October 2006

Policy Framework for the Development of Captive Power:
A Perspective
By SC Shrivastava, Joint Chief (Engg.), CERC
provided for open access in transmission mandatory, and open access in distribution in a phased manner. The Act also liberalized the generation of power (except hydro generation), laid a special emphasis on the development of captive power generation, including cogeneration. Electricity is one of the key drivers for the socio-economic development of the country. Earlier, the vertically integrated State Electricity Boards (SEBs) and central generating companies dominated the Indian power sector. Setting up captive generating stations was not allowed without prior permission of the SEBs.

Statutory Provisions
The Act thus provided the legal and enabling framework for the development of the power sector with clear emphasis on competition, efficiency and economy, and paved the way for the development of captive and cogeneration plants. Section 9 of the Act 2003 provided that any person, cooperative society, or a group of persons was free to set up a captive generating plant primarily for his/their use meeting the specified criteria (holding of 26% equity stakes and using 51% of power for own use collectively) under the Electricity Rules notified on 8 June 2005. The balance or the surplus power could either be sold to a third party, i.e. to any class of consumer or to distribution licensees subject to the grant of open access in transmission and distribution depending on availability. Sections 38, 39 and 40 of the Act made it mandatory for the Central Transmission Utility (CTU) and the State Transmission Utility (STU) respectively to provide nondiscriminatory open access to the captive generator for the use of the transmission system for his/their own use without any surcharge. In case of supply to any consumer a surcharge shall be payable by the consumer concerned under Section 42 (4) as specified by the SERC during intrastate transmission. Section 42 (2) of the Act provides that the Commission shall allow open access to consumers with a contracted capacity of 1 MW or less in due course, at such time and in such phases as it may be considered feasible, with due regard to operational constraints and other factors. It also provides for the levy of a reasonable surcharge for the
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Policy Initiatives at the Center
The power sector began undergoing changes in 1991 when a shift in the policy framework allowed participation of the private sector in power generation. This was prompted by a widening gap in the demand and supply of power and a resource crunch at the government level. Private sector participation had not materialized due to a host of reasons, including poor financial health of the SEBs. The Central Government in October 1995, for the first time, decided to develop captive power generation as an alternative route where industries themselves would meet their own power demand by pooling resources together. The Center asked all State Governments to create an institutional mechanism allowing captive/cogeneration power plants an easy and automatic entry through quick clearances, rational tariffs for purchase of surplus power by the grid, and third-party access for direct sale of power to other industrial units. In spite of this Central Government initiative, State Governments and SEBs did not take serious or concrete steps to facilitate development of captive power generation.

Power Sector Reforms
This was followed by the creation of regulatory commissions at the Center and the States, reforms involving restructuring of SEBs, and private sector participation in the transmission and distribution sector. All this culminated in a new comprehensive legislation in June 2003, “The Electricity Act, 2003”, herein called the Act. The Act provided for trading as a distinct activity and also

Supported by

Shri Ajit K. Gupta, Adviser, MNES, New Delhi

Ministry of Non-Conventional Energy Sources (MNES), Government of India Co-sponsored by ISGEC John Thompson Thermax Ltd. Editorial Board Mr RC Tiwari, Director, MNES Mr PP Naiknavare, Executive Director, Cogen India Mr SC Natu, Member Secretary, Cogen India Chief Editor Mr Ajit K Gupta, Adviser, MNES Editors Mrs Anita Khuller, Cogen India Mr Sandeep Junjarwad, Cogen India Published by Cogeneration Association of India (Cogen India) c/o MSFCSF Ltd., 1st floor, Sakhar Sankul, Shivajinagar Pune 411 005, India Tel: +91-20-25511404 Fax: +91-20-25511446 Email: cogenindia@dataone.in / cogenindia2005@yahoo.com Web: www.cogenindia.org Printers Innovative Designers & Printers, New Delhi Tel: 66605070, 66408241 Email: idpdelhi@yahoo.com Disclaimer The views expressed in the articles within are those of the authors and do not necessarily reflect those of Cogen India or the newsletter sponsors.

The Indian energy sector has witnessed momentous developments during the last 15 years. The policy, legal and regulatory framework has been continuously evolving since the first policy changes were initiated in 1991 to bring private investments in power generation. Taking a cue from the opening up of the power sector, the Ministry of Non-Conventional Energy Sources (MNES) circulated Policy Guidelines to the States during 1993-94 for promotion of non-conventional energy-based power projects through the introduction of conducive policies for wheeling, banking, third-party sale, and buy-back by utilities. Consequent to the introduction of such policies by a majority of States, development of commercial projects for wind power generation, biomass power and cogeneration, and small hydropower picked up in the country. In addition to policies for grid connectivity, fiscal and financial incentives also spurred commercial development. These include accelerated depreciation, duties and tax relief, and term loans from the Indian Renewable Energy Development Agency (IREDA). Central Financial Assistance was provided in the form of capital or interest subsidy for different types of projects and end-uses. Meanwhile, further initiatives were taken by the Government to promote captive power generation in 1995, and for the creation of a regulatory framework for the power sector in 1998, culminating in a comprehensive legislation – the Electricity Act 2003. The Policy Guidelines of the Ministry were recommendatory in nature and were introduced in varying measures by different States. Power development being a ‘concurrent’ subject, the Central Government could only act as a catalyst and facilitator. The restructuring of the electricity sector and the consequent creation of the State Electricity Regulatory Commissions (SERCs) led to a review of the policies and tariff regimes for non-conventional energy introduced in various States. As a result, investments and capacity additions slowed down to some extent during this period. However, the Electricity Act 2003 has several enabling provisions that are providing a fillip to renewable power development and cogeneration. The Act provides for determination of tariffs by the Regulatory Commissions to be guided by the promotion of cogeneration and generation of electricity from renewable sources of energy. It also requires the State Commissions to promote cogeneration and generation of electricity from renewable sources of energy by providing suitable measures for grid connectivity and sale of electricity to any person, and also specify, for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licensee. The development of a market, including trading, is also to be promoted by Regulatory Commissions. What is more, the Act contains favorable provisions to promote captive generation. It also does away with the requirement of licensing for generation and distribution of electricity in designated rural areas. The National Electricity Policy; the Electricity Rules pertaining to captive generation; the Tariff Policy; and, the recently announced National Rural Electrification Policy are in general conducive to the all-round development of renewable energy and cogeneration in the country through private investments. Under the procurement obligation, Renewable Purchase Obligation (RPO) Orders have been issued in 11 States and are under discussion in other States. Tariff Orders for different renewable energy sectors have been announced by the Regulatory Commissions in several States. There has been a spurt in renewable power generation during the current Plan Period. A capacity of about 4,500 MW has been added during the first four years of the Plan, against an addition of 10,000 MW that was envisaged for the two Plan periods 2002-12. This has taken the cumulative installed capacity through renewables to 8,100 MW, which constitutes around 6% of the total installed capacity. The current momentum is likely to be maintained. By 2012, around 20,000 MW corresponding to 10% of the then installed capacity is likely to be contributed by renewables, with 5% contribution to
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900. is consumed for the captive use.007 4. However the likely capacity addition during the 10th stipulated under Section 9 of the Act.200. Notwithstanding anything contained in this Act.6 597. shall have the right to open access for the purposes of carrying electricity from his captive generating plant to the destination of his use provided that such open access shall be subject to availability of adequate.499. and that the Central Transmission or the State Transmission Utility shall determine the transmission facility and its availability. To meet the rising demand of power. if any.8% (April to or association of persons for generating electricity primarily August 2006).8 68.9 4. there is a renewed interest in captive generation. electricity demand to be fully met by 2012.0 plant set up by any person to generate electricity primarily for his own use. the conditions mentioned l l . Surplus power.375 11.994 MW as below: Installed Capacity (as on 31 August 2006) Sector Hydro Coal State Private Central 25.507. who has constructed a captive generating plant and maintains and operates such a plant.623. play a supplementary role in meeting India’s power demand.494 Thermal 8.3% and peaking shortage of 12. which are either utilized in process industry or used for in-house power consumption.7 6. To meet the objectives of the National Electricity Policy.8 1. coal/lignite 48. a target for the use of members of such a cooperative society or th of 41.199 20. Even with the above installed capacity.e. Capacity addition requirements of 71. including cogeneration power plants. from captive power plants could be fed into the grid (figures in MW) as the Act provides for open access in a nonNuclear Wind/ RES Total discriminatory way.0 38.840 7.400 Total 15.248.428. 1.5 Thermal Gas 3.9 126.3 0 70.0 15. thermal 50. the provisions of Plan is as under: (figures in MW) which are below: Sector Central State Private Total Hydro 5. The captive power plant can be set up as set.5 After the enactment of the Electricity Act 2003 (hereafter called the “Act”).387 Nuclear 1.110 MW capacity additions during the 10 Plan was association.400 0 0 1.0 6. and Not less than 51% of the aggregate electricity generated in such plant.300. Electricity Act & National Electricity Policy Provisions The Act defines a captive generating plant as a power Total 33. exist in India. 4 Industrial Cogeneration India The electricity rules issued by the Ministry of Power notification dated 8 June 2005 prescribes that: 1.135 3.659 700 9. so that reliable and quality power is available to them.567.192. gas/LNG 2.900. provided that in the case of power plant set up by registered cooperative society. therefore.000 units/annum and a spinning reserve of 5% needs to be made. and that Every person.516.8 5. including cogeneration power plants of varied type and sizes.160 MW (hydro 17.8 3.281 2.700.201.5 41.130. Some plants are also installed as standby units for operation only during emergencies when the grid supply is not available.160) in the 11th Plan are envisaged.899 31.1 0 0 0 3.422.8 13. maintain or operate a captive generating plant and dedicated transmission lines provided that the supply of electricity from the captive generating plant through the grid shall be regulated in the same manner as the generating station of a generating company.103 MW in March 2005. could.2 1. India faces an energy and includes a power plant set up by a cooperative society shortage of 8. and nuclear 3.241.0 2.100.419. per capita consumption needs to be increased to 1. Captive plants.663.317.0 4. A number of industries do not want to depend on grid power and have set up captive plants. Captive Power Plants (CPPs) Several captive plants. a person may construct. A No power plant shall qualify as a captive generating plant unless: In case of a power plant: Not less than 26% of the ownership is held by the captive user(s).239.190. determined on an annual basis. and provided further that the Appropriate Commission shall adjudicate upon any dispute regarding the availability of the transmission facility.348 4.5 3. The installed capacity of CPPs has increased from 588 MW in 1950 to 19.Captive Power Policy at the Center and States The installed power generation capacity (exclusive of captive power plants) of utilities in India as on 31 August 2006 was 126.581. i.988.994.0 Diesel 604.4 26.

