Study on Economic Partnership Projects. in Developing Countries in FY2009. India SUMMARY. March 2010

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1 Study on Economic Partnership Projects in Developing Countries in FY2009 Study on Geothermal Power Project at Uttrakhand State in India SUMMARY March 2010 West Japan Engineering Consultants, INC. Mitsubishi Corporation

2 The study on geothermal power development projects in Uttarakhand State, India, was carried out for purpose of the Yen Loan project formation. The feasibility as a Yen Loan project was examined in Tapovan geothermal field, which resources is possible to be used for power generation and implementation plan from geothermal resource study to power plant construction was prepared. The geothermal power development project in this field is judged feasible if it would use the Yen Loan which terms and conditions are favorably soft. However, more detailed resource explorations and feasibility study for the project are necessary and NTPC is expecting technical cooperation from the Government of Japan for carrying out the feasibility study on geothermal resource and geothermal power in Tapovan geothermal prospect. The summary of the study results is described below. (1) Project Background and Necessity In India, electricity demand is remarkably increasing due to economic growth and progress of electrification. However, power supply cannot catch up with increasing demand due to delayed power development. Target of the 10th five-year power development plan ( ) was power development of 41,110 MW, but actual result was development of 21,180 MW (corresponding to 51.8 % of the target). In India, NTPC, NHPC, SEB and private companies supply electric power. According to CEA, installed capacity in India was 156, MW (31 Dec.2009) and that of NTPC s plants was 30,644 MW. Target of the 11th five-year power development plan ( ) is total installed capacity of 215,000MW. Major sources of power in this plan are coal fire, diesel, nuclear and large-scale hydropower. As renewable energy (wind power, biomass and small hydro), potential of about 54,000 MW is estimated in India. However, installed capacity of plants using these power sources is 15,541 MW, as Oct Geothermal resources in India are estimated to correspond with power output of about 10,500 MW. When geothermal power generation is realized, renewable energy contributes to bridge the gap between demand and supply. However, geothermal power plant is not yet installed in India and most of prospective geothermal fields are still on earlier exploration stage in the process of geothermal development from exploration stage to operation and maintenance (O&M) stage, through feasibility stage and development (construction) stage. NTPC is planning power development of 1,000 MW by renewable energy and a target of geothermal development is 30 MW. For this geothermal power development plan, NTPC concluded an agreement for co-workings on geothermal exploration with National Geophysical Research Institute (NGRI). And they already started a preliminary survey in 5 geothermal fields. From this survey result, the Tapovan field was selected as a proposed

3 field for geothermal development. NTPC expects that construction of geothermal power plant will be progressed as a Japanese Yen Loan Project. (2) Basic Policy of Implementation Body for the Project The Tapovan field is selected as a prospective field for geothermal development by NTPC. However, condition of this field is still on earlier exploration stage in the process of geothermal development. To progress this geothermal project successfully, it is recommended to conduct detailed explorations (e.g. geological survey, geochemical study, MT survey), drillings of exploratory wells, discharge test and resource evaluation. And detailed feasibility study shall be done after this process. Although available data are very limited at the present, potential of geothermal resource in the Tapovan field is estimated by a volumetric method applying Monte Carlo Analysis in this study. From this analysis, potential of more than 23.7 MWe is estimated at a possibility level of 80 %. As the Tapovan field is characterized by topographic condition of a steep wall valley, there are not so many sites suitable for a plant. Considering this field condition, 10 wells can be drilled with rather easy site preparation (construction). Assuming that 10 wells will be composed of 5 production wells and 5 reinjection wells and productivity of a production well will correspond to 2 MW per well, expected output is 10 MWe. From this consideration, a project targeting geothermal development plan of 10 MW is recommended at the present. Estimated resource potential shall be examined through the future explorations. (3) Outline of the Project As geothermal resource in the Tapovan field is considered to be hot water of 100 o C to 200 o C, a power plant applying binary system is recommended as a suitable geothermal power generating system in this field. Although it is difficult to detailed designing of a power plant, the following geothermal project will be proposed. <Geothermal resource development> Site preparation for production wells pad, reinjection wells pad and power plant site Construction of access road Drillings of production wells and reinjection wells

