production (2001/02) 320 mt Fuel wood used (1994–95) 220 mt

Lignite production (2001/02) 20 mt Crop residue production (1994–95) 160 mt
Total solid fuels 340 mt Total 380.0 mt
Natural gas (2001/02) 22 bm3 Biogas from cattle dung (potential) 36.23 bm3
LPG consumed (2001/02) 7.3 mt Biogas from Sewage (potential) 0.29 bm3
Biogas from MSW (potential) 0.24 bm3
Biogas from other wastes (potential) 0.05 bm3
Total 36.8 bm3
Total gas energy 1.08 EJ/yr (1 EJ=1018 J) Total gas energy (ultimate potential) 0.693 EJ/yr

Source: V.V.N. Kishore, Lecture notes on biogas technology, prepared for Renewable Energy Updating Workshop for MNES staff, June 1997,
Pondicherry; TEDDY 2001/02, New Delhi; TERI, 2002.

Table 3
Firewood using industries/enterprises in India

Industry Specific fuelwood consumption (approximate) Total firewood consumption per annum (estimated)

Halwai (khoya making etc.) — Not known

Distilleries — —
Lime making 0.34 kg per kg limestone Not known
Surkhi 0.1 kg 0.1 kg per kg dry clay Not known
Khandsari units — —
Brick making 8–10 kg for 100 bricks Not known
Roof tile making — —
Potteries 0.5–1.5 kg per kg final product Not known
Extraction of animal tallows 6 kg per kg tallow Not known
Beedi manufacture — Not known
Coconut oil production 0.075 kg per kg oil Not known
Rice par-boiling kg per kg raw paddy Not known
Hotels, hostels etc. — Not known
Preparation of plaster of paris Not known Not known
Charcoal making 4 kg per kg charcoal Not known
Tyre retreading Not known Not known
Soap manufacture 250–300 kg per batch of 400–500 kg Not known
Paper and paper board products Not known Not known
Rubber sheet smoking 1 kg (per kg fresh latex) Not known
Ceramic industry — —
Refractories — —
Bakeries 0.7 kg per kg of output Not known
Vanaspati ghee 0.67 kg per kg ghee 0.63 mt
Foundries — 45,000 t
Fabric printing of sarees and cloth 0.2 kg per m of cloth 1.72 mt
Road tarring 23 t per km 370,000 t
Fish smoking — 20,000 t
Tobacco leaf curing 4–10 kg per kg cured tobacco 4,38,000 t
Tea drying 1.0 kg per kg dry tea 0.25 mt
Cardamom curing — 75,000 t
Silk reeling 17–25 kg per kg silk yarn 1,00,000 t
Cremations 300 kg per body Approximately 1.7 mt

Source: FAO field document no. 18 and Indian wood and biomass energy development project, project document submitted by TERI to FAO,
September 1994.

of all fuels is comparable. The ratios of carbon emissions
per unit of ‘useful energy’, which take into account the
device efficiency, are shown in Fig. 1(b) and it is obvious
that traditionally used biofuels emit nearly ten times
more carbon into the atmosphere per unit of useful
energy.
One might argue that, since biofuels do not contribute
to ‘net’ carbon emissions, the issue of end use energy
efficiency is not very important. But considering the fact
that biomass is harvested unsustainably in many
developing countries and that the national forest covers
in many of them is substantially lower than the desired
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804 V.V.N. Kishore et al. / Energy Policy 32 (2004) 801–810

Producer gas
Biogas
Dung cake
Rice husk
Bagasse
Mustard stalks
Wood
Natural gas
LPG
Kerosene
LSHS
Furnace oil
LDO
HSD
Lignite
Coal
0.0000 0.0200 0.0400 0.0600 0.0800 0.10000 .1200
(a) kg C/kWh (th)

Producer gas
Biogas
Dung cake
Rice husk
Bagasse
Mustard stalks
Wood
Natural gas
LPG
Kerosene
LSHS
Furnace oil
LDO
HSD
Lignite
Coal
0.0000 .500 1.000 1.500 2.000 2.500
(b) kg C/kWh (th)
Fig. 1. (a) Carbon–CV ratios (inherent) for various fuels. (b) Carbon–CV ratios (end use) for various fuels.