Appropriate commercial arrangements would need to be instituted between licensees and the captive generators for harnessing of spare capacity energy from captive power plants.092 19.867 147 19.25 : The provision relating to captive power plants to be set up by group of consumers is primarily aimed at enabling small and medium industries or other consumers that may not individually be in a position to set up plant of optimal size in a cost effective manner. This has further increased to 19. The energy produced by captive generating units of 1 MW and above is about 71. the entire electricity generated shall be treated as if it is a supply of electricity by a generating company. The appropriate Regulatory Commission shall exercise regulatory oversight on such commercial arrangements between captive generators and licensees and determine tariffs when a licensee is the offtaker of power from captive plant. On captive power generation the National Electricity Policy stipulates as under: Para 5.2. It needs to be noted that efficient expansion of small and medium industries across the country would lead to creation of enormous employment opportunities. determined on annual basis. It shall be the obligation of the captive users to ensure that the consumption by the captive users at the percentages mentioned in sub-clauses (a) and (b) of subrule (1) above is maintained and in case the minimum percentage of captive use is not complied with in any year.749 157 79 37 17 39 20 2.389 2. Grid inter-connections for captive generators shall be facilitated as per section 30 of the Act. and The equity shares to be held by the captive user(s) in the generating station shall not be less than twenty six per cent of the proportionate of the equity of the company related to the generating unit or units identified as the captive generating plant.7% The electricity required to be consumed by captive users shall be determined with reference to such generating unit or units in aggregate identified for captive use and not with reference to generating station as a whole. In case of a generating station owned by a company formed as special purpose vehicle for such generating station. 2003 with respect to setting up of captive power plant has been made with a view to not only securing reliable.2.26 : A large number of captive and standby generating stations in India have surplus capacity that could be supplied to the grid continuously or during certain time periods. Under the Act.103 % 28 12 10 6 4 13 27 100 Installed Capacity (as on 31 March 2005) MW % of total 47 37 15 1 Hydro Steam Diesel (HFO/diesel) Gas Wind Total 59 8.127 2. Installed Capacity/PLF of Captive Power Plants Item Installed capacity Generation Average plant load factor (PLF) 2003-04 18740 MW 68173 MU 41.103 Status MoP/CEA have taken a number of initiatives to address various issues being faced by captive power plants to contd on pg 33 Industrial Cogeneration India 5 . a unit or units of such generating station identified for captive use and not the entire generating station satisfy(s) the conditions contained in paragraphs above including the following: conventional energy sources including cogeneration could also play a role. Para 5.above shall be satisfied collectively by the members of the co-operative society. the total installed capacity of captive power plants having 1 MW and above capacity was 18. allowed open access.103MW as on 31 March 2005. non- Captive Power Plants (Installed Capacity > or = 1 MW) IC Range (MW to MW) Nos.5% 2004-05 19103 MW 71417 MU 42. This should be done on priority basis to enable captive generation to become available as distributed generation along the grid.24 : The liberal provision in the Electricity Act. captive generators have access to licensees and would get access to consumers who are.567 5. quality and cost effective power but also to facilitate creation of employment opportunities through speedy and efficient growth of industry. and provided further that in case of association of persons.882 1. B. These plants offer a sizeable and potentially competitive capacity that could be harnessed for meeting demand for power.2. Captive Power Plants (1 MW and above) As per the details available in CEA.3.197 1. the captive user(s) shall hold not less than 26% of the ownership of the plant in aggregate and such captive user(s) shall consume not less than 51% of the electricity generated.417 GWh in the year 2004-05.098 5. Towards this end. Para 5.224 752 2. Installed Capacity (as on 31 March 2005) MW 01 to < 10 10 to < 20 20 to < 30 30 to < 40 40 to < 50 50 to < 100 100 & Above Total Prime Mover 1. in proportion to their shares in ownership of the power plant within a variation not exceeding 10%.04.740 MW as on 31.903 7.

While EA 2003 has strengthened the institution of ERCs by entrusting several functions such as licensing. normal operations and backing-down periods. It is possible to achieve overall efficiency levels of more than 70% through cogeneration. the demand for electricity is going to increase significantly. as the name suggests. ‘Cogeneration’. thereby avoiding transmission of electricity over long distances. with growing demand for fossil fuels worldwide. cogeneration facilities contribute to an increase in overall energy efficiency. steam. the ERCs have to set tariffs in such a manner that generation from cogeneration and renewable energy sources is promoted. However. which permitted private sector participation in the generation sector. determination. etc. tariff 6 Industrial Cogeneration India Harnessing Surplus Captive Generation According to CEA statistics. Enactment of the Electricity Act 2003 (EA 2003) provided further impetus to cogeneration by mandating State Electricity Regulatory Commissions (SERCs) to promote generation from cogeneration and renewable energy sources. The challenge lies in striking a balance between operational requirements of cogenerators and addressing concerns of utilities and consumers who procure power from such cogenerators. and outlined the broad contours for the promotion of such industrial cogeneration projects. Further. by achieving higher efficiency. it is difficult to determine tariffs for cogeneration projects as allocation of fuel cost to power. Further. . shaft power or other forms of energy from a single source of fuel. market development. The Ministry of Power recognized the need to promote such initiatives and notified a Policy on 6 November 1996.. Developments Till Date As power sector reforms were initiated in 1991. it uses significantly less fuel than what would be needed to produce those forms of energy separately. etc. little has been done to promote ‘industrial cogeneration’ or cogeneration using fossil fuels. to cater to varying power and steam requirements of the industrial plant during start-up. Karnataka. fuel prices are continuously rising over the last few years. At the same time. produces multiple forms of energy such as electricity. even though significant rural consumer base is yet to be provided with electricity connections. qualification requirements for cogeneration. MERC put in place a detailed monitoring mechanism. Under Section 61(h) of the EA 2003. Further. The primary reason for this being the fact that the EA 03 does not explicitly distinguish between cogeneration using ‘fossil fuels’ and cogeneration using ‘non-fossil fuels’ such as bagasse. In a ‘cost-plus’ regime. captive generation capacity of 20. cogeneration efficiency varies for different modes of operation of cogeneration facilities. This has made efficient and optimal utilization of available resources in every application the need of the hour.by installation of captive cogeneration facilities. many industrial consumers began exploring options to meet their energy requirements – electricity. It may be necessary to develop innovative schemes to tap such idle capacity. process steam and motive power . which specified various forms of cogeneration for the first time. to ensure that cogeneration plants operate at efficiencies above threshold level (above qualification criteria).Accelerating Cogeneration and Captive Power in India: The Role of Central and State Governments India currently faces an energy shortfall of around 8% and a peak capacity shortfall of 12%.000 MW (for 1 MW and above plants) exists. Promotional Tariff For Non-Fossil Fuel-based Cogeneration Some ERCs in States such as Maharashtra. With the ‘Electricity to All by 2012’ program of the Government of India. Similarly. captive cogeneration facilities are useful as these provide electricity at the place of consumption. no SERC has yet determined tariff for procurement of power by distribution utilities from industrial cogeneration using fossil fuels. Encouraging Electricity Procurement from Cogenerators Though several SERCs have formulated Regulations for promotion of generation of electricity from cogeneration and renewable energy sources under 86(1)(e). Due to its ability to produce energy in more than one form. steam and/or shaft power is difficult. have determined ‘promotional tariffs’ for cogeneration projects using non-fossil (bagasse) fuels. The Maharashtra Electricity Regulatory Commission (MERC) had undertaken such an exercise for allocation of fuel cost to power and steam while determining tariffs for bagassebased cogeneration projects. This capacity is lying idle and should be utilized during the current phase of extreme shortage of power. Thus. these distributed generation facilities help in improving voltage profiles of the network. it has put the onus of development of policies for optimal utilization of resources on the Central Government. A large percentage of this capacity is based on liquid fuels and is being utilized at less than 50% plant load factor (PLF).

the duties on consumption of electricity is linked to sources of generation (like captive generation) and the level of duty levied is much higher when compared to that being levied on the same category of consumers who draw power from the grid. Hence. thereby reducing drawal from the grid. the Regulatory Commissions are required to formulate various regulations. However. Fax 22163976. Conclusion The urgent need for optimal utilization of various fuel sources cannot be overemphasized. The Central Government should initiate measures to treat cogeneration facilities at par as far as benefits/incentives offered to ‘mega power projects’ are concerned. Several types of taxes and duties such as import duty. transmission and evacuation arrangements. while devising rules/regulations in these matters and to facilitate procurement of power from cogenerators. thereby eliminating load shedding in the city of Pune. wheeling and banking. Under this scheme. etc. generation from cogeneration presents a better alternative. subsequently some States such as Andhra Pradesh introduced additional electricity duty on captive power plants thereby putting industrial consumers. However. refineries. under the current scenario of spiraling fossil fuel prices as well as constrained availability of these resources. Chairman. which is being collected from consumers in Pune city in the form of a ‘Reliability Surcharge’. cess. and metals and mineral industries. Typically. All stakeholders such as SERCs. It has further been observed that in some cases. The NTP warns that such taxes and cess could potentially distort competition and optimal use of resources especially if such levies are used selectively and on a nonuniform basis. Under the circumstances. consumers with captive generation plants will run their plants. to extract maximum out of each unit of fuel burned. fertilizers. Mumbai 400 005. However.MERC recently instituted a mechanism in the city of Pune to tap about 90 MW of liquid fuel-based captive capacity. as a promotional measure. MERC developed this scheme through a transparent regulatory process. However. are added to the delivered cost of fuel in the case of fossil fuels. The captive generating plant is being compensated for additional generation costs.mercindia. World Trade Center Center # 1. during normal operations. 13th floor. The Central Government’s Role The Central Government has recognized the urgent need for capacity addition in the power sector and has offered several incentives such as waiver of import duty on capital equipment and material to be used for mega and ultramega power projects. Central Government. during peak hours. Tel: (022) 22163964/65. Email: mercindia@mercindia. standby power and steam requirements for such process industries is very high and the cogeneration facility is designed to meet this initial start-up requirement. As cogeneration facilites with higher efficiencies use Courtesy: Dr Pramod Deo. this increases the cost of capital goods for industrial consumers. at great risk. the State Governments need to play a proactive role and to begin with. Web site: www. should exempt at least generation from cogeneration sources from levy of electricity duty. This not only increases the capital cost of the cogeneration facility but also discourages competition amongst suppliers of power plant equipment. Depending on the process and loading. Such a distinction is invidious and unjust. the National Tariff Policy (NTP) notified by the Central Government on 6 January 2006 has rightly advised State Governments against excessive usage of the right to levy taxes and cess on sale or consumption of electricity. In this regard. certain State Governments had exempted captive power plants (CPPs) and cogeneration facilities from levy of electricity duty on generation from their plants. the requirement of process steam and power varies. As a limited number of power plant equipment manufacturers exist in India. The continuous availability of process steam is essential for continuous process industries. who had invested significant funds and incurred huge capital expenditure on captive/cogeneration facilities. the Regulators will have to address specific operational requirements of cogeneration facilities. fuel resources more efficiently. codes and standards in respect of various aspects of power system such as connectivity. in case of smaller capacity power generation projects such as captive and cogeneration facilities. Other Key Regulatory Considerations Under EA 2003. In the past. There exist several industrial cogeneration installations using fossil fuels mainly in process industry such as chemicals. the same needs to be encouraged to the extent feasible. The Role of State Governments The levy of electricity duty on generation from captive and cogeneration projects has been a major bone of contention for industrial investors. etc. fuel cost forms a significant component of the cost of generation for cogeneration projects. Further.com. Maharashtra Electricity Regulatory Commission. In order to encourage generation from cogeneration sources. royalty. Cuffe Parade. industrial consumers and utilities have a role to play to speed up the process of harnessing generation from existing captive and cogeneration facilities as well as encouraging capacity addition in cogeneration facilities. the import duty at full rate is levied on import of power generation equipment. It is even more critical considering environmental implications of fossil fuel usage for power generation purposes. petrochemicals.com Industrial Cogeneration India 7 . State Governments. which is supplied to other consumers. the Central Government should consider exemption or at least lower rates of taxes and duties to be applicable for fuel used by cogeneration facilities. start-up. This would release grid energy. surplus capacity available with co-generation facilities could be harnessed for supply to grid.

