SUMMER INTERNSHIP REPORT ON
INVESTMENT OPPORTUNITY IN BAGASSE BASED
COGENERATION PLANTS & REVIEW OF REC
MECHANISM
UNDER THE GUIDANCE OF
Dr. Rohit Verma, Dy. Director (NPTI)
Mr. S. Baskaran, Asst.Vice President, IL&FS Energy
Submitted by
ASHISH BENIWAL
Roll No: 1120812203
MBA (POWER MANAGEMENT)
Sector 33, Faridabad-121003, Haryana
(Under Ministry of Power, Govt. of India)
MAHARSHI DAYANAND UNIVERSITY, ROHTAK
August 2012
1
DECLARATION
I, ASHISH BENIWAL, ROLL NO 1120812203, student of MBA (POWER MANAGEMENT)
at National Power Training Institute, Faridabad hereby declare that the Training Report entitled –
“Investment Opportunity in bagasse based cogeneration plants & Review of REC Mechanism” is
an original work and the same has not been submitted to any other institute for the award of any
degree.
A seminar presentation of the training report was made on_______________________________
And the suggestions as approved by the faculty were duly incorporated.
Dr. RohitVerma
AshishBeniwal
Project In charge
MBA (Power Mgmt.)
NPTI Faridabad
NPTI Faridabad
Counter Signed
Director/Principal of the Institute
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EXECUTIVE SUMMARY
It is high time that we as a nation embrace alternative energy sources such as Biomass
(Bagasse) and invest for our future. Bagasse cogeneration describes the use of fibrous
Sugarcane waste - bagasse - to cogenerate heat and electricity at high efficiency in sugar mills.
There is abundant opportunity for the wider use of bagasse-based cogeneration in sugarcaneproducing countries and to contribute substantially to high efficiency energy production. This
potential can make a meaningful contribution to the energy balance especially in developing
countries i.e. India, Brazil, Thailand, Pakistan.
It offers a viable option in the energy supply mix, particularly in the context of the present
constraints on conventional sources. It also offers an attractive investment option to the private
sector, in the context of the recently announced policies and drive towards private sector
generation.
Government of India has come up with handful of schemes for the promotion of
renewables in our country. India has a potential of 5000MW in Non-fossil fuel based
cogeneration and it is necessary to make the investment in this kind of energy attractive and
financial viable.
Indian sugar mills, both in the private and co-operative / joint sectors, have
acknowledged importance of implementing high efficiency grid connected Non fossil fuel
based cogeneration power plants for generating exportable surplus. In fact, additional revenue
stream by sale of exportable power to State Electricity Boards (or third party customers) at
Preferential tariff or at APPC and earn REC benefits, either way will help sugar mill to achieving
long term sustainability, given the fiercely competitive domestic and international sugar markets.
This report will discuss about Investment opportunities for Non-fossil fuel(Bagasse)
based cogeneration plants. The report also includes REC mechanism review to attract
investment in these bagasse based cogeneration plants.
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ACKNOWLEDGEMENT
Apart from efforts of the person doing the project, the success of any project depends largely on
the encouragements and guidelines of many others. I take this opportunity to express my
gratitude to the people who have been instrumental in the successful completion of the project.
I first thank MR.HAZIQ BEG, CHIEF OPERATING OFFICER, IEDCL, for giving me the
opportunity to work on such an insightful project.
A special vote of thanks to Mr. BASKARAN, ASST. VICE PRESIDENT, IEDCL and also my
project guide for his support and guidance during this project.
Special thanks to Mr. ANKESH DESAI, MANAGER, IEDCL & Mr. DINESH KAUNDAL,
MANAGER, IEDCL for their support during my project.
I also record my sincere thanks to Mr. SAMANT JHA, ASST. MANAGER, IEDCL for his
guidance during this project.
I also give my immense pleasure to thank the entire staff of IL&FS ENERGY for their
immeasurable cooperation necessary for carrying out project related work.
I feel deep sense of gratitude Mr. S.K.CHAUDHARY, PRINCIPAL DIRECTOR, CAMPS, my
internal project guide Mr. ROHIT VERMA, DEPUTY DIRECTOR, NPTI and Mrs. MANJU
MAM, DEPUTY DIRECTOR, NPTI for arranging my internship at IL & FS ENERGY and
being a constant source of motivation and guidance throughout the course of my internship.
I also extend my thanks to all the faculties in CAMPS (NPTI), for their support and guidance in
my project.
ASHISH BENIWAL
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LIST OF TABLES
Table 1
State-wise Potential of Bagasse based cogeneration
Table 2
Sugar mills located in Haryana and Mill Wise Crushing Capacity
Table 3
Status of Biomass Cogeneration, Bagasse Cogeneration & Biomass
Projects in Haryana
Table 4
Panipat Coop. Sugar Mills Data.
Table 5
Calculation of electricity potential in Panipat Sugar Mill
Table 6
Project Snapshots
Table 7
Financials of the Project
Table 8
Fees and Charges for REC
Table 9
NAPCC target implementation for RE Energy
Table 10
Demand Potential of RE Power Requirement (in MUs)
Table 11
REC Floor Price + APCC vs. Preferential Tariff
Table 12
REC Mean Price + APCC vs. Preferential tariff
Table 13
REC Forbearance Price vs. Preferential Tariff
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LIST OF FIGURES
Figure 1
Time line of Sugar Industry Development
Figure 2
Graph of REC Floor Price vs. Preferential Tariff
Figure 3
Graph of REC Mean Price vs. Preferential Tariff
Figure 4
Tariff
Graph of REC Forbearance Price vs. Preferential
LIST OF ABBREVIATIONS
APPC
Average Power Purchase Cost
ARR
Annual Revenue Requirement
CDM
Clean Development Mechanism
CEA
Central Electricity Authority
CER
Certified Emission Reduction
CERC
Central Electricity Regulatory Commission
CUF
Capacity Utilization Factor
DISCOM
Distribution Company
DOE
Designated Operational Entity
ERCOT
Electric Reliability Council of Texas
GBI
Generation Based Incentive
GOI
Government of India
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IPP
Independent Power Producer
IRR
Internal Rate of Return
KWh
Kilo Watt Hour
MNRE
Ministry of New & Renewable Energy
MoP
Ministry of Power
MWh
Mega Watt Hour
NAPCC
National Action Plan on Climate Change
NFFO
Non Fossil Fuel Obligation
NPV
Net Present Value
OFGEM
Office of Gas and Electricity Markets
ORER
Office of Renewable Energy Regulator
PDD
Project Design Document
PLF
Plant Load Factor
PPA
Power Purchase Agreement
PUCT
Public Utility Commission of Texas
RE
Renewable Energy
REC
Renewable Energy Certificate
ROC
Renewable Obligation Certificate
RPO
Renewable Purchase Obligation
RPS
Renewable Purchase Specifications
SERC
State Electricity Regulatory Commission
UNFCC
United Nations Framework Convention onClimate
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TABLE OF CONTENTS
Declaration ....................................................................................................................................... i
Executive Summary ........................................................................................................................ ii
Acknowledgment ..................................................................................................................... ….iii
List of Tables ................................................................................................................................ .iv
List of Figures ..................................................................................................................................v
List of Abbreviations .......................................................................................................................v
Contents……………………………………………………………………………………….…vii
Chapter-1 INTRODUCTION & PROBLEM STATEMENT
1.1 Introduction…………………………………………………………………………………...1
1.2 Problem Statement……………………………………………………………………………1
1.3 Scope of Project……………………………………………………………………………….1
1.4 Objective of Project…………………………………………………………………………...2
1.5 About the Organization……………………………………………………………………......2
Chapter-2LITERATURE REVIEW & METHODOLOGY ADOPTED
2.1 Literature Survey……………………………………………………………………………...5
2.2 Existing Legal Framework & Policies………………………………………………………...9
2.3 Methodology Adopted……………………………………………………………………….15
Chapter-3 INVESTMENT OPPORTUNITY IN PANIPAT COOP. SUGAR MILL
3.1 Sugar Industries process……………………………………………………………………..16
3.2 Benefits of adopting Co-generation system in sugar industries……………………………..17
3.3Co-Generation and Choice of Technology…………………………………………………..18
3.4 Bagasse based Cogeneration potential
(Current Status & Future potential)………………………………………………………….24
3.5 Status of Sugar Industries in Haryana………………………………………………………..26
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3.6 Status of Biomass Cogeneration, Bagasse Cogeneration & Biomass Power Projects in
Haryana……………………………………………………………………………………....28
3.7Analysis of Investment Opportunity in Bagasse based Cogeneration Plants
(Case Study of Panipat Sugar Coop. Mills Ltd.)…………………………………………….31
Chapter-4 REC MECHANISM
4.1 REC Mechanism in India……………………………………………………………………36
4.2 Salient Features of REC Framework………………………………………………………...39
4.3 REC Potential Market Assessment…………………………………………………………..44
4.4 Comparison of REC & Preferential Tariff Sale option for FY 2011-12…………………….46
Chapter-5 CONCLUSION AND RECOMMENDATIONS
5.1 Conclusion…………………………………………………………………………………...52
5.2 Recommendation…………………………………………………………………………….52
5.3 Limitations of Project………………………………………………………………………..52
5.4 Future Scope of Project……………………………………………………………………....53
BIBLIOGRAPHY…...………………………………………………………………………….54
ANNEXURES
Annexure-A..................................................................................................................................57
Annexure-B..................................................................................................................................58
Annexure-C……………………………………………………………………………………..59
Chapter 1
INTRODUCTION & PROBLEM STATEMENT
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1.1 Introduction
In India, out of 566 sugar mills, 315 are in the co-operative sector and 251 are in the private
sector. Besides 136 units in the private sector are in various stages of implementation. In
Haryana alone, at present, there are 15 sugar mills in operation with an annual capacity of 4825
tons of sugarcane crushing capacity as per the Haryana State Co-operative Sugar Factories
Federation.
The estimated Potential for bagasse cogeneration in India is 5000 MW.
1.2 & 1.3 Problem Statement & Scope of the Project
The bagasse cogeneration scheme is doing well in the private sector sugar mills whereas
problems are being faced in promoting optimum cogeneration in the cooperative sector sugar
mills. The problems mainly are institutional and financial resulting from the profits that have to
be given back through higher cane price in cooperative sector sugar mills. In view of this, the
GoI offers a higher incentive package and upfront subsidy support for cooperative/public sector
sugar mills for taking up cogeneration projects.
The new capital subsidy Scheme announced in December, 2006, provides for subsidy to projects
for setting up biomass combustion based power projects and bagasse cogeneration projects in
private/cooperative/public sector sugar mills. The capital subsidy is released to Financial
Institutions which provides loan to the project developer on setting up biomass power and
bagasse cogeneration project towards reducing the loan amount and deemed as pre-payment of
loan by the developers. The new scheme provides for higher level of capital subsidy for bagasse
cogeneration projects in cooperative/public sector sugar mills. Capital subsidy is also being
provided for Non-bagasse Cogeneration Projects in industries.
During the 11th Plan, the MNRE has provided Central Financial Assistance through following
schemes under the Biomass Power, Bagasse Cogeneration and Non-bagasse Cogeneration
Programs.
i. Setting up Biomass Power projects (IPPs) and Bagasse Cogeneration Projects by
private/cooperative/public sector sugar mills;
ii. Bagasse cogeneration projects in cooperative/public sector sugar mills through BOOT model
implemented by IPPs/State Government Undertakings/SPVs.
iii. Bagasse cogeneration projects in existing cooperative sugar mills employing boiler
modifications.
iv. Non-bagasse cogeneration projects set up in industries for meeting their captive heat and
power requirement.
* The scheme (ii) and (iii) has been initiated during the year 2010-11
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A capacity of 1667 MW from bagasse cogeneration in sugar mills has so far been commissioned
mainly in the states of Tamil Nadu, Uttar Pradesh, Karnataka, Andhra Pradesh, Maharashtra,
Chhattisgarh, Punjab and Rajasthan. The target of 1200 MW Bagasse Cogeneration has been set
for 11th Plan period. During the first 04 years of the 11th Plan a capacity addition of about 1044
MW from Bagasse Cogeneration was achieved.
1.4 Objective of the Project
This report, based on Bagasse Cogeneration, describes the use of fibrous sugarcane waste –
Bagasse – to cogenerate heat and electricity at high efficiency in Co-operative Sugar Factories of
Haryana.
This report indicates that there is abundant opportunity for the wider use of Bagasse based
cogeneration in sugarcane-producing states in India and to contribute substantially to high
efficiency energy production. Yet this potential remains largely unexploited. The potential to
make a meaningful contribution to the energy balance is especially great in Uttar Pradesh,
Maharashtra, Tamil Nadu, Karnataka, Andhra Pradesh and Gujarat. Overall, the potential in
these states of India (which accounts for 90% of Indian cane production) reaches as high as 37%
in Uttar Pradesh and 22% in Maharashtra and, as an average, a significant 59% of total cane
production.
The report covers suggestions and illustrations for the following so as to suitably maximize
financial gains for Sugar Factories operating in Haryana:




The best methodology for utilizing REC certificates in addition to electricity trading,
Effective usage of surplus Bagasse in electricity generation,
To study investment opportunities in Bagasse based cogeneration plants.
To review REC mechanism in India to attract investment in bagasse based cogeneration
plants.
1.5 About the Organization
Infrastructure Leasing & Financial Services Limited (IL&FS) is one of India's leading
infrastructure development and finance companies.
IL&FS was promoted by the Central Bank of India (CBI), Housing Development Finance
Corporation Limited (HDFC) and Unit Trust of India (UTI). Over the years, IL&FS has
broad-based its shareholding and inducted Institutional shareholders including State Bank
of India, Life Insurance Corporation of India, ORIX Corporation - Japan and Abu Dhabi
Investment Authority.
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IL&FS has a distinct mandate - catalyzing the development of infrastructure in the
country. The Organization has focused on the commercialization and development of
infrastructure projects and creation of value added financial services.
From concept to execution, IL&FS houses the expertise to provide the complete array of
services necessary for successful project completion: visioning, documentation,
development, finance, management, technology and execution.
Financial Services
At IL&FSs’ conception, the development of skills in financial services was considered a
critical ingredient to the commercialization of infrastructure. The Financial Services
division took shape to cater to this need.
Over the last decade, this division has expanded its services to offer a suite of
sophisticated financial services and today boasts of being one of the largest integrated
financial services provider and a one-stop financial solution resource for its clients.
Teams at IL&FS comprise of finance professionals with several years of experience.
Continuously engaged in developing innovative, layered and competitive solutions, these
professionals have demonstrated, time and again, that the key to unraveling full value for
customers is based on the fusion of ‘micro’ financial elegance and ‘macro’ enterprisewide architecting.
Public Private Partnership
IL&FS has evolved into a prominent institution that harnesses the power of Public
Private Partnership, to develop and finance infrastructure projects across a variety of
sectors. Almost uniquely, IL&FS has succeeded in turning infrastructure capacity
creation into a commercially
IL&FS is committed to providing projects with financial investment, managerial
expertise and inputs that ensure efficiency in service delivery. We offer a full range of
financial, project development and management services. These services include
investment banking, project financing, project development, management and
implementation, asset management, merchant banking, corporate advisory services and
back office services.
IL&FS Energy
IEDCL a Subsidiary of your Company is uniquely placed with a pan India presence for
the development of power projects from both Conventional and Non-Conventional
Energy sources. It provides a gamut of services in the Power sector from Concept to
Commissioning IEDCL is currently associated with power projects aggregating to
approximately 10,000 MW under various stages of implementation. Some of the major
projects under implementation under the flagship of IEDCL are as follows:
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– Conventional
• 4,000 MW Imported Coal based Supercritical Thermal Power Project in Tamil Nadu –
Rs 240 billion
• 1,600 MW Coal based Supercritical Thermal Power Project in Andhra Pradesh along
with APGENCO – Rs 85 billion
• 726.6 MW Gas based Combined Cycle Power Project in Tripura along with ONGC –
Rs 35 billion
– Non-Conventional:
• 45 MW Tipang Hydro Electric Project – Rs 2.60 billion .
• 24 MW Passo-Dissing Hydro Electric Project – Rs 1.40 billion.
• 80 MW Bagasse base Cogeneration projects in Maharashtra – Rs 4 billion.
• 3 x 1320 MW Coal based Thermal Power Project form Government of Bihar – Rs 240
billion.
• 2 x 250 MW Coal based Thermal Power Project at Barauni for BSEB – Rs 27.50
billion.
• 1,320 MW Coal based Thermal power Project for the Union Territory of Daman & Diu
and Dadra & Nagar Haveli – Rs 63 billion.
• Development of various Hydro power projects in the state of Uttarakhand.
• 680 Kms of 400 KV Transmission line in North Eastern Region – Rs 17 billion.
• 400 KV Indo – Nepal Transmission link – Rs 2.40 billion
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Chapter- 2
LITERATURE REVIEW & METHODOLOGY ADOPTED
2.1 Literature Survey
Revin P. Beeharrry et al (1996) stated that the availability and exportable electricity-production
potential of bagasse and sugarcane residues are estimated for various technologies which
determine steam production and utilization at cogenerating sugar factories. Almost 565 kg of
fibrous sugarcane biomass (expressed as kilograms of bagasse at 50% moisture) are potentially
available for exportable electricity production for every tone of cane milled. A “bagasse proper
only” strategy would utilize 28% of the fibrous cane biomass and can potentially produce
between 60 to 180 kW h of electricity per tons of mill able cane. Use of cane tops and leaves as a
bagasse extender would utilize another 32% of the sugarcane biomass and the electricity output
could range between 146 and 401 kW h/t of mill able cane. The extreme case where 100% of the
fibrous sugar cane biomass is utilized has the potential of producing up to 678 kW h/t of mill
able cane.
M.P. Sharma et al (1999) stated that with the increase in industrialization coupled with
population growth, the demand for power is rapidly increasing, thereby jeopardizing the
economic and social growth of the country. In addition to power from conventional sources, the
New & Renewable Energy Sources (NRES) has been found to have enormous potential. About
800 MW of power from renewables has already been created while about 2000 MW is likely to
be added in near future. Among the NRES, bagasse based co-generation of surplus power in
Indian sugar mills has been given a new boost, as more than 3500 MW of surplus power
potential exist in sugar mills only (10,700 MW from all industries). These industries are being
encouraged by the Govt. of India to generate surplus power & feed to the grid by offering a
number of incentive schemes.
An attempt has been made in his paper to present energy scenario, co-generation potential,
technological options available, incentives for encouraging power generation in sugar industry,
techno-economic analysis of co-generated power and future scope of research & development in
this vital field.
Chaprey et al (2006) discussed that the Cogeneration of steam and electricity has become the
norm in the sugarcane industry worldwide. This process has been taken further to a stage where
sugar companies can export a substantial amount of energy to the grid. Mauritius and Reunion
Islands have implemented state of the art technology in bagasse energy cogeneration. It is on this
basis that the potential for cogeneration in Zimbabwe’s sugar industry is being examined. The
findings indicate that it is technically feasible to implement such a project. A full economic and
financial feasibility study would still need to be done. Two plants of 105 MW each can be put in
place, providing about 517 GWh of clean bagasse firm power to the Zimbabwe Electricity
Supply Authority. Bagasse would be used during the crop season and coal during the off-crop
14
season. Coal usage during the off-season, will enable the exportation of extra power to the grid.
This kind of project, which can save money for the utility, meets about 8% of the country’s
electrical energy needs, reduces the amount of foreign currency needed to import electricity,
results in improved efficiency in the sugar industry and can avoid the use of 293 750 tons of
coal, hence avoiding the emission of 885 000 tonnes of carbon dioxide and the production of
47 000 tonnes of coal ash. The sugar millers would accrue revenue benefits equal to those
revenues from selling sugar that accrue to the milling activities only.
M.V. Biezma et al (2006) stated that The combined production of mechanical or electrical and
thermal energy using a simple energy source affords remarkable energy savings and in many
cases makes it possible to operate with greater efficiency when compared to a system producing
heat and power separately. The economic optimization in the design and operation of a combined
heat and power (CHP) unit is usually performed through an examination of the investment
criteria. In spite of the numerous criteria available, virtually the only ones used to determine
whether to reject or to accept a project have been the net present value (NPV), internal rate of
return (IRR) and payback period (PP). The aim of this paper is to develop a clear description and
understanding of the uses and limitations of many different project evaluation techniques and to
show when these methods are connected and are applicable to cogeneration plants.
Chaphekar et al (2006) stated that the increasing price of fossil fuels, the increasing need for the
power supply reliability and security and the increasing demand for energy-efficient technologies
are tending to favor the application of small power generation solutions. An excellent approach
to these solutions is to install combined heat and power systems that can be configured to operate
under normal conditions to supply local power needs but with grid back up. Cogeneration is also
called 'total energy' or 'combined heat and power'. It is the use of a single fuel such as gas to
simultaneously produce useful heat and electricity from the same source. While cogeneration
matches other power generation options in terms of the investment costs, it provides an
indigenous source of the electrical energy for the nation, saves on foreign exchange, is a tool for
the employment and wealth creation and agent for abatement of environmental degradation. A
significant potential exists for generating electricity from various products such as bagasse, a
waste product of the cane milling process, agricultural, animal, municipal solid waste etc.
Several studies in India and other parts of the world, point to the sugar industry as a prime
candidate for supplying low cost, non-conventional power via cogeneration. The different
systems have been designed for electricity generation from all types of wastes.
Khatavakar et al (2006) sated that The increasing price of fossil fuels, the increasing need for the
power supply reliability and security and the increasing demand for energy-efficient technologies
are tending to favor the application of small power generation solutions. An excellent approach
to these solutions is to install combined heat and power systems that can be configured to operate
under normal conditions to supply local power needs but with grid back up. Cogeneration is also
called 'total energy' or 'combined heat and power'. It is the use of a single fuel such as gas to
simultaneously produce useful heat and electricity from the same source. While cogeneration
matches other power generation options in terms of the investment costs, it provides an
indigenous source of the electrical energy for the nation, saves on foreign exchange, is a tool for
15
the employment and wealth creation and agent for abatement of environmental degradation. A
significant potential exists for generating electricity from various products such as bagasse, a
waste product of the cane milling process, agricultural, animal, municipal solid waste etc.
Several studies in India and other parts of the world, point to the sugar industry as a prime
candidate for supplying low cost, non-conventional power via cogeneration. The different
systems have been designed for electricity generation from all types of wastes. The major power
outages in North America and Europe have resulted in focus on developing energy technologies
like domestic scale micro CHP (combined heat and power) to reduce the reliance of the
consumers on large generators and the grid.
De souza et al (2008) discusses how the revenue from the sale of certified emission reductions
(CERs) can contribute to the attractiveness of investment in projects of bagasse-based
cogeneration. It was observed that revenue from CERs is probably not enough to make these
investments acceptable in the economic and financial aspect. However, his study speculates that
clean development mechanism projects will be strategic to build a positive image concerning the
social responsibility and sustainability of the business in the sugar cane sector.