levels, more efficient utilization of biomass will definitely
enhance the ‘sink’ effect of forests. From this perspec-
tive, climate change projects aimed at biofuel conserva-
tion should get at least as much importance as
afforestation projects.
A second issue related to biomass combustion in
traditional devices is concerned with products of
incomplete combustion (PIC), chiefly carbon monoxide,
methane, total non-methane organic compounds
(TNMOC) and N2O. These greenhouse gases have
higher global warming potentials (GWPs) and it
has been shown that their CO2 equivalent contribution
is nearly the same as the actual CO2 emitted (Hayes
and Smith, 1994). Results of a study conducted
for 28 stove-fuel combinations in India (Smith et al.,
2000) clearly establish that the currently practised
biomass cycles are not GHG neutral. In fact the study
highlights the win–win situation achievable by promot-
ing use of ‘modern’ biofuels like biogas and producer
gas.
3. Biomass technologies for village power, cooking gas
and rural infrastructure
Biomass technologies for decentralized power genera-
tion can be categorized as follows:
(i) Direct burning of biomass to run steam turbines.
(ii) Direct burning of biomass to run sterling engines.
(iii) Gasification of biomass to run IC engines and
combined cycle systems.
(iv) Biogas production from cattle dung to run IC
engines.
 ARTICLE IN PRESS
V.V.N. Kishore et al. / Energy Policy 32 (2004) 801–810
(v) Miscellaneous technologies for producing liquid
fuel (bio-alcohol, bio-diesel, pyrolitic oil) to run IC
engines.
Earlier attempts of ‘direct burning’ projects such as
the dendothermal power plants in Philippines (Kishore
and Thukral, 1993) failed probably due to a combina-
tion of factors related to technology maturity, biomass
collection, organizational set up, funding etc. Biomass
fired sterling engine system (Kishore and Sinha, 1999)
seemed a sound technology option for small power
generation (o25 kW) for isolated rural communities
and for irrigation pumping. Lack of financial support
for technology improvements and market development,
however, resulted in closing down of this enterprise.
In recent years, however, there is a revival of activity
in direct burning biomass power products. The bagasse
cogeneration power plants seem to be taking off quite
well. About 222 MW capacity has already been installed
till March 2000 and the ultimate potential is estimated at
3500 MW. A few rice husk based power plants in the
capacity range of 5–8 MW in the state of Andhra
Pradesh in South India and one based on mustard stalks
in Haryana in North India have been built and operated
by private industrial firms. The future growth of such
plants will depend to a large extent on regulatory
mechanisms (e.g. sale of power to third party) and on
development of mechanisms to procure biomass at
economical prices.
Biomass gasifier-based power plants, typically in the
range of 5–500 kW, have also been established under
subsidy schemes or demonstration projects of MNES.
However, several of these seem to have been discon-
nected from the gasifier, as shown in a survey conducted
in Haryana (Chakravarty et al., 1999). Also, field data
on performance (diesel replacement, actual costs of
maintenance, delivered cost of biomass etc.) is scarce.
The chief technical problems ailing the gasifier technol-
ogy are (i) tar and other impurities present in the gas
and (ii) inability of most gasifiers to operate smoothly
on fuels other than wood chips. The impurity problem is
not yet effectively solved for small gasifiers, but some
recent designs of gasifiers and cleaning trains ensure gas
quality adequate for engine applications, but probably