The fixed cost related to network assets would be recovered through wheeling charges. Most of this capacity is for their own use and does not feed the grid due to lack of proper incentives and general reluctance of SEBs/ distribution licensees so far in this regard. S is the surcharge. and constitutes about 16% of the installed capacity. National Electricity Policy The National Electricity Policy announced by the Central Government in February 2005 provided the necessary policy framework for the development of captive power plants. It also provided for procurement by distribution licensees at preferential tariffs determined by the appropriate Commission. The tariff policy has also addressed issues related to cross subsidy/additional surcharge for open access. It also makes it obligatory for distribution licensees to purchase a specified percentage of power requirements from such sources. The surcharge formula given in the tariff policy is as under: 8 Industrial Cogeneration India Source: Workshop on captive power on 20 March 2006 The development of CPP was generally guided by the internal process requirement. and L is the system loss for the applicable voltage level. Development of CPPs till Date The aggregated installed capacity of captive generating stations in the country by end-March 2005 was estimated to be around 19. It also provides for permitting captive generating plants to sell electricity to licensees and consumers with open access (as mentioned above). taking into account availability of such resources in the region and its impact on retail tariffs. The Electricity Policy also advised SERCs to introduce Availability-based Tariff (ABT) at the State level within one year. expressed as a percentage The tariff policy further provides that the cross-subsidy surcharge should be brought down progressively and as far as possible at a linear rate to a maximum of 20% of its opening level by the year 2010-11. the National Electricity Plan. Development of Captive Power : Key Issues The key issues affecting the development of captive power generation in the country are as follows: l l Open access in intra-state transmission & distribution Availability of fuel . excluding liquid fuel-based generation and renewable power. it also laid emphasis on harnessing surplus power from existing captive power plants and cogeneration plants using non-conventional energy sources. Section 86(1) (e) of the Act provides that State Commission shall promote cogeneration and generation of electricity from renewable sources of energy by providing suitable measures for connectivity with the grid. It also called for an institution of an appropriate commercial arrangement under regulatory over-right of the appropriate commission. The growth of the installed capacity of captive power plant and utilities is shown below: Tariff Policy The Tariff Policy notified by the Central Government in January 2006 provided the institutional arrangement and tariff guidelines for the development of captive power. loss of the cross-subsidy element and an additional surcharge under Section 42(4) for meeting its fixed cost for supply to the consumer granted open access. Section 79(4) and 86(4) of the Act provides that the National Electricity Policy. and Tariff Policy guide the Central Commission and the State Commissions.103 MW with capacities of 1 MW and above. and extending it to grid-connected captive plants in a phased manner as determined by SERCs. including cogeneration. has been and continues to be stranded. or if there is an unavoidable obligation and incidence to bear the fixed cost consequent to such a contract. it says that it should become applicable only if it is conclusively demonstrated that the obligation of a licensee. C is the weighted average cost of power purchased of the top 5% at the margin. It provided for procurement of all future requirements of power by distribution licensees through a competitive bidding route. It also obligated the appropriate Commission to create an enabling environment to harness captive generation into the grid. With regard to additional surcharge. This policy also fixed a minimum percentage for purchase of energy from non-conventional energy sources. in terms of existing power purchase commitments.contd from pg 1 S = T – [C (1+ L / 100) + D] Where. Apart form emphasizing the setting up of new captive generating stations of optimum size in a cost-effective manner. T is the tariff payable by the relevant category of consumers. The tariff policy also cast a duty on the Central Commission to lay down guidelines for pricing non-firm power from renewable energy sources within three months. and sale of electricity to any person. D is the wheeling charge. The tariff policy also provided for introduction of ABT at the state level by April 2006.

and bagasse and rice husk-based captive generation. and cross-subsidy surcharges only. back-up charges. the environment is very congenial and bright for the development of captive power in India. which may offer optimization of resources and better efficiencies. or supply power to any class of consumer subject to getting open access in distribution. Out of this. The tariff for sale of power can be negotiated with consumers. Industrial Cogeneration India 9 . Orissa. policy and regulatory framework in place creating an investor-friendly environment with several alternatives to captive generators to pool their resources to set up plants to get cost-effective reliable and quality power. etc. Standing Linkage Committee. Tamil Nadu. be subject to operational constraints and availability of the transmission/distribution system. 2003 and has been made effective through Open Access Regulations for Inter-State Transmission issued by CERC. Madhya Pradesh.9 10.5 MW is in the capacity range of 15 MW and above. The SLC grants linkage on the recommendation of CEA and the Ministry of Power. Maharashtra. Wheeling and transmission charges: This issue has been deliberated at regulator forums and there was a consensus that these should be reasonable to allow enough incentive to a consumer to opt for open access.1 9.000 per MW. Therefore.2 42. It would however. With open access in transmission and distribution. Assam. regulatory intervention is limited to determination of transmission. which could be supplied to the grid from existing captive generating stations. and should be applied to the relevant voltage level after providing for technical losses. and Uttaranchal have allowed open access for a contracted capacity of 5MW or above. The details are as under: Captive Power Plants Jindal SAIL Nava Bharat Alloys Bhushan HEG Hindustan Zinc Kanoria Chemicals Total MUs 897. namely Andhra Pradesh. Jharkhand.. SCOPE Complex. Captive mine blocks are also being allocated to captive generators by the Ministry of Coal.3 87. and captive generators should also be able to do so. Tel: 011-436 4895.2 80. parallel operation charges/grid support charges. Chhatisgarh. Captive plants have availed open access opportunities and the potential to transfer surplus capacity in the captive plant located in one region/state to group industries located in another region/state. Fax: 436 0010/0058 Web: ………………. Open access in transmission and distribution has become a reality. Captive generators may also supply power to distribution licensees at competitive bid rates. Kerala. the same was mandatory under the Electricity Act. Prominent companies are SAIL. The reactive energy and SLDC charges should be at par with other users. 7 Institutional Area Lodi Road New Delhi 110003. Core 3. Ministry of Coal. Nava Bharat Alloys Ltd. Availability of Fuel: There is a set procedure in place for obtaining long-term coal linkages from the Ministry of Coal.0 123. and they have transacted the approved volume of 1. These assume further significance with the onset of Special Economic Zones (SEZs) in the country. Environment for the Development of Captive Power It can be seen that there exists a legal. Haryana. while plants of capacity between 5-10 MW are accorded low priority for grant of long-term linkage. please contact: Central Electricity Regulatory Commission (CERC). wheeling. small hydro. Few are selling their surplus captive through traders or directly by availing open access. minimum demand guarantee charges. Punjab.100 MW. Gujarat. These charges were deliberated at the forum of regulators and it emerged that the State Commissions should endeavor to rationalize various charges and club them into a single charge. most SERCs. Cross subsidy and additional surcharge: This has also been addressed in the tariff policy as discussed above. Uttar Pradesh. etc. JINDAL. Further. 5th floor. Bhushan Ltd. Captive power plants of capacity 5 MW and below are not considered for long-term linkage. The open access for contracted capacity for 1 MW and above is scheduled to be made effective by April 2008 by most SERCs. There appears to be no constraint on obtaining long-term linkages and setting up medium to large capacity coalbased captive stations. Under the provisions of the Act. Demand charges and other charges: Captive power plants are required to pay several charges – contract demand charges. Captive generators may also opt for cogeneration and nonconventional energy sources such as wind. The Central Commission is in the process of laying down guidelines for pricing non-firm power from nonconventional energy sources. SLDC charges.l l l Cross-subsidy and additional surcharge Wheeling charges Demand charges and other charges Open access in intra-state transmission & distribution: As regards open access in transmission for inter-state transfer of power by the captive power plant is concerned. after paying the prescribed fee of Rs 2. reactive power charges. about 735. A captive generator is required to apply to the Chairman. CEA has identified a surplus capacity of 1. HEG. ABT in the State. Karnataka.250 MUs in 2005-06. Rajasthan.6 1. there is a need to simplify procedures for the grant of open access and specification of clear terms in advance. Captive generators can now supply surplus power to the grid after implementation of For details.250 Merchant plants like Malana HEP (2 x 43 MW) are able to sell their total generation through short-term open access.

product quality standards. have made CHP eligible to be included in this too. just initiatives that apply to a subset only. though. and suggest best practices for stimulating the development of DE.5kW PV cell 1 DE technologies consist of the following forms of power generation systems that produce electricity at or close to the point of consumption: -High efficiency cogeneration/combined heat and power -On-site renewable energy systems -Energy recycling systems. Tax schemes. building standards. Standards Interconnection standards. In some cases it will remain better to have technology-specific regulations. certificate trading schemes. Examples of legislation that has proved effective in stimulating DE include: l Renewable portfolio standards – these require electricity producers to generate certain percentage of their production from renewable sources. Technologies that have not been traditionally associated with one another have now been put into the same category. such as CHP or on-site renewables. the realisation of the importance of reducing greenhouse gas (GHG) emissions from power generation. dynamic pricing. The drivers are common throughout the world but the potential varies from region to region. Voluntary guidelines Financial Quality guidelines.Global Captive Power Policy Recently increasing fossil fuel prices. and a 5. a reluctance to permit DE to interconnect to the grid. To date there have been no policy initiatives that promote DE in general. etc. waste heat and pressure drops to generate electricity on-site Such systems are DE regardless of project size. Some legislatures. As interest in DE rises. or apply to the energy sector as a whole. Types of Decentralized Energy Regulations Regulation can be focused specifically on certain technologies. as rising fuel prices will force electricity users to consider investing in their own on-site generating system for their homes and businesses or at the very least to consider efficiency. and concerns over reliability and security of electricity networks have acted as powerful drivers for decentralized energy DE) 1. as below: Types of Regulations Laws and legislation Renewable portfolio standards (RPS). disclosure labelling. Examples of the rising interest in DE include technological innovation in markets such as residential scale combined heat and power (CHP) units that generate electricity and heat simultaneously in one’s home. and improved economics for more established technologies.000 kW CHP machine have in common: the fact that both applications generate power in the same place it is used. For example policy makers have not typically seen what a 0. but general support mechanisms for DE could make a valuable contribution to energy policy. Nevertheless various regions from around the world have demonstrated that making laws to promote DE can be successful. is also often criticized for interfering in markets. accelerated depreciation. Policy makers have therefore tended to create mechanisms that stimulate different DE technologies separately. Despite this general trend many obstacles remain which are slowing its trajectory and preventing DE from realizing its great potential for economic development and environmental sustainability. because it can provide new ideas to policy makers. This article will focus on the regulation side. or whether the system is on-grid or off-grid. we may soon see examples of single policies to promote all DE technologies. grant programs. Industrial Cogeneration India 10 . etc. procedural standards. and compare different strategies and mechanisms that have been implemented in different countries. etc. This trend is expected to continue. The major obstacles include lack of access to financing (mostly because DE is an unfamiliar technology to lending institutions). such a comparison is valuable. Like in any economic sector. legislated directives. like the State of Pennsylvania. there are two main forces at work in shaping investment climate for DE: market forces and regulatory forces. Laws & Legislation Arguably the most effective form of regulation. such as solar PV. DE targets. The EU Emission Trading Decentralized Energy Policy Creating policy to promote DE is a particular challenge for policy makers because the term is relatively new and means different things to different individuals. system benefits charges. and distribute tradable quota among the major emitters. Pricing mechanisms Locational pricing. Despite differences between countries in local circumstances and conditions for DE. cap and trade schemes. fuel or technology. etc. delegated accountability. legal intervention. emissions rules. etc. l Cap and trade system – cap the total admissible GHG emissions of an area. feed-in laws. and a lack of rules for fairly rewarding those that do decide to invest in DE for the benefits they deliver to the system. including the use of waste gases. financing schemes.