Borroso et al (2009) stated thatrRenewable sources have recently emerged as a generation option
for many countries in order to promote clean energy development. I n the case of Brazil, small
Hydro plants and cogeneration from sugarcane waste (bagasse) have been attractive alternatives
during the past years, with hundreds of MW installed since 2004. Despite their advantages, both
alternatives are hindered by seasonal yet complementary availability. This forces producers to
discount (or price) the risks faced when selling firm energy contracts and may ultimately lead to
projects being commercially unattractive. We propose a stochastic optimization model that
defines the optimal composition of a portfolio based on these two renewable sources in order to
maximize the revenue of an energy trading company. At the same time, this model mitigates
hydrological and fuel unavailability risks, thus allowing the participation of both sources in the
forward market environment in a competitive manner.
Uturbey et al (2009) deals with generation expansion from biomass co-generation. A
methodology to assess investment decisions, based on cash flow analysis and financial tools, is
presented. In order to incorporate the investor risk aversion criterion, a measure of risk given by
the probability of obtaining negative cash flows net present values, is employed. Main
uncertainties that influence cash flows are taken into account by Monte Carlo simulation and
managerial flexibilities given by investment alternatives are compared employing a Real Options
approach. Moreover, in order to illustrate the proposed methodology, the paper presents an
analysis of the investments opportunities in the Brazilian power market for co-generation from
sugar cane bagasse.
Diwakar et al ( 2010) discussed that the use of bagasse, rice husk and municipal solid waste as a
fuel for power generation can be an option to supplement the growing power demand as the
conventional power source i.e. fossil fuel is diminishing day by day. So bagasse, rice husk and
MSW have the substantial potential of such energy to be tapped in a synergistic manner. The
potential of power generation by bagasse in Uttar Pradesh is 1400 MW which can replace
approximately 560 tonne of coal otherwise. The greenhouse emissions are also lower in the
burning of bagasse reducing the environmental pollution. Also the potential of power generation
16
by rice husk in Uttar Pradesh is 257.05 MW which is equivalent to energy of approximately 102
tonne of coal. At district Etawah the power generation by rice husk is approximately 9.45 MW.
Likewise the potential of power generation by MSW in Uttar Pradesh is 258 MW which can save
approximately 103 tonne of coal. If the power is generated by all these non-conventional fuels in
Uttar Pradesh then the overall power generation potential would be 1916.5MW equivalent to
766.42 tonne of coal. Even the blending of rice husk with the bagasse and MSW both is possible
to have appreciable calorific value in case of scarcity of any one of three at a place. An effort is
made here to study and analyze keeping the availability and environmental pollution in view of
all these resources at district Etawah of Uttar Pradesh in the country
Zunli Zhang et al (2011) aimed at cost allocation problem of cogeneration plant products, the
paper presents a new heat-electricity product cost allocation method named equivalent allocation
method. In the method, the heat-electricity product cost is divided into Fixed Cost and Variable
Cost. They are allocated respectively based on the unit type and the equivalent characteristic
between heat product and electricity product. Compared with other existent allocation methods,
the equivalent allocation method reflects "deciding electricity by heat" principle and market
attribute more reasonably. It is observed that the equivalent allocation method can promote
encouraging cogeneration’s investment, reducing speculation behaviors of cogeneration's
corporations and enhancing energy saving in cogeneration's corporations and heat users.
Barbara Haya et al (2011) mentioned that the Indian government has set the challenging goal of
increasing its electricity capacity six- to eight-fold in the next 30 years in the context of
significant capacity shortfalls and a financially ailing electricity sector. The central and state
governments are subsidizing renewable energy because of energy security concerns, to promote
domestic resources and a diversity of fuel supply. International funds made available through the
international climate change regime could potentially provide much needed support to pay the
higher costs that most renewable energy requires. This article performs a case study analysis of
the history of the development of one renewable energy technology in India—cogeneration of
sugarcane waste—focusing on the barriers this technology has faced in the past and now faces,
and how well international and domestic efforts have worked to overcome these barriers. The
goal of this work is to lend insight into the effective structure of future international support
mechanisms being discussed for inclusion under the post-2012 climate change regime. This
study finds that bagasse cogeneration has faced layers of informational, technical, regulatory and
financial barriers that have changed over time, and differed significantly between the private and
cooperative sugar sectors. Each of the programmes designed to support bagasse cogeneration had
a role to play in enabling the bagasse cogeneration currently installed, and no single programme
would have been successful on its own. Some barriers to the technology needed directed efforts
designed to address the specific context of the sugar sector in India; simply subsidizing the
technology or putting a price on carbon was not enough. Where climate (global) and
development (local) priorities differ, projects that bring about international goals risk running
into conflict with other more pressing domestic goals. Interviews at mills attempting to access
carbon financing through the Kyoto Protocol's Clean Development Mechanism (CDM) indicate
that additionally-testing is a challenge to the effectiveness of this mechanism. Any effort to
exploit the remaining 86% of the estimated national potential for high efficiency bagasse
cogeneration will need to address the special financial and political conditions facing cooperative
mills.
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2.2 Review of Existing Legal Framework
The Preamble to the Electricity Act 2003 records the following:
“An Act to consolidate the laws relating to generation, transmission, distribution, trading
and use of electricity and generally for taking measures conducive to development of
electricity industry, promoting competition therein, protecting interest of consumers and
supply of electricity to all areas, rationalization of electricity tariff, ensuring transparent
policies regarding subsidies, promotion of efficient and environmentally benign policies,
constitution of Central Electricity Authority, Regulatory Commissions and establishment
of Appellate Tribunal and for matters connected therewith or incidental thereto.”
Further, the EA 2003 has following provisions for promotion and development of Renewable
Energy sources in India.
86(1)(e): The State Commission shall ‘promote cogeneration and generation of
electricity from renewable sources of energy by providing suitable measures for connectivity with
the grid and sale of electricity to any person, and also specify, for purchase of electricity from
such sources, a percentage of the total consumption of electricity in the area of a distribution
licensee.’
Act, specify
the terms and conditions for the determination of tariff, and in doing so, shall be guided by the
promotion of co-generation and generation of electricity from renewable sources of energy.
b): The SERCs shall discharge the function to regulate electricity purchase and
procurement process of distribution licensees including the price at which electricity shall be
procured from the generating companies or licensees or from other sources through agreements
for purchase of power for distribution and supply within the State.
National
Electricity Policy and tariff policy, in consultation with the State Governments and the
Authority for development of the power systems based on optimal utilization of resources such
as coal, natural gas, nuclear substances or materials, hydro and renewable sources of energy.
18
in consultation with the
State governments, and the Authority review or revise, the National Electricity Policy and
tariff policy referred to in section 3(1).
discharge the
functions assigned under the Act.
66: The Appropriate Commission shall endeavor to promote the development of a
market (including trading) in power in such manner as may be specified and shall be guided by
the National Electricity Policy referred in Section 3 in this regard.
National Electricity Policy was notified by Central Government in February 2005 as per
provisions of Section 3 of EA 2003. The Clause 5.12 of NEP outlines several conditions in
respect of promotion and harnessing of renewable energy sources. The salient features of the said
provisions of NEP are as follows.
-conventional sources of energy being the most environment friendly there is an urgent
need to promote generation of electricity based on such sources of energy. For this purpose,
efforts need to be made to reduce the capital cost of projects based on non-conventional and
renewable sources of energy. Cost of energy can also be reduced by promoting competition
within such projects. At the same time, adequate promotional measures would also have to
be taken for development of technologies
and a sustained growth of these sources.
des that co-generation and generation of electricity from nonconventional sources would be promoted by the SERCs by providing suitable measures for
connectivity with grid and sale of electricity to any person and also by specifying, for purchase of
electricity from such sources, a percentage of the total consumption of electricity in the area of a
distribution licensee. Such percentage for purchase of power from non-conventional sources
should be made applicable for the tariffs to be determined by the SERCs at the earliest.
Progressively the share of electricity from non-conventional sources would need to be increased
as prescribed by State Electricity Regulatory Commissions. Such purchase by distribution
19
companies shall be through competitive bidding process. Considering the fact that it will
take some time before non-conventional technologies compete, in terms of cost, with
conventional sources, the Commission may determine an appropriate differential in prices to
promote these technologies.
cogeneration of electricity. A significant potential for cogeneration exists in the country,
particularly in the sugar industry. SERCs may promote arrangements between the cogenerator and the concerned distribution licensee for purchase of surplus power from such plants.
Cogeneration system also needs to be encouraged n the overall interest of energy efficiency and
also grid stability.
National Electricity Policy was notified by Central Government during January 2006 as per
provisions of Section 3 of EA 2003. Tariff Policy (TP) has further elaborated the role of
regulatory commissions, mechanism for promoting harnessing of renewable energy and
timeframe for implementation etc. The Clause 4 of the TP addresses various aspects associated
with promotion and harnessing of renewable energy sources. The salient features of the said
provisions of TP are as under:
ction 86(1)(e) of the Act, the Appropriate Commission shall fix a
minimum
percentage
for
purchase
of
energy
from
such
sources
taking
into account availability of such resources in the region and its impact on retail
tariffs. Such percentage for purchase of energy should be made applicable for the
tariffs to be determined by the SERCs latest by April 1, 2006. It will take some
time
before
non-conventional
technologies
can
compete
with
conventional
sources in terms of cost of electricity. Therefore, procurement by distribution
companies shall be done at preferential tariffs determined by the Appropriate
Commission.
Such
procurement
by
Distribution
Licensees
for
future
requirements
shall be done, as far as possible, through competitive bidding process under
Section 63 of the Act within suppliers offering energy from same type of nonconventional sources. In the long-term, these technologies would need to compete
20
with other sources in terms of full costs.
pricing nonfirm power, especially from non-conventional sources, to be followed in cases where such
procurement is not through competitive bidding."
Energy situation and Government Policy

