Presentation by Presentation by Indian Sugar Mills Association 22 nd - - PowerPoint PPT Presentation

CERC Public Hearing on Tariff Fixation for CERC Public Hearing on Tariff Fixation for Non‐conventional Energy Sources

Presentation by Presentation by Indian Sugar Mills Association

22nd July , 2009

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Bagasse based Cogeneration in India

Sugar Industry began cogen capacity addition following MNES promotional policy

• f 1993‐94.

Cogen capacity addition further boosted with preferential tariffs announced by SERC’s following direction given in Electricity Act 2003 and National Electricity Policy. Present installed cogen capacity ‐ 3090 MW Future investment in the sector largely dependant on the promotional policy & measures by the Govts. and Regulatory authorities. CERC has already considered the directives laid down in Electricity Act 2003 and National Electricity Policy to promote co‐generation and, hence, we are limiting our National Electricity Policy to promote co generation and, hence, we are limiting our submission on the important parameters considered for determination of bagasse based cogen tariff in the draft Regulation.

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Capital Cost

Capital cost of Rs 445 lacs/ MW for first year of control period (2009‐10) is considered in the draft Regulation ( Based on the data from IREDA and UNFCCC) TNERC in its tariff order dated 06.05.2009 for co‐generation projects has considered capital cost of Rs. 4.67 crores / MW (Based on the average figure suggested by IREDA) Evacuation cost of about Rs 25‐30 lacs per MW is to be borne by the developer. Capital cost of about Rs 5.0 crores per MW need to be considered for tariff determination.

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Depreciation

Depreciation of 6% considered in the draft Regulation based on term loan of 12 years. The tenure of loan advanced by the banks and FIs is around 7 to 9 years. None of the cogen projects have got the loan period extending beyond this period. TNERC in its recent order dated 06 05 2009 on cogen tariff has allowed TNERC in its recent order dated 06.05.2009 on cogen tariff has allowed depreciation @ 7.84% per annum till depreciation accumulates to 90% of the project cost. This may be considered in this Regulation also.

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Plant Load Factor

Operational period of 240 days considered (uniform for all States) in the draft Regulation ‐ 180 days crushing season and 60 days non‐crushing season. C hi d f i ifi tl f St t t St t L t 10 Crushing days of season vary significantly from State to State. Last 10 years average data for major states indicate U.P. ‐ 126 days, A.P. ‐ 120 days, Karnataka ‐ 149 days Tamil Nadu ‐ 185 days Crushing season of a State must be based on average crushing period of that State PLF should be state specific For operation during off season, tariff should take into account price of bagasse purchased at market price.

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Bagasse Price

Proposed guidelines suggest bagasse price based on cost of equivalent calorific value of coal based on thermal power plants located in the respective States coal based on thermal power plants located in the respective States. Wide variation in State to State bagasse price evaluated based on proposed guidelines ‐ Rs 761/MT in MP to Rs 1327/MT in Haryana Cogen plants are located near load centers. Fair comparison could only be drawn with coal based thermal plants located near load centers. The price of bagasse based on average coal price at Harduaganj, Panki and Parichcha Thermal Power Stations of Uttar Pradesh as reported in the generation tariff order of UPERC for the year 2008‐09 works out to be Rs.1300 per MT, against Rs 953/MT assumed in the draft regulations. Market price of bagasse is now established & should ideally be the basis for price

• determination. This varies from state to State and in U.P. bagasse price is currently around
• determination. This varies from state to State and in U.P. bagasse price is currently around

Rs 2300/MT ex‐factory. Unless cogenerators get a fair and competitive price for bagasse , they will not be i ti i d t t

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incentivised to generate power.

Gross Station Heat Rate

Gross SHR of 4000 Kcal/KWH considered in draft regulation for bagasse based cogeneration plants . The normative ratio of fuel cost between power and steam considered as 60:40 in the proposed guideline .This implies that fuel cost for power generation corresponds to SHR of 2400 Kcal/ KWH which is contradictory. The bagasse consumption during season for power generation including process steam is found to be between 2.5 to 2.7 Kg per unit of electricity generated depending on the operating parameters of the plant. This translate into Gross SHR of 5625 to 6075 Kcal per Kg of bagasse. A Gross SHR of 4000 Kcal/KWH has been considered in the draft regulation for bagasse based cogeneration plants. It may be worth mentioning that the power and steam ratio varies from plant to plant during the season and the steam requirement for process is generally not more than 20 to 25% of the total steam

• generation. Therefore, a ratio of power to steam should be in the ratio of 75 to 25.

To have an actual idea of heat requirement of power generation, it would be prudent to consider

• ff‐season operation when the plant is exclusively used for power generation. The SHR during off‐

season is observed to be about 4000 KCal/KWH as per the actual operation data.

