Ex Memo RE Tariff Regulation 2012 17

EXPLANATORYMEMORANDUM_RENEWABLEENERGYTARIFFREGULATIONS_DRAFTFORCIRCULATION
ExplanatoryMemorandum For DraftTermsandConditionsfor DeterminationofTariff For RenewableEnergySources November,2011
CENTRALELECTRICITYREGULATORYCOMMISSION (CERC),NEWDELHI
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1. BACKGROUND In exercise of powers conferred under Section 61 read with Section 178 (2) (s) of the Electricity Act, 2003 (36 of 2003) (herein after the Act), the Commission framed the Central Electricity Regulatory Commission (Terms and Conditions for Tariff determination from Renewable Energy Sources) Regulations, 2009 (herein after RE Tariff Regulations 2009) dated 16.09.2009. The Control Period specified was of three years ending on 31.03.2012. The said Regulations also state that the Commission shall undertake the exerciseofrevisioninRegulationsfornextControlPeriodatleastsixmonthspriortothe endofthefirstControlPeriod.Hence,theCommissionhasinitiatedtheexerciseofframing RETariffRegulationsforthenextControlPeriod. 2. SCOPEOFRETARIFFREGULATIONS 2.1 InaccordancewithSection79readwithSection62oftheAct,theCommissionisrequired todeterminethetariffforthecentralsectorgeneratingstationsorthegeneratingstations with composite scheme for sale of electricity to more than one State. Accordingly, it is proposed that RE Tariff Regulations shall be applicable in all cases where tariff for a generating station or a unit thereof based on renewable sources of energy. Further, in cases of wind, small hydro, biomass, nonfossil fuel based cogeneration, biomass gasifier based,biogasbasedpowerprojectsandsolarpowerprojectstheseRegulationsshallapply subjecttothefulfillmentofeligibilitycriteriaasspecifiedundertheRegulations.Para 6.4 (3) of National Tariff Policy empowers the Commission to lay down the guidelines for pricingofnonfirmpower.ThePara6.4(3)readsasunder,
APPLICABILITYOFREGULATIONS
(3)The Central Commission should laydown guidelinesforpricing nonfirm power, especially from nonconventional sources, to be followed in cases wheresuch procurement isnotthroughcompetitivebidding.
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CERC RE Tariff Regulations are also a guiding factor for the State Electricity Regulatory Commissions in terms of Section 61(a) of the Act and the aforesaid provision of the Tariff Policy. 2.2 The tariff determined under these Regulations shall be applicable in respect of RE technologies meeting specific Eligibility Criteria. The Commission proposes to retain the EligibilityCriteriaasspecifiedintheRETariffRegulations2009forthesmallhydro,biomass powerprojectbasedonrankinecycletechnology,nonfossilfuelbasedcogeneration,Solar PV and Solar Thermal Power Projects. The Ministry of New and Renewable Energy (MNRE),videitscirculardated27.06.2002,hadissuedaguidelinetoconsiderWindPower Density (WPD) of 200 watt/m2 at 50 meter hub height as the minimum requirement for suitability of wind power project development. Accordingly, RE Tariff Regulations 2009 specified the same as eligibility criteria for the wind energy projects. With change in wind turbine technology and better efficiency, even the lower wind regimes have become exploitable.Consideringthesame,theMNRE,videitscirculardated01.08.2011,hadissued anewguidelinewhereinithasbeendecidedthathereafter,norestrictionwillexistforWind Power Density criteria as far the development of wind power project is concerned. Therefore,theCommissionproposeseligibilitycriteriaforwindenergyprojectsaccordingly. The Commission also proposes to specify eligibility criteria for the Biomass Gasifier and biogasbasedpowerprojects. EligibilityCriteriaforthenextControlPeriodareasunder:
(a) Windpowerproject using new windturbinegenerators,located at the sites approved
ELIGIBILITYCRITERIA
by State Nodal Agency/StateGovernmentonlyforzoningpurpose.

(b)Small hydro project located at the sites approved by State Nodal Agency/ State
Government using new plant and machinery, and installed power plantcapacitytobe lowerthanorequalto25MWatsinglelocation.
(c)Biomass power project based on Rankine cycle technology using new plant and
machinerybased on Rankine cycle technology and using biomass fuelsources,

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provideduseoffossilfuelisrestrictedonlyto15%oftotalfuelconsumptionon annualbasis.
(d)Nonfossil fuel based cogeneration project using new plant and machinery and is in
accordance with the definition and also meets the qualifying requirement outlined below: TOPPINGCYCLEMODEOFCOGENERATION Any facility that uses nonfossil fuel input for the power generation and also utilizes the thermal energy generated for usefulheatapplicationsinotherindustrialactivitiessimultaneously. Provided that for the cogeneration facility to qualify under topping cycle mode, the sumof usefulpower outputandone halftheuseful thermal output begreaterthan45%ofthefacilitysenergyconsumption,duringseason. EXPLANATIONForthepurposesofthisclause, (i)Usefulpoweroutput is the gross electrical output fromthe generator. Therewill be an auxiliary consumption in the cogeneration plant itself (e.g. the boiler feed pump and the FD/ID fans). In order to compute the net power output it would be necessary to subtract the auxiliary consumption from the gross output. For simplicity of calculation, the useful power output is defined as the gross electricity (kWh)outputfromthegenerator. (ii)UsefulThermalOutput is the useful heat (steam) that is provided to theprocess bythecogenerationfacility. (iii)EnergyConsumptionofthe facilityisthe usefulenergyinputthatissupplied bythefuel(normallybagasseorothersuchbiomassfuel).
(e) SolarPVandSolarThermalPowerProject BasedonTechnologiesapprovedbyMNRE.
(f)
Biomass Gasifier based Power Project using new plant and machinery and having a Grid
connectedsystemthatuses100%producergasengine,coupledwithgasifiertechnologies approvedbyMNRE.
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EXPLANATORYMEMORANDUM_RENEWABLEENERGYTARIFFREGULATIONS_DRAFTFORCIRCULATION (f) Biogas based Power Project using new plant and machinery and having grid connected
systemthatuses100%Biogasfiredengine,coupledwithBiogastechnologyforcodigesting agricultureresidues,manureandotherbiowasteasmaybeapprovedbyMNRE. 2.3 APPROACHFORDEVELOPMENTOFTARIFFNORMS
Whiledeterminingthetariffnormsfollowingaspectshavebeenconsidered:
(a) Detailed review of the Tariff Orders / Regulations notified by the various SERCs and the approachesconsideredindeterminingthenormsfortariffforaspecificREtechnology. (b) Scrutiny and analysis of the actual project cost details and information about performanceparametersinrespectofexistingREprojectsbasedoninformationgathered fromfinancialinstitutionsandalsoavailableinthepublicdomain. (c) Comparative analysis of project cost and performance parameters in respect of similar RE technologyapplicationsintheinternationalcontext. (d)Feedback/views/commentsofthevariousstakeholdersreceivedontheRETariffRegulations 2009inthesubjectmatter. Thetariffnormshavebeencategorizedbroadlyunderthreesections,namelyGeneral Principles, Financial Principles and Technology specific Principles. On the basis of RE technologies covered under the Regulations, the Explanatory Memorandum has been dividedintothefollowingsections: i. ii. iii. iv. GeneralPrinciples FinancialPrinciples TechnologyspecificPrinciples:WindEnergy Technology specific Principles: Biomass based generation with Rankine cycle technology
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v. vi. vii. viii. ix. x.
TechnologyspecificPrinciples:NonfossilfuelbasedCogeneration TechnologyspecificPrinciples:SmallHydroPower TechnologyspecificPrinciples:SolarPV TechnologyspecificPrinciples:SolarThermal TechnologyspecificPrinciples:BiomassGasifierbasedpowergeneration TechnologyspecificPrinciples:Biogasbasedpowergeneration
BroadapproachadoptedfordevelopmentofnormsforthepurposeofRE Tariff determination in respect of various RE technologies has been presented diagrammaticallybelowandthesamehasbeenelaboratedundersubsequentsections.
ComponentsofRETariffdetermination
General Principles
TariffPeriod
Financial Principles
DebtEquity Mix Loan &Finance charges
Operational Principles
Wind,Small Hydro,SolarPV andThermal
CUF
CapitalCost Benchmarking
Regulatory Approach
Biomass, Bagasse,Biogas andBiomass gasifier

FuelMix Calorific value SHR FuelPrice Auxiliary Consumption O&M Expenses
Control Period
MarketApproach
Tariff Structure
Depreciation
Auxiliary Consumption O&M Expenses
ActualCost Approach
TariffDesign
Returnon Equity
TariffRevision Mechanism
Working Capital
3. GENERALPRICIPLES Underthissection,thegeneralprinciplesforREtariffdeterminationsuchasControlPeriod, tariffperiod,tariffstructure,tariffdesign,tariffreviewmechanismetc.havebeendiscussed.
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3.1
CONTROLPERIOD
IntheRETariffRegulations2009,three(3)yearsControlPeriodwasspecified. While specifying the same, the Commission had considered the advantages and disadvantages of specifying a short duration Control Period of 2 years or long duration ControlPeriodof5years.
The Commission was of the view that the short duration Control Period would lead to frequent revision of tariff. However, regulatory concern could be easily addressed due to close regulatory monitoring and on the other hand, while long duration Control Period wouldofferlongtermcertaintyofregulatoryprinciples,itmightleadtosituationwhenthe underlying tariff parameters would hold valid through the long duration of the Control Period. The Commission had also considered the gestation period of different RE technologiesforspecifyingtheControlPeriodsothatprojectconceptualizedonthebasisof thesenormscouldreceivethesametariff. Consideringthematuritylevelofthenonsolartechnologies,theCommissionnowproposes to keep second Control Period of five years. The tariff determined for the RE projects commissioned during the Control Period, shall continue to be applicable for the entire durationoftheTariffPeriod.Itishowever,alsoproposedthatthebenchmarkcapitalcost forSolarPVandSolarThermalprojectsmaybereviewedannuallybytheCommission. The Commission also proposes that the revision in Regulations for next Control Period wouldbeundertakenatleastsixmonthspriortotheendofthepresentControlPeriodand in case Regulations for the next Control Period are not notified until commencement of next control period, the tariff norms as per these Regulations shall continue to remainapplicableuntilnotificationoftherevisedRegulationssubjecttoadjustmentsasper revisedRegulations.
3.2
TARIFFPERIOD
In the RE Tariff Regulations2009, it is specified that Tariff Period for Renewable Energy
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power projects except in case of Small Hydro Projects below 5 MW, Solar PV, and Solar thermalpowerprojectsshallbethirteen(13)years.IncaseofSmallhydroprojectsbelow5 MW,thetariffperiodshallbethirtyfive(35)yearsandincaseofSolarPVandSolarthermal powerprojectstheTariffPeriodshallbetwentyfiveyears(25)years.
While specifying above mentioned Tariff Period of 13 years for some technologies, the CommissiontookbalancedapproachbasedontheprovisionsoftheActandtheTariffPolicy which outline preferential treatment to renewable energy projects till such time that RE technologies are allowed to compete in the market. The Commission also considered that theregulatorysupportduringthe13yeartariffperiodwillprovidecertaintytotheproject developer to meet its debt service obligations and after this period, the competitive procurement of renewable energy will ensure that power is procured at most reasonable rate,andbenefitpassedontotheconsumer. However, different dispensation provided to small hydro projects below 5 MW and useful life of 35 years was considered as tariff Period because of smaller size and such projects mightnotbeabletoexploreothermarketmodelsaftertariffperiodof13yearsandwould havetodependonlocaldistributionlicenseeforsaleofpower.Forsolartechnologieswhich areatnascentstageofdevelopmentinIndia,theCommissionspecifiedTariffPeriodof25 years(usefullife)toensureadequateregulatorysupportisavailabletoSolarPowerprojects tillsuch timeenough confidenceis generatedamongstallstakeholdersabout solarpower technologies. The Commission proposes to retain the Tariff Period as specified for the various renewable energy technologies in the RE Tariff Regulations2009 for the next ControlPeriod. The Commission proposes that in case of Biomass Gasifier and biogas based power projects useful life at 20 years for determination of Tariff as suggested in the MNRE letter dated 7.12.2010,referringrequestletterofGraminAbhirudhiMandli,Banglore.Itisalsoinlinewith theusefullifespecifiedforbiomassbasedpowerprojectswithrankinecycletechnologyand bagasse based cogeneration projects. The Commission proposes the tariff period for such project equaltothe usefullifeof20yearsbecausesuchprojectsaresmallerinsize (upto2
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MW)andsuchprojectsmightnotbeabletoexploreothermarketmodelsaftertariffperiodof 13yearsandwillhavetodependonlocaldistributionlicenseeforsaleofpower. 3.3 TheRETariffRegulations2009specifiethatthetariffforrenewableenergytechnologiesnot havingfuelcostcomponentshallbesingleparttariffconsistingofthefollowingfixedcost components: i. ii. iii. iv. v. Forrenewableenergytechnologieshavingfuelcostcomponent,likebiomasspowerprojects and nonfossil fuel based cogeneration, single part tariff with two components, fixed cost componentandfuelcostcomponent,wasspecified.TheCommissionconsideredthatsingle part tariff structure for RE technologies involving no fuel cost component is the simplest methodtooperationaliseconsideringnumberofprojectsandunitsizeofeachprojectand thesamehasbeeninpracticeforREtechnologiesforlongtime. In case of RE technologies involving fuel cost components single part tariff with two componentsrepresentingfixedcostcomponentandvariablecostcomponentwasspecified. Any generation beyond threshold PLF shall also receive same tariff since risk and cost associated with project sizing, project location etc is expected to be borne by project developer.
TARIFFSTRUCTURE
Returnonequity; Interestonloancapital; Depreciation; Interestonworkingcapital; Operationandmaintenanceexpenses.
The Commission proposes to continue with the same tariff structure for the next Control Period.
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3.4
TARIFFDESIGN
In the RE Tariff Regulations2009, it was specified that the tariff would be determined on levellised basis for all RE technologies for tariff period. While specifying the same the Commission considered that Levellised tariff approach is a balanced approach amongst varioustariffdeterminationmechanismslikefrontloadedtariff,backloadedtariffetc. TheCommissionwasoftheviewthatthefrontloadedtariffmeetstherequirementofthe REprojectdeveloperatthesametimeitleadstosignificantcashflowimpactfortheutilities duringinitialperiodandinaddition,therewouldbelittleincentivefortheREdeveloperto continuewiththeexistingenergypurchaseagreementwiththeUtilityoncethedebtservice obligations are over. On the other hand, backloaded tariff structure meets with the requirementofutilitybut,significantbackendingwouldimpactprojectcashflowandmay notmeetrequirementoftheprojectlenders/investors. The Commission also considered that Levellised tariff with appropriate discount rate representingweightedaveragecostofcapitalonthebasisofnormativedebt:equityratio specifiedintheRegulationsortimevalueofmoneyyieldsnecessarybalancebetweenfront loaded or backloaded tariff. The discount rate used for renewable energy tariff determination was the pretax Weighted Average Cost of Capital (WACC). The WACC was computedasunder: WACC=CostofDebt+CostofEquity Where, CostofDebt=NormativeDebtX(NormativeRateofInterest) CostofEquity=NormativeEquity*(PreTaxReturnonEquity) NowitisproposedtouseposttaxWACCforthedeterminationoflevellisedtariffinthenext Control Period. This is based on the understanding that while taking the investment decisions the developer considers post tax WACC as the discount rate to post tax incrementalcashflowstoarriveatNPVoftheproject. PostTaxWACC=CostofDebt+CostofEquity Where,
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CostofDebt=NormativeDebtX(NormativeRateofInterest)X(1CorporateTaxRate) CostofEquity=NormativeEquityX(PostTaxReturnonEquity) TheCommissionintheRETariffRegulations2009alsoaddressedthedebtservicecoverage /cashflowrelatedconcernduringtheinitialyearbyspecifyingthehigherdepreciationrate of7%perannumforfirst10yearshasbeenspecified.TheCommissionisoftheviewthat sincemostoftheREtechnologieshaveachievedmaturitylevel,itwouldbepossibleforthe developerstogetloanfromlenders/financialinstitutionforlongerdurationofsay12years. Consideringthesame,Commissionnowproposesdepreciationrateof5.83%perannumfor first12yearsandbalancedepreciationtobespreadduringremainingusefullifeoftheRE projects. 3.5 RETariffRegulations2009specifiedthattheprojectspecifictariffwouldbedeterminedby theCommissiononcasetocasebasis,fornewREtechnologieslike:MunicipalSolidWaste Projects,HybridSolarThermalPowerplants,Biomassprojectotherthanthatbasedon Rankine Cycle technology application with water cooled condenser, any other new renewableenergytechnologiesasapprovedbyMNRE.
PROJECTSPECIFICTARIFF
It was also specified in the RE Tariff Regulations2009 that the financial norms as may be specified except for capital cost, would be ceiling norms while determining the project specifictariff.
TheCommissionproposestoretainthesaidprovisionintheRegulationsforthenextControl Period and also proposes to include hybrid options (i.e. renewablerenewable or renewableconventionalsources)forwhichREtechnologyisapprovedbyMNRE.
3.6
SCHEDULINGOFRENEWABLEENERGY
In the RE Tariff Regulations2009, it was specified that all renewable energy power plants
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exceptforbiomasspowerplantswithinstalledcapacityof10MWandabove,andnon fossilfuelbasedcogenerationplantsshallbetreatedasMUSTRUNpowerplantsandshall not be subjected to merit order despatch principles. For the biomass power generating station(rankinecycletechnology)withaninstalledcapacityof10MWandaboveandnon fossilfuelbasedcogenerationprojectsitwasspecifiedthatsuchprojectsbesubjectedto scheduling and despatch code as specified under Indian Electricity Grid Code (IEGC) and Central Electricity Regulatory Commission (Unscheduled Interchange and related matters) Regulations,2009includingamendmentsthereto. While specifying the above provision, the Commission considered that generation from renewable energy sources such as wind, solar, small hydel etc. are nonfirm in nature as criticallydependentonvagariesofnature.TheCommissionalsoconsideredthattheuseof the same needs to be maximised as and when such resources are available in order to optimallyutilisetheassetsandmaximisegenerationfromsuchassetsalreadyinstalled. Forthebiomasspowerandnonfossilfuelcogenerationprojectsof10MWandabove,the Commission considered that such projects are amenable to scheduling for daytoday operations, as it has established fuel management chain. However, for such projects with installed capacity of lower than 10 MW, in view of their smaller size and complexities of ensuringvisibilityatSLDCtheCommissionconsideredthatsuchprojectsarenotamenable toschedulinganddespatchrequirementunliketheircounterpartswithinstalledcapacityin excessof10MW. With significant increase in share of renewable energy in total energy portfolio, frequent increaseorreductioninenergyinjectionwithinshortdurationmaynotbeintheinterestof safe,smoothandreliablegridoperations.Inordertohavefairideatosystemdeveloperof possibleenergyinjectiontothesystemoperatorfromsuchrenewableenergysources,the Commission investigated and deliberated the feasibility of scheduling of wind and solar energyprojectsforimposingforecastingrequirementsonsuchREsourcesandcoveredthis aspectintheIndianElectricityGridCode(IEGC)2010. AccordingtotheIEGC2010,witheffectfrom1.1.2012,schedulingofwindpowergeneration
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plantswouldhavetobedoneforthepurposeofUnscheduledInterchange(UI)wherethe sum of generation capacity of such plants connected at the connection point to the transmissionordistributionsystemis10MWandaboveandconnectionpointis33KVand above.Theschedulebywindpowergeneratingstationsmayberevisedbygivingadvance noticetoSLDC/RLDC,asthecasemaybe.Suchrevisionsbywindpowergeneratingstations shall be effective from 6th timeblock, the first being the timeblock in which notice was given.Further,eight(8)revisionsareallowedforeach3hourtimeslotstartingfrom00:00 hoursduringtheday. IEGC2010alsospecifiesthatthescheduleofsolargenerationtobegivenbythegenerator based on availability of the generator, weather forecasting, solar insolation, season and normalsolargenerationcurveandsamewillbevettedbytheRLDCinwhichthegeneratoris located and incorporated in the interstate schedule. If RLDC is of the opinion that the scheduleisnotrealistic,itmayaskthesolargeneratortomodifytheschedule. ConsideringtheaboveprovisionsrelatedtoschedulingofwindandsolarenergyintheIEGC 2010,scopeoftherelevantRegulationintheRETariffRegulationforthenextControlPeriod isproposedtobeexpanded. 4. FINANCIALPRINCIPLES Under this section, the financial principles such as Benchmarking of Capital Cost, Debt: Equity, Loan and Finance Charges, Depreciation, Return on Equity, Interest on Working Capitalhavebeendiscussed.
4.1
CAPITALCOST
For development of benchmark capital cost in respect of different RE technologies, the Commission considered inter alia, the capital cost norms as approved by various SERCs in lastthreeyears.SuchcapitalcostnormapprovedbySERCsvariedfromStatetoState.Most oftheSERCshavenotconsideredtheyearonyearbasisvariationincapitalcostduringthe
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ControlPeriodwhichmeansthatprojectcommissionedatthebeginningofControlPeriod willhavesamecapitalcostastheprojectstobecommissionedattheendofControlPeriod, providingnomechanismforconsideringtheinflationimpactinthecapitalcost.
The Commission also compared capital cost for installation of renewable energy projects awarded through competitive tender process in last three years by public and private entities particularly, wind energy projects. Information about capital cost of projects awardedthroughcompetitiveroutecouldreflectrealcosttowardscapacityadditionrather than any notional cost as assumed under regulated approach. However, under supply shortage scenario, with limited number of equipment manufacturers, market based approach,islikelytoreflectinfluenceofdemandsupplygapratherthanunderlying costs.
The Commission has also collected capital cost information for RE projects as provided by IREDAandPFC.Further,capitalcostinformationsubmittedbytheprojectdevelopersto ExecutiveBoardofUnitedNationsFrameworkConventionforClimateChange (UNFCCC)undertheProjectDesignDocument(PDD)forprojectsregisteredasCDMprojects arealsoconsidered. The analysis for benchmark capital cost formulation for each RE technology has been elaboratedseparatelyunderTechnologyspecificsection. 4.2 TheCommissioninitsRETariffRegulations2009specifiedcapitalcostindexationformulato considertheyearonyearvariationfortheunderlyingcapitalcostparametersforeach REtechnologyexceptSolarPVandSolarThermal. CapitalcostforeachREtechnologyhasbeenspecifiedasfunctionofsiteindependent parametersmainlyplantandmachinerycostandotherfactors(F1,F2andF3)representing sitespecificfactorssuchasland/civilworks,erectionandcommissioningandfinancingcost andInterestDuringConstruction(IDC)asoutlinedbelow:
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CAPITALCOSTINDEXATIONFORMULA
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CC(n)=P&M(n)(1+F1+F2+F3)
F1=FactorforLandandCivilWorks
F2=FactorforErectionandCommissioning
F3=FactorforIDCandFinancingCost Thecapitalcostbreakupasfurnishedbythedevelopersandavailableinpublicdomainhad beenconsideredandseparatefactorsspecifiedforeachREtechnologydependingon itspercentagecomponentwithinoverallcapitalcostassummarizedbelow. Technology Wind Biomass/Biogas Bagasse SmallHydro
Plant& Machinery 80% 75% 80% 70%
LandandCivil Work(F1) 0.08 0.10 0.10 0.16
Erectionand IDCand commissioning(F2) financing(F3) 0.07 0.09 0.08 0.10 0.10 0.14 0.07 0.14
Indices influencing Plant and Machinery across projects have been identified as material indiceswhichconstituteunderlyingcostparametersforplantandmachinery.Indices consideredwerewholesaleindexforsteelandwholesaleindexforelectricalmachineryfor indexation purpose as these two elements constitute major part of plant and machinery cost.Appropriateweightageforeachindexhadbeenconsidered. Following formulation specifiedintheRETariffRegulation2009toarriveatCapitalCostforsecondyearandthird yearofControlPeriod.
P&M(n)=P&M(0)*(1+d(n)) d(n)=[a*{(SI(n1)/SI(0))1}+b*{(EI(n1)/EI(0))1}]/(a+b) Where, CC(n)=CapitalCostfornthyear P&M(n)=PlantandMachineryCostfornthyear P&M(0)=PlantandMachineryCostforthebaseyear d(n)=CapitalCostescalationfactorforyear(n)ofControlPeriod SI(n1)=AverageWPISteelIndexprevalentforfiscalyear(n1)oftheControlPeriod