Prevalent Scenario
The Central Electricity Authority (CEA) has projected an energy shortfall of 10.3 per cent and
a peak shortage of 12.9 per cent in the country during the current financial year (2011-12),
even though significant consumer base is yet to be provided with electricity connections. In the
previous financial year, energy shortage was 8.5 per cent and peak shortfall 9.8 per cent. The
peaking shortage in the current financial year would prevail in all the regions, varying from 5.9
per cent in the north-eastern (N-E) region to 14.5 per cent in the south. The projected energy
shortage in N-E will be 7.7 per cent, compared to 11 per cent in the western region.
With the ‘Electricity to All by 2012’ program of the Government of India, the demand for the
electricity is going to increase significantly. At the same time, the growing demand for fossil
fuels in India, fuel prices are continuously rising over the last few years. This has made efficient
and optimal utilization of available resources in every application the need of the hour.
‘Cogeneration’, as the name suggests, produces multiple forms of energy such as electricity,
steam, shaft power or other forms of energy from a single source of fuel. Due to its ability to
produce energy in more than one form, its uses significantly less fuel then what would be needed
to produce those forms of energy separately. It is possible to achieve overall efficiency levels of
more than 70% through cogeneration. Thus, by achieving higher efficiency, cogeneration
facilities contribute to an increase in overall energy efficiency.
Similarly, captive cogeneration facilities are useful as these provide electricity at the place of
consumption, thereby avoiding transmission of electricity over long distances. Further, these
distributed generation facilities help in improving voltage profiles of the network.

