Factors Influencing Grid Interactive Biomass Power Industry
Abstract
Presently, in India only 13% of the total installed generating capacity of electricity is from renewable energy sources while 70 % of electrical power is generated using fossil fuels. Contribution of biomass to the total installed generating capacity of the electricity is mere 2%. As on today, only 23% of the total biomass power potential in India is utilized for power generation. The scope for the biomass power industry enhances with the recent ambitious target of biomass power of 10000 MW by 2022. The present research work aims at identifying the factors and to analyze its influence on biomass power entrepreneurship in India. The factors are identified based on the interviews with the biomass power experts and industry representatives. Presently in India, the primary drivers for installing biomass power are returns to the investments, to provide clean and reliable power to the industries and to save on the electricity bill due to high power tariff for industries. The major barriers influencing biomass power industry is the supply and frequent price fluctuations of the fuel stock (biomass input) which leads to reduced gap between the tariff and the cost of fuel over the period of time. A macro level analysis based on the secondary data collated for 28 states in India reveals that the installed capacities of biomass power presently responds strongly to the level of industrialization and power tariff for industries rather than the state level feed in tariff identified for biomass power. Even the states with high biomass potential and high feed in tariff are not able to utilize the existing biomass potential. Region wise installed generating capacity of electricity (utilities) also has strong influence on promotion of grid interactive biomass power. The paper suggests that such states should encourage biomass power entrepreneurship to supply power to the existing industries in addition to the high feed in tariff rates for the biomass power. Frequent revisions in tariff are recommended for sustenance of biomass power plants along with attempts to develop plan for organized supply of biomass fuel stock for power generation at state level.
Keywords
Download Options
Introduction
In India, 70 % of the installed generating capacity of electricity (Utilities) is through thermal power plants while about 30 % of power generation is contributed by various sources like hydro, nuclear and renewable energy. Renewable energy contributes about 13 % of the total power generation in India. Out of the total installed generation capacity of renewable power, Wind power accounted for about 66.69%, followed by Biomass power (12.66%) and Small hydro power (12%) (Ministry of Statistics and Programme Implementation, 2015).
Biomass power generation is becoming an emerging industry in India over the last decade (Singh & Setiawan, 2013). It attracts an annual investment of over INR 8850 million and produces about 5000 million units of electricity with 10 million man-days jobs in rural areas (Ministry of New and Renewable Energy, as on December 2015), (Kumar, Kumar, Baredar, & Shukla, 2015). The total potential for biomass power generation in the country as on 31.03.14 is estimated as 17,538 MW (11.88% of total renewable power potential) and 5000 MW (3.39% of total renewable power potential) from bagasse-based cogeneration in sugar mills. However, the installed capacity of grid interactive biomass power in India as on March 2014 was 4013.55 MW which is only 18% of the total biomass potential. There still holds the possibilities to tap the 80% of the unused biomass potential to feed electricity to the industries. A review of infraline energy database indicates that majority (about 90%) of the biomass power plants are owned by the private sector.
Provided the scenario of huge untapped biomass potential and dominance of private sector in the emerging biomass power industry, the paper tries to understand the factors influencing the biomass power generation industry through the lens of the entrepreneurs. In the later section, the paper attempts a macro level analysis of the influencing factors using the data secondary data collated for 28 states in India to relationship of the influencing factors in present context with the biomass power capacities.
Conclusion
The biomass power is a clean and reliable source of electricity and is an emerging industry which is able to provide power to the industries as well as to the grids for further transmission. The biomass power plants also contributes to the economic development at local level as it is a labour based industry and the fuel input is purchased locally in most of the cases. The fuels used are agricultural residues, fodders, woods and energy plantations. Presently, the biomass power plants in general are owned and operated by private sector. The technology of biomass power generation is mature with the scope for further improvements to bring down the capital and power generation cost. Unlike other renewable power sources such as wind and solar, the biomass power does not face the issue of variability. However, biomass power is also the only renewable power source that incurs continuous input cost. The country has huge biomass potential yet 80% of the biomass power potential is still untapped.
The paper analyses the factors influencing biomass power based on the first hand information collated through expert’s interview and the sector representatives along with review of published reports and papers. Presently, biomass power plants are installed for providing power to the industries either as captive power or through wheeling.
States are primarily responsible for the policies and implementation of the biomass power plant projects though the central level policies such as subsidy for capital cost and tax exemption also influence the returns and savings in biomass power generation. However, the large variation existing among the state level policy needs to be narrowed down. One among the motivating factors is the return to investment which is determined by the biomass tariff as well as tariff determined for third party sale or open access. However, the revisions in tariff are not as frequent as the increase in the biomass input. The tariff in case of biomass power needs a detailed and frequent revision based on prevailing biomass cost and other variable costs (including man power, water, spare parts and maintenance). Biomass power has significant operating expenses unlike wind and solar apart from initial capital investment and more so of input fuel cost which becomes many times even higher than 2/3rd of total cost of generation. Andhra Pradesh was first to introduce two-part tariff (fixed and variable component). Many power plant promoters still feel though two part tariff is welcome step with inclusion of variable component for operating cost still the tariff is not rational and very attractive for attracting private investment and some feel even managing existing power plant is difficult with prevailing tariff due to very thin margin against wide fluctuating operating expenses (Deloitte Touche Tohmatsu India Private Limited, 2009). A scope for detailed implication of two part tariff may be explored for the other states as well.
The installed capacities of biomass power responds strongly to the level of industrialization and power tariff for industries but not to the feed in tariff. Presently, the biomass power is primarily encouraged to provide power to industries. There are states with high biomass power potential as well as high biomass power tariff but with low installed grid interactive biomass power. These three states have average level of NSDP and power tariff for industries when compared to average for all states. Thus, only deciding sufficient tariffs are not sufficient but promotion of biomass power for industries is also important in the biomass potential states.
Similar to the policy aspect on tariff, the supply aspect of biomass input for biomass power plant is to be considered. Biomass-generated electricity can be very competitive where low-cost fuel stocks are available onsite at industrial, forestry or agricultural processing plants. In such cases, biomass power generation projects can produce electricity for as low as INR 2.04/kWh in developing countries (International Renewable Energy Agency, 2015). It is important to identify such industries and sites where biomass feedstock is available at cheap prices for development of biomass power.
In addition to the existing policies on power purchase and financial issues, emphasis should be given for policies, which include research and development to enhance the techno-economic viability. Biomass power policy must have dedicated clauses (related to tariff and wheeling, finance etc.) for large scale replication as in case of Solar and wind power generators.
India has huge potential of biomass power to supply reliable and clean power to the industries and grid. In spite of the huge potential and other benefits of being labour intensive industry, the biomass power industry is not taking up as it should. The paper identifies frequent revisions in biomass tariff along with measures to promote biomass power for the industries initially in the biomass potential states. The biomass power industry has the potential to generate revenue along with power provided the issues linked to tariff and fuel stock are addressed.