Biomass Power Generation: Prospects and Issues

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1 Presentation on Biomass Power Generation: Prospects and Issues 26 th Sept 2013 By A.Mohan Reddy 1

2 Biomass Power Potential Vs Achievement All India Potential (MW) Achievement (MW) As on July, 2013 % of achievement Biomass % The above figures indicates that there is still large potential for harnessing biomass based power in India 2

3 Significance of Biomass Power Generation Biomass energy is renewable source, widely available, carbon neutral and has the potential to provide significant employment in rural areas Surplus biomass is huge and is an untapped energy source to provide a sustainable model of energy generation Currently most of it is burnt in the field with limited nutrient value It engages the rural population and make them key stakeholders in the operation of the biomass power plant Biomass power sector is generating employment of more than 10 million man days in rural areas 3

4 Increased Income levels of the farmers

5 Significance of Biomass Power Generation Employment generating per MW of biomass power is estimated between 1200 to 2000 persons for various operations for collection of biomass across cropping segregation, collection, transportation, processing and storage Potential to provide employment opportunities in the rural areas only second to the government run NAREGA scheme. Being located in rural areas, provide stability to local grids and ensure better availability of power to these areas. 5

6 Significance of Biomass Power Generation Additional income generation to Farmers on account of supply of biomass material Over 70% of revenue goes to the local area Economic and income generation activity into rural areas especially for women thereby contributing to local & regional development Employment generated in fuel collection and logistics has excellent gender mix in favor of women. This leads to women empowerment. 6

7 Biomass Vs Conventional Fuels Biomass is widely scattered where as fossil fuels are concentrated. Hence, biomass has logistical problems in collection, transportation, loading and unloading. Biomass is low in bulk density and heat value. Hence, need more volume, demands more storage area and difficult to handle. Biomass supply and price is not regulated, whereas fossil fuels are more regulated. Hence, the risk of availability affects the viability of the biomass project. Management of biomass such as sourcing, collection, is more complex than fossil fuels, hence, need special attention. 7

8 Biomass Vs Conventional Fuels Limitation exists in respect of capacity. Biomass is suitable for low capacities, where as fossil fuels are suitable for large capacities. Biomass is in many forms with wide variations in properties and characteristics, hence, need special attention and individual treatment. Fossil fuels are almost constant in properties and characteristics Fossil fuel power generating units enjoy the economies of scale both in investment as well as operation. Escalation in the cost of fossil fuel is absorbed in the price and no such mechanism for biomass fuels. But yet biomass power is preferable to conventional fuels due to various other benefits. 8

9 Biomass Vs Other Renewables Wind and small hydro involve no fuel costs. Cost of generation is low for wind, hydro and co generation compared to biomass power. Price of biomass is sensitive to demand, and is not the case with other renewables. Biomass power is dependable and suitable for base load/peak load and may not be so with other renewables. Employment creation is much higher in case of biomass compared to other RE sources 9

10 Unfortunately biomass sector is not getting adequate fiscal and regulatory support despite the immense benefits it provides to the rural economy. 10

11 Biomass Capacity & Present Status In reality though the installed capacity is 1265 MWs, only about 60% of Capacity is in operation and most of them are operating at low capacity utilization levels. Balance projects commissioned have been closed down due to lack of financial viability and the entire funds invested in these plants remain dormant 11

12 Tariff is the central issue 12

13 Biomass Power Issues Tariff is generally determined by the state commission Even though Key parameters are submitted by various Stake Holders Final Orders passed do not reflect the submissions in most cases resulting in fixation of unviable tariff Most of the tariff orders are assuming annual escalation of biomass fuel costs at 5% only though sharp rise to the extent of 15 20% per annum in the real scenario Regulatory commissions had taken a position that since it s an informal market, it would be very difficult to give a biomass price pass through in the tariff. 13

14 Biomass Power Issues Biomass sector is the only RE segment, where fuel is not free, the variable cost of fuel constitutes almost 65 to 85% of the tariff given to the Biomass power plants. Interest cost is about 20% to 40%. Thus tariff covers hardly raw material and interest. Leaving O & M, loan repayment et uncovered, resulting in plants accumulating losses and majority of them being forced to close down. 14

15 Biomass Power Issues Biomass availability Harvesting is seasonal When procured for the entire season there s a cost of it in terms of both space, money and degradation of fuel quality Major challenge faced by the Industry is continuous availability of biomass fuel at reasonable price 15

16 Biomass Power Issues Lack of clear RE specific, supportive and market oriented policy to address the practical problems of the entrepreneurs. Despite many advantages, biomass sector has not received the requisite attention from the government and other agencies Solar and wind have been able to achieve their profiles because they had global advocates, huge companies so they can spend all the money for seminars, workshops, international gatherings and spread the message CDM market has collapsed Draught situations Non functional REC market 16

17 The situation is grim and requires immediate attention if the industry is to survive and contribute to the overall RE portfolio, as also play its role in the development of the rural economy. 17

18 Suggestions from Industry MNRE shall have a control on RE policies followed by states through some means While determining the tariff key operating parameters should be fixed at realistic levels by collecting data from the existing plants and should be reviewed annually Cost of biomass fuel to be revised annually considering the price prevailing during Q4 of the FY. Policy should be market oriented and developers should have flexibility of selling of power (PPA) 18

19 Suggestions from Industry Financing under priority sector lending at rates applicable to agricultural sector as biomass being an indirect agri sector as over 70% of the tariff received by the sector flows back to the farmers/ rural economy towards purchase of biomass fuel. To encourage investments in the Sector suitable GBI scheme should be designed through clean energy fund for both existing and new plant for a period of 10 years. Net billing shall be followed for the import of power Exemption from NA for biomass projects 19

20 Suggestions from Industry Time bound Single window clearance would be a preferred option to the developer. All the states may follow the procedure State nodal agencies may strictly follow restriction on allotment of more than one license in a district and also a 50 to 75 km radius Policy for allocation of waste lands for captive plantation Policy for fuel price adjustment mechanism Uniform tariff policy for all states 20

21 Final Word If Tariff issue is settled then only the industry will survive and then only further investment and capacity addition can be possible. Otherwise biomass sector will be history in India 21

22 Thank you 22