Developments till Date
As power sector reforms were initiated in 1991, which permitted private sector participation in
the generation sector, many industrial consumers began exploring options to meet their energy
requirements – electricity, process steam and motive power – by installation of captive
cogeneration facilities. The Ministry of Power recognized the need to promote such initiatives
21
and notified a policy on 6 November 1996, which specified various forms for the first time,
qualification requirements for cogeneration, and outlined the broad contours for the promotion of
such industrial cogeneration projects.
Enactment of the Electricity Act 2003 (EA 2003) provided further impetus to cogeneration by
mandating State Electricity Regulatory Commissions (SERCs) to promote generation from
cogeneration and renewable energy sources. Under Section 61 (h) of the EA 2003, the ECRs
have to set tariffs in such a manner that generation from cogeneration and renewable energy
sources is promoted.
While EA 2003 has strengthened the institution of ERCs by entrusting several functions such as
licensing tariff determination, market development, etc., it has put the onus of development of
policies for optimal utilization of resources on the Central Government.

Encouraging Electricity Procurement from Co-generators
Though several SERCs have formulated Regulations for promotion of generation of electricity
from cogeneration and renewable energy sources under 86(1)(e), little has been done to promote
‘Industrial cogeneration’ or co-generators using fossil fuel. The primary reason for this is the
underlying fact, which believes EA 03 does not explicitly distinguish between cogeneration
using ‘fossil fuel’ and cogeneration using ‘non fossil fuels’ such as Bagasse.

Promotional Tariff for Non Fossil Fuel based Cogeneration
Some ERCs in states such as Maharashtra, Karnataka, etc. have determined ‘promotional tariffs’
for cogeneration projects using non-fossil (Bagasse) fuels. However, no SERC has yet
determined tariff for procurement of power by distribution utilities from industrial cogeneration
using fossil fuels.
In a ‘cost-plus’ regime, it is difficult to determine tariffs for cogeneration projects, as allocation
of fuel cost to power, steam and/or shaft power is difficult. The challenge lies in striking a
balance between operational requirements of co-generators and addressing concerns of utilities
and consumers, who procure power from such co-generators. Further, cogeneration efficiency
varies for different modes of operation of cogeneration facilities, to cater to varying power and
steam requirements of the industrial plant during start-up, normal operations and breaking down
periods.

Harnessing Surplus Captive Generation
According to CEA statistics, captive generation capacity of 20000 MW (for 1 MW and above
plants) exists. A large percentage of this capacity is based on liquid fuels and is being utilized at
less than 50% plant load factor (PLF). This capacity is less than idle and should be utilized
during the current phase of extreme shortage of power. The necessity for the need to develop
innovative schemes to tap such idle capacity is addressed by the introduction of RPO and REC
policies.
MERC recently instituted a mechanism in the city of Pune to tap about 90MW of liquid fuelbased captive capacity. Under this scheme, during peak hours, consumers with captive
generation plants will run their plants, thereby reducing drawl from the grid. This would release
grid energy, which is supplied to other consumers, thereby eliminating load shedding in the city
22
of Pune. The captive generating plant is being compensated for additional generation costs,
which is being collected from consumers of Pune city in the form of a ‘Reliability Surcharge’.
MERC developed this scheme through a transparent regulatory process.

Other Key Regulatory Considerations
Under EA 2003, the Regulatory Commissions are required to formulate various regulations,
codes and standards in respect of various aspects of power system such as connectivity,
transmission and evacuation arrangements, wheeling and banking, etc.
However while devising rules and regulations in these matters and to facilitate procurement of
power from co-generators, the Regulator will have to address specific operational requirements
of cogeneration facilities.
There exist several industrial cogeneration installations using fossil fuels mainly in process
industry such as chemicals, petrochemicals, fertilizers refineries and metals and mineral
industries. The continuous availability of process steam is essential for continuous process
industries, depending on the process and loading, the requirement of process steam and power
varies. Typically start-up, standby power and steam requirements for such industries is very high
and the cogeneration facility is designed to meet this initial start-up requirement. However
during normal operations, surplus capacity available with cogeneration facilities could be
harnessed for supply to grid.

The Central Government’s Role
The Central Government has recognized the urgent need for capacity addition in the power
sector and has offered several incentives such as waiver of import duty on capital equipment and
material to be used for mega ultra-mega power projects. However, in case of smaller capacity
power generation projects such as captive and cogeneration facilities, the import duty at full rate
is levied on import of power generation equipments. This not only increases the capital cost of
cogeneration facility but also discourages competition amongst suppliers of power and plant
equipment. As a limited number of power plant equipment manufactures exist in India, this
increases the cost of capital goods for industrial consumers. The Central Government should
initiate measures to treat cogeneration facilities at par as far as benefits and incentives offered to
‘mega power projects’ are concerned.
Further, fuel cost forms a significant component of the cost of generation projects. Several types
of taxes and duties such as import duty, cess, royalty, etc are added to the delivered cost of fuel
in the case of fossil fuels. As cogeneration facilities with the higher efficiencies use fuel
resources more efficiently, the Central Government should consider exemption or at-least lower
rates of taxes and duties to be applicable for fuel used by cogeneration facilities.
23
2.3 Methodology Adopted
This project is made based on the data and findings collected by me on the visit to two Sugar
Industries in Haryana---
The Panipat Co-op. Sugar Mills Limited in Panipat district of Haryana on 21st
June 2012.