and ensures the quality and reliability of the network as a whole. the Chinese target of 10% by 2010 or the Egyptian target of 14% by 2020. Guidelines Guidelines are voluntary policy measures. In other places the lack of such standards still poses a major barrier to DE. etc. For developing countries the market the market for tradable Certified Emission Reductions from CDM projects provides major opportunities for DE installations. The State of California has done this for NOx emissions. depending on the size of the installation. Quality guidelines – these are important as they define what technologies are included in categories such as ‘renewable energy’ or ‘CHP’. but the system could be replicated for other types of emissions. Emission rules – linking emission rules to energy output rather than fuel input encourages development of efficient generation technologies. Delegated responsibility – Japan’s Rational Energy Law requires large industrial energy users to appoint energy managers to optimize energy efficiency of the production process through waste heat recovery and power generation from heat output streams. Industrial Cogeneration India Standards As policy measures standards for DE are less direct than 11 . but feed-in laws for DE in general are also possible. and the introduction of attractive buyback rates for any surplus electricity produced by businesses that have invested in cogeneration in a growing list of Indian States. such as the feed-in tariffs for wind and PV in Spain and Italy. Prince Edward Island (100% by 2015)). like for PV in the US States of Arizona and California. Certificate trading schemes – these are similar to cap and trade systems. Standardizing these procedures facilitates DE development. the best example is the UK “CHP Quality Assurance Scheme”. declares that each member state must work to address the key barriers to CHP and provide regular reports outlining the progress. The Collaborating Label and Appliance Standards Program (CLASP). and in the UK. the EU CHP Directive. licensing and permitting procedures still are a major obstacle to DE facilities. and which regulation applies to it. l Product quality standards – standards for electricity requiring a certain generating efficiency are well established in most OECD countries. they can be effective. l Interconnection standards – standardizing the rules for DE technologies to connect to the grid-network promotes safe practice on-site. Often this applies to renewables only. Iceland. legislation. l Procedural standards – in addition to interconnection standards. Hawaii to more modest. where DE is common have established such standards. including the UK and Germany. for example Maharashtra. The Walloon region of Belgium has introduced an interesting certificate scheme aimed at promoting clean energy including CHP.g. thereby stimulating DE compared to centralised generation. a voluntary methodology for determining what constitutes a CHP project of high quality. for example. and therefore less forceful than legislation. tries to establish product quality standards in non-OECD countries. as most energy use takes place in constructing and operating buildings. Brazil. The EU Green Buildings Directive requires all new buildings over 1. Feed-in laws – this common legislative tool requires utilities to purchase electricity from clean sources at a certain minimum price. But they form an important element of an effective DE policy. For cogeneration. Legislated directives – the EU has passed several directives applicable to DE. Targets for renewables range for hugely ambitious (e. Merton Council has made 10% DE compulsory in all new public buildings. based on trading of ‘green energy’ credits for electricity from renewable sources. though the United States has had an effective sulfur dioxide emission market since 1995. like the EU target of 22% by 2010. a voluntary energy efficiency standards and labeling program. In particular. but indicate a government’s commitment to certain technologies. Jurisdictions. if there is sufficient support from the electricity producers and users to achieve the aims set out in the guidelines. and South Africa. encouraging investment in these.000m3 in area to consider onsite generation at the design stage. including China. Targets .many countries have set targets for DE/renewable technologies. For instance. DE technologies that can provide electricity at a similar price as centralized generation then become more attractive to consumers. in the Czech Republic two different guaranteed tariffs are set for electricity from CHP. and can therefore encourage investment. Other examples include the 2004 law in Brazil requiring that distribution companies must buy at least 10% of the electricity they need to meet demand from renewables and CHP plants with an efficiency of over 75% 5. Disclosure labeling – requiring electricity utilities to specify the energy sources used on each consumer’s bill can act as a driver for DE. l Building standards – incorporating the consideration of on-site generation in building standards can be very effective for promoting DE development. as it makes consumers aware of the environmental impacts. India.l l l l l l Scheme is the main example of this. and have proved effective in driving DE investment. However. because they streamline the installation process for DE technologies. and facilitate the integration in buildings and networks. In the US IEEE 1547 provides voluntary standards for interconnection. with the difference that there is no cap on the number of certificates available. These are often not legally binding.

12 Industrial Cogeneration India .

The effectiveness of different approaches has varied between countries and regions. as well as recognition of the benefits on-site generation delivers to the network in terms of avoided losses and network investment. It is often hard to draw a definitive link between the implementation of a policy and increased investment in DE. For instance. In the UK renewable energy technologies incur 5% VAT. Carbon taxes. Many governments therefore have schemes in place to assist developers with financing. can also stimulate DE. Tax schemes – tax exemptions or reductions for DE technologies make investing in on-site generation more economically attractive for energy users. However. who administrate loans for project developers. while avoiding the potential market distortion that legislative measures can have. as most of the costs are up-front capital costs. New York State has emerged as a leader in the USA arguably because of their strong policy. A fair buy-back rate would include the direct value of the electricity generated. The challenge for all these initiatives is to put theory into practice. rather than the usual 17. but in general countries with a strong policy framework have also seen the strongest uptake of DE. network. Certainly the government’s strong commitment to clean energy generation and their unique approach to industrial energy efficiency mentioned above contributes to some extent to their success. and their success is often attributed to strong feed-in policies. Dynamic pricing – real-time pricing by adjusting electricity prices according to the demand for electricity can benefit DE in several ways. and Shanghai airport has installed CCHP units to avoid excessive electricity bills. reduced custom duty rates apply to renewables. and reinvest the revenues in sustainable energy sources for public benefit.Financial Measures Financial policy initiatives have been popular with policy makers. Higher prices at peak times encourage DE facilities to provide electricity to the network when demand is high. In the Netherlands the government established an extensive scheme to promote cogeneration to reduce dependence on fossil fuels after the oil crises of the 70s. System benefit charges – DE investment can also be stimulated using funds collected from energy users.in various countries. In Argentina a locational pricing scheme rewards generators that are sited in areas of high transmission congestion. From Regulation to Practice This article has discussed various types of policy and regulations that can promoted DE development by addressing existing barriers. as it is less carbon intensive than centralized generation. Canada has grants available for cogeneration plants with efficiencies over 72% or using biomass. Accelerated depreciation . Many developing countries. which would facilitate real-time pricing and promote energy efficiency. Spain and Germany are world leaders in renewable energy. Kenya leads the contd on pg 17 Industrial Cogeneration India Pricing Mechanisms A major problem for DE developers in many places is securing a fair price for the electricity they supply to the 13 . as they can be highly effective in promoting DE. This benefits DE investors because by their nature DE resources are situated close to load centres. their effectiveness and applicability depends on market conditions. Even where feeding electricity into the grid is impossible. like existing in Sweden and planned for New Zealand. A unique grant system in Thailand allows project developers to specify the grant in the application process. like China and India. including Canada the UK.5%. Grants can alleviate the problem of potentially prohibitive upfront costs. and small businesses or individuals often do not have access to the amounts of money required. depending on the local circumstances and market conditions. Many jurisdictions charge electricity users a small surcharge on every kWh bought from the network. In developing countries micro-financing for renewable energy is becoming more common too. As a result of measures to ensure products live up to advertised quality standards. Municipal governments and utility companies in the US have also offered capital grants for installing DE. and similar schemes exist in European countries and the US. Japan has long had one of the least energy intensive industrial sectors per unit GNP. and many specific cases also provide compelling examples. the Chinese government has recently adopted peak power pricing across China in an attempt to reduce transmission constraints. In Canada the Province of Ontario requires all users to install smart meter by 2008. The Sri Lankan government provides financing to third parties. Grant programs – the most direct financial support for DE is through grant programs. dynamic pricing encourages energy users to invest in on-site generation to avoid high charges for grid electricity use at peak times. commercial installations benefit from accelerated depreciation of investments in renewable or DE investment. Now the share of CHP of total electricity generation is among the highest in the world. Financing schemes – in many places project developers still face problems with obtaining funding for installing DE. Locational pricing – pricing electricity according to the distance between the generation site and place of demand is an alternative approach to the postage stamp approach which is widely used today. New York State uses such funds to promote DE and energy efficiency. and thereby drive DE development. and the lowest bids are rewards with the grant they requested. mitigating capacity and congestion problems. The Japanese government has offered low interested loans to households and businesses for PV systems. and in Portugal a number of DE technologies are eligible for 50% capital grants through the PRIME programme.

In view of these PPAs. electricity would have been produced from coal brought to the plant site. not a settled affair. Basically. basically checks equipment and fuel costs and ensures that the total costs. by and large. Independent Power Producers (IPPs) have to subject themselves to COSR regulations for determination of the price of their power. Besides the Commission was taking a dim view of the price at which the power in excess of 75% PLF was sold. However. In the absence of electricity production. The 10% discount was to allow for the fact that Korex gas was after all a by-product. There was a bit of opportunity cost reasoning here. the Electricity Transmission Company (ETC). i. Cogeneration. The ETC had signed a PPA to buy power at around Rs 3. and you need to arrange for alternative supply of fuel like coal if the power plant has to run throughout the year. their Power Purchase Agreements (PPAs) with the licensees are subject to Regulatory scrutiny and approval. viz. which form the basis for price determination. unless the power comes through a competitively bid route. using cost accounting principles. using bagasse from sugar mills or Korex gas from steel mills. But for the purchaser.760 hrs in a year x 100.Cogenerators as Power Producers: Policy Perspectives Cogeneration offers an innovative way of generating power at a cost often lower than alternative forms of power. Beyond 75% PLF the electricity was priced at Rs 2. Gas being a byproduct. some time ago in 2003. had no opportunity value. all allocations involve some arbitrariness.75 x 8. 14 Industrial Cogeneration India . but only for consultation.e.60 was unsatisfactory. which did not have any alternative value to the producer other than in the power application. in the absence of Korex gas. is an example of the former. and is not always followed. and generation of electricity from waste is an example of the latter. The boiler is capable of operating with Korex gas as well as coal. which. therefore violating the ERC Act. since the byproduct may have alternative uses of higher value. CEA ruled that the maximum allowable value of cost of the byproduct gas should not exceed 90% of the equivalent calorific value obtained from coal. taking its delivered cost to the plant. the opportunity cost of the Korex gas can be valued at zero since it was a byproduct. The viability of cogeneration is. since it was not sent to the Commission for approval. is the cost of electricity it will have to purchase from the next best vendor.000 kW = 657 million kWh in one year.60 per kWh at 75% plant load factor (PLF)1 of its 100 MW plant. the opportunity cost of electricity from Korex gas. and leaves the pricing of that power to the Regulator.00 per kWh from the private sector. Often a byproduct of some other process becomes the fuel for cogeneration. in the absence of production of electricity. with its heat energy can heat water in a boiler and produce steam. To the producer of steel. The price was arrived at whereby the fixed costs (capacity costs) and variable costs (energy costs) were clubbed together to get one average total cost. in which case s/he is obliged to adopt the price that emanates from the winning bid. only a nominal reduction of 40 paise is offered for units beyond 75% PLF. A byproduct of steel manufacture is a gas called Korex gas. Cogenerators face a rather unappetizing situation here.20. and herein the policy aspect occurs. The Electricity Act 2003 does not have any specific provisions governing cogeneration. if bagasse is produced close to paper mills. and another PPA with the local state public sector power corporation from its coalbased power plant at Rs 3. Since competitive bidding is not made mandatory. i. The steel company offered a Power Purchase Agreement to the local Electricity Board (EB) to sell electricity at Rs 2. At 75% PLF electricity generated amounts to 0. the opportunity cost argument can cut both ways. But the state electricity regulatory commission (ERC) was of the opinion that it was an illegal contract. One implication is that full capacity cost would have been recovered at 75% PLF. one has to do some allocation. In fact. and that the steel company was using the byproduct gas and yet nearly charging the full alternative coal-based price. and therefore is available almost at zero cost. Arriving at the cost of generated power involves first arriving at the cost of gas. The following example from a steel company illustrates the point. go waste. In this case. For example. Plant load factor is the ratio of electricity generated in a year to the electricity that can be generated in a year. the gas would. The Regulator has to adopt a Cost of Service Regulation (COSR) approach. by arriving at the cost of Korex gas. if one has to spend money to dispose of the byproduct. as in the case of sugar and bagasse. the state government considered the steel company’s power an attractive offer. enough gas was not produced. are reasonable.e. when the steel industry was in recession. and sometimes even at negative cost. considering that Korex gas is a byproduct coming free to the steel company and that the price of power was to be determined based on the cost in the 1. or if the product of the main product—and therefore the byproduct as well—is seasonal.00 per kWh. of course. The Central Electricity Authority carries the techno economic clearance of these projects. and the power plant was operating for most of the time with coal. The Auditor General of the local state government also took a similar view that the price of Rs 2. The financial viability of cogeneration depends upon the price the producer receives. which. which in turn can run a turbine to produce electricity. but this is not passed on to the buyer fully.