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SI(0)=AverageWPISteelIndexprevalentforfiscalyear(0)atthebeginningofControl Periodi.e.April2008toMarch2009 EI (n1) = Average WPI Electrical Machinery Index prevalent for fiscal year (n1) of the ControlPeriod EI(0)=AverageWPIElectricalandMachineryIndexprevalentforfiscalyear(0)atthe beginningoftheControlPeriodi.e.April2008toMarch2009 a=ConstanttobedeterminedbyCommissionfromtimetotime,forweightagetoSteel Index b = Constant to be determined by Commission from time to time, for weightage to ElectricalMachineryIndex The Commission proposes to continue with the above formulation of indexation in the Capital cost for the next Control Period for the wind, bagasse based cogeneration, small hydroprojects,biomasspowerprojectsincludingbiomassgasifierandbiogasbasedpower projects. The Commission proposes the following formulation to arrive at Capital Cost for secondyearandthirdyearofthenextControlPeriod. P&M(n)=P&M(0)*(1+d(n)) d(n)=[a*{(SI(n1)/SI(0))1}+b*{(EI(n1)/EI(0))1}]/(a+b) Where,
CC(n)=CapitalCostfornthyear P&M(n)=PlantandMachineryCostfornthyear P&M(0)=PlantandMachineryCostforthebaseyear d(n)=CapitalCostescalationfactorforyear(n)ofControlPeriod SI(n1)=AverageWPISteelIndexprevalentforfiscalyear(n1)oftheControlPeriod SI(0)=AverageWPISteelIndexprevalentforfiscalyear(0)atthebeginningofControl Periodi.e.April2011toMarch2012 EI (n1) = Average WPI Electrical Machinery Index prevalent for fiscal year (n1) of the ControlPeriod EI(0) = Average WPI Electrical and Machinery Index prevalent for fiscal year (0) at the beginningoftheControlPeriodi.e.April2011toMarch2012
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a=ConstanttobedeterminedbyCommissionfromtimetotime,forweightagetoSteel Index b = Constant to be determined by Commission from time to time, for weightage to ElectricalMachineryIndex 4.3 The Commission in its RE Tariff Regulations2009 specified that the generic tariff to be determinedbasedonsuomotupetition,thedebtequityratioshallbe70:30. ForProjectspecifictariff,itwasspecifiedthatiftheequityactuallydeployedismorethan 30% of the capital cost, equity in excess of 30% shall be treated as normative loan and whereequityactuallydeployedislessthan30%ofthecapitalcost,theactualequityshallbe considered for determination of tariff. CERC RE Tariff Regulations2009 also provided for normativedebtequityratioof70:30forGeneratingCompany/licensee. It is proposed to continue with the debt to equity ratio of 70:30 in line with RE Tariff Regulations 2009 for the determination of renewable energy tariff in the next control period. 4.4
DEBTEQUITYRATIO
LOANANDFINANCECHARGES
4.4.1
LOANTENURE
In the RE Tariff Regulation2009, the Commission after considering the suggestions from stakeholdersspecifiedanormativeloantenureof10yearsforthepurposeofdetermination of tariff. The Commission is of the view that since most of the RE technologies have achieved maturity level, it should be possible for the developers to get loan from lenders /financialinstitutionforlongerdurationofsay12years.Consideringthesame,Commission nowproposesnormativeloantenureof12yearsforthepurposeofdeterminationoftariff.
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4.4.2
INTERESTRATE
ConsideringtheperceivedhigherriskprofileofRenewableenergyprojectsascomparedto conventionalpowerprojectsnormativeinterestrateof150basispointsaboveStateBankof India long term prime lending rate (SBILTPLR), as on 1st April of the relevant year of the ControlPeriodwasspecifiedintheRETariffRegulations2009. With effect from 01.07.2010, SBI replaced Benchmark Prime Lending Rate (BPLR) regime withnewregimeofBaseRate.However,SBIhasstillcontinuedwiththeBenchmarkPrime LendingRate(BPLR)(alsoreferredtoasSBAR)andprevailingBPLRis14.75%.
BaseRate % 07.50 07.60 08.00 08.25 08.50 09.25 09.50 10.00
EffectivefromDate 01.07.2010 21.10.2010 03.01.2011 14.02.2011 25.04.2011 12.05.2011 11.07.2011 13.08.2011
BenchmarkPrime LendingRate(BPLR)% 12.25 12.35 12.75 13.00 13.25 14.00 14.25 14.75
The Commission took note of the interest rates charged by IREDA and PFC to various renewable energy projects. IREDA classifies borrowers/investors into four grades and depending on the grade, charges interest rate from 11 to 13.25% depending upon the renewableenergytechnology.Thematuredtechnologies,like:wind,cogenandSmallhydro projects,arebeingfinancedatlowerinterestratecomparedtosolarPVandsolarthermal projects.
ScheduleA,AAA.RatedPSU StateSector Wind,Cogen,Hydro SolarPV SolarThermal OtherSectors
GradeI 11.00 11.00 11.75 12.25 12.50 13.50
GradeII
GradeIII
GradeIV
11.25 12.00 12.50 12.75
11.50 12.25 12.75 13.00
11.75 12.5 13.00 13.25
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In view of the above, the Commission proposes normative interest rate of three hundred (300)basispointsabovetheaverageStateBankofIndiaBaseRateprevalentduringthefirst six months of the previous year of the relevant year of the Control Period for the determinationoftariffforthenextControlPeriod. 4.5 IntheRETariffRegulations2009theCommissionspecifieddepreciationperannumbased on Differential Depreciation Approach' over loan tenure and beyond loan tenure over usefullifecomputedonStraightLineMethod.Thedepreciationratespecifiedforthefirst 10yearsoftheTariffPeriodshallbe7%perannumandtheremainingdepreciationshallbe spreadovertheremainingusefullifeoftheprojectfrom11thyearonwards. While specifying the same, the Commission had considered the concern of the investors/lendersaboutdebtservicecoverageneedsasmorerenewableenergycapacityis envisagedtobefundedbywayofnonrecoursefinancebasis.TheCommissionisoftheview thatsincemostoftheREtechnologieshaveachievedmaturitylevelitshouldbepossiblefor thedeveloperstogetloanfromlenders/financialinstitution,forlongerdurationofsay12 years.Thetherefore,Commissionnowproposesdepreciationrateof5.83%perannumfor first12yearsandbalancedepreciationtobespreadduringremainingusefullifeoftheRE projects. 4.6 In the RE Tariff Regulations2009, the Commission specified that the normative Return on Equity of pretax 19% per annum for the first 10 years and pretax 24% per annum 11th yearsonwards.Itwasfurtherspecifiedthatthevaluebasefortheequityshallbe30%ofthe capitalcostorlower,incaseofactualequityislessthan30%ofthecapitalcost(incaseof projectspecifictariffdetermination). The Commission while specifying the Return on Equity of pretax 19% per annum for the
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DEPRECIATION
RETURNONEQUITY
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first10yearshadconsideredtaxholidaybenefitavailableundertheSection80IAofIncome TaxAct,1961.Renewableenergyprojectdevelopersareexemptedfromincometaxonall earningsgeneratedfromtheprojectforany10yearconsecutiveassessmentyearduringthe first15yearsoftheprojectlifeandtheMinimumAlternateTax(MAT)wouldbeapplicable onbookprofitofsuchundertaking. TheCommissionproposestocontinuewiththesamepropositionwithprevailingMATand Corporate Tax rate. The Commission proposes to consider normative Return on Equity of 20%perannumforthefirst10yearsconsidering16%posttaxreturnonequitygrossedup with prevailing MAT Rate 20% (Normal rate18.5% + Surcharge 5% + Education Cess 3% (2%+1%),=16%/(120%)) and 24% per annum 11th years onwards considering prevailing corporate tax rate 32.445%(Normalrate30%+Surcharge5%+EducationCess3%(2%+1%)) 4.7 The Working Capital requirement in respect of wind energy projects, Small Hydro Power, SolarPVandSolarthermalpowerprojectsareproposedtobecomputedinaccordancewith thefollowing: INTERESTONWORKINGCAPITAL
WindEnergy/SmallHydroPower/SolarPV/Solarthermal A. Operation&Maintenanceexpensesforonemonth; B. Receivables equivalent to 2 (Two) months of energy charges for sale of electricity calculatedonthenormativeCUF; C. Maintenancespare@15%ofoperationandmaintenanceexpenses.
The Working Capital requirement in respect of biomass power projects with rankine cycle technology, nonfossil fuel based cogeneration projects, Biomass Gasifier based power projectsandbiogasbasedpowerprojectsareproposedtobecomputedinaccordancewith thefollowingclause:
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Biomass Power (with rankine cycle technology), Nonfossil fuel Cogeneration, BiomassGasifierbasedpowerprojectsandBiogasbasedpowerprojects A. FuelcostsforfourmonthsequivalenttonormativePLF; B. Operation&Maintenanceexpenseforonemonth; C. Receivablesequivalentto 2(Two)monthsoffixedandvariablechargesforsaleof electricitycalculatedonthetargetPLF; D. Maintenancespare@15%ofoperationandmaintenanceexpenses.
Interest on Working Capital is proposed to be kept at interest rate equivalent to average StateBankofIndiaBaseRateprevalentduringthefirstsixmonthsofthepreviousyearplus 350basispointsoftherelevantyearoftheControlPeriod,forthedeterminationoftarifffor thenextControlPeriod. 4.8SUBSIDYANDINCENTIVE Regulation22oftheRETariffRegulations2009,specifiethattheCommissionshalltakeinto consideration any incentive or subsidy offered by the Central or State Government, includingaccelerateddepreciationbenefitifavailedbythegeneratingcompany,forthe renewableenergypowerplantswhiledeterminingthetariff.Italsoprovideprinciplestobe considered for ascertaining income tax benefit on account of accelerated depreciation, if availed,forthepurposeoftariffdeterminationwhichisreproducedasunder:
a) Assessment of benefit shall be based on normative capital cost, accelerateddepreciationrateasperrelevantprovisionsunderIncomeTaxAct andcorporateincometaxrate. b)CapitalisationofREprojectsduringsecondhalfofthefiscalyear. c) Per unit benefit shall be derived on levellised basis at discount factor equivalenttoweightedaveragecostofcapital. Provided further that in case any Central Government or State Government notificationspecificallyprovidesforanyGenerationbasedIncentiveoverand abovetariff,thesameshallnotbefactoredinwhiledeterminingTariff.
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The Commission proposes to continue with the same principles during the next control period. 4.9TAXESANDDUTIES TheCommissionproposesthatthetariffdeterminedundertheseRegulationsisexclusiveof taxes(otherthancorporatetaxandminimumalternativetax)anddutiesasmaybelevied bytheappropriateGovernment: Providedthatthetaxes(otherthancorporatetaxandminimumalternativetax)andduties leviedbytheappropriateGovernmentshallbeallowedaspassthroughonactualincurred basis. 5. TECHNOLOGYSPECIFICNORMS:WINDENERGY Under this section, technology specific parameters such as Capital Cost norm, capital cost indexation mechanism, Capacity Utilization Factor (CUF), O&M Expenses for wind energyprojectshavebeendiscussed.
5.1
CAPITALCOST
The Commission in its RE tariff Regulations2009 specified capital cost for wind energy projectsat` 515Lakhs/MW(FY200910duringfirstyearofControlPeriod)andlinked to theindexationformulaasoutlinedunderRegulation25ofthesaidRegulations.TheCapital costsconsideredforeachyearofthecontrolperiodareasunder:
Year 200910 201011 201112
DateofRegulation/ Order 17.09.2009 26.02.2010 09.11.2010
Capitalcost ` Lakh/MW 515.00 467.13 492.52
Wind projects require a capital investment comprised of a number of other costs beyond
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theturbinesalone.However,asshowninthetablebelow,approximately75%ofthetotal investment costisassociatedwith the costofthewindturbines. Othercosts includegrid connection, foundations, installation, and constructionrelated expenses, summarized as percentages. These are based on a selection of data from Germany, Denmark, Spain, and theUK. Parameters Turbine,tower,blades(exworks) Gridconnection Foundation Electricinstallation Land FinancialCosts Roadconstruction Consultancy Beforewegointodetailsofwindpowerprojectcostof,let'shavealookattheinternational trend. 5.1.1INTERNATIONALTREND:INSTALLEDWINDPOWERPROJECTCOST U.S.DepartmentofEnergysinJune2011publishedareporton2010WindTechnologies Market Report, prepared by the Lawrence Berkeley National Laboratory (LBNL), which revealsthatthetotalProjectcostswhichwerebottomedoutin200104;roseby$850/kW on average through 2009; held steady in 2010 at around $2,160/kW and appear to be droppingin2011ataround$2000/kW.Similartrendwasalsoobservedintheturbinecosts whichwerebottomedoutin200104;roseby$0.70m/MWonaveragethrough2009;held steady in 2010 at around $1.5m/MW and appear to be dropping in 2011 at around $1.20 m/MW.
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Shareofthetotalcost(%) 6884 210 19 19 15 15 15 15
Source:IEAWindTask26:MultinationalCaseStudyoftheFinancialCostofWindEnergy:March2011
24
InstalledWindPowerProjectCostsoverTime
Source:U.S.DepartmentofEnergysinJune2011publishedareporton2010WindTechnologiesMarketReport
TurbineCostsoverTime
TheBloombergNewEnergyFinancesWindTurbinePriceIndexFebruary,2011whichalso showsthattheglobalturbinecontractssignedinlate2010fordeliveryinH12011andH2 2011displaypricing,withaveragevaluesat0.98m/MW($1.33m/MW). HoweverinIndiancontextthetotalinstalledcostislowerincomparisontoUSandEurope market which is around $1.30m/MW. Reason of variance could be shipping cost, terrain, cheaper labour cost, insurance etc. Wind energy sector in India registering 50% growth in
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the last financial year and with a trend of 2530% growth in the coming period, the cost economicsinthecountryseemstobeabitdifferentfromtheinternationalmarket. Inordertoderivebenchmarkcapitalcostforwindenergyprojectsfortheyear2012 13,followingapproacheshavebeenconsideredviz.regulatoryapproach,actualprojectcost approach, and market based approach. The analysis of various approaches and summary resulthavebeendetailedinfollowingparagraphs. 5.1.2REGULATORYAPPROACH TheCommission,underRegulation24(2)oftheRETariffRegulations2009dated17.9.2009, specified the normative capital cost for wind energy projects as ` 515 Lakh / MW for FY 200910 which was linked to the indexation mechanism specified under Regulation 25 of the RE Tariff Regulations2009. The Commission determined the normative capital cost of theWindEnergyProjectsas`467.13Lakh/MWforFY201011(OrderNo.53/2010dated 26.02.2010)and`492.52Lakh/MWforFY201112(OrderNo.256/2010dated9.11.2010). AfterthenotificationofCERCRETariffRegulations2009,theOERC,MPERC,MERCandKERC came out with the wind energy Tariff Regulations/Orders. Details of the capital cost specifiedareasunder:
NameoftheCommission
DateofOrder /Regulation 23012009 15052009 17.09.2009 11.12.2009 31012010 26.02.2010 14.05.2010 14.09.2010 09.11.2010 29.04.2011
Capitalcost `Lakh/MW 525.00 535.00 515.00 470.00 (inc.evacuationcost) 462.00 467.13 500.00 (inc.evacuationcost) 467.13 492.52 489.53
RERC TNERC CERC(FY0910) KERC GERC CERC(FY1011) MPERC OERC(FY1011toFY1213) CERC(FY1112) MERC(FY1011)
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TheMPERC,OERCandKERChavenotconsideredtheyearonyearbasisvariationincapital costduringtheControlPeriod.TheMERCandOERChavefollowedCERCspecifiednormfor capitalcostoftheproject.TheKERCandMPERChaveincludedevacuation/gridconnectivity costaspartofCapitalCost.
5.1.3 ACTUALPROJECTCOSTAPPROACH Under this approach, the capital cost data has been collected from two sources namely projects sanctioned by IREDA and PFC as well as projects registered with UNFCCC. The capital cost data for around 41 projects which translates into 1127.24 MW of capacity additionhavebeenanalyzedunderthisapproach. Technology Wind IREDAhasfinanced14projectsoftotal790MWduringFY201011andFY201112.Capital costperMWrangesfrom`5.53to`6.45.Weightedaveragecostworksoutto`5.90Cr./ MW PFCfinanced3windenergyprojectsoftotalcapacityof124.2MWin200708.Capitalcost perMWrangesfrom`5.45Cr./MWto`7.10perMW.Weightedaveragecostworksout to ` 6.15 Cr./ MW. However, since such capital cost data are prior to the CERC RE Tariff Regulations2009, the same is not considered for the determination of capital cost benchmarknorm.
IREDA Nos. 14 MW 790.00
PFC Nos. 03 MW 124.20
UNFCC Nos. 28 MW 429.24
TheCapitalcostdataof19projectsoftotal221MWregisteredwithUNFCCCcommissioned duringFY200911havebeenanalyzed.Capital costper MWrangesfrom`4.43to`6.62 Cr./MW.Theweightedaveragecostofthesameworksoutto`5.32Cr./MW

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5.1.4 MARKETBASEDAPPROACH In case of wind energy projects, the various private and public entities have set up wind farms by inviting the tenders from various wind project developers. The total 34.20 MW capacity awarded through tender process during the FY201011 of total 5 wind projects. Capital cost per MW ranges from ` 5.82 Cr./ MW to ` 6.18 per MW. Weighted average costworksoutto` 6.00Cr./MW.
5.1.5 CAPITALCOSTFORMULATIONFORWINDENERGY ItappearsfromthetablebelowthattheperMWcapitalcosthasincreasedovertheperiod. However,suchincreasewassignificantbetweentheyearsFY2010andFY2011,mainly duetosteepriseinmaterial/equipmentcost. Source IREDA(FY1011) IREDA(FY1112) UNFCCC(FY0910) UNFCCC(FY1011) Tender(FY1011) Total The average wind energy project cost in the industry stands higher at around ` 5.23 to 6 Crore/MWdependinguponthesize,capacity,sitesasagainsttheCERCsnormative`4.92 Crore/MWfor201112.Consideringtheabove,Commissionproposesthenormativecapital cost for first year of the next Control Period at ` 5.25 Cr. /MW (without evacuation infrastructurefrompoolingsubstationtonearestgridsubstation).
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No.ofProjects 10 4 14 5 5 38
MW 570 220 137 84 34 1045
CapitalCost `CroreperMW 5.90 5.90 5.23 5.47 6.00
28
5.2
CAPITALCOSTINDEXATIONMECHANISMFORWINDENERGY
The Commission proposes indexation mechanism, as mentioned in the para 4.2, to be applicableincaseofwindenergyprojectsforadjustmentsincapitalcostovertheControl PeriodwiththechangesinWholesalePriceIndexforSteelandElectricalMachinery. 5.3 TheRETariffRegulations2009specifiedfollowingCUFnormsonthebasisofwindresource assessmentcarriedoutbyCWETinfourgroupsofannualmeanwindpowerdensityrange measuredat50meterhubheight: AnnualMeanWindPowerDensity(W/m2) 200250 250300 300400 >400 It was also specified that Wind Atlas as and when prepared by CWET would be basis of categorizationofwindsties.ItalsomentionsthatasitmighttakesometimetogetthisAtlas completed,theWindPowerdensitymapprovidedbyCWET(asannexedunderSchedule1 of RE Tariff Regulations2009) would be the basis for categorization of wind sites as an interim arrangement. Further, a provision was incorporated in the RE Tariff Regulations 2009 which enabled the Commission, by notification in Official Gazette, to amend such SchedulefromtimetotimebasedontheinputsprovidedbyCWET/MNRE. CWEThaspublishedIndianWindAtlasinFebruary2010.Accordingtotheinputsprovided by CWET, the assessment was done through Mesoscale modeling with 5 kM resolution, and that there would be huge uncertainty in WPD values at boundary lines where 250 becomes251or300becomes301.CWETsuggestedthatitisnotadvisabletouseAtlasfor tariff fixation and the same is also mentioned in the preface of atlas. Further, CWET has CUF 20% 23% 27% 30% CAPACITYUTILISATIONFACTOR(CUF)
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also communicated that the theoretical energy in the WPD cannot really represent the power getting out from todays model of wind turbine as actual performance depends on thepowercurveandefficiencyofmachine. Withchangeinwindturbinetechnologyandbetterefficiency,eventhelowerwindregimes havebecomeexploitable.Consideringthesame,theMNRE,videacirculardated1.08.2011, issuedanewguideline,whereinitisdecidedthathereafter,norestrictionwillexistforWind PowerDensitycriteriaasfarthedevelopmentofwindpowerprojectisconcerned.
InaccordancewiththeMNREguidelinesforwindmeasurement,thewindmasteitherput upbyCWEToraprivatedeveloperandvalidatedbyCWETwouldbenormallyextended10 km from the mast point to all directions for uniform terrain and limited to appropriate distance in complex terrain with regard to complexity of the site at the desecration of C WET.TheCommissionproposesthatbasedonsuchvalidationbyCWET,statenodalagency shouldcertifyzoningoftheproposedwindfarmcomplex.
Thereisacleartrendoflinearlyincreasinghubheightinproportiontorotordiameter.Most manufacturersofferarangeoftowerheightswithanygiventurbinemodel,tosuitvarying siteconditions.
Source:http://www.windenergythefacts.org,GarradHassan
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In general trend is towards steadily growing hub heights, with most major wind turbine manufacturers now routinely offering turbines with hub heights around 80 meters. While fixing the capital cost related norm based on the prevailing market price of wind turbines having average hub height of 80 meters, it is vitally essential to understand the impact of increaseinturbineheightfrom50metersto80metersonthewindspeedwhichrationally definescapacityfactorofwindturbinewhichrequiresextrapolationofabovereferredwind classat50metersto80metershubheights. The Commission approached CWET in this regard. CWET, vide letter dated 14.10.2011 informed us that CWET will not able to provide authentic data in this regard as measurementsat80mhubheightareavailableonlyatsomelocationsandtheydonothave turbinewisegenerationdataforanystate. TheLawrenceBerkleyNationalLaboratory(LBNL)didastudyReassessingWindPotential EstimatesforIndia:EconomicandPolicyImplicationswhereinwindpotentialathigherhub heights i.e. 80, 100 and 120 meters has been estimated. Wind power class, density and capacityutilizationfactoratsuchhigherhubheightsareasunder:
WindturbinesavailableinIndiahaving80meterhubheightsareconsideredforanalysis.To estimate energy content of available wind resource at mast location, Weibull distribution approachisadoptedwhichiswellacceptedinwindindustryandisthebasisforallhighend
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wind flow modelling softwares. It gives a good representation of the variation in hourly meanspeedoverayearatmanytypicalsites.Itindicatesfractionoftimeforwhichwindis atagivenvelocityVandischaracterizedbytwoparametersscaleparameterandshape parameter. Weibull parameters estimated at mast height are extrapolated to the hub height.Inthismethodmastheightandwindspeedsareextrapolatedtothehubheightofa turbine.
CapacityFactorAnalysis Airdensity Shapefactork ScalefactorC
Height 10 m
1.225kg/m3 1.95 (WS/Gamma(1+1/k)