The Palwal Co-op. Sugar Mills Limited in Palwal District of Haryana on 29th june
2012.
The data collected is then sorted and analyzed to determine the bagasse potential in both the
sugar industries and then to determine how much electricity we can produce from those
potentials of bagasse in each of the Panipat and Palwal Sugar Plants.
Then how much investment is required to build a bagasse based cogeneration plants and to
calculate payback period and discuss the other financial perspectives.
REC mechanism is also studied to know how it is useful to attract investors in these Sugar
Industries of Haryana.
24
Chapter 3
INVESTMENT OPPORTUNITY IN PANIPAT COOP. SUGAR MILL
3.1 Sugar Industries Process
In recent times sugar cane prices have been rising exponentially whilst sugar prices have been
rising at a much slower rate. Therefore the profits made by sugar manufacturers are going down
every day. To remain profitable, Sugar manufacturers need to optimize and integrate their
factory’s so as to attain the highest possible output with the least input. Therefore this essay shall
explore the feasibility and need of such a project.
To understand the proposed project better, let us first look at how sugar is made-
25
Sugarcane is crushed so as to extract all its juice. Thereafter this juice is purified; the waste
materials that come out are Bagasse and Molasses.
Figure Conventional vs. CHP System
3.2 Benefits of adopting Co-generation systems in Sugar Industries

Not depending on external power to all, sugar plants can be located nearer the sugar
nearer the sugar growing areas, thereby saving on transportation cost of sugarcane.

An efficient and sustained co-generation enables the plant to isolate itself from the
vagaries of power.

Power generation using bagasse is environmentally cleaner as bagasse produces very
little fly ash and no Sulphur.

Net contribution to greenhouse effect from the bagasse based co-generating plant is zero,
since the carbon-dioxide absorbed by the sugar cane grown is more than the one emitted
by the co-generating plant.

Low capital investment.

Recurring costs are also lower compared to fossil fuel based power plants.

Use of totally renewable source of energy.
26

Total saving in the mining, extraction and long distance Transportation expenses of fossil
fuels.

Rural location of sugar mills enables co-generated power to be directly fed to the local
substation, consequently minimizing T & D losses and the requirement of long feeder
lines.

Saves the expenditure on safe storage and disposal of bagasse.

A co-generation plant places no financial or administrative burden on the utility as it is
executed and managed by the sugar factory.

Power is generated at a lower cost in co-generating systems and pay back periods are
shorter.

Provides an initiative to sugar mills to concentrate more on conservation of energy and
reduction of steam consumption thereby improving their profitability of operation.
3.3 Co-Generation and Choice of Technology
Introduction
When steam (in the case of steam turbine) or gas (in the case of gas turbine) expands through the
turbine, nearly 60 to 70% of the input energy escapes with the exhaust steam or gas. If this
energy in the exhaust steam or gas is utilized for meeting the process heat requirements, the
efficiency of utilization of the fuel increases. Such an application, where the electrical power and
process heat requirements are met from the fuel, is termed "Cogeneration". Most of the industries
need both heat and electrical energy. Hence, cogeneration can be a good investment for
industries. Cogeneration system may be based on any type of fuel or heat source and with
commercially available technology.
Cogeneration Schemes
Cogeneration, based on fuel, plant size and specific application, can be classified broadly under
the following categories:
 Based on energy source i.e. conventional solid, liquid gas fuels, renewable fuels, process
gas etc.
 Based on primary equipment i.e. gas turbine, fired boilers heaters, waste heat boilers,
steam turbines etc.
27
Options for Cogeneration
The two options for gas turbines are:


Gas turbine with waste heat recovery boiler (WHRB) and extraction / back pressure
turbines.
Steam boiler with extraction / back pressure steam turbines.
In both the cases, the combustion of fuel releases heat energy. A portion of the heat energy is
used for electric power generation, while another portion is used for meeting the process thermal
energy requirements through steam.
An ideal cogeneration scheme will be such that, the fuel heat input is exactly equal to the sum of
electrical energy and thermal energy requirement of the process plant. In such a case, since all
the fuel heat will be fully utilized, the system efficiency will be 100% except for any practical
heat release and heat utilization losses. This however is nearly impossible to implement in
practice, because of the in-compatibility of the ratio of the electrical and thermal energy
requirements of the process plant. Thus, it becomes evident that any cogeneration scheme
adopted would meet only one of the two (thermal and electric) energy needs of the plant fully.
Since electricity needs can be supplemented with the power from grid also, it follows that the
cogeneration scheme should strive to meet the thermal energy requirements fully and generating
whatever feasible electricity in the system. Such a system is called as a thermal balanced
cogeneration system. In addition, some process plants (like sugar industry) generate fuel in the
process. The heat energy content of the fuel, so generated, would be much in excess of the sum
of electrical and thermal energy needs of the plant. In such cases, the cogeneration scheme
adopted would produce excess electric power (while exactly catering to the thermal energy need
s of the process plant through low pressure steam) and the excess electricity can be pumped into
the utility grid, which is ever starving for additional electrical power.
Having identified thermal energy balanced system as the best alternative for adoption, there
would be still two options possible under this system, viz.,


Generate excess electricity and send the excess to the utility grid.
Generate less electricity and buy the balance electricity requirement from the grid.
When the combustion of fuel takes place in a gas turbine (GT) or an internal combustion engine,
the exhaust gases from them (which contain the thermal energy for process use) are passed
through Waste Heat Recovery Boilers (WHRB) for producing the steam required. It must be
noted that, such cases would result in either auxiliary firing (when the energy at GT exhaust is
short) or bypassing of some gas to atmosphere, when the energy at GT exhaust is more than the
requirement.
Cogeneration Configuration
There are five (5) important configurations of cogeneration possible that will satisfy the above
guidelines. They are described below:
28

Simple back pressure system:
Case - A: Alternator in stand-alone mode:
In this case, the flow through the turbine depends on the electrical power needs of the plant. Any
shortfall of the plant steam requirement is met by drawing the main steam through a PRDS.
However, this is a less efficient alternative and should be avoided, if possible.
Case - B: Alternator in parallel with grid:
In this case, the flow through the turbine is controlled by the plant steam requirements. Any
excess power or shortfall of power is adjusted with the grid. This system is very cost effective.
However, it depends very much on the reliability of the grid. Hence, this is not a preferred
alternative in most cases.

Extraction cum condensing system
29
This system can be operated either in stand-alone mode or paralleled with the grid. The steam
flow to the plant as well as the main steam generation can be varied depending on the needs of
power and plant steam requirements. In most of the industrial cases, the turbines would
accommodate a maximum of two extractions only. This is a very popular alternative because of
its high flexibility, even though the overall thermodynamic efficiency would be relatively lower.
In order to minimize such efficiency decrements, the quantity of steam condensed should be as
low as possible.
Extraction back pressure system:
This is adopted in such cases where the plant steam requirements are at more than one pressure
level. The limitations with regard to number of extractions possible in industrial turbines, apply
equally well in this case. This is in essence a more elaborate version of the first alternative of
Simple backpressure system and hence suffers / enjoys similar advantages and disadvantages.
30

Gas turbine / diesel sets with WHRB for meeting process steam:
In this case, the quantum of steam generated by the WHRB is totally dictated by the gas
turbine exhaust gas quantity. Hence if the plant steam requirements are more than the
quantity generated by WHRB, the shortfall will have to be met by adding auxiliary firing
in the WHRB. Having thermally balanced the system, electrical output variations will
have to be balanced by connecting the generator to the grid. However in some cases, the
steam generated by the WHRB can be more than the plant requirements. In such cases,
the steam balance is to be achieved by venting off some of the exhaust gases, bypassing
the WHRB.