you arrive at the situation that (1) the fixed cost component of charge should be zero. thereby telling the people that it had got a good deal. who broke away from the SEB supply. Hence market prices of the state power corporation and other energy companies are the relevant figures for the ETC to look at. Fax: 91-80-2658 4050. generate a useful byproduct of Korex gas at virtually no extra cost. it had to turn to the market prices if the steel company refuses to sell power to it. Should it be full cost or variable cost plus some incentive? That depends on whether the steel company constructed its power plant with the contract to sell power to the ETC or took the demand risk completely itself.absence of competitive bidding. to promote competition and blunt the effect of cross subsidy surcharge.60 the steel company could really make huge profits. The assumption of economic rationality suggests that if the non-fuel variable cost is say 2 paise per kWh.0 from the state power corporation and Rs 2 + variable cost for fuel from another energy company. What should be the price of power beyond 75% PLF? At 75% PLF the fixed cost is completely recovered. Courtesy: V Ranganathan. Pure competition recognizes the law of one price. In the absence of policy. announced with fanfare that it had signed a PPA with the steel company at Rs 2.3 x 657 million units = Rs 8. the PTC itself can buy the power.30 accounted for variable energy costs. 4. and at Rs 2.in Industrial Cogeneration India 15 .30 was one corresponding to operation with coal as fuel! Thus. maybe. The Commissions should ensure that licensees purchase power at the most economical price so that consumers are protected from avoidable price increases. totaling Rs 1. which is ‘anti-competitive’. since its Korex gas was got at zero economic cost. you should ask yourself what is the benchmark the ETC should keep in negotiating price with the steel company? Though it could use the low cost for negotiating purposes. variable cost is close to zero.60 when the previous Power Purchase Agreements (PPAs) it had signed were all above this price. the PTC does provide benchmarks. In the price of Rs 2. Economic profit to the steel company at 75% PLF? 2. At a deeper level of analysis. Alternatively.ERNET. treat power as a commodity. and (3) because the economic cost of Korex gas is zero. Rs 2. for all open access sales.30 accounted for plant capacity costs and Rs 1. While plant costs need to be recovered. in this case the price that any ETC would buy from the marginal producer or the price at which the Power Trading Corporation (PTC) would buy from any potential buyer.30 for energy costs is really not there for the steel company. and do not bother how it is produced. In other words.30 for every kWh it sold. and other buyers can use this benchmarks. This it was able to do because of its economies of scope.541 crore. and that constituted the major component of the variable cost. Should the buyer (ETC) go by the cost of the steel company’s power or by the prices available from alternative private power producers and the stateowned power corporation? What should be the price of power beyond 75% PLF? What is the economic profit to the steel company in a year if it sells power to the extent of 75% PLF? What kind of economies are behind the steel company’s relative attractiveness? 3. because it has already been recovered at 75% PLF (2) So only the variable cost should be charged. 3. since its financial and economic cost of Korex gas is zero. RBI Chair Professor on Infrastructure Indian Institute of Management. it is open to producers of cogeneration power to claim carbon credits from the Clean Development Mechanism. viz.60 is a good deal for the ETC. 4. when it is not economically viable. for 1 paise is greater than zero! Recently another ERC decided to treat cogeneration power as captive power. But it did not provide concessional rates for wheeling and banking. even if it hurts incumbent SEBs in terms of loss of cross subsidy. The Govt. while other coal plants in similar circumstances would have made zero economic profits. Hence any small incentive above zero should suffice to induce the steel company to supply beyond 75% PLF. 2. it was exempt from paying the crosssubsidy surcharge that was being levied from normal independent power producers (IPPs) if there were to sell to third parties. compared to Rs 3. Remember that the variable cost of Rs 1. even 3 paise per kWh should be acceptable and the steel company will produce power and sell the extra units. the Accountant General was wondering why it should charge Rs 2. the steel company made an economic profit of Rs 1. Bangalore. the absence of a Policy as to how to price cogeneration power may indeed stand in the way of development of cogeneration power. this second Rs 1. But the ERC (regulator) as well as the Auditor General were quite unhappy. Now to answer question 1. because the ERC felt that the Government had bypassed them in signing the PPA without its approval. Professor of Economics & Energy. Of course. In this context. Tel: 91-80-2699 3155.30. Email: ranga@IIMB. viz. They felt that compared to their costs the steel company’s prices were too high. and constructed the plant without any PPA from the ETC. Rs 1. the following questions arose: 1.60. There sould be no problem in having a uniformly low wheeling and banking charge. but there should not be discrimination between one form of power and another form of power. The principle here is that competition should be promoted. So. viz. as it does not account for the opportunity cost of power to the buyer. True competition would only brook the law of one price. Conclusion Thus. Both perceptions turn out to be true.20 per kWh when its variable cost component is only Rs 1. the ETC could also explore what alternatives the steel company has if the ETC does not buy power from it. The cost of service regulation (COSR) approach is also a strong disincentive for development of cogeneration power. enabling inefficient projects to pass the muster of financial viability. Changing the rules on case-to-case basis for projects will send wrong signals. Cost becomes relevant in this line of argument. But if you superimpose the fact that the economic value of Korex gas is zero. and that price would be the market-clearing price.

783 Rs 7. where there is a built-in arrangement for steam generation by burning bagasse – the residue remaining after the juice has been extracted from cane stalks – has by far the most potential for cogeneration of power. MW Commissioned. energy efficiency and environment technologies for sustainable development”.59 crore 2.Financing Industrial Cogeneration in India: IREDA’s Views The Indian Renewable Energy Development Agency (IREDA) is a public sector undertaking established in 1987 to promote. waste to energy.99 crore till 31 March 2006. 11. fuel oils. despite the fact that there is a very good demand-supply gap for power in all those states. support and accelerate the development of power generation through renewable energy sources in India by providing financial and technical assistances to prospective developers to set up commercially-viable renewable energy projects. small hydro. biomass fuel. By adopting a uniform favorable policy throughout India the potential available in the remaining states can be tapped as well. industrial cogeneration plants can use various cheap fuels like biomass. distilleries.783 projects with a committed loan amount of Rs 7. The highlights of IREDA’s lending operations as on 31 March 2006 are furnished below: In the sugar industry.000 MW.80 lakh MTCR/year Cumulative Lending Operations under the Cogeneration Sector No. MW 33 711 687 445 377 Cogeneration projects have improved energy efficiency and the viability of sugar plants by additional revenue generation without incurring major input costs of buying raw material. The potential for cogeneration in sugar industries alone is about 3. gas. biofuels. i.450. textiles.0 Maximum Repayment Period (years) 10 + 4 (4 years’ grace period) Minimum Promoters’ Contribution(%) 30 Term Loan from IREDA Up to 70% of the total project cost . including utilization of biomass energy.707 MW 1. which includes major industries like sugar.450. develop and extend financial assistance for renewable energy and energy efficiency/conservation projects. and other low cost fuels. restriction of third-party sales in many states. A uniform and favorable tariff policy is the need of the hour for exploiting the industrial cogeneration potential in India. The estimated potential for industrial cogeneration in India is about 20. The various sectors that are being financed by IREDA include wind energy. IREDA is financing biomass-based cogeneration projects and has proposed to fund industrial cogeneration based on other fossil fuels also under the same terms and conditions. IREDA’s mission is to “Be a pioneering. 16 Industrial Cogeneration India Lending Norms for Present Biomass Cogeneration Projects Sector (Project Financing) Biomass Cogeneration (small-scale cogeneration except the sugar industry) up to 7. It supplies both steam and power for selfconsumption as well as for export thereby improving the energy efficiency of the integrated plants. coal char. of Projects Sanctions (Rs in crore) Disbursements (Rs in crore) Capacity. IREDA has been in the forefront to promote. IREDA has so far sanctioned 1.a. which in turn leads to financial viability of the projects. un/semi-utilized wastes. Moreover.89 MW Conventional Fuel Replacement 12. participant-friendly and competitive institution for financing and promoting self-sustaining investment in energy generation from renewable sources.5 MW installed capacity Above 7. lignite. and solar.99 crore Rs 4. of Projects Approved IREDA’s Loan Commitment Loan Disbursements Power Generation Capacity Capacity Commissioned 1.e. etc. biomass. rice mills. cogeneration. and inadequate wheeling and banking arrangements in many states.500 MW Issues concerning the installation of industrial cogeneration plants in India are mainly inadequate tariff structure for sale of power to State Utilities. refinery muds.018.025. Highlights of Cumulative Lending Operations No. IREDA’S experience in financing biomass-based cogeneration in India shows that financing is restricted to States with favorable policies for selling of power. coal. paper and pulp industries.5 MW installed capacity (both for sugar and non-sugar industry) Interest Rate(%) p. fertilizer.