50 m 80 m
Windclass 1
3 4 5 6 7
WindPower WindPower WindPower Density WindSpeed Density WindSpeed Density WindSpeed Scalefactor (W/m2) (m/s) ScalefactorC (W/m2) (m/s) ScalefactorC (W/m2) (m/s) C 0 0 0.00 0 0.0 0.00 0 0.0 0.00 50 3.5 3.92 100 4.4 4.93 122 4.7 5.27 100 4.4 4.93 199 5.5 6.21 244 5.9 6.64 112.5 4.5 5.13 224 5.7 6.46 274 6.1 6.91 125 4.7 5.31 249 5.9 6.69 305 6.3 7.15 137.5 4.9 5.49 274 6.1 6.90 335 6.5 7.38 150 5.0 5.65 299 6.3 7.11 366 6.7 7.60 175 5.3 5.95 349 6.6 7.48 427 7.1 8.00 200 5.5 6.22 399 6.9 7.82 488 7.4 8.37 225 5.7 6.46 448 7.2 8.14 549 7.7 8.70 250 5.9 6.70 498 7.5 8.43 610 8.0 9.01 275 6.1 6.91 548 7.7 8.70 670 8.2 9.30 300 6.3 7.12 598 7.9 8.95 731 8.5 9.58 350 6.6 7.49 698 8.4 9.43 853 8.9 10.08 400 6.9 7.83 797 8.7 9.86 975 9.3 10.54 700 8.4 9.44 1395 10.5 11.88 1707 11.3 12.70 1000 9.4 10.63 1993 11.9 13.38 2438 12.7 14.31
Thestandardpowercurveofturbinesisappliedasinputalongwithfrequencydistribution fordeterminationofgrosselectricitygeneration/CapacityUtilizationFactor(CUF)estimation at 80 meter hubheights. The Net generation/CUF is determined by considering suitable discountingfactorstothegrossgeneration/CUF. BasedontheaboveanalysisandLBNLstudyreport,theCommissionproposestodetermine windenergytariffatfollowingCUFnormsinfivegroupsofannualmeanwindpowerdensity rangeextrapolatedat80meterhubheight:
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AnnualMeanWindPowerDensity(W/m2) Upto200 200250 250300 300400 >400

CUF 20% 22% 25% 30% 32%
5.4
OPERATIONANDMAINTENANCE(O&M)EXPENSES
TheCommissioninitsRETariffRegulations2009specifiednormativeO&Mexpensesforthe firstyearoftheControlPeriod(i.e.FY200910)at`6.50LakhperMW.Theabovenormsfor O&M expense had been proposed in the Regulations after considering the O&M expense normsspecifiedbydifferentSERCsintheirTariffOrders.Italsoprovidethatthenormative O&MexpensesforthefirstyearoftheControlPeriod(i.e.200910)tobeescalatedatthe rate of 5.72% per annum over the tariff period for determination of the levellised tariff. Accordingly, the Commission considered O&M cost norm for wind energy as ` 7.26 Lakh/MWfordeterminationoftariffforFY201112. O&Mexpensesareasignificantcomponentoftheoverallcostofwindenergy,butcanvary substantiallyamongprojectsdependinguponthesizeoftheprojectandtechnologyofthe turbine. O&M costs are related to a limited number of cost components, including: Insurance; Regular maintenance; Repair; Spare parts, and Administration. Some of these costcomponentscanbeestimatedrelativelyeasily.Forinsuranceandregularmaintenance, it is possible to obtain standard contracts covering a considerable share of the wind turbinestotallifetime.Conversely,costsforrepairandrelatedsparepartsaremuchmore difficult to predict. And although all cost components tend to increase as the turbine gets older,costsforrepairandsparepartsareparticularlyinfluencedbyturbineage;startinglow andincreasingovertime. Wind energy developers generally offer O&M rates on annual basis with an escalation provision.MostofthedevelopersareofferingfirstyearO&Mfreeofcostandsubsequently thereisacompoundedescalationof5%percent.O&Magreementsbeingsignedbetween
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the wind farm developers and investors are in the range of ` 7 Lakh to ` 12 Lakh/MW. GearlesswindturbinehascomparativelylowerO&Mcostthanwindturbinewithgearbox. Additionally most of the wind energy projects also would end up spending 0.25% of the projectcostasinsurance,andthesameneedstobeaddedtoo.Inaddition,from1.1.2012 wind energy generators are covered under ambit of scheduling requirement. Therefore, forecasting expenses are also needed to be added in the O&M expanses. The O&M cost normapprovedbytheStateElectricityRegulatoryCommissionsareasunder:
ERCs CERC APERC GERC KERC MPERC MERC RERC TNERC 15.05.2009
O&MCost Rs.6.50Lakh/MW(200910) 1.25%ofCC 1.5%ofCC 1.25%ofCC 1.0%ofCCforFirst5yrs 1.46%forfirstyr(6.87Lakh/MW) Powerplant1.25% Trans.Lines3%oflinescost 1.1%ofCC,InsuranceCost0.75%of m/ccostfor1styr,reducedby.5%of previousyrsinsurancecosteveryyr.
Escalation 5.72% 5.00% 5.00% 5.00% 5.72% 5.72% 5.72% 5.00%
Considering the above, the Commission proposes the operation and maintenance cost for FY 201213 at ` 9 Lakh/MW (i.e. O&M cost for FY 1112 escalated with 5.72% annual escalation+0.25%ofcapitalcostasinsurancecost+forecastingCost). 6. Under this section, technology specific parameters such as Capital Cost norm, capital cost indexation mechanism, Capacity Utilization Factor, Auxiliary Consumption and O&M Expensesforsmallhydropowerprojectshavebeendiscussed. 6.1 TheCommissioninitsRETariffRegulations2009specifiednormativecapitalcostforsmall
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TECHNOLOGYSPECIFICNORMS:SMALLHYDROPOWER
CAPITALCOST
34
hydroprojectsduringfirstyearofControlPeriod(FY200910).Capitalcostforsubsequent yearstobedeterminedonthebasisofindexationformulaasoutlinedunderRegulation29 oftheRETariffRegulations2009. In line with the indexation mechanism, the Commission determined the normative capital costforFY201011(videOrderNo.53/2010dated26.2.2010)andFY201112(videOrder No.256/2010)asshownbelow, CapitalCost (FY200910) (`Lakh/MW) CapitalCost (FY201011) (`Lakh/MW) CapitalCost (FY201112) (`Lakh/MW)
Region
ProjectSize
HimachalPradesh, Below5MW Uttarakhandand 5MWto25MW NorthEasternStates
700 630
634.94 571.44
669.42 602.48
OtherStates
Below5MW 5MWto25MW
550 500
498.88 453.53
525.97 478.16
TheCommissionspecifiedCapitalCostnormsforSHPbelow5MWhigherthanSHPbetween 5 MW to 25 MW as small size hydro projects below 5 MW have higher capital cost and higheroperatingcostduetotheirsmallsize,remotelocations,gridconnectivityissuesetc. 6.1.2COSTCONSIDEREDBYTHESTATEREGULATORYCOMMISSIONS AfternotificationofCERCRETariffRegulations2009,KERC,UERC,MERC,HPERCandOERC have come out with the Small Hydro Tariff Regulations/Order. Details of the capital cost specifiedareasunder:
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Karnataka Himachal
Orissa
Maharashtra
Uttarakhand
Project Cost (`Cr/Mw)
4.75
6.50
6.70
Upto5MW:7.00 5to10MW:6.85 1to5MW:4.98 10to15MW:6.70 >5to25MW:4.53 15to20MW:6.50 20to25MW:6.30 June 2010 July 2010
Order
December February 2009 2010
May 2010
MERC and UERC have followed CERC specified norm for capital cost of the project. MERC has specified indexation mechanism in line with CREC RE Tariff Regulations2009. UERC, OERCandKERChavenotconsideredtheyearonyearbasisvariationincapitalcostduring the Control Period which means that project commissioned at the beginning of Control PeriodwillhavesamecapitalcostastheprojectstobecommissionedattheendofControl Period, providing no mechanism for considering the inflation impact in the capital cost. KERChasincludedevacuation/gridconnectivitycostaspartofCapitalCost. 6.1.3ACTUALPROJECTCOSTAPPROACH Capitalcostinformationfor18SmallHydroProjects(which translates into 153.60 MW)as provided by IREDA, PFC as well as capital cost information submitted by the project developers to Executive Board of United Nations Framework Convention for Climate Change (UNFCCC) in the Project Design Document (PDD) for projects to get registeredunderCDMactivityhave beenanalysedunderthisapproach. Source IREDA PFC UNFCCC Total Under this approach, the capital cost data has been collected from two sources namely projects sanctioned by IREDA and PFC as well as projects registered with UNFCCC. The
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NoofProjects 7 12 1 20
Capacity,MW 78.15 83.45 15.00 176.60
36
capital cost data for around 18 projects which translates into 153.60 MW of capacity addition have been analyzed under this approach. IREDA has financed 4 projects of total 63.75MWduringFY201011.CapitalcostsperMWduringFY201011areasunder:
Region
ProjectSize
No.of projects 1 2 1
CapitalCost (FY201011) (`Lakh/MW) 796 743 538
HimachalPradesh,Uttarakhand Below5MW andNorthEasternStates 5MWto25MW OtherStates Below5MW 5MWto25MW
IREDA has financed 3 projects of total 14 MW during FY 201112. Capital costs per MW duringFY201112areasunder:
Region
ProjectSize
No.ofprojects 2 1
CapitalCost (FY201011) (`Lakh/MW) 817 518
HimachalPradesh,Uttarakhand Below5MW andNorthEasternStates 5MWto25MW OtherStates
Below5MW 5MWto25MW
PFCfinanced10smallhydroprojectsoftotalcapacityof72.75MWin200809.Capitalcost perMWrangesfrom`7.89Cr./MWto`15.39Cr./MW.Weightedaveragecostworksout to ` 9.59 Cr./ MW. However, since such capital cost data are prior to the CERC RE Tariff Regulations2009, of is not considered for the determination of capital cost benchmark norm. PFC financed 2 small hydro projects in Kerala State of total capacity of 10.7 MW in 200910.
Region
ProjectSize Below5MW 5MWto25MW
No.of projects 1 1
MW 3.2 7.5
OtherStates
CapitalCost (FY200910) (`Lakh/MW) 594 458
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Capitalcostdataof1projectsoftotal15MWcommissionedinKarnatakaStateregistered withUNFCCCcommissionedduringFY0910havingperMWcapitalcostat`5.26Cr./MW.
6.1.4 CAPITALCOSTFORMULATIONFORSMALLHYDRO Theweightedaveragecapitalcostsunderdifferentcategoriesunderactualcostapproachin FY200910arecomparedwiththeCERCconsideredcostinthesameyearasunder: Region ProjectSize CapitalCost (FY200910) CapitalCost (FY201011) CapitalCost (FY201112)
HimachalPradesh, Uttarakhandand NorthEasternStates OtherStates
Below5MW 5MWto25MW Below5MW 5MWto25MW
No.of (`Lakh/ No.of (`Lakh/ No.of (`Lakh/ project MW) project MW) project MW) 1 2 594 503 1 2 1 796 743 538 2 1 817 518
From the above analysis it is found that the capital cost for small hydro projects varies significantlyacrosstheStates,mainlyduetovariationincivilworksandtransportationetc. The Commission proposes to restore at the original level i.e. Capital cost specified for the FY200910intheTETariffRegulations2009.Thenormativecapitalcostforfirstyearofthe nextControlPeriodisproposedasunder: CapitalCost (FY201213) (` Lakh/MW) 700 630 550 500
Region HimachalPradesh,Uttarakhandand NorthEasternStates OtherStates
ProjectSize Below5MW 5MWto25MW Below5MW 5MWto25MW
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6.2
CAPITALCOSTINDEXATIONMECHANISMFORSMALLHYDRO
The Commission proposed indexation mechanism, as mentioned in the para 4.2, to be applicableincaseofsmallhydroprojectsforadjustmentsincapitalcostovertheControl PeriodwiththechangesinWholesalePriceIndexforSteelandElectricalMachinery. 6.3 TheRETariffRegulations2009specifiethatCapacityUtilizationFactor(CUF)forthesmall hydroprojectslocatedinHimachalPradesh,UttarakhandandNorthEasternStatesshallbe 45%andforotherStates,CUFwas30%.ItwasfurtherspecifiedthatthenormativeCUFis netoffreepowertothehomestateifany,andanyquantumoffreepowerifcommittedby thedeveloperoverandabovethenormativeCUFshallnotbefactoredintothetariff.The above norms for CUF were derived on the basis of CUF considered by the SERCs while approvingthetariffforsmallhydroprojectsintheirrespectiveStates.TheCUFconsidered byvariousSERCsareasfollows: Andhra Pradesh 35% TheCommissionproposestoretainthenormspecifiedintheREtariffRegulations2009asit isforthenextControlPeriod. 6.4 The Commission in its RE tariff Regulations2009 specified the Normative Auxiliary Consumption for the small hydro projects of 1.0% for the determination of tariff. While specifyingtheabovenorm,theCommissionconsideredthatatypicalSHPprojecthasvery fewauxiliariesandpumpingunitsascomparedtolargesizehydroprojects.
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CAPACITYUTILISATIONFACTOR(CUF)
Uttaranchal
Maharashtra Karnataka
Himachal
U.P.
Orissa
45%
30%
30%
40%
35%
35%
AUXILIARYCONSUMPTIONFACTOR
39
The Commission proposes to retain the normative auxiliary consumption including transformationlossesof1%. 6.5 The Commission in its CERC RE Tariff Regulations2009 specified the normative O&M expensesforthefirstyearoftheControlperiod(i.e.FY200910).Whilespecifyingtheabove normtheCommissionconsideredtheoperationandmaintenanceexpensenormof2%of Capital cost specified in the CERC (Terms and Conditions for Tariff) Regulations, 2009 for newlargesizehydroprojects.Itwasfurtherconsideredthatthesmallhydroprojectswould nothavetheadvantageofeconomies ofscaletherefore,O&M expensefortheseprojects wouldbehigherthanthatspecifiedforlargehydroprojects. Regulation32ofRETariffRegulations2009providedforthenormativeO&Mexpensesfor smallhydroprojectsfortheyear200910whichshallbeescalatedattherateof5.72%per annumoverthetariffperiodfordeterminationofthelevellisedtariff.Accordingly,thetable belowpresentsthenormativeO&MExpensesconsideredbytheCommissioninitsRETariff OrderforFY201112,
O&MEXPENSEFORSMALLHYDRO
Region HimanchalPradesh, UttarakhandandNorth EasternStates OtherStates
FY0910 O&MExpense (`Lakh/MW) 21 15 17 12
FY1112 O&MExpense (`Lakh/MW 23.47 16.77 19.00 13.41
The Commission proposes the following O&M expenses norm for the first year of Control Period(i.e.FY201213)whicharedeterminedbyapplyingannualescalationfactorof5.72% perannumontheO&McostnormapplicableforFY201112:
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Region HimanchalPradesh, UttarakhandandNorth EasternStates OtherStates
FY1213 O&MExpense (`Lakh/MW) 25 18 20 14
7. TECHNOLOGYSPECIFICNORMS:BIOMASSPROJECTSRANKINECYCLE Under this section, technology specific parameters such as capital cost norm, capital cost indexation mechanism, plant load factor, auxiliary consumption, station heat rate, gross calorific value, biomass fuel price, biomass fuel price indexation mechanism and O&M Expenses, for biomass based power projects with rankine cycle technology have been discussed.
7.1
TECHNOLOGYASPECT
The tariff norms for biomass power projects under these Regulations have been developed in respect of Biomass power projects based on rankine cycle technology and usingbiomassfuelsourcesanduseoffossilfueltolimitedextent,provideduseoffossilfuel isrestrictedonlyto15%oftotalfuelconsumptiononannualbasis.
7.2 The Commission under Regulation 34 of the RE Tariff Regulations2009 specified the normative capital cost for the biomass power projects based on Rankine cycle technology applicationusingwatercooledcondenseras`450Lakh/MWforFY200910andlinkedto theindexationmechanismspecifiedunderRegulation35oftheRETariffRegulations2009. Accordingly,theCommissiondeterminedthenormativecapitalcostas`402.54Lakh/MW forFY201011and` 426.03Lakh/MWforFY201112.
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CAPITALCOSTBENCHMARKING
41
7.2.1
COSTCONSIDEREDBYTHESTATEREGULATORYCOMMISSIONS
AfterissuanceoftheCERCRETariffRegulations2009,variousSERCshaveissuedtheTariff Ordersforbiomassbasedgenerationprojects.Thelatestcostdataapprovedbythevarious StatesCommissionsareasunder: SERCs CapitalCost `Cr./MW 5.40:WaterCooled Condenser 5.85:AirCooled Condenser 4.25 Indexation Mechanism Asper Formula Order/ Regulation Regulations 23/01/2009 OrderNo.5of 2010: 17.05.2010 Regulations Dated 06.07.2010 Regulations 07.06.2010 OrderNo.5of 2010: 11.12.2009 Regulations Dated 27.01.2010 Orderdated 27.5.2011 Remark
RERC
TooknoteofCERC determinedCCfor FY1011 AsperCERC
GERC
Notprovided
UERC
4.50 4.03 (FY1011) 4.87 inclusiveof transmission infrastructurecosts 4.50 4.50
Notprovided
MERC
AsperCERC
AsperCERC
KERC
Notprovided
TooknoteofCERC specifiedCC for200910
JSERC HERC
Notprovided Notprovided
AsperCERC AsperCERC
7.2.3
ACTUALPROJECTCOSTAPPROACH
CapitalcostinformationforREprojectsasprovidedbyIREDAandcapitalcostinformation submitted by the project developers to Executive Board of United Nations FrameworkConventionforClimateChange(UNFCCC)intheProjectDesignDocument (PDD)forprojectstogetregisteredunderCDMactivityareconsidered.
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The capital cost data for around 10 projects which translates into 101.3 MW have been analysed under this approach. The table below summarises the average capital cost for theprojectsduringvariousyears.
Source
FY200910 No Capacity MW 4 4 36.8 36.8 Capital Cost,` Cr/MW 4.74 4.74
FY201011 No Capacity MW 2 2 4
FY201112
IREDA UNFCCC Total
No Capacit Capital Capital yMW Cost, Cost, `Cr/MW `Cr/MW 19.90 4.79 1 9.90 5.00 24.5 5.39 44.4 5.12
IREDAhasfinanced3projectsoftotal29.8MWduringFY201012.CapitalcostsperMWare rangingfrom`4.79Cr.to`5Cr./MW.TheCostBreakupfor9.9MWprojectfinancedby IREDAhavingtotalprojectcostofaround`50.0Cr.(Includingevacuationinfrastructurecost beyond point of connection and with Air Cooled condenser) as confirmed by the project developerareasunder: CivilWorks:07.0Cr. Plant&Machinery:34.0Cr.(IncludingTrans.Linecost,2CroreandAirCooledCondenser) IDC:03.5Cr. PreoperativeCharges:04.0Cr. MarginmoneyforW/C:01.5Cr.
IREDAusesfollowingbenchmarkcapitalcostnormforfinancingthebiomassbasedpower projectsduringFY201112:
Pressure Configuration (ata) 44 66 86 102 110
BiomassPowerproject (` Crore/MW) 6MW 7.5MW 10MW 4.03 3.93 3.79 5.38 5.19 5.03 5.59 5.37 5.15 5.93 6.05 5.77 5.89 5.61 5.72
MNRE vide its letter dated 30th September, 2011 submitted that the Capital cost of the biomassbasedpowerprojectdependsuponthetypeoffuel,whichinturndecidestheplant
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configuration and technology type. MNRE recommended project cost for various biomass categoriesforIPPandtailendprojectsasgiveninthetablebelow:
CostHead ProjectCostIPP(` Lakh/MW) ProjectCostTailEnd(` Lakh/MW) Straw Stalk Plantation Husk Straw Stalk Plantation Husk 87/515 87/515 48/435 48/435 48/435 48/435 SteamPressure/ 68/435 68/435 temperature (ata/0C) LandCiviland 545.5 522.6 517.2 517.2 650.0 650.0 650.4 650.3 EquipmentCost FuelLogistics 49.6 3.6 5.6 1.5 62.5 13.0 13.5 10.2 equipment PDDCharges 4.6 4.2 4.1 4.1 2.8 2.8 2.8 2.8 FinanceCharges 31.1 28.7 27.4 28.4 36.1 36.5 36.6 36.5 MarginMoney 19.3 19.2 19.2 18.8 19.5 19.4 19.4 19.4 TotalProjectCost 650.1 578.3 573.5 570 771.3 721.7 722.7 719.2 MNREfinallyrecommendednormativecapitalcostasshownbelow: ìnLakh Biomass Ricehusk Straw Others 7.2.4 Based on analysis of the actual project cost approach as well as the benchmark norm developed by the IREDA for financing the biomass based projects for FY 201112, the Commission proposes normative capital cost at ` 4.45 Crore/MW (` 5.0 Crore ` 0.20 (Evacuationinfra.Costbeyondpointofconnection)`0.35(DifferencebetweenAirCooled Condenser(ACC)andWaterCooledCondenser(WCC)=`4.45Crore/MW)forfirstyearof theControlPeriod. 7.3 The Commission proposes indexation mechanism, as mentioned in the para 4.1, to be applicableincaseofbiomassbasedpowerprojectsforadjustmentsincapitalcostover
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IPP(>5MW) 570 650 580
Tailend(<2MW) 720 770 720
CAPITALCOSTFORMULATIONFORBIOMASSPOWERPROJECT
CAPITALCOSTINDEXATIONMECHANISMFORBIOMASPROJECTS
44
the Control Period with the changes in Wholesale Price Index for Steel and Electrical Machinery. 7.4 TheCommissionspecifiedthethresholdPlantLoadFactorinitsRETariffRegulations2009 forthebiomassbasedpowerprojectswithRankinecycletechnologyfordeterminingfixed chargecomponentofTariffasunder: 1.DuringStabilisation:60% 2. Duringtheremainingperiodofthefirstyear(afterstabilisation):70% 3.From2ndYearonwards:80% Itwasfurther,specifiedthatthestabilizationperiodshallnotbemorethan6monthsfrom the date of commissioning of the project. The Plant load factor (PLF) being a critical performanceparameterforanypowerplantinstallationandsinceitisdependentonfactors suchasreliableandqualityfuelsupply,plantavailabilityandunconstrainedofftake,while specifying the above norm, the Commission considered the information available from IREDA/UNFCCCinrespectofbiomasspowerprojects.MostoftheProjectsassumecapacity utilizationat6070%duringthe1styearofoperation,and75%to80%fromthe2ndyear onwards. The Commission proposes to retain the norm specified earlier for the threshold PlantLoadFactorfordeterminingtariffforthenextcontrolperiod. 7.5 TheCommissioninthe RETariffRegulations2009specified thenormativeauxiliarypower consumption factor at 10% for the determination of tariff for biomass based power generationprojectswithRankinecycletechnology. WhilespecifyingtheabovenormtheCommissionconsideredthattheauxiliaryconsumption factorisoneofthekeyperformancefactorsandisdependentofthesizeoftheplant,needof
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PLANTLOADFACTOR(PLF)
AUXILIARYENERGYCONSUMPTION
45
preprocessing requirement of the biomass fuel and drive towards adopting energy conservationmethods. Auxiliarypowerconsumptioninapowerplantinfluencesthenetpoweravailableforexport fromanypowerplant.Lowertheauxiliaryconsumption,higherwillbethepowerthatcanbe exported. The major power plant auxiliaries in the power plant contributing to the auxiliary powerconsumptionare, BoilerFeedwaterPump CondensateExtractionPump CoolingWaterPumps IDFans FDFans CoolingTowerFans AirCompressor FuelHandlingEquipments
Lossesinthetransformers
AccordingtothestudycarriedoutbyNPCitvariesbetween10%&18%.Theysuggested thatpowerplantsshouldstrivetomaintainauxiliaryconsumptionwithin12%,whichcan beachievedifoperatedunderstableconditions.
The auxiliary consumption also depends on the plant availability and loading on the plant. Greater the plant availability & higher the plant loading, the lower will be the auxiliary consumption. The plant availability is largely dependent on the quality of fuel while the loadingonthepowerplantisgreatlyinfluencedbythegridconditions.
TheCommissionproposestoretainthenormasitisforthenextcontrolperiod. 7.6 TheCommissionspecifiedtheStationHeatRateforbiomasspowerprojectsbasedonRankine cycletechnologyat3800kCal/kWh.