not adequate for gas turbine operation. There is also not
enough evidence to suggest that the gas quality is good
enough for engines with turbo-chargers and after-
coolers. Most gasifiers use wood chips at present and,
though there are a few commercial manufacturers
offering rice husk gasifiers, there is little operational
and field performance data to back their claims.
Biomass supply may not be a big problem for small
gasifiers, but the cost of delivered biomass does not
appear to be low. Based on recent field experiences, it is
apparent that the cost of wood chips or similar material
like ipil–ipil is in the range of 1000–1500 Rs/ton. This
805
factor, combined with the current high prices of diesel,
make dual fuel operation somewhat uneconomical.
Engines operations on 100% producer gas are not yet
commercially available. Microturbines with a capacity
rating of about 80 kW are currently made by Allied
Signal, but have not been tested for producer gas
operation. Microturbines and gas engines, however,
seem to be very attractive choices for prime movers in
gasifier-based power plants. The much talked about
option of biomass gasifier-steam injected gas turbine
(BIG-STIG) seems to be on a back burner now as the
multi-partner GEF project involving Shell Brasil, TPS
Termiska etc. did not take off. However, in spite of all
the above-mentioned problems of technology matura-
tion, the gasifier-based system seems to be the most
promising option economically for small power genera-
tion under 1 MW.
The earliest tried out option for small village power
was the biogas system. The community biogas concept
in which cooking gas was produced in a decentralized
manner and distributed to households and part of the
gas used for power generation was a highly relevant
local initiative. But as there were no efforts on
technology upgradation (for example, in the direction
of developing high rate reactors, dry digestion etc.) and
enterprise development, the community biogas concept
degenerated into a government run programme and was
finally abandoned. But the concept can be revived in
view of the recent advances in anaerobic digestion. A
biphasic, TEAM process has recently been developed
(Rajeshwari et al., 2001) for biomethanation of solid
organic wastes and initial trials using cattle dung are
encouraging. The process can be scaled up, demon-
strated at a village level through entrepreneurial efforts
for production of power, cooking gas and manure on
commercial or semi-commercial lines. Or the commu-
nity biogas plant can itself be upgraded and revamped to
involve entrepreneurs.
A project aiming to utilize oil from non-edible oil
seeds as a substitute for diesel has recently been initiated
in the state of Karnataka, but there is not enough field
experience and operational data to evaluate such a
process for technical and economic viability. Processes
for producing pyrolytic oil from biomass are available,
for example at BTG, University of Twente and a
proposal to use such oils for gas turbine operation has
been mooted by a Canadian company. Such projects are
yet to be evaluated for detailed techno-economic
feasibility studies.
There are two problems preventing village power
ventures from becoming success stories in the commer-
cial sense. The first one is related to plant load
utilization and the second to the purchasing power of
rural people. The cost of power generation, apart from
other factors, depends critically on the plant load factor
or the number of hours of operation per year at the
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806 V.V.N. Kishore et al. / Energy Policy 32 (2004) 801–810