to assess which measures are most appropriate. Edinburg.iredaltd. there are concessions and incentives available from the Ministry of Non Conventional Energy Sources (MNES). Conclusions A long-term policy and its effective implementation by the Central and State Governments is the need of the hour. Equal access to investment capital by providing a level-playing ground for fiscal and financial incentives is required. Managing Director. Courtesy: Jeff Bell and Sytze Dijkstra. India Habitat Center. Barriers & Issues The following are some barriers and issues in the implementation of industrial cogeneration projects: Policy Issues: l l l l l l l Lack of appropriate policy support Lack of a level-playing ground for fiscal and financial incentives Lack of appropriate legislative mechanisms No proper institutional and implementation arrangements Frequent changes in policies/no consistent long-term policies A tariff that is not conducive Third-party sales being withdrawn or discouraged in most states Rationalization of grid connectivity charges levied by different states Standardization of sub-station power evacuation facilities (11 kV / 33 kV / 66 kV) Upgradation of sub-station facilities to higher voltages for effective power evacuation Lack of adequate awareness in financial institutions Lack of consumer financing routes/options Lack of financing through various sectors Lack of motivation of financial institutions Non-payment by SEBs Adjustment of revenues by SEBs Adjustment by working capital bankers Many products and technologies are not yet matured Minimum economic sizes are under evaluation Risks involved in the transformation of technologies High capital investment and marginal commercial viability Distortions in energy markets Stiff competition from subsidized conventional energy Less major players in the industrial segment For details. The Government of India should take larger steps towards coverage of initial technology introduction risk so that the industry develops and matures. All financial institutions and banks should be involved through more awareness creation initiatives. etc. Various financing models should be encouraged. A wide diversity of policies to promote various DE technologies are being employed all over the globe today. Email: contact@iredaltd. rather than suggesting a single solution. 1st floor.Apart from the improved viability of industrial cogeneration projects. Cleary there is no one right way of promoting DE via regulatory measures. IREDA IREDA. Rather. the prospects of financing industrial cogeneration in India are very high. is required.org References have been made to an original article from the Cogeneration and Onsite Power Production magazine. legislators and policy makers considering the most effective ways of fostering investment in DE should look at a cross section of precedents before deciding on the best approach for their jurisdiction. Standardization of infrastructural facilities such as grid connectivity. In these decisions it is vital to take into account local circumstances and prevailing market conditions. UK Tel : +44 131 625 3333. New Delhi 110 003 Tel: 24682214-21. Fax: 24682202. and how they can be customised to the specific situation on the ground. In many cases this will mean a combination of different approaches that reinforce and complement each other. priority sector lending status should be given to cogeneration. Scotland. Industrial Cogeneration India Financial Issues Product-/Technology-related Issues Market-related Issues 17 . the financing pattern of IREDA also helps in easier repayment of loans over a period of 14 years. Favorable tariffs and concessions for improved viability and to level the market with other conventional power producers are necessary. etc. Hence. Fax : +44 131 625 3334 Email : sytze. Web: www. A pick-and-mix from precedent regulation is likely to be highly effective in creating the right strategies to enable DE to achieve its promise and potential. including a maximum moratorium period of 4 years.com contd from pg 13 Grid-related Issues l l l l l l l l l l l l l l l l l way in per capita renewable energy sales for residential systems. power evacuation facilities. East Court. Major industrial and other players should be involved. please contact: By D Majumdar. Regularization of payment by State Electricity Boards/Utilities is essential.com. which includes meeting the cost of preparation of Detailed Project Reports (DPRs)/subsidy. In conclusion. Core 4A. EH3 7TP. Further.dijkstra@localpower. and there is scope for exploiting the available potential and increasing the installed capacity of industrial cogeneration once a uniform and favorable power policy is in place. Research Executive World Alliance for Decentralized Energy 15 Great Stuart Street.



is direct combustion of biomass to generate steam in a boiler that runs a steam turbine to produce power. The cycle efficiency will increase with higher steam inlet temperatures. wood chips and coal fired Travelling Grate Boilers. turbine components. The capacity of these boilers is generally restricted to around 100 tph with steam pressure up to 66 kg/ cm2 in order to optimize the number of dumping sections and to minimize drops in pressure due to dumping operations that lead to fuel loss. The advantages of traveling grate technology over other available options have been discussed below: Dumping Grate Boilers: These boilers are not suitable for multi-fuels and fossil fuels such as coal and lignite that have high bulk density and high ash content. In a few installations low ash (3 to 4%) coal. Expectations of a user of biomass-fired boilers include high availability and reliability. However. These boilers have low thermal efficiency. However. and the creep-fatigue behavior of materials at higher temperatures. cost of boiler and turbine systems. A wide range of processes and routes are available for electric power generation from biomass. the demand for electrical energy has grown at a tremendous pace. in combination with bagasse. A number of cogeneration units with 87 kg/cm2 pressure and 5150C temperature are in successful operation in India using bagasse during the season and combination of other biomass fuels such as rice husk. bagasse being a seasonal fuel. India has no doubt emerged as one of the leaders in cogeneration. which is most popular worldwide. quality of feed water. The amount of energy that can be extracted from biomass fuels is largely dependent on: l l l Moisture content Gross calorific value Combustion technology Due to concerns related to cost. and the level of confidence of the plant operators. This article discusses characteristics of biomass fuels and boiler technology best suited for combustion of these fuels. Thermodynamically. 87 kg/cm2(a). has become an important financial driver for biomass-based cogeneration. Metallurgy of the boiler tubing. The sugar industry in India and several other countries have made phenomenal progress in cogeneration. Hence an increase in steam temperature should be accompanied by a matching increase in steam pressure. High-pressure and high-temperature cycles are crucial for 20 Industrial Cogeneration India . Technologies Available for Biomass Combustion Selection of appropriate boiler technology requires a thorough understanding of the fuel characteristics and emission requirements.Biomass Use in High-pressure Traveling Grate Boilers With rapid industrial growth over the last few decades. the widening gap between power generation/ demand and environmental concerns. fuel flexibility. which gives a monetary value to CO2 emission reduction.000 MW. Biomass fuels. which will go into production in 2007. the percentage of coal has been limited to 120 TPH. The conventional route. wood chips and rice husk. increasing operating efficiency and power output from cogeneration plants. decide the temperature selection. Due to the above limitations. Pin Hole Grate Boilers: These boilers are suitable for firing bagasse and low ash fuels such as wood chips. Studies reveal that in India alone the exploitable power generation potential from biomass fuels is around 10. the energy recovery from the Rankine cycle depends more on steam temperature than pressure. water treatment systems available. has also been fired. Steam pressure also plays a role in ensuring optimum extraction of useful energy as the enthalpy changes with pressure. in combination with bagasse. rice husk. Several technology options are available for combustion of biomass fuels. The incentive of trading carbon credits has become a motivation for considering the cogeneration route. is available at almost no cost as fuel. including bagasse. particularly since bagasse. there is a need to find other biomass fuels for year-round generation of power. Units with 105 kg/ cm 2 and 540 0 C are currently under supply for cogeneration plants in the sugar industry. environmentfriendliness. this technology has not been used for yearround cogeneration. The application of the Clean Development Mechanism (CDM) of the Kyoto Protocol. owners of industrial and commercial facilities are actively looking for ways to produce energy more efficiently. Boiler is designed for firing Bagasse. ISGEC John Thomson has experience of supplying over 500 boilers in India and overseas markets which include over 250 bagasse. The choice of pressure and temperature levels for the steam cycle depends on several factors including fuel properties. wood chips and fossil fuels such as coal during the off-season. Due to the steady decline of non-renewable energy resources. a waste product from sugar mills. So the boiler technology selected should address these issues. and to bring about reductions in emissions of air pollutants and greenhouse gases. 515 0 C Travelling Grate ISGEC John Thompson Boiler under installation at Triveni Engineering & Industries Limited. are renewable fuels. and the need to harness the potential of biomass fuels to generate electricity has increased. India. and well recognized as potential fuel for the future. including bagasse. Depletion of fossil fuels and environmental concerns has led to increased importance of green power using biomass fuels. piping.

Corrosion due to chlorine becomes serious when the metal temperature is greater than 450ºC and the flue gas temperature greater than 650ºC. and chlorides. These boilers also have high power consumption. Kenya. mainly the oxides of sodium and potassium. Effect of Fuel Properties on Boiler Performance l l l l l Properties of Performance Biomass Affecting Boiler The properties of biomass fuels affecting boiler performance are volatile matter. ISGEC John Thompson is currently executing Boiler projects in Uganda. tomato and cotton stalks. Tanzania (a CIEL Agro. wood chips. Typically the volatile matter in most biomass fuels is high (30 to 40%). 480º C Bagasse Fired Travelling Grate Boiler under construction at TPC. These deposits form a bonded dense matrix through the sintering process and sometimes these deposits may also be partially fused. In many biomass fuels such as mustard. Many biomass fuels have high organic alkali content. Moisture in fuel has significant influence on the combustion process as well as on the calorific value of the fuel. biomass. even 0. As the de-ashing in these boilers is done by steam blowing. The biomass fuels fired in these boilers include bagasse.01 to 0. CFBC boilers have not been successful for burning fibrous fuels such as bagasse. A small amount of chlorine. Bagasse has high moisture content (46 to 54%). chlorides and silicates are present. and wood chips. cotton and mustard stalks. Depending on ash fusion temperatures.10% MCR. Atmospheric Fluidized Bed Combustion (AFBC) boilers: AFBC boilers are good for burning coal and washery rejects. rice husk. Agglomeration or bridging of convective heat transfer surface caused by low ash fusion temperature due to presence of alkalis. Circulating Fluidized Bed Combustion (CFBC) Boilers: These boilers are popular where stringent emission norms for SOx and NOx are to be met.9% by weight. using hydraulic drives or variable frequency drives varies the speed of the grate. pin hole grate and dumping grate boilers. Chlorine reacts with sodium and potassium forming low melting point eutectic salts that form deposits on tubes. sugarcane trash. ISGEC John Thompson (IJT) is currently supplying a 170tph. due to its tendency to compound the problem of sintering and deposit formation. and Increased frequency of soot blowing due to deposition and agglomeration. Also the capital investment for CFBC boilers is higher than other options. Corrosion of superheater coils due to the presence of chloride in ash. especially silica and phosphorous. to produce low melting point compounds which cause sintering and agglomeration in the convective heating surface in the furnace and the back pass. IJT’s boiler design philosophy for biomass fuels covers the following: l Generous volumetric loading of furnace: A tall furnace to ensure lower furnace exit gas temperature hence reduce the chances of fouling due to presence of alkali contents in fuel ash and also corrosion of superheater tubes due to the presence of chlorides in fuel ash. The organic alkalis in the fuel vaporize at furnace temperatures and react with other ash and fuel constituents. groundnut and coconut shells. Corrosion due to alkali and chloride results in frequent tube failures. Biomass fuels such as bagasse having high moisture content cannot be fired in these boilers due to bed clinkerization and non-uniform bed temperature. It causes high temperature corrosion particularly in superheater zones. Rice husk and saw dust with low moisture content can also be fired in AFBC boilers. tomato and mustard stalks. Chlorine in biomass is of great concern. Fossil fuels such as coal and lignite have also been successfully burned in these boilers. This makes combustion easy. Secondary combustion or combustion in the upper regions of the furnace due to carry over of fines and low-density fibrous particles. empty fruit bunches of palm. moisture and alkali content. High potassium content is specially associated with back pass fouling while sodium oxide is more often associated with sinter formation in the high temperature superheater zones. l l l Fouling of heating surface due to sodium oxide and potassium oxide. Boiler Design Philosophy for Biomass Fuels To take care of the above issues. mustard husk.1%. These boilers have high auxiliary power consumption when compared to the traveling grate. and wood chips have high alkali constituents. and fossil fuels such as coal and lignite. 105 kg/cm2 and 5400C bagasse. including high pressure (87 kg/cm2 and high temperature (515 0 C) boilers at several cogeneration plants at sugar factories in India firing bagasse. Paper mill wastes such as wood bark. Fuels such as cotton. High unburned carbon carry over. High superheater steam temperature picks up due to secondary combustion resulting in higher flue gas temperature and leading to increased spray water quantity in desuperheater. sugarcane trash. For efficient combustion. Traveling Grate Boilers: Multi-fuel firing capability makes traveling grate boilers suitable for firing a wide variety of biomass fuels and agro wastes. 90 TPH 45 kg/cm2(a). High back end flue gas temperature due to secondary combustion resulting in loss of boiler efficiency. Sudan. Philippines and Bangladesh. the chlorine content varies from 0. Generally the potassium content in the above fuels is quite high (15 to 30%). Traveling grate boilers up to 250 tph capacity are in operation worldwide. rice husk and coalfired boiler for a sugar mill in India. is sufficient to initiate corrosion if other constituents such as sulphates. these boilers are not suitable for fuels with high bulk density and high ash content. wood chips and sawdust also have high moisture content (25 to 45%). Mauritius Group company). bark. the furnace exit gas temperature is kept in the range of contd on pg 30 Industrial Cogeneration India 21 . among others. This is a turnkey project and commissionning is scheduled for July 2006. The corrosion rate is very fast when the temperature of the scale is high and alkali chlorides are partially fused on the metal surface. hence loss in boiler efficiency. tomato.