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STATIONHEATRATE
46
WhilespecifyingtheabovenormtheCommissionconsideredthatalthoughthedesignStation HeatRateisoftheorderof34003600kCal/kWh,theoperationalefficiencyissignificantly lowerandconsequentlyoperationalstationheatrateishigherduetoseveralfactorssuchas deteriorationinqualityoffuelduetostorage,O&Mpracticesetc.
Theheatrateassessmentofthebiomassbasedpowerplantsisrequiredtobeevaluatedon the basis of the boiler efficiency and turbine performance. The Central Electricity Authority (CEA) came out with a report on operation norms for biomass based power plant in September 2005, wherein norm of 4500 kCal/kWh was suggested based on the analysis of datafurnishedbythe16projectsmostofthemhavingcapacityrangingfrom4MWto6MW. Fromthedesigndataprovidedbythebiomasspowerplants,CEAcalculatedTurbineheatrate at 3094 kCal/kWh. Weighted Average Gross heat rate of 16 projects was arrived at 4033 kcal/kWhbasedonthedesignsteamparametersandefficiencyoftheboilerderivedfromthe performancecurveadjustedbasedonthemoisturecontentinthebiomassfuelwhichisinthe rangeof77%. CEAinitsreportmentionedthattherearevariationinparameterslike:fuelquality,moisture content,fueltype,condenservacuumandgridfrequencyetc.areobservedduringtheactual operationoftheplant.Biomasssuchascottonstalk,chillystalkandmustardstalketc.,create problem in the boiler tubes, thus affecting the performance of the boiler. Therefore, CEA suggested allowing 5% allowance over average gross heat rate. Further, noted that since biomassisstoredinopen,itisaffectedbyclimatechanges.Certainpercentageweightwillget loss due to lost of moisture and degradation due to weather changes and loss during the strongwind.Therefore,CEAalsosuggestedallowingadditional5%over4234.65totakecare offuelrelatedlosseslikequalitativeandquantativedegradationofbiomasswhichworksout to4446.38kCal/kWhsay4500kcal/kWh. The National Productivity Council also conducted a field study for MEDA for assessment of heatrateofcommissionedbiomasspowerplantsinMaharashtra.Theobservationandresults ofthestudyconductedareasunder:
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Sr. No. 1 2 3 4 5 6 7 8 9 10 11
NameoftheUnit
Parameters SteamFlow SteamPress. SteamTemp. SteamEnthalpy CondensateEnthalpy TotalHeatInput TotalPowerOutput TurbineHeatrate Steamrate BoilerEfficiency StationHeatRate
Shalivahana Rake Saradambika GAPS Green Power PowerPlant Power& EnergyLtd. Ltd. Pvt.Ltd. Infra.Pvt.L Unit 10MW 10MW 10MW 10MW TurbineInletCondition TPH 35.6 42.4 43.0 57.3 Kg/cm2 64.9 63.7 61.3 42.3 DegC 432 471 487 458 kCal/kg 775.7 799.6 809.6 798.9 kCal/kg 56 61 75.4 43 TurbineHeatRate kCal/Kg 25621320 31309254 31570600 43282834 kWh 7850 9825 9250 12310 kCal/kWh 3264 3178 3413 3516 Kg/kWh 4.5 4.3 4.6 4.7 % 79.5 75.5 73.1 76.6 kCal/kWh 4090 4221 4669 4590
Based on the acceptable Boiler Efficiency & Turbine Heat rate, the NPC suggested that SHR shouldbeinfollowingrange: ProjectwithBoiler Type AFBC TravelingGrate MNREsubmittedtheirrecommendationfortariffguidelinesvideletterdated30thSeptember, 2011whereinitwasstatedthattheSHRdependsupontypeoffuelwhichinturndecidesthe plantconfigurationandtechnology. Itisfeasibletouseveryhighpressureandtemperatureandsuperiorcombustiontechnology forricehuskfuel.However,itwouldnotbecosteffectivetousesuchhighendtechnologyfor ricestrawasithaspoorphysicalandchemicalcharacteristics. While mustard husks, stalks and plantation fuels are somewhat in between rice husk and straw. MNRE recommendations on SHR for different technology and fuel are shown in the followingtable: StationHeatRate kCal/KWh 40004100 41504250
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Biomass Source Mustard Stalk Paddy Straw RiceHusk Plantation
Gross Technology Calorific Value Travelling Grate Travelling Grate AFBC AFBC 3300 3300 3200 3200
IPP (8MWCapacity)
Tailend (2MWCapacity)
Steam Steam NetStation Steam Steam NetStation Pressure Temperature Heatrate Pressure Temperature Heatrate (ata) (0C) (kCal/kWh) (ata) (0C) (kCal/kWh) 68 68 87 87 465 435 515 515 4401 4465 4127 4127 48 48 48 48 435 435 435 435 5753 5753 5753 5753
MNREfinallysuggestedfollowingSHRforbiomasspowerplantgreaterthan5MW: Biomass Source RiceHusk Straw Others TheCommissionisoftheviewthatspecifyingdifferentbenchmarknormsfordifferenttypes ofbiomassfuelandsizeoftheprojectfordeterminationofgenerictariffwillnotencourage projectdevelopertouseefficientsystemofconvertingbiomassintoelectricity.Basedonthe acceptable Boiler efficiency and Turbine Heat rate, the Commission proposes norm for the Station heat rate at 4000 kCal/kWh for the purpose of determination of tariff for the next ControlPeriod. 7.7
IPP (>5MW) 4100 4400 4150
TailEnd (<2MW) 5200 5500 5200
GROSSCALORIFICVALUE(GCV)
The Commission specified calorific value for eight States in the RE Tariff Regulations2009, whichcomprisesaroundapproximately70%ofestimatedsurplusbiomasspowerpotentialin the country for the mix of biomass fuel available in particular State. Further, in order to determine the weighted average calorific value of biomass fuel mix, the calorific values of individual biomass have been considered as maintained by Indian Institute of Science, Bangalore. States wherein biomass potential is yet to be explored, have been considered underOtherStatecategory.TheBiomassAtlaspreparedandmaintainedbytheIndian
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InstituteofScience,BangaloremapsStatewiseavailabilityofthedifferenttypeofbiomass fuel and also presents the power generation potential using each of the biomass fuel. The followingmethodologywasfollowedwhilespecifyingnormstatewise:

Typeof Biomass Paddy
GCV MAH kCal/kg 3000 6% 6% 6% 47% 13% 9% 86%
UP 46% 37% 10%
AP 56% 10% 5% 12% 6%
TN
KAR 11% 18% 18% 9% 9% 16% 10%
RAJ 51% 28% 9%
PUN 49% 28% 21% 98%
MP 7% 16% 37% 9% 19% 89%
HAR 34% 33%
Wheat 3800 Mustard 3400 Bajra 3950 Maize 3500 Cotton 3636 Groundnut 4200 Coffee 4300 Coconut 3300 Jowar 3500 Gram 3810 Soyabean 3700 Sunflower 2800 ShareinTotalBiomass SurplusAvailable
23%
13%
93%
90%
13%
91%
88%
90%
ShareinTotalBiomass 12,10711,696 4,235 1,091 7,652 6,878 24,395 8,957 9,215 SurpluskT/Yr TotalBiomassSurplus 14,00212,537 4,689 8,092 8,442 7,808 24,789 10,080 10,288 AvailablekT/Yr Wt.Avg.CalorificValue 3,611 3,371 3,275 3,300 3,576 3,689 3,368 3,612 3,458 forStatekCal/kg CVofBiomasskCal/kg 3,476 AcomparisonofCERCspecifiedGCVofthebiomassfuelinRETariffRegulations2009and CalorificValueusedforthepurposeofdeterminationoftariffacrossvariousStatesareas under:
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State
CalorificValue CalorificValue (kCal/kg) (kCal/kg) Asspecifiedby Asspecifiedby CERC concernedSERC 3275 3458 3611 3612 3368 3689 3300 3371 APERC:3200 HERC:3458 MERC:3611 MPERC:3325 PSERC:3368 RERC:3400 TNERC:3200 UERC:3371 JSERC:3467 BERC:3150
Rationalconsidered
AndhraPradesh Haryana Maharashtra MadhyaPradesh Punjab Rajasthan TamilNadu UttarPradesh
Basedonthereportoftheexpert committee:CVof3250kcal/kgwhich translatesinto1.12kg/kWh. AsperCERC AsperCERC BaseonGCVofmainbiomassfuel 3400,supp.biomassfuel2900and coal3600In 50:25:25proportion AsperCERC AsperCERC AsperCERC AsperricehuskGCV SpecifiedbasedonSpecificfuel consumptionat1.16kg/unit. AssuggestedbySNA
OtherStates
3467
KERC:3275 GERC:3300
MNREvideitsletterdated30thSeptember,2011suggestedthatGCVshouldbedecidedbased onthebiomasstypeandfollowingtableshouldbereferredforGCVofvariousbiomass: Sr. No. 1 2 3 4 5 6 7 8 9 10
NameofBiomass GroundnutShell JeeraResidue SawDust SindhiSaunf Asalia Isabgol MustardResidue Juliflora PaddyStraw RiceHusk
Moisture(%) 4.60 6.80 30.00 16.97 6.69 6.79 10.00 13.00 10.00 12.00
Dust(%) 4.00 3.85 12.00 4.66 6.31 5.18 4.00 1.00 4.00 1.50
GCVonasreceivedbasis (kCal/kg) 3167 3690 2139 3186 3505 3588 3300 2800 3300 3200
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MNRE also mentioned that there are other losses which are being encountered during the storageandhandlingofbiomassduetolandsettlement,lossoffuelduringsandstorm,GCV lossduetodecayingofbiomass.MNREreferredtoarecentsurveycarriedoutbyDESLunder mandate from Rajasthan Renewable Energy Corporation Ltd. (RREC) to assess such losses whichareintherangeof3.2to3.5%.MNRErecommendedthatthereshouldbeprovisionof loss of fuel during storage at around 2%. MNRE recommended that the following general principlescanbeadoptedfortheGCVasunder:
Biomass Ricehusk Straw/Stalks/Otherhusks Plantation
GCV(kCal/kg) 3200 3300 2800
CEA in its report on Operation Norms For Biomass based Power Plants September 2005 assumed GCV of 3300 kCal/kg based on the calculation of weighted average GCV for 16 biomasspowerplantandalsotakingintoaccountoflargevariationinqualityandvarietyof biomassusedincludingvariationinmoisturecontentduetoweatherconditions.
TheNationalProductivityCouncil(NPC)initsstudymentionedthatbasedonthefuelanalysis reportfromthedifferentplants,GCV&moisturevariationcouldbeasunder:
Biomass Ricehusk MaizeBhutia CottonStalk(AirDriedBasis)
GCV(kCal/kg) 30003200 3500 3250
Variationin Moisture(%) 1218 21 8
ConsideringthesuggestionsreceivedfromMNRE,astudycarriedoutbyNPC,astudycarried out by CEA and norms specified by the SERCs, the Commission proposes normative GCV of biomass at 3250 kCal/kg. Taking into account, use of 15% of coal and 85% uses of Biomass fuel, weighted average GCV works out to 3300 kCal/kg (considering biomass GCV at 3250 kCal/kg and average coal GCV at 3600 kCal/kg in proportion of 85% and 15% respectively (3300=(0.85*3250+0.15*3600)).
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7.8
FUELPRICERELATEDASSUMPTION
The Commission, in terms of Regulation 44 of the RE Tariff Regulations2009, specified the biomass fuel price applicable during the period 200910 and specified fuel price indexation mechanism,incasedeveloperwishedtoopt,fortheremainingyearsoftheControlPeriod. The Commission while specifying the biomass fuel price for respective States,had adopted equivalent heat value approach for landed cost of coal for thermal power stations at respective States. For this purpose, the Commission had considered the landed cost and calorificvaluesofcoalasapprovedbytherespectiveStateElectricityRegulatoryCommission whiledeterminingthegenerationtariffoftherespectiveStateUtility.Thebiomassfuelprices fordifferentstatesspecified/determinedbytheCommissionareasunder: Biomassprice (Rs/MT) 200910 1301 2168 1801 1299 2092 1822 1823 1518 1797 Biomassprice (Rs/MT) 201011 1,342.81 2,237.67 1,858.87 1,340.74 2,159.23 1,880.55 1,881.58 1,566.78 1,854.75 Biomassprice (Rs/MT) 201112 1,460.75 2,434.21 2,022.14 1,458.50 2,348.88 2,045.72 2,046.84 1,704.39 2,017.65
State AndhraPradesh Haryana Maharashtra MadhyaPradesh Punjab Rajasthan TamilNadu UttarPradesh OtherStates
Pricing of biomass power mainly depends on supply and demand of biomass. Availability of biomass (agro waste) is mostly dependent on production of the underlying crop which is subjecttoclimaticconditionsandcroppingpatterns.Therefore,itspricesarefacingseasonal variation.Ondemandside,biomasspowerplantsfacestiffcompetitionfromalternateusers like: industries which use biomass as fuel for generation of steam, heat and power, feed stockapplicationinpaperindustries,asafuelbybrickkilnandbriquettemanufacturersas
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well as by households for domestic fuel. Increased use of biomass by various users has resulted in to shortages of biomass for power generation and resulted into biomass prices shootingupinmostofthestates. SpiralingofbiomasspriceissuewasalsodiscussedintheForumofRegulatorMeetingheldon 16th June, 2011 wherein the MNRE mentioned that the determination of biomass fuel price needs a detailed review as some of the biomass projects are closing down in Chhattisgarh, PunjabandRajasthanbecauseofincreasingpricesofBiomassfuel. 7.8.1 Sincecostoffuelisacriticalparameterindeterminingtariff,theCommissionhasanalysedthe biomasspricesdeterminedbySERCsandrationaleforfixingthesame:
BIOMASSFUELPRICESCONSIDEREDBYTHESTATECOMMISSIONS
State
Biomass Biomassprice (`/MT) price Asspecified (`/MT) byconcerned CERC SERC 201112 1,461 2000 2390 (1112) 2605 (1013) 1181 (0708)
Rationaleconsidered
AndhraPradesh
Haryana
2,434
Maharashtra
2,022
DateofOrder:31.3.09,basedonthe prevailingcostofbiomass ReviewedbiomasspricevideOrder dated27.052011asdirectedbyAPTEL afterdetailedanalysisandinlinewith theCERCnorm MERCOrderdated29.04.2011 Specifiedbasedontheprevailingcost ofbiomass EquivalentheatvalueofCoalin 50:25:25proportionofmainbiomass, supplementbiomassandcoal Collectedinformationfromvarious sourcesLike: MPL:2469,DDL:2845,ApexCo operativeInstitutions27733070, IREDA:18002000
MadhyaPradesh
1,459
Punjab
2,349
2500 (1011)
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Rajasthan
2,046
1216 (0910)
RERCassumedsuchpriceinthe absenceofadequatebenchmarkprice forbiomass,Furthernotedthat stakeholdersshouldsubmit documentaryevidenceinsupportof theirclaimsothatRERCmayreview thebaseprice Basedonprevailingprices EquivalentheatvalueofCoal AsperCERC(0910) AsperCERC(1112) DateofOrder21.5.2009 TooknoteofCERCspecifiedprice1797 (0910) AssuggestedbyStateNodalagency i.e.1500plustransportation/handling cost100/MT
TamilNadu UttarPradesh
2,047 1,704
2000(0910) 1675(0910) JSERC:1797 CSERC:2018 BERC:1050
OtherStates
2,018
KERC:1280 GERC:1600 (1011)
FromtheabovetableitappearsfromtheabovethatMERCandPSERChaverevisedthenorm ofthebiomasspricebasedontheprevailingpricesofbiomass.GERChasspecifiedonlower side as suggested by State Nodal Agency. HERC, JSERC and CSERC have followed CERC specified norm and rest of the states came out with an order prior to the CERC Re Tariff Regulations2009.
MNREvideletterdated23rdSeptember,2011submittedtheirfindingsonevaluationreport on biomass price wherein prices of different types of biomass in different States for the currentyearsgivenintable4ofsaidreportareasunder: State Rice Mustard Stalks Wheat Paddy Juliflora Wood Husk Residue (Cotton/ Straw Straw Shavings Maize) 3000 2200 2000 2500 1500 3500 2400 3200 2000 2400 2000 2500 1900 1600 2000 1800 2000 2500 2500 2000 1400 1500 1500 1400 1500 1900 3500 4000 2500 3000 3500
Haryana Maharashtra Punjab Rajasthan Orissa WestBengal Chhattisgarh
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MNRE vide letter dated 30th September, 2011 submitted their recommendation on biomass pricewhereinitmentionedthatthedifferencesinthepricesprevailingindifferentstatesare attributable to present demand supply situation and competitive uses and prices of alternativefuels.Itisexpectedthatasmorepowerplantsaredevelopedinallstates,prices willtendtoconvergeandhomogeneousmarketwilldevelop.Accordingly,followingpricescan beconsideredforthecurrentyearashomogeneouspriceforallstates. Biomass Ricehusk Stalks/Otherhusks Straw Plantation
Price (`/MT2011) 3000 2000 2400 2000
7.8.2 Consideringtheabove,theCommissionproposesnormativepriceforthebiomassfuelforthe firstyearofthecontrolperiodasmedianvalueofEquivalentheatvalueapproachforlanded cost of coal for thermal power stations at respective States, SERCs specified biomass norms escalated with 5% to bring at FY 201213 as well as MNRE recommended price with IISc suggested weightages of different biomass for different States For other States, average of eightstatesnormisconsidered.
(`/MT)
MNREsuggestedprice appliedonIIScspecified weightagesonsurplus biomss FY1213 2650 2572 2116 2313 2805 2300 2065 2645 2687 2169 2821 2277 1863 2642 1956 1546 2730 Equ. Medianof Landed SERC,MNRE costof &eq.heat coal approach FY1213 3302 3358 3483 3860 3943 3613 4292 3350 1916 2726 1946 1387 2399 2536 2277 2355 FY1213 2315 2635 2116 1507 2756 2300 2277 2355 2283
BIOMASSFUELPRICESFORFY201213
States
AsspecifiedbyconcernedSERC FY0708 FY0809 FY0910 FY1011 FY1112 FY1213
LandedCostofCoal FY1011 FY1112 FY1213 1917 2774 2054 1623 2866 2777 2962 2391
GCV
AndhraPradesh Haryana Maharashtra MadhyaPradesh Punjab Rajasthan TamilNadu UttarPradesh OtherStates 1181 1240
2000
2100 2390
2205 2510 1436 2625 1341 2205 1847
2315 2635 2605 1507 2756 1408 2315 1939
1302 1216 2000 1675
1367 2500 1277 2100 1759
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State
BiomassFY201213 (`/MT)
AndhraPradesh Haryana Maharashtra MadhyaPradesh Punjab Rajasthan TamilNadu UttarPradesh OtherStates
2315 2635 2116 1507 2756 2300 2277 2355 2283
7.8.3 REVIEWOFBIOMASSFUELPRICESFORTHEPROJECTSCOMMISSIONED INTHEEARLIERCONTROLPERIOD Since the presentbiomassbasedpowergeneration tariffstructureofCERCaswellasSERCs have no provision to adjust the biomass price adequately to reflect the increased cost of biomass fuel price and in turn cost of generation for the biomass power projects commissionedinthepreviouscontrolperiod.Manyprojectshavebeenaffectedduetoitand havebeenforcedtoshutdown. Considering the above, the commission is of the view that any revision either increase or decrease in biomass price is required to be suitably factored in for the viability of biomass powerplantscommissionedintheearliercontrolperiod.TheCommissionproposesthatany revision in the biomass price for the next control period shall also be applicable to projects commissionedintheearlierControlPeriodwithprospectiveeffect.
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7.10FUELPRICEESCALATION The Commission specified the following fuel price indexation formulae in the RE Tariff Regulations2009 in order to take care of variation in prices of raw fuel, labour charges for storageandhandlingandtransportationcostfortheremainingyearofthecontrolperiod: P(n) Where P(n) = Price per ton of biomass for the nth year to be considered for tariff =P(n1)*{a*(WPI(n)/WPI(n1))+b*(1+IRC)(n1) +c*(Pd(n)/Pd(n1))}
determination P (n1) = Price per ton of biomass for the (n1)th year to be considered for tariff determination. a =Factorrepresentingfuelhandlingcost b =Factorrepresentingfuelcost c =Factorrepresentingtransportationcost IRC(n1) = Average Annual Inflation Rate for indexed energy chargecomponent in case of captive coal mine source (in %) to be applicable for (n1)th year, as may be specifiedbyCERC forPayment purposeasperCompetitiveBiddingGuidelines Pdn Pdn1= WPIn= = WeightedaveragepriceofHSDfornthyear.
WeightedaveragepriceofHSDfor(n1)thyear. WholesalepriceindexforthemonthofAprilofnthyear
WPIn1= WholesalepriceindexformonthofAprilof(n1)thyear. Wherea,b&cwillbespecifiedbytheCommissionfromtimetotime.Indefault,thesefactors shallbe0.2,0.6&0.2respectively.
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VariableChargeforthenthyearshallbedeterminedasunder: VCn =VC1x(Pn /P1)or VCn =VC1x(1.05)(n1) (optional) where, VC1represents the Variable Charge based on Biomass Price P1for FY200910and shallbedeterminedasunder: VC1 =StationHeatRate(SHR) GrossCalorificValue(GCV) Intheaboveformulathe various components of base priceof the biomass fuel have been linkedtoindicessuchas averageAnnualInflation Ratefor domesticcoal to benotifiedby the CERC from time to time, Wholesale Price Index and Weighted Average Price of High Speed Diesel to take care of fuel cost, fuel handling cost and transportation cost respectively. A normative fuel price escalation factor of 5% per annum shall be applicableattheoptionoftheproducer. The Commission proposes to retain the above formula for Fuel Price Escalation during the ControlPeriod.TheCommissionalsoproposesthatasandwhenCommissiondeterminesthe biomasscostforthenextControlPeriodsamewillalsobeapplicableprospectivelytoproject commissionedunderthisControlPeriod. 7.11OPERATION&MAINTENANCEEXPENSES The Commission in its RE Tariff Regulations2009 specified O&M expense at ` 20.25 Lakh/MW for the first year of the Control Period i.e. 200910 for the purpose of determinationoftariff.
1_________xP1 (1AuxConsum.Factor) 1000
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WhilefixingthesaidnormtheCommissionrecognizedthatthesizeofbiomasspowerplantis small compared to the conventional power projects and therefore the expenses towards manpower,otherestablishmentandadministrativeexpensesarehigherascomparedtothe conventionalpowerplants. TheCommissioninitstariffRegulations,200914,specifiedthenormsforO&Mexpensefor suchplantsat` 18.20Lakhs/MW.ConsideringthesamethenormativeO&Mexpensesfor biomass based projects for the year 200910 was fixed at ` 20.25 lakh/MW (4.5% of the Capital Cost) and the same was escalated at the rate of 5.72% per annum to take care of increase in manpower and other related costs. For that reason, in the determination of generic tariff for the FY201112, the Commission considered O&M cost norm for biomass poweras` 22.63Lakh/MW.
The Central Electricity Authority (CEA) came out with a report on operation norms for biomass based power plant in September 2005, wherein based on the analysis of data furnished by ten (10) biomass projects having capacity ranging from 4 MW to 8 MW followingnormhasbeensuggested:
O&MCostelements Salaries AdminExpenses Repairs&Maintenance Insurance Consumables Total
SuggestedNormin%of capitalCost 1.5% 1.0% 2.5% 0.5% 1.5% 7.0%
CEA suggested that 7% norm may be allowed presently and same may be reviewed after 23 years. While suggesting above norms, CEA observed that biomass power projects are labour orientedandmaintenancerequirementinboiler,fuelpreparationsideetc.comparativelyhigher thancoalfiredplants.
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Mostofthebiomassbasedpowerprojectshavesizeinrangeof4to6MW.Largeplantstendto havelowerO&Mcostsduetoeconomiesofscale.Consideringthemoderatesizeoftheprojects, theCommissionproposesthenormat `234Lakh/MW(whicharedeterminedbyapplyingannual escalationfactorof5.72%perannumontheO&McostnormapplicableforFY201112)forthe firstyearofthenextControlPeriodi.e.FY201213andthesameisproposedtobeescalatedat therateof5.72%perannumtotakecareofincreaseinmanpowerandotherrelatedcosts.
8. TECHNOLOGYSPECIFICNORMS:NONFOSSILFUELBASEDCOGENERATION Under this section, technology specific parameters such as capital cost norm, capital cost indexation mechanism, plant load factor, auxiliary consumption, station heat rate, gross calorific value, biomass fuel price, biomass fuel price indexation mechanism and O&M Expenses,fornonfossilfuelbasedcogenerationprojectshavebeendiscussed. 8.1 Theprojectmayqualifytobetermedasacogenerationproject,ifitisinaccordance withthedefinitionandalsomeetsthequalifyingrequirementoutlinedbelow: Topping cycle mode of cogeneration Any facility that uses nonfossil fuel inputfor the power generation and also utilizes the thermal energy generated forusefulheatapplicationsinotherindustrialactivitiessimultaneously. For the cogeneration facility to qualify under topping cycle mode, the sum of usefulpoweroutput and one half the useful thermaloutputs be greaterthan 45% of thefacilitysenergyconsumption,duringseason. 8.2
TECHNOLOGYASPECT
The Commission under Regulation 47 of the RE tariff Regulation2009 specified the normative capital cost for the NonFossil Fuel Based Cogeneration Projects as ` 445
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Lakh/MW for FY 200910 which was linked to the indexation mechanism specified under Regulation 48 of the RE Tariff Regulations2009. In line with the indexation mechanism specifiedinRegulation48oftheRETariffRegulations2009,theCommissionvideOrderNo. 53/2010dated26thApril2010determinedthenormativecapitalcostoftheNonFossilFuel basedCogenerationpowerprojectsas`398.07Lakh/MWforFY201011andvideOrderNo. 256/2010 dated 9th November, 2010 determined the normative capital cost of ` 421.30 Lakh/MWforFY201112.
Year
Dateof Order/Regulation
Capitalcost `Lacs/MW 445.00 398.07 421.30
200910 201011 201112
17.09.2009 26.02.2010 09.11.2010
8.2.1 Three SERCs have issued tariff Orders for bagasse based cogeneration projects after the issuanceofRETariffRegulations2009byCERC.ThecostdataapprovedbysuchSERCsareas under:
COSTCONSIDEREDBYTHESTATEREGULATORYCOMMISSIONS
DateofOrder/ Regulation
CERC 17.9.09 4.45 (FY0910) 3.98 (FY1011) 4.21 (FY1112) Provided
GERC 31.5.10
MERC 7.6.10 3.98 (FY1011) AsperCERC Indexation asperCERC
JSERC 27.01.10
HERC 3.2.11
CapitalCost ÌnCr./MW
4.15 (FY1011)
4.00 (FY1011) AsperCERC
4.45 (FY1011) AsperCERC
Indexation provision
Noindexation
Indexation asperCERC
Indexation asperCERC
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AnalysisoftheCapitalcostinthetariffsettingexerciseundertakenbydifferentSERCsshows that the Capital Cost specified by above referred SERCs have considered CERC determined norm. 8.2.2 CapitalcostinformationforbagassebasedcogenerationprojectsasprovidedbyIREDAand PFCareanalysedasunder: CostofbagassebasedcogenerationprojectssanctionedbyIREDAduring201011and2011 12areasbelow:
COSTCONSIDEREDBYTHEFINANCINGFINSTITUTIONS
Sr. No. 1 2 3 4 5
CapacityinMW 26 10 22 20 30
ProjectCost `Lakh 12850.00 4430.00 11019.00 8783.11 15945.00
ProjectCost `Lakh/MW 494.23 443.00 500.86 439.16 531.50
Cost of bagasse based cogeneration projects sanctioned by PFC to TNEB for establishment ofcogenerationplantsat10CooperativeSugarmillsand2Publicsectorsugarmillswitha total capacity of 183 MW having total project cost of ` 1034.69 Crore/MW. Per MW cost worksoutto`5.65Crore/MW.Thisprojectisgoingtoemployboilerconfigurationof87Kg/ cm2and5150Cfor10sugarmillsand110Kg/cm2and5400Cfor2sugarmills.
Thecapitalcostofinstallationofbagassebasedcogenerationprojectsdependsuponboiler pressure/temperature,capacityofpowerprojects.Utilizinghighpressuretechnologymore power can be generated. Following benchmark on capital cost is being considered by a financialinstitution: Pressure Configuration (Kg/cm2) 44 66 BagassebasedCogenerationProjectCost(`Crore/MW) 2500TCD 3.70 4.13 3500TCD 3.58 4.06 5000TCD 3.53 4.00 >5000TCD 3.46 3.93
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86 102 110
4.77 5.42 5.53
4.70 5.12 5.22
4.66 4.83 4.93
4.60 4.77 4.87
ImpactofSteamgenerationpressureonpowergenerationina2500TCDSugarMill Steam Pressure/ Gross Electricity Temperature Generation (MW) o 21bar/300 C 2.0 33bar/380oC 45bar/440oC 64bar/480oC 85bar/510oC 3.5 6.0 13.5 17.0 Inhouse Surplus to Consumption Grid(MW) (MW) 2.5 0.5 3.5 4.0 4.5 6.0 8.0 0 2.0 9.0 11.0 13.0
110bar/540oC 21.0 Source:MNRE
8.2.3
BASISFORFORMULATIONOFCAPITALCOSTBENCHMARK
Based on analysis of the actual project cost, benchmark capital cost norm developed by IREDA for financing the project during FY 201112 and considering the typical size of the project for 2500 TCD with 66 bar / 480 o C configuration, the Commission proposes to considernormativecapitalcostof`420Lakh/MWforfirstyearofthenextControlPeriod. 8.3 The Commission proposes indexation mechanism, as mentioned in the para 4.1, to be applicableincaseofbagassebasedcogenerationprojectsforadjustmentsincapitalcost overtheControlPeriodwiththechangesinWholesalePriceIndexforSteelandElectrical Machinery.
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8.3
TheCommissionspecifiedthefollowingplantloadfactorfordifferentStatesinitsRETariff Regulations2009 for nonfossil fuel based cogeneration projects on the basis of inputs received from MNRE and IREDA regarding duration of crushing season in the state and additionaloffseasonoperationwithstored/purchasedbagassewithloadfactorof92%. State Uttar Pradeshand AndhraPradesh TamilNaduand Maharashtra OtherStates Analysis of the PLF and related discussion in the tariff setting exercise undertaken by different SERCs in establishing the tariff for bagasse power plant shows that the PLF specifiedbymostoftheSERCsareintherangeof50%to60%. States Dateof Order/ Regulation PlantLoad Factor
OperatingDays 120days(crushing)+60days(off season) = 180daysoperatingdays 180days(crushing)+60days(off season) = 240daysoperatingdays 150days(crushing)+60days(off season)=210daysoperatingdays
PlantLoadFactor(%) 45%
60%
53%
Uttar Pradesh 9.9.2009 50%
Andhra Pradesh 31.3.2009 & 20.3.2004 55%
Gujarat 31.5.10 60%
Tamil Nadu 6.5.09 55%
Karnataka Maharashtra 11.12.09 60% 7.6.10 60%
Consideringtheabove,theCommissionproposestoretaintheplantloadfactorspecifiedin the RE tariff Regulations2009 on the basis of the average crushing period in respective StatesforthepurposeofdeterminingthefixedchargesforthenextControlPeriod.
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8.5
AUXILIARYCONSUMPTION
TheCommissionspecifiedauxiliarypowerconsumptionfactorof8.5%fortheControlPeriod 200912.WhilefixingsuchnormtheCommissionconsideredthatthenonfossilfuelbased cogenerationplantshavesomeoftheauxiliaryequipmentcommonbetweenthesugarmill and the power generation unit. It was also considered that the bagasse requires less processingcomparedtothebiomassandhencecompriseslesserauxiliarysystem. Analysis of the Auxiliary Consumption and related discussion in the tariff setting exercise undertakenbydifferentSERCsinestablishingthetariffforbagassepowerplantshowsthat theAuxiliaryConsumptionspecifiedbythemostoftheSERCsintherangeof8to10%. States Dateof Order/ Regulation Auxiliary Consumption Consideringthesame,theCommissionproposestoretaintheauxiliaryconsumptionnorm at8.5%. 8.6 The fuel consumption during crushing season (cogeneration mode) is used for power generation as well as steam generation purposes, whereas fuel consumption during off season is essentially used for power generation purposes. Considering the same, the Commission specified the normative Station Heat Rate of 3600 kCal / kWh for power generation component alone for computation of tariff for nonfossil fuel based CogenerationprojectsfortheControlPeriod200912.Theabovenormwasspecifiedbased ontheinformationfurnishedbyMNREandanalysisoftheheatmassbalancediagramsfora fewcogenerationprojects. STATIONHEATRATE Uttar Pradesh 9.9.2009 8.5% Andhra Pradesh 31.3.2009 & 20.3.2004 9% Gujara t 31.5.10 8.5% Tamil Nadu 6.5.09 9% Karnataka Maharashtra 11.12.09 8% 7.6.10 8.5%
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States Dateof Order/ Regulation StationHeat Rate kCal/kWh
UttarPradesh 9.9.2009 3650 foroldplants 3100 fornewplants
Andhra Pradesh 31.3.2009 & 20.3.2004 3700
Gujarat 31.5.10
Tamil Nadu 6.5.09
Karnataka Maharashtra 11.12.09 7.6.10
3600
3518
3600
3600
Most of the SERCs have specified the norm for Station Heat Rate around 3600 kCal/kWh. UPERCallowedStationHeatRateas3650Kcal/kWhforexistingplantsbutalowerStation Heat Rate as 3100 Kcal/kWh for new plants considering that new plants will have higher efficiencyduetoadvancedtechnology.
TheCommissionproposestoretaintheStationHeatRatenormat3600kCal/kWh. 8.7 The Commission had specified the Gross Calorific Value for bagasse considered as 2250 kCal/kg for the Control Period 200912. This was based on the information collected for various projects, literature available on the gross calorific value of bagasse like, study of literatureonByproductsofthecanesugarindustryauthoredbyMr.J.MauricePaturau, (consultant for cane sugar technology, Published by Elsvier Scientific Publishing Company, AmsterdamSecondRevisededition1982),thecommentsreceivedfromthestakeholders onthediscussionpaperfloatedbythevariousSERCsaswellasverificationwithagriculture researchinstitutestheGrosscalorificvalueofbagassevariesintherangeof2200kCal/kg to2300kCal/kgonwetbasisdependingonthepercentageofthemoisturecontentandthe solublesolidsinthebagasse. States DateofOrder/ Regulation GCV
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Uttar Pradesh 9.9.2009 2280
Andhra Pradesh 31.3.2009& 20.3.2004 2312
Gujarat 31.5.10 2250
Tamil Nadu 6.5.09 2300
Maharashtra 7.6.10 2250
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Gross Calorific Value specified by different SERCs is in the range of 2250 to 2300 kCal/kg. ConsideringthesametheCommissionproposestoretainthenormforGrossCalorificValue at2250kCal/kg. 8.8 TheCommissioninits RE TariffRegulations2009computedthefuelpriceofbagassefor respectiveStatesforthebaseyear200910onequivalentheatvalueapproachforlanded costofcoalforthermalStationsforrespectiveStates. BagassePrice (200910) (`/MT) 899 1411 1123 809 1398 1243 1013 1163 BagassePrice (201112) (`/MT) 1,009.39 1,584.26 1,260.89 908.34 1,569.66 1,395.63 1,137.39 1,305.80 FUELPRICE
State AndhraPradesh Haryana Maharashtra Madhya Pradesh Punjab TamilNadu UttarPradesh OtherStates
Bagasse is a byproduct in the sugar industry and it also has alternate uses like, in paper industry. Alternative approach is the price that bagasse would otherwise get for other applicationscanbeconsideredascostofbagasseinshortterm.
Analysisofthebagassepriceandrelateddiscussioninthetariffsettingexerciseundertaken bydifferentSERCsinestablishingthetariffforbagassepowerplantareshownasunder:
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States Dateof Order/Regulat ion
UttarPradesh 9.9.2009
Gujarat 31.5.2010
TamilNadu 6.5.2009
Maharashtra 7.6.2010 1832/ duringfirst threeyearsof theControl Periodand thereafter linkedto indexation Basedon prevailing pricesof bagasseinthe state
Haryana 3.2.2011
FuelCost(in `/MT)
1178/ (200910) with6% escalation
600/ (201011) Indexation asper CERC
Approach
equivalent heatvalueof coal
Basedon prevailing equivalent pricesof Costoflignite bagasseinthe state
Basedon prevailing priceof bagassein thestate
TheCommissionproposestoretaintheapproachfollowedintheRETariffRegulations2009 i.e. equivalent heat value approach for landed cost of coal for thermal Stations for respectiveStates,fordeterminationofthefuelpriceofbagasseforrespectiveStatesforthe base year 201213 considering the landed cost and calorific values of coal as approved by therespectiveStateElectricityRegulatoryCommission. TheStateElectricityRegulatoryCommission,whiledeterminingthegenerationtariffofthe respectiveStateUtility,approvedthecoalpricesduringtheyearFY201011and201112. The bagasse prices so derived have been escalated based on fuel price indexation mechanism stipulated under the Regulation to derive fuel prices during first year of the Control Period (i.e. for FY 201213). The fuel price for each station in terms of `/MT equivalent to heat content of 2250kCal/kg is then derived, which is presented under followingtable. State AndhraPradesh Haryana Maharashtra BagassePrice (`/MT) 1307 1859 1327
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MadhyaPradesh Punjab TamilNadu UttarPradesh OtherStates 8.9 FUELPRICEINDEXATIONMECHANISM
946 1636 1408 1458 1420
In case of bagasse based cogeneration projects, the following indexing mechanism for adjustmentoffuelpricesforeachyearofoperationwillbeapplicablefor determinationofapplicablevariablechargecomponentoftariff,incasedeveloperwishesto optforindexingmechanism:
P(n)=P(n1)*{a*(WPI(n)/WPI(n1))+b*(1+IRC)(n1)+c*(Pd(n)/Pd(n1))} Where: P (n) = Price per ton of Bagasse/biomass for the nth year to be considered for tariff determination P (n1) = Price per ton of Bagasse/biomass for the (n1)th year to be considered for tariff determination.Incaseofn=1,P(n1)shallbeequaltoP0. a =Factorrepresentingfuelhandlingcost b = c = IRC(n1)=AverageAnnualInflationRateforindexedenergychargecomponentincaseof captivecoalminesource(in%)tobeapplicablefor(n1)thyear,asmaybespecifiedby CERCforPaymentpurposeasperCompetitiveBiddingGuidelines Pdn Pdn1 = = WeightedaveragepriceofHSDfornthyear. WeightedaveragepriceofHSDfor(n1)thyear. WholesalepriceindexforthemonthofAprilofnthyear Factorrepresentingfuelcost Factorrepresentingtransportationcost
WPIn=
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WPIn1=
WholesalepriceindexformonthofAprilof(n1)thyear.
Wherea,b&cwillbespecifiedbytheCommissionfromtimetotime.Bydefault,thesewill be0.2,0.6&0.2respectively,unlessotherwisespecified. (2)VariableChargeforthenthyearshallbedeterminedasunder: VCn=VC0x(Pn/P0)orVC0=1.05^(n1)(optional) Where, VC0 representstheVariableChargebasedonbagassePriceP0forFY201213(i.e.beginning ofControlPeriod)andshallbedeterminedasunder: VC0=60%xStationHeatRate(SHR)x___1___ x____P0___
GrossCalorificValue(GCV)(1AuxCons.Factor)1000 8.10 The Commission had specified the O&M cost norm as Rs 13.35 lakh per MW (3% of the Capital Cost ` 445 Lacs/MW) for the year FY 200910 with escalation rate of 5.72% per annum for remaining year of the Control Period for determination of the levellised tariff. Subsequently, the Commission, while determining the generic tariff for FY201112 consideredtheO&Mcostnormfornonfossilfuelbasedcogenerationas`14.92Lakh/MW.
OPERATIONANDMAINTENANCEEXPENSES
While specifying such norm, the Commission considered that in case of cogeneration projects there are several common expenses between the host sugar factory and cogeneration unit. It was further considered that the bagasse is readily available in the premisesofthesugarfactoryonly,andhencedoesnotrequireadditionalmanpowerinfuel transportationandhenceassociatedhandlingchargesarenegligible.
The O&M cost of bagasse power plants is on the higher side compared with the thermal power plants because of small size of the plant. Analysis of the O&M cost and related discussion in the tariff setting exercise undertaken by different SERCs in establishing the
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tariffforbagassepowerplantshowsthattheO&McostspecifiedbythemostoftheSERCs at3%exceptTNERC.
States Dateof Order
Uttar Pradesh 9.9.09
Andhra Pradesh 31.3.09& 20.3.04 3%of capital Cost 4%
Gujarat 31.5.10
Tamil Nadu 6.5.09
Karnataka 11.12.09
Madhya Pradesh 9.2008
Haryana 3.2.11 ` 13.35 Lakh/MW (3%of capitalCost) 5.72%
Maharasht ra 7.6.10
O&M Expenses
3%of capital Cost 4%
4.5%of 3%of capital capitalCost Cost 5% 5%
` 14.11 Lakh/MW
Escalation
5.72%
The Commission proposes the normative O&M expenses as ` 16 Lakh/MW for the year 201213 (FY1112 norm escalated at 5.72%). The Commission further proposes that the operationandmaintenanceexpensesfortheyear201213shallbeescalatedfurtheratthe rateof5.72%perannumtoarriveatpermissibleoperationandmaintenanceexpensesfor thesubsequentyearsoftheControlPeriod. 9. Under this section, technology specific parameters such as capital cost norm, capacity utilizationfactorandO&MExpenses,forsolarPVprojectshavebeendiscussed. 9.1 NormsforSolarPhotovoltaic(PV)powerwouldbeapplicableforgridconnectedPVsystems thatdirectlyconvertsolarenergyintoelectricityandarebasedonthetechnologiessuchas crystallinesiliconorthinfilmetc.asmaybeapprovedbyMNRE. TECHNOLOGYASPECT TECHNOLOGYSPECIFICNORMS:SOLARPVPOWERPLANT
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9.2
ThecapitalcostsforSolarPhotovoltaic(PV)powerprojectsfallintotwobroadcategories; themoduleandthebalanceofsystem(BOS).ThemoduleistheinterconnectedarrayofPV cellsandincorporatesfeedstocksiliconprices,cellprocessingandmoduleassemblycosts. TheBOSincludesstructuralsystemcostsviz.structuralinstallation,racks,sitepreparation andelectricalsystemcosts,inverter,wiringandtransformer. In accordance with the first proviso under Regulation 5 of the RE Tariff Regulations2009, the benchmark capital cost for Solar PV power projects is to be reviewed annually. The Commission, for FY 200910, specified the normative capital cost for MW scale Solar PV PowerProjectsas`1700Lakh/MW.Subsequently,Commissionhadreviewed,benchmark capital cost for Solar PV power projects at ` 1690 Lakh / MW for the FY 1011 (vide the Order dated 25.02.2010 in Petition no. 13/2010) and ` 1442 Lakh / MW for the FY 1112 (videtheOrderdated15.9.2010inPetitionno.255/2010). Year 200910 201011 201112 9.2.1 PVmodulescostrepresentthesinglelargestcostitemofaPVsystem.AverageglobalPV module factory prices dropped from about USD2005 22/W in 1980 to less than USD2005 1.5/Win2010(Bloomberg,2010).Studyaboutpriceexperiencecurve(learningcurve)focus on the silicon wafer based photovoltaic modules wherein world market prices are shown belowasafunctionoftheglobalcumulativeshipment(logarithmicscales). MODULECOSTCOMPONENT BenchmarkCapitalcost `Lakh/MW 1700 1690 1442
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Source:SolarEnergyResearchInstituteofSingapore(SERIS)ANNUALREPORT2010 The above figure illustrates PV price decline over the last 20 years, with the price of PV modulesdecreasingbyover20%everytimethecumulativesoldvolumeofPVmoduleshas doubled (learning factor). According to the Solar Energy Research Institute of Singapore (SERIS)thestrongreductionofmodulepricesisdueto(i)economyofscale(ii)optimization ofproductioninindustry(iii)reducedcompanymarginsinthecourseoftheeconomiccrises and (iv) a multitude of highly essential incremental R&D results (almost throughout the wholecurve). TheEnergyTrendssurveywhichalsoshowsthattheSiliconModulesaverageweeklyspot pricesperwattason28thSeptember2011wasaroundUS$1.124perWatt.