11.0 DR= 0.7 (vi) Desalination to provide drinking water.

Cd =16 Rs/lit (vii) Supply of waste heat to biogas plants.
10.0 Cw=1.0 Rs/kg
I2 =Rs 7,50,000
(viii) Supply and servicing of small gasifiers for rural
CRF=0.203 (r=13%, OL =8 yrs) enterprises.
9.0
OMRg = Rs 1,44,000
OMRd = Rs 22,5002
8.0 Biomass briquetting has emerged as a commercially
viable activity in recent years in India. At the current
7.0 Total cost of electricity higher prices of fuel oils, several small industries are
favouring usage of briquettes for process heat wherever
6.0
Rs/kWh

feasible, and are willing to pay prices up to 1800 Rs/ton.

5.0 OMRd
100% diesel The cost of production of briquettes is in the range of
OMRg
1000–2000 Rs/ton and thus there is a good profit margin
4.0 in briquette making. Besides, a briquetting plant will be
Third party sale
Cap + Interest a good load centre. Supplying of cooking gas through
3.0
MNES allowed the biomethanation route was already mentioned ear-
2.0 Biomass lier, but it is also possible to supply piped producer gas
for cooking. More than 65 installations based on the
1.0 Diesel latter have been established in China (Sun et al., 1995).
There are several advantages of getting into the business
0
0 1000 2000 3000 4000 5000 6000 7000 8000 9000 of cooking gas supply. Firstly, it has a direct bearing on
N, hrs/yr the quality of life and removes the drudgery of women.
Fig. 2. Economics of wood gasifier-based power plants. Secondly it frees biomass from being inefficiently used
and thus makes it available for power generation. A
conceptual scheme of how the biomass burnt at present
in traditional stoves can be used for providing both
rated load. Fig. 2 shows the variation of different cost
cooking gas and electricity at the national level is shown
components with the number of hours of operation for a
in Fig. 3. It can be seen that, by following the gasifier
typical gasifier-based dual fuel power plant. It can be
route, not only all the cooking energy requirements are
seen that, while the diesel and biomass costs remain
met, but enough biomass would be available to generate
more or less constant, the operation, maintenance and
125 billion kWh of electricity. The current demand in
repairs cost (OMR) and interest costs per unit of
rural areas is not even half this amount.
electricity generated are quite high at low plant usage
If a biogas plant is operated in the same complex as
hours. And yet, this is typically the case for rural loads
the gasifier power plant, the waste heat from the engine
where lighting load is low, pumping load is seasonal and
can also be used which increase the operating tempera-
no industrial load centres exist. Thus the final cost of
ture of the biogas plant, thus increasing the gas
electricity generated would tend to be high. On the other
production rates. There are several other ways of using
hand, the purchasing power of rural people is quite low
the waste heat. It can be used to run a cold storage
in many areas, as they are dependent primarily on
operating on the absorption (ammonia–water) or
agriculture. Also, electricity had been subsidized heavily
adsorption (methanol–silica gel) (Mande et al., 1997)
for rural areas and hence people are accustomed to pay
systems. If necessary, the waste heat can be supplemen-
very little for it. This situation, however, is changing
ted by burning part of the gas. There is a severe shortage
slowly as regulatory bodies are becoming important and
of cold storages in the country leading to spoilage of
several state governments are convinced about the need
fruits and vegetables and distress sales by farmers. The
to raise tariffs. It is thus imperative that any power
usual practice is to rent out cold storage space on a daily
producer operating in rural areas cannot restrict to
or weekly rate. Operation of cold storages will thus
supply of electricity alone, and will have to expand the
provide additional income to the power plant besides
services offered, so that extra income is generated. Some
increasing the overall efficiency significantly.
of the operations which have the potential to increase
The other post-harvest operation in rural areas is
the profitability of a rural energy enterprise and which
drying. Crop drying is presently done by open sun
would help in improving rural infrastructure at the same
drying leading to inefficient moisture removal, fungus
time are:
infection etc. Crops need drying temperatures in the
(i) Biomass briquetting. range of 55–801C, which can be easily obtained from
(ii) Supply of cooking gas. engine exhaust by using a gas-air heat exchanger. Recent
(iii) Making of char briquettes. experience of using gasifiers for cardamom curing in
(iv) Running a cold storage. Sikkim showed that, not only drying times are reduced,
(v) Crop drying. but the quality of the dried product is superior, fetching
 ARTICLE IN PRESS
V.V.N. Kishore et al. / Energy Policy 32 (2004) 801–810
220 million tons/year
of firewood
880×1012 kcal of
wood energy
Traditional route
(10% efficiency)
88×1012 kcal of
useful energy
176×1012 kcal for
cooking
50% efficiency
88×1012 kcal of
useful energy for
cooking
Fig. 3. A conceptual scheme for generating cooking gas and electricity from the same amount of firewood used at present traditionally.
a higher price in the market. When the demand for