fertilizers and pharmaceutical. there is an option of producing clean gas to generate their own captive power . India Glycols. which results in a high concentration difference between the gas & liquid phase. A part of the washing liquid is circulated over a settling tank to recover elementary sulphur. power generation from biogas by firing directly into gas engines is becoming more profitable due to the encouragement by Government of India for producing power especially from any renewable source of energy Innovative offers a biological solution to remove H2 S through its state-of-the-art “Bioskrubber” technology. and MMS Steel and Power using natural gas. H2S Removal “Bioskrubber” Technology The removal of H2S from biogas or waste gases and air is essential for both economic & technical reasons. VA Tech Wabag. Step I :In the scrubber the washing liquid absorb the hydrogen sulphide from the gas phase in to the liquid phase. Low cleaning cost of biogas as upto 92 % caustic recycled. Som Distilleries. Chemical reaction with hydroxide ions takes place which 22 Industrial Cogeneration India H 2S removal plant at BMSS. nowadays. HS. Akluj. Maharashtra contd on pg 24 . among others using biogas. But. Successful commercially operating plants for the last 5 years. Very high H2S removal efficiency – over 99 %. Degremont India. from the settling tank the sulphur sludge is dewatered to produce elementary sulphur having purity more than 95 %. Riddhi Sidhi Gluco Biols. Thus very high removal efficiencies in excess of 99 % can be easily obtained. The liquid entering the scrubber at the top is sulphide free. This scrubber has been installed at Kanoria Chemicals.+ H2O (1) From the equation 1 & 2 it becomes clear that the hydroxide ions used in the scrubber step are regenerated in the biological step.+ 1/2 O2 So + OH(2) HS. This increase the operational safety of the scrubber (practically no risk of blockage) a clear advantage compare to other conventional methods. H2S reduction to less than 500 ppm guaranteed No expensive catalyst and chemical required Operation at ambient temperature and pressure Elemental sulpher as bi-product with more than 93 % purity. results in formation of sulphide in the washing water stream. H2S + OH Step II :The liquid containing sulphide is led into the bioreactor where the bacteria oxides the sulphide ions into sulphur during this conversion process the bacteria forms hydroxide ions. which are led back to scrubber for washing. Luna Chemicals. BMSS. the process is even more distinguishing since the sulphur is not form in the scrubber itself but out side the scrubber. The principle of “Bioskrubber” is based on the biological oxidation of sulphide in to elementary sulphur. From the technique & technology point of view “Bioskrubber” is economically attractive technology to remove H2S from biogas & sour air stream. The burning of biogas without removal of H2S is wastage of sulpher which has number of applications in sugar industry. Technology Description The “Bioskrubber” can be viewed as a caustic scrubber in which the spent caustic solution is continuously regenerated in a bioreactor.Bioskrubber : Biological H2s Removal Bioskrubber: Biological H2s Removal Biogas generation is becoming more attractive as the energy cost rises. The block diagram shows the two process steps that form the essence of “Bioskrubber” Advantages l l l l l l l l Clean bio-technology for H2S cleaning. Now with “Bioskrubber” technology. Typically Biogas is fired in the boilers as an alternate fuel and it saves conventional fossil fuels like coal and oil. Clean biogas (H 2S free) can be used for generation of power by biogas engines.

ranks among the fifteen largest producers of paper in the world. at New Delhi. Environment pollution from waste and effluents Poor energy efficiency and awareness High cost of purchased electricity and steam produced for process use Frequent use of DG sets to offset fluctuations from grid supply High-pressure. were held for the distillery sector. equipment suppliers. These events were partially supported by the Ministry of Non-Conventional Energy (MNES).4 million tons. The estimated decentralized energy generation/cogeneration potential is about 2.000 klpd (kiloliter per day). Karnataka. financial. with an installed capacity of around 7 million tons and production of 5.  Participants (numbering a total of around 350) at the workshops included representatives from MNES. information dissemination. MD. Thermax Ltd. and other stakeholders. 9 Dec 2005 The Pulp & Paper Sector The pulp and paper industry is one of India’s core sector industries and is about a hundred years old. An estimated potential of about 850 MW for cogeneration exists in this sector alone. State Energy Development Agencies. Pentagon Turbines. technical and industry – could get together and find solutions to tap the maximum potential in their respective sectors.500 million liters of alcohol with individual plant capacity ranging from 1.000 MW. KREDL. energy audits/ implementation assistance. one national awareness workshop was held at New Delhi (August 2006) for pulp and paper mills. The chief guest. Kirloskar Ebara Ltd.Promoting Cogeneration in the Distillery and Paper Sectors In order to promote decentralized energy generation/ cogeneration in various industrial sectors. and distilleries/pulp and paper mills. advising on fuel linkages and financing. Sitson India. in the technology session. financial institutions. developing and implementing cogeneration/captive power plants at member units. MNES. the Cogeneration Association of India (Cogen India) took up the task to provide a platform whereby all the stakeholders involved – policy. followed by case studies from major technology suppliers on multifuel-fired boilers. The policy session included presentations from MNES. Clarke Energy. Power Finance Corporation. lobbying for conducive policy/ regulatory frameworks. Dr BS Shivalingiah. The Distillery Sector There are about 330 distilleries today in India. steam turbines. high-efficiency rankine cycle technology for captive generation of steam and power yet to be adopted across the sectors Serious attempts for year-round captive/cogeneration power not made across the sectors Poor capacity for conceiving.000 – 100. designing. Detailed action plans were drawn up and mutually agreed to. New Delhi. At present. energy efficiency improvement. captive cogeneration and biogas projects Lack of adequate finance for implementing these projects l Lack of availability of total solution providers Awareness Workshops Two regional awareness workshops (one at Bangalore in December 2005 and another in Mumbai in January 2006) and a national-level workshop at New Delhi (March 2006) Shri Subramanian. Secretary. Key Issues Some key issues emerged at the end of the above workshops: l l l l l l l l Moving Ahead MoUs were signed between Cogen India and the All India Distillers’ Association (AIDA) and Indian Agro and Recycled Paper Mills Association (IARPMA) to undertake promotional efforts in the distillery and pulp and paper sectors respectively. developing demonstration projects with different technologies and models (such as the Special Purpose Vehicle or SPV). Around 185 are stand-alone while the rest are connected with sugar mills. India. State Energy Development Agencies and financing institutions. at the Regional Awareness Workshop for Distilleries at Bangalore. conceiving. The activities planned included capacity building workshops. there are more than 500 pulp and paper mills in the organized and unorganized sectors India. alternative fuels and linkages. The total installed capacity is about 3. PTC India Ltd. and co-sponsored by IREDA. and Turbomach. Kessels Engg. 6 Mar 2006 Industrial Cogeneration India 23 . The theme of the workshops was “Accelerated Development of Cogeneration/Captive Power Plants”. Similarly. implementing and operating energy efficiency improvement.

CEO.30 Rs/unit Innovative Environmental Technologies Pvt. 781/4. Tungai Apts. Value 500 max. Sir Shadilal Distillery. Maharashtra. However. Their captive requirement is 500 kW. Trichy Distilleries. Lane. contd from pg 22 Case Study Innovative supplied an H 2 S removal “Bioskrubber” plant to Brihan Maharashtra Sugar Sydicate Ltd. A review meeting was held at MNES on 7 July 2006 with the interested distilleries (UB Group. Business proposals to implement projects. respective Associations will readily provide any assistance that may be required.25653748 Email: ietl@vsnl. They have installed a 1-MW power generation plant. 400 sq. Similar efforts and review meetings will be held with paper industries for promotion and faster implementation of cogeneration/captive power projects at their plants.0 max. Business Manager. etc.(BMSS). Dist.Potential & Opportunities Everyone agreed that the Electricity Bill 2003 provisions were conducive to the promotion of captive power/ cogeneration projects. Pune 411 004. Key Results These workshops and follow-up actions are expected to trigger off implementation of cogeneration/captive power projects in distilleries/pulp and paper mills. Further details are available at www. CDM services. India Tel: 020 – 25675423. Kamala Nehru Park. Innovative is ready to embark into the business of pollution control. Cogen India. m. several distilleries and pulp/paper mills have yet to come forward with their requests or Shri Sandeep Junjarwad. (Innovative). Vilas Muttemwar. where the level of organic pollutants is reduced Biological Sulphur and methane-containing biogas is produced. A commitment to continuous innovation and upgradation of process technology permits Innovative to carry out bench and pilot scale studies. To remove the H2S from biogas they have put up an H2S removal plant based on the bioskrubber technology. Detailed Project Reports (DPRs) & loan syndication. SVP Ind Ltd. 5. about 18 distilleries contacted Cogen India and AIDA seeking further details and assistance in implementing cogeneration projects. Pilkhani Distilleries. The capacity of the distillery is 25 klpd and the raw material used is molasses. nm3/hr CH4 % CO2 % H2S % Area required for plant 24 Industrial Cogeneration India Performance Parameters Inlet H2S % Outlet H2S ppm Sulphur generated kg/day Plant availability per year. Manager. Ltd. and provide long-term business opportunities to various stakeholders. It was also agreed that biogas. energy audits. thus helping application engineering immensely. Telefax: 020 . Shamli Distilleries. Flat No. Pune.cogenindia.45 2. biomass and fossil fuel combinations are possible. days Value 3. with a biogas-based engine. Opp. Erandawane. Cogen India and the the Union Minister Hon. Raw Biogas Parameters (at the inlet of the bioskrubber) Parameters Flow.org. Cogen India is an association formed in 2001 for the promotion of decentralized cogeneration/captive power plants in all industrial and commercial sectors. The distillery wastewater treatment facility is based on anaerobic digestion. and Agribiotech Industries have submitted their proposals and are under various stages of project implementation. For copies of the proceedings of the above workshops. please contact Sandeep Junjarwad.net . Shivajinagar. Cogen India. DPRs. Shreepur. 50 . Innovative Environmental Technologies Pvt Ltd. loan syndication. After the workshops for the distilleries. Riga Sugar.55 40 . Solapur. felicitating MNES.5 Less than 500 300 350 Cost of H2S cleaning per unit generated. 0. Shri. after which some members (like Trichy Distilleries and Hira Sugars) have requested for the preparation of pre-feasibility reports. Cogen India and its members can also provide other services such as preparation of pre-feasibility reports. BMSS uses this biogas to produce power.. Agribiotech Industries and Birla Group of Sugar Industries). is dedicated to promoting new technologies in non-conventional energy. Courtesy: Chandan Gadgil. while they use around 500 kW of grid power.