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According to the Pvinsight, the Silicon and Thin Film Modules weekly average spot prices per watt as on 28th September 2011 was around US$ 1.135 and US$ 0.895 per Watt respectively. Tem SiliconModulePricePerWatt ThinFilmModulePricePerWatt High US$ 1.50 1.20 Low US$ 1.00 0.80 Average US$ 1.135 0.895
Source:http://pvinsights.com/ The above analysis reveals that the current thin film module price per watt varies in the range of $0.8 to $1.20 and crystalline module price varies in the range of $1.0 to $1.5. Currently, modules suppliers are offering crystalline modules in India at around $1.15 per watt. Most of the international studies reveal that the prices are expected to decline in future. Considering the same, the Commission proposes to consider base module cost at $1.00 per watt (CIF) i.e. cost, insurance, taxes and freight price, for the determination of benchmark capital cost for solar PV projects for FY201213. With the exchange rate of Rs 49/US$,themodulecostworksoutto`4.90Crore/MW. 9.2.2 NONMODULECOSTCOMPONENT:
The nonmodule cost components (Balance of Supply) comprise cost towards land, civil & general works, ground mounting structures, power conditioning unit, cabling & transformer/ switchgears and preliminary/preoperating expenses & financing costs. The nonmodule component together contributes to approximately40% of overall capital cost requirementofsolarPVbasedpowerprojects. There is great cost reduction potential for the BOS industry as it develops, and adopts similar principles to those followed in the module industry. An increased level of component standardisation can decrease cost and labour. This standardisation of components can help drive economies of scale, and lead to high volume manufacturing. Preassembledcomponentsrealisedthroughthestandardisationandresultingeconomies,
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can also offer cost savings in the installation phase. High volume manufacturing has the potential to significantly reduce component costs, as it has in the module production industry. Significant cost savings opportunities remain, as the BOS component manufacturesaretypicallysmall(withsmallmarketshare),andutilisematerialsthatarenot specificallydesignforuseinthesolarindustry.(Source:RenewableEnergyTechnologyCost ReviewMelbourneEnergyInstitute,March2011)
Each component of above referred nonmodule cost of Solar PV based power plant is estimatedasunderforthedeterminationofbenchmarkcapitalcostofSolarPVprojectsfor FY201213.
1.1
9.2.2.1 POWERCONDITIONINGUNIT:INVERTER
ThesinglelargestoftheBOScomponentstheinverter.TheCommission,whiledetermining thebenchmarkcapitalcostforSolarPVprojectsfortheyear201112,hadconsideredthe Inverter cost as ` 1.60 Crore/MW. According to IPCC Report2011, the overall BOS experiencecurvewasbetween78and81%,ora19to22%learningrate.Quitesimilarto themodulerates,learningratesforinverterswerejustintherangeof10%. BasedontheEnergyTendsurveyasshownintheabovetable,theCommissionproposesto considerbaseinverterpriceat$0.20perwattforthedeterminationofbenchmarkcapital costforsolarPVprojectsforFY201213.WiththeexchangerateofRs49/US$,themodule costworksoutto`0.98Crore/MW.
9.2.2.2
LAND
The land requirement for Solar PV based power project depends upon the technology employed i.e. Crystalline or Thin film, conversion efficiency and solar radiation incident in respectivearea.TheCommission,whiledeterminingthebenchmarkcapitalcostforSolarPV projectsfortheyear201112,hadconsideredlandrequirementof5Acre/MWanditscost wasconsideredas`3Lakh/Acreor0.15Crore/MW.Afterallowing5%escalationoverthe benchmarklandcostforFY201112,theCommissionproposestoconsider`16Lakh/MW
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as the land cost for the determination of benchmark capital cost of Solar PV projects for FY201213. 9.2.2.3 The cost associated with civil works includes roads and pathways, testing of soil, preparationofsoil/groundwithallnecessaryworkslikeearthmoving,foundationsandcivil works for: transformers, HT panels, module mounting structures, fencing, earthing mat, main gate, security room, main control room, cable trenches, water systemsump with pumpandwaterpipelinesetc.
CIVILANDGENERALWORKS
TheCommission,whiledeterminingthebenchmarkcapitalcostforSolarPVprojectsforthe year201112,hadconsideredthecivilandgeneralworkstogetheras` 0.95Crore/MWIt wasderivedafterallowingcostescalationof5%overthelastyearscost.
ConsideringtheCivilWorksratesbeingofferedbytheEPCcontractorsforMWsizeprojects, theCommissionproposestoconsider0.90Crore/MWasthecostforCivilandGeneralwork forbenchmarkcapitalcostofSolarPVprojectsforFY201213. 9.2.2.4 This expenditure includes cost associated with manufacturing, delivery, installation and calibrationofMSgalvanizedsteelstructuresincludingallnecessarymaterialandworksof erection and commissioning. The Commission, while determining the benchmark capital costforSolarPVprojectsfortheyear201112,hadconsideredthecostofgroundmounting structureas`1.05Crore/MW.
MODULEMOUNTINGSTRUCTURES
ConsideringthemodulemountingstructuresratesquotedbytheEPCcontractorsforMW sizeprojects,theCommissionproposestoconsider1.00Crore/MWasthecostforCiviland GeneralworkforbenchmarkcapitalcostofSolarPVprojectsforFY201213
9.2.2.5
CABLESANDTRANSFORMERSANDEVACUATIONSYSTEM
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This expenditure includes EPC cost towards DC caballing between Solar PV panels & Inverters including junction boxes, AC cabling between Inverter & substation, Earthing arrangements and Transformer. The transformer cost includes the EPC cost of a step up outdoor type transformer, auxiliary transformers, 33 kV breaker, Current Transformers, Potential Transformers, Isolators, LAs, protection relay and TOD meter. It also includes electrical accessories like , MCCBs, MCBs, fuses, lugs, glands etc, plant and control room lightingsystemwithsupports,fixtures,SCADAsystem,batteryset,earthingsystem.
The Commission, while determining the benchmark capital cost for Solar PV projects for theyear201112,hadconsideredthecostofcablesandtransformersandotherassociated equipments as ` 0.90 Crore/MW. The Commission proposes ` 1.00 Crore / MW as expenditure towards cables, transformers and evacuation system for solar PV projects for thedeterminationofbenchmarkcapitalcostofSolarPVprojectsforFY201213. 9.2.2.6 The preliminary/preoperating expenses include transportation of equipment, storage of equipment at site, insurance, contingency, taxes and duties, IDC and finance charges etc. DetailedbreakupofPreliminaryandPreoperativeexpensesandfinancingcost,lumpsum inpercentageoftotalcapitalcostisproposedasunder: i. ii. iii. iv. v. vi.
PRELIMINARY/PREOPERATINGEXPENSESANDFINANCINGCOSTS
InsuranceCost:0.5% Contingency:0.5% InterestduringConstruction(IDC):4% Financingcost:1% Projectmanagementcost:0.5% PreoperativeCost:1%
Preliminary/Preoperating expenses and Financing Cost contribute to above 7.5% of total capitalcostonaveragebasis.Accordingly,`0.80Crore/MWisproposedtobeconsidered aspreliminary/PreoperatingexpensesandFinancingcost. ThetablebelowpresentsthebreakupofbenchmarkcapitalcostnormforSolarPVprojects fortheFY201213:
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Sr. No. 1 2 3 4 5 6 7 8
Particulars PVModules LandCost CivilandGeneralWorks MountingStructures PowerConditioningUnit Cables,Transformersandothermisc. PreliminaryandPreOperativeExpenses includingIDCandcontingency TotalCapitalCost
CapitalCostNormfor SolarPVproject (`Lakh/MW) 494 16 90 100 98 100 80 978
%of totalcost 54% 2% 9% 10% 9% 10% 7.6% 100%
Consideringtheabovefactsintoconsiderationaswellastakingcareofdegradationinthe moduleoutputoveraperiodoftime,theCommissionproposesthetotalcostofSolarPhoto voltaicpowerprojectsfortheFY201213as`10.0Crore/MW. 9.3 The Commission in its RE Tariff Regulations2009 specified the Capacity Utilisation Factor for Solar PV project at 19%. Subsequently, the Commission had commissioned a study to assessastowhethertheCUFof19%forsolarPVwasadequategiventhesolarradiationin the country. The report suggests that the average CUF at more than 80% locations works out to be more than 19% for solar PV plant based on thin film technology. Similarly, the averageCUFatmorethan50%locationsworksouttobemorethan19%forsolarPVplants based on crystalline technology. Considering the same, the Commission proposes benchmarkCUFof19%forthenextControlPeriodfordeterminationtariff. 9.4
CAPACITYUTILISATIONFACTOR
OPERATIONANDMAINTENANCEEXPENSES
Regulation59oftheRETariffRegulations2009providedthenormativeO&Mexpensesfor solarPVprojectsforthe year200910tobe Rs9.00lakh/MW whichshallbeescalatedat
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therateof5.72%perannumoverthetariffperiodfordeterminationofthelevellisedtariff. Accordingly, O&M expense norm for solar PV power project as Rs 10.06 Lakh/MW for FY 201112hasbeenconsidered.
AccordingtoIntergovernmentalPanelonClimateChange(IPPC)workinggroupreportthe O&M costs of PV electricity generation systems are low and are found to be in a range between 0.5 and 1.5% annually of the initial investment costs (Breyer et al., 2009; IEA, 2010c).BasedonthecapitalcostproposedaboveitcomesundertherangeofRs6.25to 18.75Lakh/MWdependinguponthesizeoftheprojects.
The Commission has also considered the offers provided by the EPC contractors for Operation & Maintenance Support services to MW scale projects at Rs 10 lakh/year/MW withtheescalationof56%perannumwhichincludesmaintainingtheplant,replacement services & Cleaning manually of Modules for 10 years along with manpower support of engineers,technicians,workmenandsecurityguard.
Consideringtheabove,theCommissionproposesthenormativeO&MexpensesforsolarPV projects for the year 201213 to be at ` 11 lakh/MW (Norm for FY201011 escalated at 5.72%) which shall be escalated at the rate of5.72% per annum over the tariff period for determinationofthelevellisedtariff. 10. Under this section, technology specific parameters such as capital cost norm, capacity utilizationfactor,auxiliaryconsumptionandO&MExpenses,forsolarthermalprojectshave beendiscussed.
SOLARTHERMALTECHNOLOGIES
Solar Thermal technologies use systems of mirrored concentrators to focus direct beam solar radiation to receivers that convert the energy to high temperatures for power generation.TherearefourcommerciallyavailableCSPtechnologies:
i.
ParabolicTrough
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ii. iii. iv.
CentralReceiverTower DishEngine LinearFresnel
AsperNRELReporttheCSPprojectsofbothparabolictroughandpowertowertechnology, asof2011,havebeendeployedmostlyinSpainandU.S.Someprojectsarealsooperational and under development in the Middle East and North Africa region (MENA). CSP projects that use Linear Fresnel Reflector and Dish / Stirling Engine systemssystemsare very few andstillunderdevelopmentalstage. 10.1 AsperRegulation5oftheRETariffRegulations2009,theCommissionneedstoreviewthe benchmark capital cost for Solar Thermal Power projects every year. Accordingly the Commissionreviewedthesameandfixeditat`1500Lakh/MWfortheFY201112(Order dated15thSeptember,2010inthePetitionNo.255/2010) The Capital cost of solar thermal project is dependent on the solar irradiation level at a particularlocation.Variationofsolarirradiationlevelatdifferentlocationswouldresultin variationinelectricityoutput,CUFandcapitalcosts.Forsolarthermalpowerprojects,the electricityoutputiscomputedbytheformula: ElectricityOutput=Annualaveragesolarirradiation(KWh/m2/year)xPlantEfficiency(%)x SolarFieldsize(m2) Solar field size is one of the most decisive factors in deciding the cost of the project. The solarfield,comprisingofmirrorswhichconcentratetheincidentsolarirradiationontoheat absorber tubes which absorb the thermal energy and transfers it to a heat transfer fluid. Heat exchangers transfer thermal energy to generate steam that drives a conventional turbine.
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Designingtherightsizeofsolarfieldtogeneratesufficientthermalheatrequiredtodrive the turbine continually throughout its operation depends on the solar irradiation level whichvariesaccordingtothetimeofday(maximumintheafternoon,lowinthemornings andevenings)andmonthofyear(lowerduringmonsoon,higherduringsummermonths). A larger than necessary (or a smaller) solar field may result in excess (or deficient) solar energyrequiredtodrivetheturbinetherebycausingsolarenergytobedumped.Basedon the solar field efficiency, hourly incident irradiation and the thermal to electric plant efficiency,solarsimulationsoftwareisusedtocomputethethermalheatofsteamrequired by the system to drive the steam turbine for different solar field sizes,along with electric output,capitalcostsandCUF. The CUF is dependent on solar field size and number of hours of storage which are optimizedforminimumLevelisedenergycost (LEC, also commonly abbreviated as LCOE). Project cost is dependent on the CUF projected and corresponding solar field size. Solar irradiation varies from location to location across the country. Therefore field size requirement and in turn the project cost would also vary for a particular CUF across the country. ParabolicTroughtechnologyhasachievedclosetofullcommercialstatuswhilecostdatafor the power Tower, Fresnel and Dish Stirling technologies are in the process of being established.Therefore,availablecostdataofParabolicTroughtechnologyisconsideredfor the determination of benchmark capital cost norm for solar thermal projects for the year 201213. 10.3 SAM software (https://www.nrel.gov/analysis/sam/) for modeling and analysis has been developed by National Renewable Energy Labs, U.S. Department of Energy (NREL). SAM software is used extensively by project developers, policy makers and regulators in
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determining the project parameters (Electricity output, project cost, LCOE etc.) based on incident solar irradiation, standard solar component efficiencies and cost through the optimizationofsolarfieldsizeandno.ofhoursofthermalstorage.NRELhasalsoprojected incident solar irradiation throughout India based on satellite modeling.
(http://rredc.nrel.gov/solar/new_data/India/nearestcell.cgi) CERChasnotconsideredtheoptimizationofsolarfieldsizeandnumberofhoursofthermal storagebutassumedzerodump(neitherexcessnordeficient)ofsolarenergyfromthesolar field. Optimization of these parameters based on incident irradiation would result in reductionofLCOE.
TheDirectNormalInsonation(DNI)ofdifferentlocationsofsolarresourcesrichstatesinthe countryisshownasunder: Year/ States 2002 2003 2004 2005 2006 2007 2008 It appears from the above table that the solar irradiation level at different locations is different and also has yearly variation at the same location. In the RE Tariff Regulations 2009,aCUFof23%hasbeenspecified.Fordeterminationofsolarfieldsizecorrespondingto target CUF of 23% and Capital cost, Rajasthan State, Jodhpur District DNI data of the year 2005takenasrepresentativeirradiation(DirectNormalInsolation(DNI):2074kWh/m2/year) fortheanalysis. Rajasthan Bhadla 2178 2048 2058 2074 1986 2097 2126 Gujarat Aurum 2180 2167 2136 2236 2164 2180 2084 AndhraPradesh Megha 2159 2008 2059 1899 2041 1900 2014
ThetableshownbelowcalculateselectricityoutputandCUFbasedonSAMmodeling(fora 111MWplantwithnetgenerationof100MWwithstandardcomponentefficiencyusedis tabulated below) for Jodhpur District representative irradiation (Direct Normal Insolation (DNI):2074kWh/m2/year)withdifferentsizeofsolarfieldassumingnilthermalstorage.
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SM 1.64 1.48 1.415 1.35 1.26 1.25 1.245 1.195 1.15 1.11 1.07 1.035 1.03 1.02 1.015 1.01 1 SolarField 843,660 761,910 729,210 696,510 650,730 644,190 640,920 614,760 591,870 572,250 552,630 533,010 529,740 526,470 523,200 519,930 516,660 Output 229,802,081.00 221,261,862.00 216,570,205.00 211,657,613.00 202,454,388 200,980,390 200,233,277 193,631,312 187,090,149 181,053,466 174,750,605 168,054,750 166,854,200 165,810,786 154,522,901 163,352,776 162,145,245 CUF 26.30% 25.30% 24.70% 24.20% 23.10% 23.00% 22.90% 22.10% 21.40% 20.70% 20.00% 19.20% 19.10% 18.90% 18.80% 18.70% 18.50% EDump 145,249,200 83,002,880 61,464,410 42,340,810 20,579,080 18,134,440 16,970,220 9,262,562 4,788,951 2,215,236 712,963 78,549 39,564 13,534 1,392 Dump/Output 63.2062% 37.5134% 28.3808% 20.0044% 10.1648% 9.0230% 8.4752% 4.7836% 2.5597% 1.2235% 0.4080% 0.0467% 0.0237% 0.0082% 0.0009%
Ithasbeenfoundthatforsolarfieldsizeof519930m2for110MWprojectsresultsinnilsolar energydumpedandprovidesanelectricityoutputof1.63MUswithaCUFof18.7%basedon standardcomponentefficiencies.
Basedontheabovetableandanalysis,inordertoachieveaCUFof23%,solarfieldsizeof 5804 m2 per MW would be required with an energy dump of 9%. The commission has thereforeconsideredcapitalcostbasedonthesolarfieldsizeof5804m2 indeterminationof benchmark capital cost while maintaining CUF of 23%. The table shown below gives informationaboutrelationbetweensolarfieldsize,correspondingCUFanddumpedenergy fora111MWplantwithnetgenerationof100MW.
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Theparametersconsideredforbenchmarkcapitalcostaretabulatedwiththeestimatedcost ofeachsubcomponentsasunder:1=`67 SolarField(m2)/MW Sr. No. 1 2 3 4 5 Particulars Structure HCE(AbsorberTubes): Mirrors Labourchargesforassembling,welding,alignmentand topography SolarFieldPiping 5804 perm2 30 41 35 12 20
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6 7 8 9 10 A 1 2 B 1 2 3 4 C
HTFSystem(pumps,tanks,Heatexchangersetc.) HTFFluid Electricalsystem ControlandInstrumentation CivilWorks TotalSolarFieldcost/m2 TotalSolarFieldcost `Crore/MW PowerBlock SteamTurbineandalternatorperkW BalanceofPlant*perkW TotalPowerBlockcostperkW TotalPowerBlockcostperMW` Crore/MW OtherCostelements Landcost:(6.25Acre/MW` 3lakh/Acre)`Crore/MW Sitedevelopment `Crore/MW Erectionandcommissioningcharges:2.5%oftotalA+B Preliminary&PreOperativeExpensesincludingIDCand contingencyandothercosts OtherCostelements `Crore/MW TotalProjectCost:A+B+C` Crore/MW
35 15 10 12 25 235 9.13 225 175 400 2.68 0.19 0.40 0.29 1.00 1.88 13.69
*Steamgenerationsystem,coolingtower,condensationsystem,auxiliarysystem, watertreatmentplant,coolingTower,compressedairsystem,waterpumping fromcatchmentarea,effluenttreatment,fireprotection,maintenanceworkshop, controlandinstrumentation,civilworks,Electricalsubstationandinstallation Considering above cost estimates as well as based on the market information of EPC contractssignedbythesolarthermalprojectsdeveloperunderphase1oftheNationalSolar Mission, the Commission proposes total project cost at ` 13.00 Crore/MW as benchmark capitalcostfordeterminationtariffforsolarthermalprojects.
10.4
OPERATION&MAINTENANCECOST
Thereis hardlyanyoperationalexperienceof MWscalethermal powerprojectsinIndia to ascertainnormsforO&Mexpenses.Regulation63oftheRERegulations2009specifiedthe normativeO&Mexpensesforsolarthermalpowerprojectsduringthefirstyearofoperation i.e.200910 as ` 13.00 Lakh/MW to be escalated at the rate of 5.72% per annum over the
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tariff period for determination of the levellised tariff. Accordingly, O&M expense norm for solarthermalpowerprojectdeterminedat`14.53Lakh/MWforFY201112. The Commission while specifying norm of ` 13 Lakh /MW considered that the repairs and maintenance expenses related to solar field operations are not significant due to limited wear and tear and mainly pertain to operation and maintenance for power block components. Significant part of manpower related expense would pertain to inspection/testing/cleaningsolarpanels/arraytrackingsystemsetc.
Commissionaftertakingintoaccounttheaboveandalsoconsideringthecheapermanpower costinIndiacomparedtodevelopednationsproposes`15Lakhs/MWasO&Mcostforthe year 201213 (FY 1112 norm escalated at 5.72%) which shall be escalated at the rate of 5.72%perannumoverthetariffperiodfordeterminationofthelevellisedtariff.
10.5
AUXILIARYCONSUMPTION
IntheRETariffRegulations2009,theCommissionspecifiedanauxiliaryconsumptionfactor at10%.TheCommissionalsospecifiedthattheabovenormsareapplicabletoplantswithout storage.
AccordingtotheCEAReport,SubgrouponintegrationofsolarsystemswithThermal/hydro powerstations,Solarthermalplantrequiresauxiliarypowerofabout8%whensolarplantis in operation and about 1% during off sun hours. Besides, solar thermal plant will daily requirestartuppower.Suchpowerisrequiredtotapofffeederfromdistributionlicensees feeder for auxiliary power/start up power requirement of solar plant at required voltage level.TheCommissionproposestoretainthesaidnormof10%forthenextControlPeriod.
11.
TECHNOLOGYSPECIFICNORMS:BIOMASSGASIFIER
MinistryofNewandRenewableEnergy(MNRE)hasapproachedtheCommissionvideletter No. 202/3/2010BM dated 7th December, 2010 with a request to amend the RE Tariff Regulations2009 for incorporating Tariff norms for Biomass Gasifier and Biogas based
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powerprojectsupto2MWinordertopromotethistechnologyconsideringtheadvantages ofsmallmegawattsizeBiomassGasificationandBiogasbasedpowerplantsconnectedatthe tailendof11kVdistributionsystemlevelandhaveenormouspotentialfor contributing to sustainabledevelopmentofruralIndia. Considering the request from MNRE, the Commission has decided to evolve the norms for BiomassGasifierbasedpowerprojectsandincorporateintheRETariffRegulationssothatit could be applicable for the determination of tariff for generation of electricity from such renewablesourcesofenergyandwhichcouldalsoactasguidingprincipleforStateElectricity RegulatoryCommissionsintermsofSection61(a)oftheAct. 11.1 Norms for biomass gasifier power project would be applicable for grid connected system thatuses100%producergasengine,coupledwithgasifiertechnologyasmaybeapproved byMNRE.
ELIGIBILITYCRITERIA
11.2
BIOMASSGASIFIERTECHNOLOGY
11.2.1 BIOMASSFEEDSTOCK Biomassfuelsavailableforgasificationincludecharcoal,woodandwoodwaste(branches, twigs, roots, bark, wood shavings and sawdust) as well as a multitude of agricultural residues (maize cobs, coconut shells, groundnut shells, coconut husks, cereal straws, rice husks, cotton stalks, mustard stalks, stalks of various other crops etc.). The chemical composition of biomass varies among species, but basically consists of high, but variable moisturecontent,afibrousstructureconsistingoflignin,carbohydratesorsugars,andash. BiomasshasanaveragecompositionofC6H10O5,withslightvariations.
11.2.2 BIOMASSGASIFICATION Biomassgasificationistheconversionofanorganicallyderived,carbonaceousfeedstockby

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partial oxidation into a gaseous product called synthesis gas or syngas, consisting primarily of hydrogen (H2) and carbon monoxide (CO), with lesser amounts of carbon dioxide (CO2), water (H2O), methane (CH4), higher hydrocarbons (C2+), and nitrogen (N2). Gasification relies on chemical processes at elevated temperatures 5001400oC, and atmospheric or elevated pressures up to 33 bar which distinguishes it from biological processes such asanaerobic digestionthat producebiogas. The oxidant used can be air, pureoxygen,steamoramixtureofthesegases.
11.2.3 GASIFICATIONREACTIONS
Biomass gasification proceeds primarily via a twostep process, pyrolysis followed by gasification.Pyrolysisisthedecompositionofthebiomassfeedstockbyheat.Thisstep,also known as devolatilization process and produces 75 to 90% volatile materials in the form of gaseousandliquidhydrocarbons.Theremainingnonvolatilematerial,containinghighcarbon content,isreferredtoaschar.
Thevolatilehydrocarbonsandchararesubsequentlyconvertedtosyngas/producergasinthe secondstepknownasgasificationprocess.Afewofthemajorreactionsinvolvedinthisstep arelistedbelow: ExothermicReactions: (1)Combustion{biomassvolatiles/char}+O2CO2 (2)PartialOxidation{biomassvolatiles/char}+O2CO (3)Methanation{biomassvolatiles/char}+H2CH4 (4)WaterGasShiftCO+H2OCO2+H2 (5)COMethanationCO+3H2CH4+H2O