drying is high in drying season, gas can be used directly
for burning to augment the available waste heat.
Many villages in India suffer from chronic draught
which aggravates if monsoons fail. Some of these
villages, especially in Gujarat State have brackish water
which is not fit for drinking. A multistage flash (MSF)
distillation system can be used to produce drinking
water from brackish water. Though the available MSF
systems are too large to be used in a decentralized
manner, a 3 or 4 stage system can be easily developed for
such applications. MSF systems also require tempera-
tures of about 1001C which can be obtained from waste
heat. Another alternative is to use membrane systems
for reverse osmosis to produce drinking water. These
will need power and hence can be employed as load
centres.
Wood charcoal is used extensively in small industries
and sells at a high price. Agricultural residues such as
mustard stalks, cotton stalks and jute sticks can be
pyrolized and the resulting char can be briquetted and
sold as a substitute for charcoal. A briquetting-gasifica-
tion system which also produce char briquettes as a side
activity was tried out (Raman et al., 2001) some time
807
Gasifier route
605×1012 kcal of gas
energy
429×1012 kcal for
power generation
25% efficiency
125 billion kWhe
(~ 24,000 MW @ 0.6
PLF)
back, but has not been upscaled yet. As there is a good
profit margin for biomass char briquettes, the power
plant owner can make surplus income.
Small gasifiers have been beneficially used for
applications such as silk cocoon cooking (Charles,
2000) textile dyeing, community cooking, CO2 manu-
facture, MgCl2 manufacture, mushroom drying and
general purpose steam generation so far by TERI. A
power company using gasifier on a regular basis will be
highly suitable for commissioning and servicing gasifiers
for small industrial applications as stated above.
A strong case thus exists for a rural power company
to expand its services several fold, so that any loss in the
selling of power is offset by profits in other streams.
Several thousands of such companies, operating with a
basket of devices and technologies, can be set up
throughout the countryside as a chain. Such a chain of
companies would require the following inputs for
steady, profit making operation.
* Quality technical and R&D inputs from established
institutes.
* A high level of system integration to optimize
operations.
 ARTICLE IN PRESS
808 V.V.N. Kishore et al. / Energy Policy 32 (2004) 801–810
* Mechanisms to ensure supply of biomass and sale of
power and other goods and services.
* Financing schemes at low interest rates both for
initial and working capitals.
We shall now examine the possibility of establishing
and operating such a chain of rural ESCOs with the aid
of the clean development mechanism (CDM) under the
Kyoto Protocol.
4. The clean development mechanism (CDM) for
commercialization and mainstreaming of biomass
technologies
Notwithstanding the controversies related to the
uncertainty in predicting climate change, and the timing
of the ratification of the Kyoto Protocol to the UN
Framework Convention on climate change, the new and
emerging issue insofar as the developing country context
is the access to additional funds and technology through
CDM.
The CDM, as described in the Kyoto Protocol is to
help DCs in ‘‘achieving sustainable development and in
contributing to the ultimate objective of the Conven-
tion’’ as also developed countries to meet their emissions
reduction targets. This will be effected through projects
sponsored by developed countries in developing coun-
tries and resulting in certified emission reductions to be
used by the former in complying with their commit-
ments.
To elaborate, the CDM has been conceived as an
instrument to promote sustainable development in
developing countries along with ‘cost-effective’ climate
change mitigation. It brings together the need for
Annex-1 countries to initiate investments in carbon-
emissions reduction opportunities in developing coun-
tries. Through this process enterprises in Annex-1
countries can, in partnership with enterprises in devel-
oping countries, invest in the establishment of or state-
of-the-art technologies in host developing countries. The
lower technological baseline in the developing countries
would imply that such an investment would result in
greater potential reductions in carbon emissions than
would occur with a similar investment in the Annex-1
country. In return for this investment, the Annex-1
country enterprise would seek carbon emission reduc-
tions (as compared to host country baseline) that occur
over the life of the device (or package of devices)
invested in. The CDM would thus be a more cost-
effective mechanism for reducing GHG emissions than
if the Annex-1 country had to implement an equivalent
reduction at home.
In this section, the possibility of packaging biomass
technologies under the provisions of the Clean Devel-
opment Mechanism is examined. To ensure that relevant
small scale projects in the areas of renewable energy
technologies and energy efficiency improvements, do not
get overwhelmed in the menu of candidate projects, a
special provision for fast tracking these projects has
been provided for, thereby giving them a comparative
advantage in the short run. These include relatively