Industrial Cogeneration India 25 .

and Hydrogen production. India offers huge environment business potential. project management.ca Global Engineering provides consulting engineering services for waste to power projects. renewable energy and opportunities under CDM are also part of an overall profound growth pattern of the Indian energy sector attracting higher private sector investments. Canada’s CDM/JI Office.com AHI provides energy and environmental solutions.airscience. This year. water and wastewater treatment. contaminant hydrogeology. GHG reduction technology. Nuworld Research & Development www.golder. More about the companies can be found in Canada’s Clean Energy Technology Portal at www. Canada’s diverse variety of environmental and renewable energy technologies and services has both a mix of well proven sales and pre-commercial R&D stage and offer a solution to meet India’s ever growing energy and environment market needs in a sustainable manner.craworld. solid waste. solid waste management and hazardous waste management. www. cogeneration.com Specialize in leads-flow and engineering services associated with efficient energy conversion of hydrocarbon based fuels and heat into electric power. environmental testing. waste-to-energy conversion processes. waste-to-energy and environmental products and services offer immense opportunities for Indian industry to achieve technological improvement and to develop new business prospects. Chennai. Canadian CCEETI has special expertise in biomass (bagasse). and offers expertise in environmental engineering. JVs to meet cost effectiveness and environmental solutions. Global Engineering Services Ltd. financial risk management. AHI has 26 Industrial Cogeneration India Sandwell Engineering Sandwell has been providing “Engineered Solutions” in India for 50 years. Pune and Mumbai. Services include consulting. Fossil fuel based clean energy. soil remediation. Areas of expertise include Volatile Organic Compound Control Systems. Areas of expertise include renewable & alternative energy.atlantichydrogen. energy efficiency. Conestaga Roves Associates Limited (CRA) www.chemisar.gc. mine engineering. Atlantic Hydrogen (AHI) www. Greenhouse Gas Reduction. which is estimated at more than US$ 3 billion specifically in the areas of wastewater treatment. information management. and waste to energy. sustainable development and carbon management.balanceco2. Technologies under clean coal. environmental and social assessment. . AirScience www. and bulk material handling systems and port and marine facilities. Technologies in the areas of clean coal. low temperature technology called CarbonSaverTM that dissociates natural gas to form gaseous hydrogen and solid carbon without generating carbon dioxide. Below is a list of companies that attended the fall mission: developed a unique. small hydro. Desulphurization with Acid Production. waste management.com Specializes in services related to energy saving projects. renewable energy such as biomass. Golder Associates www.com Areas of expertise include geotechnical engineering. water and wastewater.com With over 60 offices worldwide. water and wastewater treatment and conservation. environment and climate change. biosciences and toxicology.com Comprised of organizations that specialize in environmental assessment. resource conservation. process efficiency evaluation and process implementation. manure to electricity and coal-bed methane gas as a clean energy source. technology transfer and community development with projects focused on renewable energy implementation. Their current focus in India includes solar power supply for rural and village electrification. landfill management and cogeneration from industrial waste. Process Gas Separation. The visit coincides with two prominent conferences and exhibitions in Mumbai including the Energy Technology Forum and Power India. Canadian energy and environment companies are well placed to benefit from these opportunities. and environmental monitoring and verification. which is also true for other technological areas. TTCE has added some exciting seminars and events as part of our 2006 Business Development Mission with visits to facilitate targeted market partnerships.cleanenergy. The delegation will include government representatives from Industry Canada. CRA works in the field of environmental and engineering consulting including expertise in wind energy. The Canadian Consortium of Clean Energy (Canadian CCEETI) www.ca. SPV. process improvements.ca AirScience is the exclusive developer of the Terragas process that produces pure hydrogen from landfill gas. Gasification Systems/ Waste Gas Valorization. energy efficiency and bio-fuels provide abundant opportunities for technology transfer.nuworldresearch. Natural Resources Canada and Export Development Canada. Balance CO2 www.Trade Team Canada Environment: Linkages with Indian Industry Trade Team Canada Environment (TTCE) has successfully participated and facilitated numerous Canadian Environment and Energy Business Development Missions to India in an effort to promote Canada’s capabilities in clean energy. environmental assessment and site remediation.globalengineering. International Trade Canada. Programs will be held in 2006 in Delhi. Canadian industry in this field provides cutting-edge technologies and innovative environmental solutions.

Industrial Cogeneration India 27 .

CERC. statistics and computer sciences. project financing. is as below: Issue: Definition of a captive plant – In case of a captive plant or a group of Industries setting up a captive plant. physical and natural sciences. TTCE’s services provided in both domestic activities and business development missions abroad include market intelligence. The present status of various issues raised during above inter actions/meetings etc. tailored business programs. SNC Lavalin Environment www.amanda@ic.ca facilitate flow of surplus power to the grid. However. CEA’s initiatives culminated in workshop on CPPs on 20th March 2006. For the plan wise growth of installed generating capacity and generation (utilities and non-utilities).com SNC-Lavalin areas of expertise include construction engineering. taking up of the matter with forum of regulator (FOR). economics.gc. and electricity duty and cess. Issue: Surcharge/cross-subsidy surcharge in some states is very high Status: Tariff policy notified by GoI on 6 January 2006 Issues: a) Very high/discriminate electricity duty imposed on captive power generation by some states. and b) Imposition of cess on captive power generation by some State Govts Status: CEA has recommended that it may be re-considered by the State Government. Trade Advisor (Energy & Climate Change). should be made effective as per the provisions of the Electricity Act. remediation.src. which provided a platform to CPPs to interact with senior ministry officials & regulators. and lower fuel costs.gc. technical seminars and showcasing opportunities. creation of specific sub-group to consider industry specific issues. chemicals. solid and hazardous waste management and strategic environmental assessments. As part of the Team Canada Inc network and managed by the federal department Industry Canada. EMS. networking events and site visits both abroad and for incoming delegations.ca SRC specializes in R&D and technology commercialization on alternative energy sources for transportation. These include regional level meetings at different locations across the country. Member (Planning). FOR set up a sub-committee to look into the matter. Canadian High Commission at: saroj. petroleum and power. onsite briefings. Efforts should also be made by the industry to install larger captive power plants using the group captive facility provided under the Act so that there should be optimal use of national resources.sk. www. Status: Electricity Rules issued by MoP vide Notification dated 8 June 2005 Issue: Open access. TTCE at: kramer. India has been a priority market for TTCE since 2002. The balance can be exported.snclavalin. mathematics.senes. solid waste management.ca The resources provided by SENES span many technical disciplines including engineering. there are still certain issues such as cross-subsidy and additional surcharges for open access. Also. site decontamination and contd from pg 5 For more information please contact: Amanda Kramer. Conclusion State Government. please contact CEA or Cogen India. Issues: l Reduction in contract demand by CPPs not allowed by state DISCOMs. TTCE (http://ttc-environment. which are required to be sorted out. some states/SERCs have levied high wheeling and other charges. at least the group of industries or individual industry should use 51% of the power generated. site remediation. RK Puram. Courtesy: VS Verma. auditing. Meshes cleaner fuels with smart technology for vehicles. and SERCs are making efforts to implement the Government policy to ensure that all impediments for the development of captive power plants are resolved. With three offices in India they are interested in projects in the area of air quality. SENES Consultants Ltd. which is the key provision to attract investment in new generation/ transmission/distribution projects.ca or Saroj Mishra. as well as promoting the industry to make their presence in key global markets. water and wastewater. 2003 and National Electricity Policy Status: Most SERCs have already issued regulations. geography and planning. reduction of GHGs and urban smog.gc.Saskatchewan Research Council (SRC) www.ca) is a public-private partnership aimed at increasing Canada’s export of environmental products and services.ic. CEA. increase in energy supply. resulting in higher demand charges l Demand charges levied on connected load irrespective of actual drawal from DISCOM l Exorbitant wheeling charges for intra-state transmission system for transfer of surplus power from captive plants l Other charges levied on CPPs by Regulatory Commissions*: Ô Additional surcharge Ô Parallel operation charge 28 Industrial Cogeneration India Ô Ô Ô Ô Ô Ô Contract demand charge/annual minimum guarantee Charge Transmission charge Fixed charge for electricity connection SLDC charge Reactive energy charge Banking charge Status: Already considered in FOR subgroup meetings and recommended for action (* under consideration) # FOR = Forum of Regulators * Commission shall allow open access to consumers with contracted capacity of 1 MW or less in due course at such time and in such phases as it may consider feasible having due regard to operational constraints and other factors.mishra@international. New Delhi 1 : Tel: Fax: Web .

Industrial Cogeneration India 29 .

Pricing structures that do not reflect the full cost of conventional energy continue to be a major constraint. subsidized electricity supply for various end users. This is critical in the case of the sugar industry which depends on alternate/opportunity fuels during the off-season for cogeneration of power. utilities and industry. We hope that their contributions will help to focus attention on the present and emerging policy landscape and identification of further reforms needed for a major scale up of commercial and industrial activity in renewables.. l l l l l l Overfire air (secondary air) with high secondary air pressure (650 to 675 mmwc) to provide better air penetration across furnace cross section to ensure better combustion of particles burning in suspension. as well as fossil fuels. contd from pg 3 the electricity mix. For high alkali fuels the primary superheater is also provided with parallel flow arrangement. View of the complete sugar plant supplied by ISGEC (a sister division of ISGEC John Thompson) to Consolidated Farming Ltd.4 x 106 to 2. A rational energy pricing structure. corresponding to 15% of the then installed capacity. further reforms in the electricity sector and removal of market distortions are necessary. in captive generation.com. Courtesy: AK Subramanian. Wide pitching of primary and secondary superheater coils to eliminate bridging of ash. renewable power capacity is likely to reach 100.000 MW. Location of soot blowers at strategic zones for efficient on-load cleaning of the heating surfaces. ISGEC John Thompson A4 Sector 24. in particular biomass and cogeneration. Airheater air bypass arrangement to be provided to maintain higher flue gas temperature leaving airheater at part load operation of the boiler and also when the ambient temperature is low. This will eliminate deposition and corrosion due to chlorine attack. wood chip and coal fired Travelling Grate boiler. It is also an extremely robust and proven technology. ISGEC is currently supplying a similar plant being set up in Kisumu. . By 2032. Web site: www. project developers. 45 kg/cm2(a). Also tube metal temperature will be lower. I had drawn attention to the captive power scenario in the country and the role of non-conventional energy. This also provides an air curtain to prevent the unburned particles carry over to superheater zone and evaporator surfaces thereby avoiding secondary combustion. Overheating of radiant superheater under low steam flow has been reported .com Editorial . could in future reduce the need for preferential tariffs for renewables and cogeneration. Zambia for producing plantation white sugar. Convective superheater design is preferred over superheaters placed in radiant zone as due to high temperature there is fouling of ash in superheater zone when fuel has high alkali content .contd on pg 21 l l l l l l l 750º to 900º C. hence lower unburned carbon loss. supplied by ISGEC John Thompson. captive power and cogeneration in the country. Conclusion The foregoing discussions establish the superiority of traveling grate technology for firing bagasse and other biomass fuels. Placing the superheater in the convective zone eliminates these problems. regulators and senior representatives of financial institutions. In order to facilitate renewable power and cogeneration to reach their full potential. there by minimizing unburned carbon loss and hence high boiler efficiency. Uttar Pradesh. India Email: ijtsales@isgec.5 to 3 seconds) for efficient fuel combustion. Generous grate area loading to ensure efficient combustion of fuel. Kenya.isgec. and other externalities in cost calculations.. Typically the grate area loading is in the range of 1. Noida 201301. This Special Issue focuses on Policy and provides perspectives from eminent experts. and the exclusion of environmental and social costs. The superheater sections are shielded by nose portion (Figure 4) which helps avoid direct radiation from furnace thereby eliminating overheating of tubes. For high alkali fuels the secondary superheater is to be placed downstream of primary superheater coils in the flue gas path. which removes distortions and internalizes 30 Industrial Cogeneration India various hidden costs. capable of firing a variety of fuels. This plant has a 40 TPH. for year-round cogeneration of power. Distortions exist in the form of direct and indirect subsidies. Parallel flow secondary superheater coils to minimize metal temperature. Tall furnace also ensures adequate residence time (2. Use of corten steel tubes at the cold end of air heater to avoid corrosion. 440º C bagasse. Single pass boiler bank arrangement without baffles to reduce flue gas velocity and eliminate tube erosion. This will minimize carbon loss and also eliminate fire hazard in Electrostatic Precipitator.5 x 106 kcals/hr/ m2 depending on the type of fuel. Pre-dust collection system at the outlet of economizer with reinjection facility of grit collected back to the furnace. with 10% contribution to the electricity mix. In the Foreword to the last Issue (June 2006)..

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