Gas turbine/diesel sets with WHRB and extraction-cum-condensing steam turbine:
This is a very efficient alternative and meets the fluctuations of steam and power demands of the
plant. It is possible for such a system to be either paralleled with the grid or operated on standalone mode.
In all the above alternatives, certain standard back up features like PRDS and additional
boiler capacities will have to be built for meeting contingencies.
The Available Technology
The most prevalent example of cogeneration is the generation of electric power and heat. The
heat may be used for generating steam, hot water, or for cooling through absorption chillers. In a
broad sense, the system, that produces useful energy in several forms by utilizing the energy in
31
the fuel such that overall efficiency of the system is very high, can be classified as Cogeneration
System or as a Total Energy System. The concept is very simple to understand as can be seen
from following points.

Conventional utility power plants utilize the high potential energy available in the fuels at
the end of combustion process to generate electric power. However, substantial portion of
the low-end residual energy goes to waste by rejection to cooling tower and in the form
of high temperature flue gases.
On the other hand, a cogeneration process utilizes first the high-end potential energy to generate
electric power and then capitalizes on the low-end residual energy to work for heating process,
equipment or such similar use. Consider the following scenario. A plant requires 24 units of
electrical energy and 34 units of steam for its processes. If the electricity requirement is to be met
from a centralized power plant (grid power) and steam from a fuel fired steam boiler, the total
fuel input needed is 100 units.
32
Figure: Cogeneration (Bottom) compared with conventional generation (top)
If the same end use of 24 units of electricity and 34 units of heat, by opting for the cogeneration
route, as in fig 2.1 (bottom), fuel input requirement would be only 68 units compared to 100
units with conventional generation.
3.4 Bagasse based Cogeneration potential---- (Current Status & Future potential)
Since the early 1990s, in recognition of the advantages of bagasse cogeneration relative to current
regimes of centralized generation in India, several governmental, national and international
agencies and financial institutions have been acting to promote and develop cogeneration power
projects in Indian sugar mills. In addition to its wider benefits, bagasse cogeneration is seen as
a potential means of meeting India’s renewable energy targets set at 10% of total installed grid
capacity by 2012. A timeline of the industry’s development is given in Figure below.
In 1994, the Indian Ministry of Non-Conventional Energy Sources (MNES) started the process
of helping bagasse cogeneration to take off by urging State Electricity Boards (SEB) to purchase
power from local generators at full avoided costs whilst contributing half of grid connection
costs. Eligibility criteria cover a wide range of configurations, broadening the Programmers
applicability. The implementation of this regime in Maharashtra was particularly advantageous,
with a buyback rate of Rs 4.30 / kWh. After regulators became convinced that such distributed
generation could provide a cost effective and environmentally friendly solution, this eventually
resulted in 710MWe of new capacity being built, planned or contracted.
33
Figure 1: Timeline of sugar industry development
. Potential for Bagasse Cogeneration in India:
Projections for India’s potential for bagasse cogeneration range from 3.5GW-5.2GW
(2002 projection) to at least 5GW (2004 projection). The potential of 5GW can be easily
increased to over 5.5GW by employing equipment and systems for reduction of steam
and power in sugar processes. By tapping this potential completely reducing annual CO2
emissions by 38.7 million tons. The potential is to be achieved mainly through
improvements in energy efficiency and adoption of extra-high pressure (>60 kg/cm2) and
temperature configurations. More potential could also be achieved by always considering
co-firing with other available fuels as an option, as this would enable mills to continue
exporting power out of season.
Table below illustrates the potential, State by State, for producing exportable surpluses from
sugar mill cogeneration. Figures are based on current mill numbers, capacities, efficiencies and
cane availability as well as future prospects in terms of modernization for optimization of export
potential.
34
Table 1: State-wise Potential of Bagasse based cogeneration1
Sr. No.
1.
2.
3.
4.
5.
6.
7.
8.
9.
STATE
POTENTIAL OF BAGASSE BASED
ENERGY (MW)
1,250
1.250
500
400
300
250
400
250
400
5,000
Maharashtra
Uttar Pradesh
Tamil Nadu
Karnataka
Andhra Pradesh
Bihar
Gujarat
Punjab
Haryana & Others
TOTAL
As per projections made by MNRE, a cumulative capacity of 2633 MW has been
commissioned; this comprises of 1636 MW Bagasse Cogeneration Projects and 997 MW of
Biomass Combustion Projects.
Sugar Cane Industry In Haryana
The sugar producing area of Haryana lies along the borders of Uttar Pradesh. The state accounts
for 4.13 per cent of the total area and 2.84 per cent of total production of sugarcane in India.
Here Ambala, Karnal, Jind, Sonepat, Rohtak, Gurgaon, Kurukshetra and Hissar districts are the
major producers. Despite marginal increase in the area of sugarcane between 1972-73 and 200708 (at an annual rate of 0.18%) the production has marked rising trend (annual rate being 1.03%)
due to high productivity (annual rate of increase being 0.82%).
The lavish measures in form of new promotional policies for the Haryana sugar industry by the
state government of Haryana was introduced at a time when it was much needed to further boost
the growth of the Haryana sugar industry. The improvements in the plant capacity and the
introduction of new techniques which enables the optimization of the existing plant capacities
has the further made the growth definite
With the new promotional policies of the Haryana sugar industry, the investors have already
starting eying the future prospects.
3.5 Status of Sugar Industry in Haryana
The Haryana Sugar Industry consists of 15 sugar mills, consisting of Private and cooperative
sugar mills, the study is carried out on few of the sugar mills listed below, some private and
some cooperative may not be working.
There are 11 mills in the cooperative sector and 4 mills in the private sector.
35
The name of sugar mills Sugar mills located in Haryana and their Mill Wise Crushing Capacity,
Cane Crushed and Sugar Produced Along with % Age of Recovery During the last 3 Years is
given below:
Table 2
Sugar mills located in Haryana and Mill Wise Crushing Capacity Sugar Cane Purchased,
Crushed, Sugar Produced Along with % Age Of Recovery During The Last 3 YEARS
(Quantity in lakh quintals)
S.
No.
Name of Mill
Cooperative
Sector
Crushing Cane Crushed
Capacity 2008- 2009(TCD)
09
10
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