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EndothermicReactions: (6)SteamCarbonreaction{biomassvolatiles/char}+H2OCO+H2 (7)Boudouardreaction{biomassvolatiles/char}+CO22CO Atypicalgasifierplantbasedontechnologyconsistsofareactor,whichreceivesairandsolid fuelandconvertsthemintogas,followedbyacoolingandwashing/cleaningtrainwherethe impurities are removed. The clean combustible gas at a nearly ambient temperature is available for running gas engine generator sets suitable for running on producer gas alone. Indicativegasifiersystemschematicisasunder:
Legend: G Gasifier, S Scrubber, WB Wet Blower, SB Separation Box, HE Heat Exchanger,CFCoarseFilter,FF1FineFilter1,FF2FineFilter2,FF3FineFilter 3,SFSafetyFilter 11.2.4 GASIFIERTYPES
Biomass fuels differ greatly in their chemical, physical and morphological properties; they make different demands on the method of gasification and consequently require different reactor designs or even gasification technologies. The range of designs include up draught, downdraught,crossdraughtandfluidizedbed.
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Allsystemshaverelativeadvantagesanddisadvantageswithrespecttofueltype,application and simplicity of operation, and for this reason each will have its own technical and/or economic advantages in a particular set of circumstances. Each type of gasifier will operate satisfactorily with respect to stability, gas quality, efficiency and pressure losses only within certain ranges of the fuel properties of which the most important are: energy content, moisturecontent,volatilematter,ashcontent&ashchemicalcomposition,reactivity,sizeand sizedistribution,bulkdensityandcharringproperties.
11.3 The capital cost of the Biomass Gasification / Biogas based power plant based on the Otto cycleincludescostoftwoprocessunitsi.e.GasProductionFacilityandGasFiredPowerPlant CAPITALCOST
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11.3.1 CAPITALCOSTNORMSASAPPROVEDBYVARIOUSSERCS GERCin2007determinedtariffforbiomassgasifierbasedpowerprojectsin2007at `4.5Cr./ MW which also includes evacuation/grid connectivity cost from interconnection points to nearestgridsubstations. RERCinitsorder,inthematterofDeterminationoftariffforsaleofelectricityfromBiomass based power plants, in the State, to Distribution Licensees during the MYT control period 200914, dated 17.08.2009 ordered that the Biomass gasifier projects have the option of adopting the general tariff of water cooled projects or approach the Commission separately for specifying norms and for determining tariff. At present no benchmark capital cost approvedbytheSERCsareavailable. TNERCcameoutwithaconsultativepaperAugust2011,inwhichtheyhavequotedIREDA letter dated 25.3.110 wherein they have suggested ` 5.82 Crore/ MW and based on the same the TNERC proposed that it is prudent to adopt the capital cost furnished by IREDA whichisinclusiveoftheevacuationcost. MNRE earlier referred to the Commission, vide letter dated 7.12.2010, a request letter of GraminAbhirudhiMandli,Banglorewhereinprojectcostsuggestedat`6.50Crore/MW. JSERCinitsRegulationsTermsandConditionsforTariffDeterminationforBiomassandnon fossil fuel based cogeneration projects) Regulations, 2010 (Dated 27.1.2010) specified CapitalcostforBiomassgasifierbasedpowerprojectat`5.50Cr./MW. 11.3.2 INTERNATIONALEXPERIENCE InsomecountrieslikeinSriLankaandEuropeanCountries,thebiomassgasifierbasedpower generation projectshave significantpresence.Equipmentcostacrossthedifferent countries
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canbeusedasabasisforcostbenchmarkingpurpose.However,thecapitalcostineachofthe countries is influenced by various local factors like competition, market size, material and labourcost,andlocalsubsidyetc.Therefore,theunderlyingcostinfluencingparametersmay besignificantlydifferentacrossthecountriesanditmayhaveverylimitedrelevanceinIndian context. 11.3.3 ACTUALPROJECTCOSTCOLLECTEDFROMVARIOUSSOURCES AccordingtoaDPRsubmittedtoMNREinJune2009foraprojectcommissionedbyM/sSun Pharma, the cost for the captive project is INR 250 Lakhs for a 500 kW plant. Since it is a captiveandoffgridpowerplantlocatedinthepremisesofM/sSunPharma,thecostforland hasnotbeenincludedhere.
Capital cost information collected from a leading manufacturer/supplier in the country for 1.2MWbiomassgasifierpowerplantalongwithgasengineareasunder: Sr. No. Description Qty. ìnLakh
GasifierSystem BiomassGasifierinultracleangasmodewithbasic 1 accessoriesandauxiliaries Provisionforparallellineoffiltersforcontinuous operation Moisturemeter(Tocheckmoisturecontentinthewood 2 pieces) Skipchargerforbiomassfeedingwithdoubledoorfeed 3 assembly 4 GasifierCoolingTower 5 Ash/Charremovalandwaterseparationsystem 6 HeatExchanger:tocoolgasto250C 7 WaterTreatmentPlant Totalofaboveitems(1to7) Engineering&erectionandCommissioningCharges Totalofallitems OptionalItems 8 Chiller 9 PLCbasedcontrolpanel 10 Biomasswoodcutter/Chipper Totalofoptionalitems
2Nos. 2Sets. 3Nos. 2Nos. Lumpsum 2Nos. 2Nos. Lumpsum Lumpsum
160.82 5.50 166.32 14.80 20.50 2.40 37.70
1No. Lumpsum Lumpsum
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1 2 3
EngineCost EngineGensetequivalentto1.2MW:3No.400kW@` Lumpsum 95.0lakhperEngine Enginecoolingtower Lumpsum CST@2%ofmaterialcost TotalofallitemsofEnginesequivalentto1.2MW TotalcostofBiomassgasifierprojectwithenginesfor1.2MW
285.00 7.65 7.10 299.75 503.77
Abovecostareexclusiveofthecostrelatedtoland,civilworks,evacuationinfrastructurecost andothercostestimatedasunder: Land: i. Acresforconstructionofplant@ `3Lakh/Acre: `3Lakh ii. 4Acresforstorage/processingbiomass@Rs. 3lakh/Acre:`12Lakh Civilwork: iii. Plantshedof19,000sq.feet@Rs.400/sq.feet:` 76Lakh Lumpsum iv. Fencing,Roadleveling,borewell,etc.:`12Lakh Crane,chainpulley,labour,weldingetc.forE&Cand Boarding,lodging,power,transportation,insuranceetc. Firstfilloflubeoil,charcoal,biomass,coolantetc AgricultureResidueProcessingMachineIncluding Threshers,tractorsetc.:`12Lakh 415Volt/11kVtransformer,DPstructure,ABTMeter, Control/powerPaneletc.,CablingfromEnginecontrol Lumpsum paneltotransformer,earthlingetc. Interestcapitalization,preoperativecostDPR Lumpsum preparationcostetc. Totalcostofprojectwithenginesfor1.2MW
115.00
2 3
45.00 20.00 683.77
ItappearsfromtheabovethatCapitalCostisaround`5.70Cr/MW. MNREvideitsletterdated30ThSeptember2011recommendedthatcapitalcostofMWsized biomass gasifier has been estimated at ` 5 Crore / MW by one of the gasifier makers and projectcostwouldbeabout`6.5Croreconsidering30%asthesoftcost,whichincludespre development,financingcostandmarginmoneyforworkingcapital.
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TNERC has in consultative Paper (August2011) on Procurement of Power from Biogas and Biogasification based Power Plants referred Indian Renewable Energy Development Agency (IREDA) reported capital cost of ` 5.82 Crore/ MW for Biogasification based Power Plants. TNERCproposedthatitisprudenttoadoptthecapitalcostfurnishedbyIREDA.Further,itis mentionedthatthecapitalcostfurnishedbyIREDAisinclusiveofpowerevacuationcost.
Consideringtheabove,theCommissionisoftheviewthatthereisfurtherscopeofreduction in the price quoted by the supplier and if one can source engines other than from biomass gasifiersupplierthereisafurtherscopeofreductionintheenginecostalso.Consideringthe sametheCommissionproposestoconsider`5.50Cr/MWfortheFY201213withoutpower evacuationcost. 11.3.4 CAPITALSUBSIDYFROMMNRE
CapitalsubsidyfromMNRE,whichaspertheprevailingnormsforBiomassGasifiersis`1.5 Cr./MWorpartthereofforgridconnectedpowerplants.Forpowerplantsforcaptiveusethe sameis`1Cr./MW.
Consideringtheabove,theCommissionhasproposedtoconsidernetprojectcostat@`4.00 (`5.50Cr.` 1.5Cr.)Cr./MWfortheFY201213forthedeterminationoftariff. 11.4
SPECIFICFUELCONSUMPTION
IncaseofBiomassGasifierbasedPowerPlantsthespecificfuelconsumptionisacombination of Producer Gas yield from Biomass Gasifier Plant and thereafter the efficiency of the Gas EngineGenerator sets. For Biomass Gasifiers for prepared biomass (chipped/ dried woody biomass and/or briquetted agriculture residues) specific fuel consumption/Wood ConsumptionperUnit(kWhr)withlessthan20%moisturelevel,basedonthespecifications providedbythebiomassgasifiermanufacturer,isaround1.1+/0.1kgperunit. ThestudycarriedoutbyIISc/CGPLontheperformanceoftheBiomassGasifierbasedPower Plantsset up byBERI also reveals that with less than 20% moisture level specific fuel consumptionisaround1.1kg/kWh.
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These values are also corroborated by the basic efficiency data of the gasifiers and gensets separately, coupled with the known calorific values of various biomass materials with given moisturecontent.Typicaloverallgasifierefficienciesincoldandcleangasmodeasrequired forenginesaregivenas73to75%withbiomassofwoodynature(wastewood,cottonstalks, mustard stalks, maize cobs etc.). Indicative efficiencies of producer gas engines are around 3031%. The overall efficiencies therefore workout to 2223% and the heat rate therefore works out to 3820 Kcal / kWh. Woody biomass with 20% moisture content generally has a calorificvalueofaround3500Kcal/kgandSFCthereforeworksouttocloseto1.1kg/kWh forwoodybiomassbutgasificatinisveryspecificandneedbiomassat20%orbelowmoisture contents.
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JSERC in its Terms and Conditions for Tariff Determination for Biomass and nonfossil fuel basedcogenerationprojects)Regulations,2010specifiedStationHeatrateat3800kCal/kWh andcalorificvalueat3500kCal/kgwhichworksouttocloseto1.1kg/kWh. Considering the above, the Commission proposes that the specific fuel consumption for biomassgasifierat1.10kg/KWh. 11.5 TheRERegulations2009forBiomassPowerPlantsbasedontheRankineCyclewerebasedon the assumption of 10% Auxiliary Power Consumption. The auxiliary consumption includes electricity consumption in upstream (biomass processing) and downstream (residues treatment)units. AccordingtoaDPRsubmittedtotheMNREof500kWofBiomassgasifiertheAuxiliaryPower Consumption is 12%. MNRE referred the request of Grameen Abhirudhi Mandli to CERC seeking amendment in the CERC RE tariff Regulations2009 by specifying Biomass gasifier technology specific parameters, wherein, normative Auxiliary Power Consumption wassuggestedat12%. TNERC in its consultative paper on Procurement of Power from Biogas and Biogasification based Power Plants dated 25.08.2011 referred IREDA letter dated 25032011 suggesting 10%AuxiliaryPowerConsumptionforBiomassGasifierbasedpowerprojectandaccordingly proposedAuxiliaryPowerConsumptionat10%. JSERC in its Terms and Conditions for Tariff Determination for Biomass and nonfossil fuel based cogeneration projects) Regulations, 2010 specified Auxiliary Power Consumption for BiomassGasifierbasedpowerprojectat10%. Considering the same, the Commission proposes to consider norm of Auxiliary Power Consumptionat10%.
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11.6
NormativevaluesofPLFofBiomassgasificationbasedpowerprojectsadoptedbyGERCinits OrderNo.2of2007wherein80%PLFconsideredforbiomassgasifierbasedpowerproject.
TNERC in its consultative paper on Procurement of Power from Biogas and Biogasification based Power Plants dated 25.08.2011 referred IREDA letter dated 25032011 suggesting 80%PLFforBiomassGasifierbasedpowerproject.
MNREreferredtherequestofGrameenAbhirudhiMandlitoCERCseekingamendmentinthe CERC RE Tariff Regulations2009 by specifying Biomass gasifier technology specific parameters,wherein,normativePlantLoadfactorat75%.
Consideringtheabove,theCommissionproposes80%PLFforBiomassGasifierbasedpower plants.
11.7
O&MEXPENSES
ThenormforO&MexpensesforBiomassPowerPlantsbasedontheRankineCycle,according to CERC RE Tariff Regulations2009, is fixed at ` 20.25 lakhs/MW as O&M expenses for FY 200910 with annual escalation of 5.72% for the remaining years of the control period. Accordingly,forFY201112andFY201112O&Mcostdeterminedat`21.41Lakhs/MWand `22.63lakhs/MWrespectively. The O&M cost for Biomass Gasifier plant will be higher than that for Biomass Power Plant based on the Rankine cycle, as man power costs do not reduce proportionately with unit rating. In addition, higher expenditure towards feedstock preparation incures extra cost on processingofagriresiduestoobtainqualityasrequiredasfeedstockforBiomassGasification Plant.TheoverallO&Mcostsneedtobeconsideredinthreeparts: i. Maintenanceofgasifier ii. Maintenanceofenginegenset,electricalsetc. iii. Manpowercostforregularoperationandmaintenance
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Operation & Maintenance costs for any power plant generally include expenses related to manpowercost,maintenancecost,consumables(costofspares),insuranceanddisposal.
TNERCConsultativepaperondeterminationtariffforthebiomassgasifierbasedpowerplant referred suggestion received from IREDA vide letter dated 25.3.2011 wherein O & M cost suggested at 3% of the capital cost for O&M and 0.5% for insurance. Based on the same TNERChasproposedanormforoperations&maintenancecostat3%ofthetotalprojectcost with5%escalationcostand0.5%forinsurance
JSERC in its Terms and Conditions for Tariff Determination for Biomass and nonfossil fuel based cogeneration projects) Regulations, 2010 specified normative Operation & maintenanceCostat4.5%oftheCapitalcostwith5.72%escalationasconsideredforbiomass combustionbasedpowerproject.
BasedontheDPRsubmittedbytheprojectdeveloperstoMNREfora500kWbiomassbased power generation wherein O&M cost is considered as 6% of the total project cost. The detailedbreakupisreproducesasunder: In`Lakh Description Costoflubeoil Manpowercost Repairs&maintenance TotalO&Mcost TotalProjectCost O&Mcostaspercentageoftotalprojectcost O&Mcost/MW
Istyear 2.89 4.80 5.20 12.89 250 5.15% 25.76
IIndyear 3.04 5.04 5.46 13.54 5.42% 27.08
IIIrdyear 3.19 5.29 5.73 14.21 5.68% 28.42
However, above referred costs were for year 2009 for a captive system wherein no managerialandothersupportmanpowerwasconsidered.
MNREvideletterdated7.12.2010submittedarequestGraminAbhirudhiMandli,Bangloreto CERC for determining generic tariff for the biomass gasifier based power plant wherein OperationandMaintenancecostwassuggestedasunder:
Description MaintenanceCosts ManpowerCost(for18person) Total
AnnualAmount (` Lakh) 50.00 12.00 62.00
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Considering above, ` 35 Lakh /MW is proposed to be considered as a norm for Operation andmaintenancecostfortheFY2013andsamewouldbeescalatedattherateof5.72%every yearduringthenextcontrolperiod. 11.8 TheCommissionproposesthatthebiomassfuelpricesuggestedforthebiomassbasedpower plant with rankine cycle technology would be applicable for the biomass gasification based powerplant. 12. 12.1 Norms for Biogas power project would be applicable for grid connected system that uses 100% Biogas fired engine, coupled withBiogas technology for codigesting agriculture residues,manureandotherbiowasteasmaybeapprovedbyMNRE. 12.2 BIOGASPLANTSTECHNOLOGY TECHNOLOGYSPECIFICNORMS:BIOGASPLANTS ELIGIBILITYCRITERIA BIOMASSFUELPRICE
12.2.1 BIOMASSFEEDSTOCK Biomass fuels available for Biomethanation include crop residues (with higher cellulosic content),cow/poultrymanure,foodandagroindustrysolidandliquidwasteandsegregated organicurbanwaste. Thechemicalcompositionofbiomassvariesfordifferentsubstratesbutbasicallyconsistsof high,butvariablemoisturecontentandrelativelyhighdigestableorganicdrysolids(orvolatile solids).
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12.2.2 BIOMETHANATIONPROCESS Biomethanationisaprocessinwhichbiogas,alongwithbiocompostisproducedbyactivity of anaerobic bacteria on organic matter prevalent in biomass/ waste. Anaerobic bacteria occurnaturallyinorganicenvironmentswhereoxygenislimited. Convertingorganicmattertomethanegasbyanaerobicdigestionisachievedbyathreestage process.
i. Thefirstsageinvolveshydrolysisoforganiccompounds. ii. Thesecondstageisacidformation,whichiseffectedbyagroupofanaerobicbacteria referredtoastheacidformers. iii. Thethirdstageinvolvesagroupofbacteriaknownasthemethaneformersthat breaks down the organic acids and produces methane as a byproduct of the degradationoftheorganicacids. The anaerobic digestion process produces biogas, whose constituents are producing power and heat. The biogas produced by anaerobic digestion, which is roughly about 5260 %
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101
methane,withCO2comprisingmostoftheremainder.HydrogenSulphide,whichispresentin small amounts, gets converted into sulphate and then the sulphate is reduced to form elementarysulphurbysulphatereducingbacteria. Thedigestereffluentcontainsthenondigestibleorganicmatter(humus)andinorganicmatter (essentiallymajor&micronutrientswhichcanbeusedforsoilfertilitymanagement. 12.2.3 BIOMETHANATIONREACTION Biomethanation process can be described through a generalized reaction as under: Anaerobes Organic Matter + Combined Oxygen New Cells
EnergyforCells+CH4+CO2+OtherEndProducts ThespecificreactionoftheBiomethanationisasunder: C6H12O6+2H2O2CH3COOH+4H2+2CO2 CH3COOHCH4+CO2 CO2+4H2CH4+2H2O 12.2.4 BIOGASPLANTDESIGN TheBiogasPlantdesigndependsupontypeofsubstratesthatareusedforbiogasproduction and also the temperature range at which the anaerobic digestion processes are controlled. Thepreprovendesignsare: (i) UpflowAnaerobicSludgeBlanket(UASB)
Upflowanaerobicsludgeblanket(UASB)reactorisoneoftheanaerobicreactorsforbothhigh andlowtemperature.UASBreactor,inthepast,hasbeenthemostwidelyusedsystemfor anaerobic treatment of distillery spent wash/food industry effluents and sewage. The digesters have extremely high volumetric efficiency and the nature of substrates eliminates the need of feedstock preparation, substrate mixing, stirring within digesters, recycling etc.
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ConsequentlythesehavetheadvantageoflowercapitalcostaswellasO&Mcost.However, UASB reactor cannot be used for codigestion of crop/agriculture residues, manure, food industrywasteetc.,whichhavesignificantlyhigherdrysolidscontent. (ii) Continuousflow,fullymixedDigesters:
These find application in substrates with high dry solids content. The efficiency being improved through technological interventions in feedstock preparation, ability to codigest substrates, substrates mixing, controlled dosing of substrates, proportionate stirring within digesters and process control to optimize production of CH4 and minimizing production of NH3 & H2S. In the past decade there has been significant evolution in plant technology and design resulting in high biogas yield and PLF in excess of 90%. A key physical factor for successful anaerobic digestion is the temperature and the proven plant designs are with followingtemperatureranges.
(iii)MesophilicTemperature:
Themesophilictemperaturerange(3538oC)istheoptimaltemperatureforalargenumberof methaneformingmicroorganismsfor productionofBiogas.Mesophilicbacteriacan tolerate temperature fluctuations of +/3 C without significant reductions in methane production. TheHRTofthistemperaturerangeis3040days.Inthemesophilictemperaturerange,the dewateringpropertiesarehighandrequireslowamountofenergyforheatingthedigester. Thethermaldestructionofbacteriaisalsoverylowinthemesophilictemperature.Hencethe microorganismsarestableinthistemperatureandproducemorebiogas
(iv)ThermophilicTemperature:
In thermophilic anaerobic digestion, the temperature (5560 C) has to be maintained inside the digester which requires lot of energy. The thermophilic bacteria are more sensitive to temperaturefluctuationsandrequirelongertimetoadapttoanewtemperature.Thegrowth rateofmethanogenicbacteriaishigheratthermophilicprocessmakingtheprocessfasterand moreefficient.Therefore,awellfunctioningthermophilicdigestercanbeloadedtoahigher degreeoroperatedatalowerhydraulicretentiontime(HRT)thanatmesophilicconditions. Butthethermophilicprocesstemperatureresultsinalargerdegreeofimbalanceandahigher riskforammoniainhibition.
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12.3
CAPITALCOST
ThecapitalcostoftheBiogasbasedpowerplantbasedontheOttocycleincludescostoftwo processunitsi.e.GasProductionFacilityandGasFiredPowerPlant 12.3.1 CAPITALCOSTNORMSASAPPROVEDBYVARIOUSSERCS HERCvideitsorderdated5thJuly,2011determinedaprojectspecifictariffforBiogasPower Projectwhereinprojectcostwasapprovedat`10.9Crore/MW(`4.36Crorefora400kW) for a cow dung based Biogas Power Plant which included the digester effluent treatment systemsandpowerevacuationsystem. TNERCcameoutwithaconsultativepaperAugust2011,inwhichtheyhavequotednorms assuggestedby: i. MNRE:`12Crore/MWfor1MWBiogasPowerPlantand`11Crore/MWfor2MW BiogasPowerPlant, ii. iii. IREDA:` 7.87Crore/MW(Distillaryspentwashbasedbiogaspowerplant), TEDA : ` 8 Crore/MW for Sago based and ` 10 Crore/MW for Poultry litter based BiogasPowerPlant, iv. 12.3.2 INTERNATIONALEXPERIENCE InEuropeandinGermanyinparticularBiogasPlantshavesignificantpresence.Germanyhas over5500IndustrialBiogasPlants,whichoperatewithPLFsupwardsof80%andover90%in caseofplantsbuiltbythetechnologyleaders.TheEuropeanplantsarebasedoncodigestion ofsubstrateslikemanure,foodindustrywaste,agricultureproduce/wasteandhenceareakin to the Biogas Plants proposed in India. The equipment cost in Europe varies from Euro 3 millionto4million/MWbasedonplantssizeandnatureofsubstrates.
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PetitonfiledbyM/sPallavaWaterandPowerLtd.BeforeTNERC:`10Crore/MW
104
Biogas Plants built in Asia are largely mono substrates based on manure or distillery spent wash/industrial effluents or sewerage. These have a much simpler plant design without requirements of feedstock preparation, substrate mixing, stirring in digesters, recycling, etc. andhencearenotarelevantbenchmarkfortheBiogasPowerPlantsproposedastailendof thegridpowergeneration. 12.3.3 ACTUALPROJECTCOSTCOLLECTEDFROMVARIOUSSOURCES
AccordingtotheDPRsubmittedtoMNRE,throughHAREDA,in2011byShreeKrishnaCaptive Energy Pvt. Ltd., the project cost for a 400 kW Biogas Power Plant was ` 5.58 Crore, or Rs 13.95 Crore/MW. Since this plant had 80% (by weight) cow manure the digester volume is relativelyhigherandprojectcostisrelativelyhigher. CapitalCostinformationcollectedfromMNREfor2MWBiogasPowerPlant,withcowdung andAgriResidues(maizeStalks,Paddy,Straw,CaneTrash)askeyfeedstockis` 2000Lacsas detailedunder: Sr. No 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
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Description BiogasPlant Land,Buildingandotherinfrastructure(BiomassStorage& Transferfacilities) BiomassStorage,Feeding,Mixing&TransferFacilities(Slurry tank+Agitators+ShredderPump) Digester(Tank)&DigesterAccessories(Agitators+Platform+ RecirculationTank) DigesterCoverwithgasholder,Supportingsystems,etc. DigestateStoragetank(Tank+Agitators+Cover) Automation&ProcessControls(PLC+Fielddevices+Gas control+GasFlare) MechanicalBOPandPipingSystem(Pumps+Piping+Valves+ Compressors+Ventilation) ElectricalBOP,CablingSystem(MCC+cabling+Earthing) HeatRecoverySystem(forDigesterheating) TechnicalBuilding
ìnLakh
110 295 412.5 125 50 95 265 50 11.5 41
105
11.
PowerEvacuationSystem(PCC+Transformer+DPStructure+ LoadBreakSwitch+11kVTransmissionLine) 12. GasEngineCoupledwithAlternator&Accessories TotalCostofProjectincludingI&CChargesfor2MWBiogasPower Plant
105 440 2000
Note:a)Abovecostbreakdownincludestechnology,engineering,procurement, transportation, insurance, erection & commissioning, project/construction management. b)AbovecostexcludeDigestateTreatmentSystemwhichisincludedinstabilized compostproductioncost MNREvideitsletterdated30thSeptembersuggestedcapitalcostforbiomethanationbased projectsat` 812Crore/MW MNRE earlier referred to the Commission, vide letter dated 7.12.2010, a request letter of GraminAbhirudhiMandli,Banglorewhereinprojectcostsuggestedat`10Crore/MW Considering above, the Commission proposes the capital cost of ` 10 Crore/MW for 1 MW Biogas Power Plant, which is the representative rating of Biogas plants that are likely to be built in rural areas with cow manure as a key feedstock. Considering the above, the commissionproposestoconsider`10Crore/MWfortheFY201213 12.3.4 CAPITALSUBSIDYFROMMNRE CapitalsubsidyfromMNRE,aspertheircircularF.No.10/1/2011U&Idated2ndMay2011is ` 3 Crore/MW (limited to ` 6 Crore/project) for Biogas Plants with feedstock mix of cattle dung, vegetable market & slaughter house waste along with agriculture wastes/residues. Financialsupportisprovidedaftersuccessfulcommissioningofprojects. MNREvideitscircularF.No.2/1/2008UICAdated26thApril2010stipulatedcapitalsubsidyof ` 1.5CroreperMW(subjecttoceilingof` 5Crore/project)forBiogasPlantswithfeedstock ofindustrialwaste(whichincludespoultrymanure).
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Consideringthatmostoftheprojectswouldbesmallcapacityprojectsof1MWorso,under the proposed tail end of the grid programme would be having feedstock of agriculture residues, cow manure and other bio waste the commission has proposed to consider net projectcostof` 7Crore/MWfortheFY201213fordeterminationoftariff. 12.3.5 SPECIFICFUELCONSUMPTION IncaseofBiogasPowerPlantsthespecificfuelconsumptionisafunctionofBiogasyieldfrom BiogasPlantandthereafterefficiencyoftheGasEngineGeneratorsets. TNERCconsultativepaperonprocurementofPowerfromBioGasandBiogasificationbased Power Plants dated 25.07.2011 regarding specific consumption of fuel, Haryana ERC has specified4.21kg/kWhforpoultrylitterbasedbiogaspowerplantsandbasedonthePetition filed by the M/s Pallava Water and Power (p) Limited, TNERC has considered a specific consumptionof3kg/kWhinthisdiscussionpaper. Theefficiencyofnewgenerationgasenginesrevealsarangeof35%to45%dependingupon the capacity. Therefore, assuming an electrical efficiency of 40% for bio gas based power plantsisreasonableafteraccountingforefficiencyvariationslinkedtositeconditionsandthis translatesintothestationheatrateof2150kCal/kWh.(860/0.4=2150) Regardingcalorificvalueofthebiogas,inthediscussionpaperofTNERCmentionedthatthe MNREhasreportedacalorificvalueof4500to5000kCal/m3. AccordingtotheMNREwebsite,thegasobtainedfromcowdungbasedbiogasplantsthrough anaerobicdigestioncontainsamixtureofmethane(5565%),carbondioxide(3540%)and traces of other gases. The calorific value of biogas is around 5000 kcal/m3. Though the calorificvalueofbiogasislessthanthatofnaturalgas(calorificvalueofCNG8600kcal/m3), biogas can be offered as an excellent fuel for many energy applications.
http://www.mnre.gov.in/annualreport/20042005_English/ch4_pg1.htm
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Biogasproducedfromsubstratesmixofcowmanureandagriculturalresidueswouldtypically have55%methane.Thenetcalorificvalueofmethaneis8750Kcal/Nm3.HenceBiogaswith 55%methanewouldhavecalorificvalueof4812Kcal/Nm3.
Theyieldofbiogasfromaparticularfeedstockwillvaryaccordingto: i. ii. Drymattercontent,foodwastesinparticularwillvarygreatly Theenergyleftinthefeedstock,ifithasundergoneprolongedstorageitmayalready havebeguntobreakdown iii. iv. v. Lengthoftimeinthedigester ThetypeofADplantandtheconditionsinthedigester Thepurityofthefeedstock
http://www.biogasinfo.co.uk
TheBiogasyieldofdifferentsubstratesvariesbuttheMNREhassuggestedtypicalyieldsfor representativesubstratesaregivenintablebelow:
Substrates AgricultureResidues(Paddy straw,maizestalks,canetrash) CowManure
%DrySolids 55 18
Biogasyield cum/MT 255 45
OnaPanIndiabasis,themanurewouldbetypicallycowmanureandsubstratemixwouldbe 60%agricultureresiduesand40%cowmanure.ThiswouldresultinaverageBiogasyieldof 167cubicmeter/MTwithtypicalfeedstockmix(Agri.Residues(12400MT)+CowDung(9000 MT)=21400MTandtotalbiogasyield=3567000m3).Consideringcalorificvalueofbiogasat 4812kCal/m3thespecificfuelconsumptionworksoutto2.86kg/kWh.
Consideringabove,thecommissionproposestoconsiderspecificfuelconsumptionof3Kgof substratemixperkWhgenerated.
12.3.6 FEEDSTOCKCOST
TNERCconsultativepaperonprocurementofPowerfromBioGasandBiogasificationbased Power Plants dated 25.07.2011 has proposed Fuel cost at ` 1020/MT with 5% escalation. Costofbyproductproposedat`2500/MTasrecommendedbyIREDAwith5%escalation.
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InrecentyearsithasbeennoticedthatBiomassCosttendstofollowtrendsofcoalasthere arealternativeapplicationsforcombustion.Recognisingthis,CERCinitsRETariffRegulations 2009 provided for price escalation formula with 60% of biomass cost linked to that of coal, 20%linkedtothatofdiesel(relatedtobiomasstransportation)and20%linkedtowholesale priceindex(relatedtolabourinbiomasscollection/transportation).
Thericehusk,wood,bagasse,cottonstalksandotheragriculturalresiduestendtohavecosts around`2500/MTwithcalorificvalueof3500Kcal/kg,.
By applying above yardstick the price for agricultural residues with higher cellulosic content (maize stalk, paddy straw, cane trash), having 45% moisture and calorific value of 2000 Kcal/kg,wouldbearound`1400/MT.
Cow manure prices vary based on current applications. However, the landed cost including collection/loading/transportation/unloading,isobservedtobebetween`500to650/MTfor partiallydriedcowmanurewith70%moisture.
Consequently,forBiogasPlanthavingfeedstockmixof40%cowmanureand60%agricultural residues,theaveragecostwouldrangebetween`1040to`1100/MT.
MNRE vide letter dated 7.12.2010 submitted a request from Gramin Abhirudhi Mandli, BangloretoCERCfordetermininggenerictariffforthebiogasbasedpowerplantwhereinfuel costconsideredasunder:
CostofDifferentSubstrate(AgricultureWaste+Manure) Sr. No. 1 2
Feedstock CowDung AgriResidues(MaizeStalks,PaddyStraw,CaneTrash)
DrySolid% 18 55
Cost/MT In` 565 1350
TypicalFeedstockMixfor1MWBiogasPlant Sr. No. 1