easier procedures for developing baselines for these
projects, to justify their amenability to CDM.
In the above context we will examine the pros and
cons of suggesting this project of a rural ESCO
providing services through biomass based technologies
or components thereof for the CDM. Typically a
biomass based power generation project could qualify,
as is evidenced by the fact that in the CERUPT tender
of the Dutch Government, of the 6 projects shortlisted
from India, three projects based on biomass have
cleared the first round of scrutiny. But one must
remember that these projects aim to feed electricity to
the grid, making a case for displacing coal based
electricity at the margin in the Indian context and
thereby saving carbon emissions.
However, for the project proposed herein, we would
need to examine two cases. One related to the power
project feeding into the grid and the other for off-grid
applications in remote areas. The first case, as men-
tioned earlier is already passing the test, and does not
actually meet the underlying objective of providing
energy services to a village or cluster of villages. Rather,
it aims at supplying electricity to the grid.
In the second scenario of off grid power, there is a
need to justify the carbon saving potential of the project,
not only on the basis of displacing existing use of
kerosene for lighting, but also the fact that in due course
the conventional grid would be extended to the village,
and that would imply additional carbon saving poten-
tial. Also, the fact that once electricity is made available,
it would be put to other end uses besides lighting, and
the average load of a household would be much higher
than in the present scenario, the savings potential would
be higher too.
To illustrate this concept, a biomass plant of 0.5 MW
is assumed to be installed by the rural ESCO, at a capital
cost of Rs 35 million/MW. The other assumptions
regarding the fuel price, consumption norms are listed in
Table 4. The PLF of the plant is assumed to be 75%, at
which the electricity generated is 2.6 million kWh.
To maintain the high PLF of 75%, the scheme
proposed aims at supplying electricity for 8 h each to
households (HH), small industrial units and agricultural
pumps. At a demand of 250 W/HH for a period of 8 h
daily, the plant can cater to approximately 1200 HH, as
also supply power to 60 pumps of 5 kVA each and 30
industrial units with load of 10 kVA each. This
obviously implies that this scheme would be prima-facie
viable for a cluster of villages, to justify the assumption
subsumed.
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V.V.N. Kishore et al. / Energy Policy 32 (2004) 801–810
Table 4
Assumptions for computing carbon reduction benefits
Capacity of biomass based power plant 500 kW
Auxillary consumption and distribution losses 20%
PLF 75%
Fuel price Rs 900/t
Sale price of electricity Rs 2.50/kWh
IRR (without proceeds from CERs) 15%
CERs generated
Case 1: Replacing existing or prospective grid 2600/annum
based electricity
Case 2: For remote locations, replacing 1120/annum
kerosene use in households and diesel and fuel oil
in agriculture and industrial applications
Sale price of CERs US $ 5/t of CO2
IRR (with proceeds from CERs)
Case 1 18%
Case 2 16%
The internal rate of return for such a scheme is
estimated to be 15%. Normally, ESCOs target a rate of
18%.
Regarding the affordability of electricity by rural
households, at the current price of Rs. 2.5/unit of
electricity, monthly bill for a HH is Rs. 150 which
matches with the average expenditure by the rural
household on lighting, using kerosene-based traditional
devices.
Under the assumption that each unit of power
produced at biomass power plant is displacing 1 kg of
CO2, given that at the margin the grid would have
supplied coal-based electricity, total carbon credits
generated are 2600/annum. Further, if it is assumed
that these credits can be sold USD 5/credit, which is the
current price being offered for certified emission
reductions (CERs), the project economics improves.
The IRR of the project increases by 3% and this may
make it attractive for an ESCO.
However, in the above examples we are focussing
primarily on biomass for power generation, and
replacing existing grid power or proposed grid con-
nectivity. If one were to examine the case of unelectrified
villages, the fuels displaced by the biomass-based project
will replace kerosene for lighting and diesel for pumping
water as also in industrial applications. In this case the
CERs generated by the project will be 1120 only,
increasing the IRR of the project by 1.2–1.3% only.
However, if significant weights are to be attributed to
a project meeting sustainable development objectives of
a country, the comprehensive concept proposed herein
including a rural ESCO providing services other than
electricity, such as supplying biogas for cooking, or
using the waste heat from the biomass gasifier to run
cold storage, will provide a good justification to
showcase how the project meets with the sustainable
development objectives of the country.
809
But, for such a concept to be viable, location
specificity is of utmost importance, and the assumptions
which have contributed to the viability of the project viz.
a high PLF, justified by a conglomeration of 1200
households, 60 irrigation pumpsets along with 30