4 <Piping to transport produced hot water (fluid collection and reinjection system)> <Construction of 10 MW binary geothermal power plant> Site preparation for a power plant shall belong to a project of power plant construction. However, power plant will be neighboring with production wells pad in this project. Therefore, all site preparation is included in this study, considering more efficient civil works. Construction of transmission lines is an essential subproject for this project. However, it is expected that government of Uttarakhand State will prepare the line. Therefore, this subproject is excluded from the project in this study. The results of economic and financial analysis are shown in Table. The Project of geothermal power generation is feasible from EIRR and FIRR simulations, if the project is implemented by the Yen Loan. Moreover, as net present value (NPV) of the cash flow indicates a positive value and cost-benefit ratio (B/C) exceeds one. These values also suggest the project financial viability. Geothermal Prospect Tapovan Installed Capacity (MW) 10 Annual Generation (GWh/year) Project Cost (Mil.USD) = (Mil.INR) 2,668 Electricity Purchase Price (cent/kwh) 10.0 = (INR/kWh) 4.7 EIRR 17.6% WACC 1.98% FIRR 6.3% Discount Rate(=WACC) 1.98% Cash Flow (NPV) (Mil.USD) = (INR/kWh) 1,667 Benefit (NPV) (Mil.USD) = (INR/kWh) 131 Cost (NPV) (Mil.USD) 81 = (INR/kWh) 3,830 B/C 1.62 Results of review of environmental and social impact are follows. The study area is located at steep walled valley with rare flatlands and far from the residential area at Tapovan village. We can see shrubbery, grassland, farmland and rocky area in the study area. There is no power plant facility, but two hydro power plant projects construction are on going near the study area. The Tapovan Vishnugad H.E. Project (520MW) and Lata-Tapovan H.E. Project (171MW) will start operation in 2011 and in 2014 respectively. Except the environmental impact from on going project, the source of significant impact can t be seen at the study area.

5 The exhaust gas and noise are only from the less traffic. The fling dust is from the construction for repairing road but it is temporary. No water pollution source can recognize in the study area. The environmental improving effect of this project is the reduction of carbon dioxide emission from electricity generation using renewable geothermal energy comparing with others fossil firing power generation. The estimated reduction of CO 2 emissions resulting from this project is 51,254 tons CO 2 per year. Annual power generation (MWh/year) Crude Oil Conversion CDM ACM ,658 62,658 Emission factor (t-co 2 /MWh) * 1 Annual emission reduction (t-co 2 /year) 51,254 52,633 * 2 *1:CO 2 baseline database, CEA *2:baseline emissions Based on the site survey results and the project characteristics, survey items that presently considered necessary before the project implementation were picked up to ensure appropriate environmental and social considerations. Contents of study on environmental and social impacts in the next step are listed as follows. 1. Flora and fauna: Study on flora fauna, precious species and status of these species living and breeding within the geothermal field 2. Study on ecosystems in and around the geothermal field 3. Hydrogen sulfide (H 2 S) 4. Noise & vibration 5. Water Quality 6. River flow /groundwater level 7. Influence to livelihood For the current project, interviews were conducted with persons in charge at the head office and local branch offices of the implementing agency, NTPC, and the local government officials and residents around some geothermal fields. Some hydroelectric power plants has installed around Tapovan site. NTPC has two hydroelectric power plant construction projects near Tapovan area; Tapovan Vishnugad H.E. Project (520MW) will be operated in 2011, Lata-Tapovan H.E. Project (171MW) will be operated in EIA for these two hydroelectric power are conducted. Resettlement due to construction of hydroelectric power plant is conducted to conform to the

6 rules of NTPC (cordially welcomed by the government). There is scarcely against hydroelectric power generation. A few local residents complain about the project for requiring employment. State Government is in favor of geothermal power development. State Government formulates the policy to promote renewable energy sources development, which include the Incentives, and formulate Master Plan. Small scale CDM is applied to UN. However, It seems to be not attractive because some revision and resubmission is required. Residents utilize electricity (there are some household which is has no electrification). Residents recognize the existence of hot springs (some residents does not know the existence of hot springs). Environmental clearance for development projects can be obtained either at the state level or at the central level depending on certain criteria concerning the characteristics of the project. However (regardless of where the final environmental clearance is obtained from), for most projects the consent must first be taken from the state pollution control board or pollution control committees in the case of union territories. The geothermal power plant is not listed in the schedule List of Projects or Activities Requiring Prior Environmental Clearance but the category thermal power plant will be applied for geothermal power plant. Based on this category, the geothermal power plant more than 50MW will be Category A, less than 50MW will be Category B. Setting up the geothermal power project involves approvals/clearances from a number of Government Agencies/Departments. The State Government of Uttarakhand provides requiste clearances in a time bound manner through a single window mechanism. For this proposes, a high level empowered committee is constituted to accord necessary approvals/clearances. The first procedure needs to be carried out by the beneficiary nation (implementing agency: NTPC) for realization of the project is to prepare the application to empowered committee. Upon conclusion of concrete plans for the project, application form will be completed promptly by NTPC.