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TypicalFeedstockMix AgriResidues(12400MT)+CowDung9000MT)
TotalMT 21400
Average Cost/MT In` 1020
109
BiogasPlantdigestereffluentneedstobetreated,priortodischarge,tocomplywithPollution Control Board norms. The treatment process involves usage of expensive flocculants along withlabourandotherconsumables.However,theseparatedsolidswouldthenhavevalueas organic manure. As the quantity of such separated solids is high it cannot be sold for only specializedapplicationssuchashorticulturebutwouldgobacktotheagriculturalfieldsfrom where the agricultural residues are collected. It is not possible to monetize such organic manureathighratesinviewoftheavailabilityofheavilysubsidizedchemicalfertilisers. Consequently, MNRE, in recent hearings of TNERC for fixation of Biogas tariff, has advised takingthebyproductcostrecoveryataround10%ofthefeedstockcost. Consideringtheabove,theCommissionproposestoconsideraveragefeedstockmixcost,net ofbyproductcostrecovery,as`990/MTforFY201213 12.3.7 AUXILIARYPOWERCONSUMPTION The RE Tariff Regulations2009 for Biomass Power Plants based on the Rankine Cycle were basedontheassumptionof10%AuxiliaryPowerConsumption. TNERC Consultative paper on determination tariff for the biogas gas based power plant referredsuggestionfromvariousstakeholdersasunder: MNRE(Letterdated19.7.2010):1012% TEDALetterDated20042010:14.60%forSagobasedand155forPoultrylitter basedplant; HERC(Orderdated21092010):12.74%; PetitionfiledbyM/s.PallavaWaterandPower(P)Ltd.:13%; IREDA(letterdated25.3.2011):10%
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Based on the above, TNERC has proposed normative Auxiliary Consumption at 12% considering special nature involved in biogas based plant such as effluent treatment system etc. HERC in its order dated 5.7.2011 approved Auxiliary Consumption at 10% for biogas based powerplant.WhilespecifyingthesaidnormtheHERChasrecordedthatintheabsenceofany norms for biogas power projects and keeping in view the associated processes including fertilizer unit, waste heat recovery system, reject water treatment system etc. which has severalspinoffbenefitsandnormforbiomassbasedprojects,hasconsideredauxiliarypower consumptionforbiogaspowerprojectsas10%. MNRE vide letter dated 7.12.2010 submitted a request from Gramin Abhirudhi Mandli, Banglore to CERC for determining generic tariff for the biogas based power plant wherein auxiliarypowerconsumptionforbiogaspowerprojectsisproposedas13%. In case of Biogas Power Plants the auxiliary power consumption would include electricity consumption in upstream (feedstock preparation and substrate mix) and downstream (digestereffluenttreatment)units.AccordinglytoaDPRsubmittedtoMNREfor2MWBiogas PowerPlanttheauxiliarypowerconsumptionis13%asdetailedbelow:

SNo
ITEM
Qty (No)
UNIT TOTAL LOAD LOAD (KW) (KW)
OPERATING LOAD(KW) FACTOR(0.9)
OPERATING TIME(Min. PerCycle)
OPERATING TIME(Min. PerDay)
Auxiliary Power Consumption (KWhr/Day)
BiogasPlant Agitatorsforslurry 1 tanks 2 Slurrytransferpump 3 RuptureRollers Screwconveyors& 4 WalkingFloorforsilage Screwconveyorfor 5 DOC ShredderforBiomass 6 feedpump
4 2 8 6 2 2
13 15 3 14.5 7.5 9.2
52 30 24 87 15 18.4
46.8 27 21.6 78.3 13.5 16.56
5 5 8 8 4 10
120 120 192 192 96 240
93.6 54 69.12 250.56 21.6 66.24
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Biomassfeedpumpto digester 2 15 30 AgitatorforMixing 8 Tank 2 22 44 9 AgitatorsforDigester 10 25 250 InstrumentAir 10 Compressor 2 2.5 5 Desulphurization 11 compressor 2 3 6 12 Lightingload 10 RecirculationTransfer 13 Pump 4 5.5 22 AgitatorsforResidual 14 StorageTank 4 10 40 15 VentilationSystem 2 14 28 Heatingpumpfor 16 Digester 4 5 20 SubTotal 681.4 Powergenerationperday(kWh) %ageofBiogasPlantAuxiliaryConsumption 17 EngineAuxiliary 2 16.42 32.84 %ageofEngineAuxiliaryConsumption 18 DigestateTreatment 2 35 70 %ageofDigestateTreatmentAuxiliaryConsumption 7
27 39.6 225 4.5 6 9 19.8 36 25.2 18 613.86
10 20 10 100
240 480 240 100
108 316.8 900 7.5 144 108 31.68 187.2 604.8
Continuous 1440 720 720 4 96
13 312 Continuous 1440 Continuous 1440
432 3395.1 43200 7.9% 29.556 Continuous 1440 709.34 1.6% 63 Continuous 1440 1512 3.5% Total%ofAuxiliaryConsumption 13%
Consideringabove,theCommissionproposestoconsiderauxiliarypowerconsumptionat12% fordeterminationoftariff.
12.3.8 PLANTLOADFACTOR(PLF)
NormativevaluesofPLFofBiogasbasedpowerprojectsadoptedbyHERCinitsOrderdated 21.09.2010wherein65%PLFconsideredforfirstyearofoperationand80%PLFconsideredfor thesubsequentyears.
TNERC recently came out with a Consultative Paper on Procurement of Power from Biogas and Biogasification based Power Plants August 2011 wherein IREDA letter dated 2503 2011and MNRE letter dated 19.07.2010 have been referred suggesting 80% PLF for biogas basedpowerproject.
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HERCinitsorderdated5.7.2011approvedPlantLoadFactorat85%forbiogasbasedpower plant.
MNRE vide letter dated 7.12.2010 submitted a request from Gramin Abhirudhi Mandli, Banglore to CERC for determining generic tariff for the biogas based power plant wherein PlantLoadFactorwasproposedat90%.
Considering the above and keeping in mind of smaller size of the projects, the Commission proposes90%PLFforBiogasbasedpowerplants.
12.3.9 O&MEXPENSES
ThenormforO&MexpensesforBiomassPowerPlantsbasedontheRankineCycle,according to CERC RE Tariff Regulations2009, is fixed at ` 20.25 lakhs/MW as O&M expenses for FY 200910 with annual escalation of 5.72% for the remaining years of the control period. Accordingly,forFY201112andFY201112O&Mcostwasdeterminedat`21.41Lakhs/MW and`22.63lakhs/MWrespectively.
HERC in its order dated 5.7.2011 allowed ` 8.1 Lakh as O&M expenses for 400 kW biogas based power plant considering the norm as specified by the CERC for 200910 for biomass based power plant with rankine cycle technology. Biogas Power Plants comprises Biogas ProductionunitandPowerunit,theoverallO&Mcostsneedstobeconsideredintwoparts. First part relates to regular maintenance of Biogas Plant, Engine gen set, etc. and the other partrelatestomanpowerforregularoperationsandmaintenance. TNERC Consultative paper on determination tariff for the biogas gas based power plant referredsuggestionfromvariousstakeholdersasunder: TEDALetterDated20042010:10%ofProjectCostforSagobased,5%ofProject CostforPoultrylitter; HERC(Orderdated21092010):6%oftheProjectCost; Petition filed by M/s. Pallava Water and Power (P) Ltd. : 5.25% of Project Cost with5.72%escalation; IREDA(letterdated25.3.2011):3%ofthecapitalcost(` 7.87Crore)forO&Mand 0.5%forinsurance.
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Basedontheabove,TNERChasproposednormforoperations&maintenancecostat3%of thetotalprojectcostwith5%escalationcostand0.5%forinsurance TheO&McostforBiogasPlantwouldbehigherthanthatforBiomassPowerPlantbasedon the Rankine cycle, as man power costs do not reduce proportionately with unit rating. In addition, higher expenditure towards feedstock preparation and substrate mixing as well as extra costs for digester effluent treatment as per Pollution Control Board norms have to be incurred.
Based on DPR submitted by a Project Developer to MNRE for 2 MW Biogas Power Plant wherein O&M cost is considered as 6% of the total project cost. The detailed break up is reproducedasunder: Description BiogasPlant&DigesterEffluentTreatmentmaintenance EnginesMaintenanceincludingLubeOil** ManpowerCost TotalO&MCost TotalProjectCost O&MCostas%ageofProjectCost O&MCost/MW
1stYear
` in Lakh
36.30 58.80 36.90 132.00 2200 6% 66
** Engine annual maintenance cost provided by Notable Engine manufacturer MWM is givenbelow; Allin`Lacs Avg of10 yrs
Year 2MW
10
14.48 29.20 36.02
30.10 103.62 22.95 80.69 29.20 211.59 30.10 58.80
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The working for operations & maintenance costs, per MW, assuming optimization in engine O&Mcostsareasfollows:
Description BiogasPlant&DigesterEffluent TreatmentMaintenance EngineMaintenanceincluding LubeOil ManpowerCost 1Engineer 4Technicians 1Chemist 1Accountant 10Labours 3SecurityPersons GrandTotal
AnnualAmount ` inLakh 18.15 29.40 3.00 4.80 1.20 1.20 6.00 2.25 66.00
Remarks ` 0.46/M3 Cost/Persons ` inLakh 3.00 1.20 1.20 1.20 0.60 0.75
MNRE vide letter dated 7.12.2010 submitted a request from Gramin Abhirudhi Mandli, BangloretoCERCfordetermininggenerictariffforthebiogasbasedpowerplantwherein dataprovidedpertainingtotheOperationandMaintenanceCostsareasunder: AnnualAmount ` inLakh 2MW ManpowerCost MaintenanceCost AnnualO&MCharges CapitalCost %O&McostonCapitalCost
Particulars
1MW 12.00 40.50 52.50 1000 5.25%
24.00 81.00 105.00 2000 5.25%
Considering the above, the Commission proposes norm for operations & maintenance costat3%ofthetotalprojectcostwhichworksoutto`30Lakhs/MWfortheFY201213 and the same will be escalated at the rate of 5.72% every year during the next control period.
***********************
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EXPLANATORYMEMORANDUM_RENEWABLEENERGYTARIFFREGULATIONS_DRAFTFORCIRCULATION

ExplanatoryMemorandum For DraftTermsandConditionsfor DeterminationofTariff For RenewableEnergySources November,2011

by State Nodal Agency/StateGovernmentonlyforzoningpurpose.

machinerybased on Rankine cycle technology and using biomass fuelsources,

systemthatuses100%Biogasfiredengine,coupledwithBiogastechnologyforcodigesting agricultureresidues,manureandotherbiowasteasmaybeapprovedbyMNRE. 2.3 APPROACHFORDEVELOPMENTOFTARIFFNORMS

v. vi. vii. viii. ix. x.

Biomass, Bagasse,Biogas andBiomass gasifier

Auxiliary Consumption O&M Expenses

3. GENERALPRICIPLES Underthissection,thegeneralprinciplesforREtariffdeterminationsuchasControlPeriod, tariffperiod,tariffstructure,tariffdesign,tariffreviewmechanismetc.havebeendiscussed.

Returnonequity; Interestonloancapital; Depreciation; Interestonworkingcapital; Operationandmaintenanceexpenses.

ControlPeriodwhichmeansthatprojectcommissionedatthebeginningofControlPeriod willhavesamecapitalcostastheprojectstobecommissionedattheendofControlPeriod, providingnomechanismforconsideringtheinflationimpactinthecapitalcost.

F3=FactorforIDCandFinancingCost Thecapitalcostbreakupasfurnishedbythedevelopersandavailableinpublicdomainhad beenconsideredandseparatefactorsspecifiedforeachREtechnologydependingon itspercentagecomponentwithinoverallcapitalcostassummarizedbelow. Technology Wind Biomass/Biogas Bagasse SmallHydro

Plant& Machinery 80% 75% 80% 70%

LandandCivil Work(F1) 0.08 0.10 0.10 0.16

BaseRate % 07.50 07.60 08.00 08.25 08.50 09.25 09.50 10.00

EffectivefromDate 01.07.2010 21.10.2010 03.01.2011 14.02.2011 25.04.2011 12.05.2011 11.07.2011 13.08.2011

ScheduleA,AAA.RatedPSU StateSector Wind,Cogen,Hydro SolarPV SolarThermal OtherSectors

GradeI 11.00 11.00 11.75 12.25 12.50 13.50

11.25 12.00 12.50 12.75

11.50 12.25 12.75 13.00

11.75 12.5 13.00 13.25

Year 200910 201011 201112

DateofRegulation/ Order 17.09.2009 26.02.2010 09.11.2010

Capitalcost ` Lakh/MW 515.00 467.13 492.52

Shareofthetotalcost(%) 6884 210 19 19 15 15 15 15

TheMPERC,OERCandKERChavenotconsideredtheyearonyearbasisvariationincapital costduringtheControlPeriod.TheMERCandOERChavefollowedCERCspecifiednormfor capitalcostoftheproject.TheKERCandMPERChaveincludedevacuation/gridconnectivity costaspartofCapitalCost.

IREDA Nos. 14 MW 790.00

PFC Nos. 03 MW 124.20

UNFCC Nos. 28 MW 429.24

TheCapitalcostdataof19projectsoftotal221MWregisteredwithUNFCCCcommissioned duringFY200911havebeenanalyzed.Capital costper MWrangesfrom`4.43to`6.62 Cr./MW.Theweightedaveragecostofthesameworksoutto`5.32Cr./MW

MW 570 220 137 84 34 1045

CapitalCost `CroreperMW 5.90 5.90 5.23 5.47 6.00

Thereisacleartrendoflinearlyincreasinghubheightinproportiontorotordiameter.Most manufacturersofferarangeoftowerheightswithanygiventurbinemodel,tosuitvarying siteconditions.

1.225kg/m3 1.95 (WS/Gamma(1+1/k)

AnnualMeanWindPowerDensity(W/m2) Upto200 200250 250300 300400 >400

CUF 20% 22% 25% 30% 32%

Escalation 5.72% 5.00% 5.00% 5.00% 5.72% 5.72% 5.72% 5.00%

HimachalPradesh, Below5MW Uttarakhandand 5MWto25MW NorthEasternStates

Project Cost (`Cr/Mw)

December February 2009 2010

Capacity,MW 78.15 83.45 15.00 176.60

CapitalCost (FY201011) (`Lakh/MW) 796 743 538

HimachalPradesh,Uttarakhand Below5MW andNorthEasternStates 5MWto25MW OtherStates Below5MW 5MWto25MW

CapitalCost (FY201011) (`Lakh/MW) 817 518

HimachalPradesh,Uttarakhand Below5MW andNorthEasternStates 5MWto25MW OtherStates

ProjectSize Below5MW 5MWto25MW

CapitalCost (FY200910) (`Lakh/MW) 594 458

HimachalPradesh, Uttarakhandand NorthEasternStates OtherStates

Below5MW 5MWto25MW Below5MW 5MWto25MW

Region HimachalPradesh,Uttarakhandand NorthEasternStates OtherStates

ProjectSize Below5MW 5MWto25MW Below5MW 5MWto25MW

Region HimanchalPradesh, UttarakhandandNorth EasternStates OtherStates

ProjectSize Below5MW 5MWto25MW Below5MW 5MWto25MW

FY0910 O&MExpense (`Lakh/MW) 21 15 17 12

FY1112 O&MExpense (`Lakh/MW 23.47 16.77 19.00 13.41

Region HimanchalPradesh, UttarakhandandNorth EasternStates OtherStates

ProjectSize Below5MW 5MWto25MW Below5MW 5MWto25MW

FY1213 O&MExpense (`Lakh/MW) 25 18 20 14

TooknoteofCERC determinedCCfor FY1011 AsperCERC

4.50 4.03 (FY1011) 4.87 inclusiveof transmission infrastructurecosts 4.50 4.50

TooknoteofCERC specifiedCC for200910

FY200910 No Capacity MW 4 4 36.8 36.8 Capital Cost,` Cr/MW 4.74 4.74

IREDA UNFCCC Total