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CDM Benefit Sharing

Proposal to pass on share of gross CDM proceeds to beneficiaries ‐ 10% in second year & increased by 10% every year till it reaches 50%. Sharing of CDM benefits unfair and unjust ‐ CDM benefits are only for bridging viability gap. Sharing of the CDM benefit will disqualify the project for CDM admissibility Most cogen projects have faced rejection – Sharing CDM benefits with the beneficiary by way of a suitable adjustment in the tariff unjustified

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Scheduling of electricity from renewable sources

Draft regulations propose that biomass power and non‐fossil fuel based cogen projects with installed capacity above 10 MW shall be be subjected to Scheduling and dispatch code under the Indian Electricity Grid Code (IEGC) and CERC (Unscheduled interchange and related matters) Regulations, 2009 The cogen plants are continuous process by nature and any non despatch of The cogen plants are continuous process by nature and any non‐despatch of power would render the heat for power generation waste Cogen plants must be categorized as must run

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Tariff Design

Draft Regulation proposes normative tariff on levellised basis for the Tariff Period. g p p Renewable energy technologies having single part tariff with two components – Tariff on levellised basis for fixed cost component. Fuel cost component on year of

• peration basis
• peration basis.

Discount factor equivalent to cost of capital Levellisation for the ‘useful life’ of the Renewable Energy project while Tariff for the period equivalent to ‘Tariff Period’. Levellisation would affect project revenue stream – Insufficiency of funds in initial Levellisation would affect project revenue stream Insufficiency of funds in initial years to service financial liabilities Control period considered three (3) years. Tariff revision would affect the levellised value of tariff determined initially. Tariff should be based on the normative parameters to cover annual financial

• bligations.

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• bligations.

Parameters CERC Draft Regulation 2009 Comments by ISMA

Summary of the parameters

• n Tariff for Renewable

Energy

Tariff Design Levelised tariff based on useful lif f th j t Normal yearly tariff based on actual parameters be ll d life of the project. allowed. Capital Cost

• Rs. 4.55 crores per MW

Rs 5 Cr/MW including transmission evacuation charges PLF 60% based on 240 days PLF should be State specific based on crushing y

• peration

p g season of respective states. Fuel Cost/ Bagasse price Bagasse price based on State wise cost of equivalent calorific l f l i f Market price of bagasse should ideally be considered. value of coal varying from Rs.761 per MT in MP to Rs.1327 per MT in Haryana If determined based on equivalent price of coal, then price of bagasse based on coal price of thermal plants located near load centres should be id d considered. SHR 4000 Kcal/ KWh with an allocation of fuel cost between power and steam in the ratio SHR of 4000 Kcal/Kwh for power generation needs to be considered.

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p

• f 60:40

Summary of the parameters ‐ contd

Parameters CERC Draft Regulation 2009 on Tariff for Renewable Energy Comments by ISMA

A ili 8 5% Sh ld b 10% d t ll iti Auxiliary Consumption 8.5% Should be 10% due to smaller capacities O&M Expenses 13.35 lacs/MW (3% of capital cost) Should be 4% of capital cost as it is much higher in comparison to conventional thermal plants ) p p Return on Equity 17% pre‐tax for first 10 year 18% post‐tax Depreciation 6% based on 12 year loan period 7.84% depreciation should be allowed based on TNERC order dated 6 5 2009 for bagasse based period TNERC order dated 6.5.2009 for bagasse based cogen plants. Carbon Credit Sharing proposed The CDM benefit therefore should remain with the developer. Scheduling As per scheduling and despatch code. Must run status since cogeneration is a continuous activity.

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Th k Thank you

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Installed Cogen Capacity in India

State Number of units Total cogeneration (MW) State Number of units Total cogeneration (MW) Bihar 2 23.0 Uttar Pradesh 57 1254.5 b Punjab 3 41.0 Maharashtra 21 416.5 Karnataka 27 610.0 Andhra Pradesh 13 195.0 Tamil Nadu 24 550.0 Total : 147 3090.0 Source: Communication from ISMA of 25th March, 2009

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State‐wise crushing season days (1990‐2009)

Year U.P. A.P. Karnataka Tamil Nadu 1999‐00 133 130 174 185 2000‐01 125 119 159 179 2001‐02 150 114 145 191 2002‐03 158 142 158 170 2003‐04 113 106 130 170 2004‐05 117 97 180 210 2005‐06 124 124 187 265 2006‐07 158 173 152 234 2007‐08 120 127 99 143 2008‐09* 65 70 110 112 2008 09 65 70 110 112 5 year average (99‐00 to 03‐04) 135 122 149 167 5 year average 117 118 149 204 5 year average (04‐05 to 08‐09) 117 118 149 204 10 year average ( 1990 – 2009) 126 120 149 185

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Price & GCV of Coal for FY 2008‐2009

S NO THERMAL POWER STATION Price of Coal GCV of Coal (K Cal/Kg) S.NO. THERMAL POWER STATION (Rs/MT) (Approved) (K Cal/Kg) (Approved) 1 Panki 2167 3755 2 Harduagunj 2227 3898 3 Parichha 2175 3512 4 Parichha Extn 2175 3512 4 Parichha Extn 2175 3512 Average 2095 3644 Source : UPERC tariff order dated 6.3.09 for U.P. Rajya Vidyut Utpadan Nigam Ltd Baggase price equivalent to coal cost = 2096 / 3644 x 2250 = Rs. 1293 per MT

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