7 (4) Project Schedule Overall project schedules from effectiveness date of Loan Agreement up to the completion of the project are as follows. The consultant will first be selected, and then procurement for drilling of production/reinjection wells and construction of fluid collection and reinjection system, geothermal power plant, transmission line system will be done in parallel. Commencement of commercial operation will be right after the completion of the project. Fifty-nine (59) months from effectiveness date of JICA's Loan Agreement to commencement of commercial operation. After Loan agreement, the consultant will first be selected within 9 months. After selection of consultant, 19 months are assumed to cover basic design, preparation of bid documents, pre-qualification, bidding, bid evaluation, and contracting. In the construction stage, drilling of production/reinjection wells, construction of fluid collection and reinjection system and geothermal power plant will be done in parallel. Commencement of commercial operation will be right after the completion of the project. Resource FS in Tapovan, which will be done as a preparatory study before the geothermal power plant construction project in Tapovan, thirty-six (36) months is required for the Resource FS from the requesting the study. At the preparatory study, surface study, exploratory well test study/evaluation, and environmental impact Assessment in Tapovan will be done. In addition, preparatory study in other geothermal field will be done in parallel. Preparatory study is assumed to be implemented as JICA Grant Project. Including the preparatory study, ninety-seven (97) months from the request of JICA study to commencement of commercial operation. 1st year 2nd year 3rd year 4th year 5th year Months Tapovan Geothermal Power Plant Construction Project Loan Agreement (L/A) L/A Consultancy Contract Selection of Consultant 9 Consulting Services 50 Steam Field Development 46 Fluid Collection and Reinjection System 48 Power Plant 43 Steam Field Development Bidding &Contracting 19 Mobilization 9 Drilling & Testing 18 Fluid Collection and Reinjection System Survey, Basic Design, Bidding &Contracting 19 Field Development, Access Road 9 Design,Fabrication & Delivery, Construction/Installation/ 20 Commissioning Power Plant Basic Design, Bidding &Contracting 19 Design, Manufacturing, Delivery, Construction/Installation/ 24 Commisionning Operation Months st year 2nd year 3rd year 4th year 5th year Power Transmission Line System Bidding &Contracting 19 Design, Manufacturing, Delivery, Construction/Installation/ 24 Commissioning Months st year 2nd year 3rd year 4th year 5th year

8 (5) Technological Advantages of Japanese Company Indian part expects once-through support from geothermal resource survey and development to plant implementation by using Japanese sophisticated technologies and skill. Japanese major manufacturers (Mitsubishi, Fuji, and Toshiba) have distinguished track records from facility development to construction, commissioning, and maintenance of geothermal power plants as leading companies in the world. For the design and fabrication of geothermal plant, sophisticated technology is indispensable to manufacture highly reliable steam turbines that can make the best use of geothermal steam with lower temperature and pressure, in consideration of corrosive geothermal fluid and atmosphere. Indian part will have a genuine reason for employing facilities from Japan with high efficiency and maintainability, although competitors exist in other countries such as Italy and the United States. Japanese manufacturers dominate more than 70% of the market of geothermal power plants worldwide. For example in Indonesia, the share of Japanese manufacturers is 72% by installed capacity and 67% by number of plant (including under construction). In the Republic of Philippines, 37 plants out of 43 are made in Japan and the 87% of installed capacity (1,887.3MW excluding binary plants) has been supplied from Japan. After commissioning of power plant, continuous operation and maintenance work will be needed. Thus, capacity building for the engineers of the recipient country by on-job training (OJT) in earlier stage of commissioning is essential. The skills of Japanese companies through the experience in geothermal power generation will contribute for such training as well.