industrial units, need to be examined further. These
may be rather optimistic conditions, and their robust-
ness in the Indian context will necessarily have to be
justified.
An outline of a possible approach for launching such
a CDM project in rural energy services is given below.
1. Selected entrepreneurs in India, along with consul-
tants or technology providers formulate a few project
concepts for different locations using different
‘packages’, e.g. one integrating power with biomass
briquetting and the other integrating power with cold
storage, etc.
2. Initial feasibility studies will be carried out for each
project, taking into account biomass supply chain,
power evacuation options, choice of product/tech-
nology mix for the package etc.
3. The entrepreneur or the consortium of different
companies will seek partnership with a possible
Annex-1 enterprise, and if the negotiations succeed,
a company would be floated in the developing
country with equity participation from the Annex-1
enterprise.
4. The so formed ‘parent’ company would make
detailed feasibility studies of the different projects,
do initial product marketing, source various sub-
systems of the final technology package, enter into
power-purchase and biomass supply agreements and
obtain commercial borrowing. It will also make
detailed estimates of carbon savings, evolve a
mechanism of ‘certifying’ the emission reductions
and calculate carbon abatement costs.
5. A few ‘pilot projects’ would be initiated and delivery
of services channelized well before the starting of the
first commitment period (2008–2012).
6. The experience of running the rural power companies
for 1–2 years will provide the necessary ‘fine-tuning’
of the technology packages required for standardiza-
tion.
7. As the first commitment period approaches, the pilot
projects would have been fully operational and the
company or consortium of companies from the
Annex-1 country which originally invested in the
project can start banking of CERs and will continue
to earn CERs in the first commitment period.
8. Many full-scale projects will be conceived as soon as
the pilot projects become operational, and the chain
of companies would start getting established through-
out the first commitment period, thus continually
increasing the stock of CERs earned. Meanwhile, the
operational and economic viability of the rural power
 ARTICLE IN PRESS
810 V.V.N. Kishore et al. / Energy Policy 32 (2004) 801–810
companies would have been established and the
national Institutions of the developing country would
be convinced about the compatibility of CDM in
achieving their own development goals.
At the moment the possibility of packaging biomass
technologies for delivering various services, may seem
remote. Nonetheless, this is a concept that needs further
exploration, especially in light of the current debate on
sustainable energy and sustainable development. Per-
haps, this initiative can be provided an initial fillip
through the much talked about Type 2 initiatives, that
have come into vogue since the World Summit on
Sustainable Development. For instance E7, comprising
nine leading electricity companies from G7 countries has
undertaken a project in Indonesia to provide electricity
to eight remote communities in eastern Indonesia. As a
part of this project 4 micro hydropower systems, one
solar–wind hybrid system and 200 solar home systems
have been installed and it is being claimed that it would
generate about 33 000 tons of CO2 offsets.
5. Conclusions
The Biomass resource base of a developing country
such as India is comparable to fossil fuels. But factors
such as collection, processing, low end use efficiency of
conventional devices and insufficient maturity of present
biomass energy technologies are major barriers for
utilizing the available bioresources more efficiently and
on a sustainable basis. Utilization of a basket of energy
technologies, rather than a single technology (as is the
current norm in most government programmes) to
deliver energy and economic services in rural areas
seems to hold the key for successful commercialization
and mainstreaming of biomass energy technologies.
Operationalization of rural ESCOs, for providing a
variety of infrastructural services, and depending for
R&D support from established institutes, can reduce the
investor risks and make subsequent projects bankable
and replicable. The fact that biomass technologies can
potentially have the lowest carbon abatement costs
amongst other renewable energy technologies lends to
their candidature for financing under the CDM mode,
especially when the sustainable development benefits of
such projects are highlighted adequately.
Acknowledgements
This paper is an enlarged and revised version of a
presentation made at the fourth meeting on Renewable
Energy at Recife, Brazil in October 1998. The financial
assistance provided by CICERO (Centre for Interna-
tional Climate and Environmental Research, Oslo) for
preparing the present version is gratefully acknowl-
edged. The support and encouragement of Dr. R.K.
Pachauri, Director General, TERI, is sincerely appre-
ciated. The authors would like to thank Mr. Amit
Kumar for his inputs. Thanks are due to Mr. Kamal
Sharma for assistance in preparing the manuscript and
to Mr. R.K. Joshi for making the drawings.
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