1800
3500
2200
1250
5000
1250
1250
2500
2500
2500
2500
26250
12.48
11.34
16.37
8.35
35.95
5.16
10.78
10.03
9.91
8.59
1.17
130.13
13.23
4.18
13.33
9.61
22.96
1.13
6.02
5.71
6.80
5.59
3.64
92.20
12.
Panipat
Rohtak
Karnal
Sonipat
Shahbad
Jind
Palwal
Meham
Kaithal
Gohana
Assandh (Hafed)
Total
Private Sector
Yamunanagar
13000
68.37
118.21 124.17 6.81
11.96 12.55 9.97
13.
14.
15.
Bhadson
Naraingarh
Bhuna
5000
4000
Closed in
2009-10
22000
48250
22.58
27.29
4.44
29.10
25.30
-
2.74
2.34
-
Total
Grand Total
Sugar Produced
Recovery
2010- 2008- 2009- 2010- 2008- 2009- 201
11
09
10
11
09
10
011
22.12 1.05 1.13 1.99 8.40 8.51 9.00
22.01 0.89 0.19 1.52 7.85 4.50 6.90
30.19 1.45 1.1.6 2.81 8.83 8.72 9.30
22.23 0.67 0.79 1.83 8.08 8.23 8.25
47.03 3.29 2.24 4.42 9.15 9.75 9.40
16.68 0.39 0.09 1.38 7.58 7.95 8.28
11.76 0.88 0.51 0.86 8.14 8.40 7.30
13.81 0.87 0.46 1.08 8.70 8.08 7.81
20.25 0.76 0.55 1.54 7.69 8.05 7.59
22.05 0.65 0.41 1.81 7.52 7.42 8.20
20.39 0.05 0.25 1.56 4.40 6.93 7.65
248.52 10.95 7.78 20.80 8.41 8.44 8.37
33.89
28.06
-
2.27
2.51
0.34
3.19
2.65
-
10.12 10.1
1
10.07 9.43 9.40
9.18 9.25 9.45
7.63 -
122.68 172.61 186.12 11.93 17.04 18.39 9.72 9.87
252.81 264.81 434.64 22.88 24.82 39.19 9.05 9.37
Source: http://agriharyana.nic.in/sugarcane_millwise.htm
36
9.88
9.02
3.6 Status of Biomass Cogeneration, Bagasse Cogeneration & Biomass Power Projects in
Haryana
Table 3
STATUS OF BIOMASS COGEN, BAGASSE COGEN & BIOMASS POWER
PROJECTS IN HARYANA
(As on 30.04.12)
Sr. No.
SOURCE
COMMISSIONED
MW ( Nos. of projects)
UNDER
EXECUTION
MW ( Nos. of
projects)
1.
Bagasse Co-gen
46.8 MW (6)
2.
Biomass Co-gen
18.95 MW (9)
6.00 MW (2)
3.
Biomass Power
4.00 MW (1)
191.00 MW (21)
-
YEARWISE PROGRESS OF RE POWER GENERATION IN HARYANA (MW)
Year
Biomass Power
Projects
Bagasse Co-gen
37
Biomass Co-gen
Up to 2004-05
4.00
3.0
-
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
Total
4.00
1.8
40.00
2.00
46.80
2.00
3.00
10.45
3.50
18.95
COMMISSIONED PROJECTS:
Sr. No.
1.
Site
Capacity
BIOMASS POWER PROJECTS
M/s Nuchem Ltd, Tohana,
4.00 MW
Fatehabad
(Mustard Straw, Cotton
Stalks, Rice Straw based)
Year of commissioning
1993-94
BAGASSE COGENERATION
The Gohana Co operative
2.00 MW
Sugar Mill Ltd., Gohana
2003-04
2.
The Sonepat Cooperative
Sugar Mill Ltd., Sonepat
1.00 MW
2004- 05
3.
The Meham Cooperative Sugar 1.80MW
Mill
2007-08
4.
The Rohtak Cooperative Sugar
Mill
16.00MW
2009-10
5.
The Shahbad Cooperative
Sugar Mill
24.00MW
2009-10
6.
The HAFED Cooperative
Sugar Mill, Asandh, Karnal
2.00 MW
2010-11
TOTAL
46.8 MW
1.
38
1.
BIOMASS COGENERATION
M/s Bharat Starch Industries,
2.00 MW
Yamuna Nagar (plywood
waste based)
2008-09
2.
M/s Sainsons Paper Industries,
Village-Bakhli, Pehowa, Distt,
Kurukshetra (rice husk based)
3.00 MW
2009-10
3.
M/s Shri. Vishnu
Overseas Pvt. Ltd., Kaithal
(rice husk based)
1.5 MW
2010-11
4.
M/s R.P Basmati Rice Ltd,
Karnal (rice husk based)
0.5 MW
2010-11
5.
M/s Sunstar Overseas Ltd, GT
Road, Behlgarh, Sonepat (rice
husk based)
1.95 MW
2010-11
6.
M/s REI Agro Ltd, ( Unit-II)
Bawal Growth Centre,
Jaliawas, Rewari (rice husk
based)
2.5 MW
2010-11
7.
M/s Best Food International
(P) Ltd, Village Norata, Tehsil
Indri, Karnal
(rice husk based)
M/s Kayem (PAN) Foods
Industries (P ) Ltd.,
G.T.Road, Panipat (rice husk
based)
M/s Satyam Industries Pvt.
Ltd, Village Pardhana, Tehsil
Israna, Panipat
4.00 MW
2010-11
0.5 MW
2011-12
3.00 MW
2011-12
TOTAL
18.95 MW
8.
9.
39
3.7 Analysis of Investment Opportunity in Bagasse based Cogeneration Plants
(Case Study of Panipat Sugar Coop. Mills Ltd.)
Table4
The Panipat Co-op. Sugar Mills Limited
OVERVIEW OF PLANT
Cane Crushing Capacity(TCD)
Toatal Electrical Energy Consumption per
hour(KWh)
Water consumption per hour
Oprating hours of plant in a day
For how many months plant runs in a year
What people do in off months of plant?
RAW MATERIALS
Cane
Cane Quantity Purchased(T)
From where canne is purchsed- Source and
Area
Price at which cane is purchsed
Harvesting method( manually or machined)
Water
Quantity of water required for whole plant
Source of water
Possibility to get addidtional water and how
much
Electricity
Total electrical energy consumption per hour
From where power is obtained
Tariff for elecricity from grid in off crushing
season
CO-GEN PLANT
Boilers( 4 in Nos)
Quantity
Year of Installation
Make
Designed Presuure of steam
Designed Temp. of steam
Capacity
Quantity
Year of Installation
1800TCD
2MW/hour
74 Tonnes per hour
24 Hours
6 months ( Nov.-April)
Overhauling & Maintenance work
Depending upon availability
Nearby Farmers
Not Known
Not Known
74 Tonnes per hour
Tube wells
Not known
2MW/Hour
Grid and Internal Cogen plant
Rs. 6/unit
3 Nos
1956
Skoda Czechoslovakia
15Kg/cm2
240C
15Tonn/Hour
1 Nos
1976
40
Make
Designed Presuure of steam
Designed Temp. of steam
Capacity
Fuel Used in Both Type of Boilers
Turbine(1 in No)
Year of Installation
Make
Designed Presuure of steam
Designed Temp. of steam
Capacity
Alternator(1 in NO)
Year of Installation
Make
CANE PREPARATION
Kicker(1 in No)
Clearance between Knives and Slat type
conveyor
HP of motor
Make of Motor
RPM
No of Knives
Chopper(1 in No)
Clearance between Knives and Slat type
conveyor
HP of motor
Make of Motor
RPM
No of Knives
Cutter (2 in No)
Cutter No 1
Clearance between Knives and Slat type
conveyor
HP of motor
Make of Motor
RPM
No of Knives
Cutter No 2
Clearance between Knives and Slat type
conveyor
HP of motor
Make of Motor
Texmaco
21Kg/cm2
340C
25Tonn/Hour
Bagasse
1976
Triveni
21Kg/cm2
340C
2.5 MW
1976
Jyoti
810mm
30 HP
Siemens
72
18
600mm
150 HP
Skoda
585
42
140mm
250 HP
Kirloskar
585
48
10mm
250 HP
Kirloskar
41
RPM
No of Knives
MILLING(6 Mills Tandem)
Each Mill has 4 Rollers
Make
Operation:
1st & 2nd Mills
3rd & 4th Mills
5th & 6th Mills
Hydraullic pressure on mills
Juice Heaters(4 in Nos, 2W&2S)
Temaperature of Juice in Heaters
Pressure of steam required to heat the juice
2 motors are used
Evaporator and Pan Section
Steam pressure required
Temperature of steam required
Centrifugal Separation
Steam pressure required
Temperature of steam required
5 motor are used
585
48
Top roller, Feed roller, Discharge roller &
Underfeed roller
Skoda Czechoslovakia
Steam Engine(Skoda make)
15kg/cm2
Turbine (Bliss & Morcom make)
16kg/cm2
Steam Engine(Skoda make)
15kg/cm2
2500kg/cm2
70-80C
4kg/cm2
75 Hp and 1440rpm
10kg/cm2
200C
12kg/cm2
220C
25Hp and 1440rpm
Table 5
Calculation of Electricity Potential In Panipat Sugar Mill*
1
2
3
Boiler efficiency
Calorific value of Bagasse
Amount of heat required to produce 1 unit of electricity i.e. 1KWh
60%
2200KJ/Kg
3600KJ
4
5
6
Heat rate required
Amount of Bagasse required to produce 1KW electricity
Amount of Bagasse required to produce 1MW electricity
(3)/(1) = 6000KJ/KWh
(4)/(2)= 2.72Kg/h
2.72Tonn/h
7
8
9
Panipat Sugar Mills Data Analysis for the year 2011-12
Total Cane Crushed
Total Bagasse produced ( 30.95% of cane crushed)
So Total electricity produced by power house
250051.63Tonn
77390.97 Tonn
(8)/(6)= 28452.56MWh
42
10
11
Total hours of actual crushing
Electricity potential in Panipat Sugar Mill
3515
(9)/(10)=8MW(approximately)
*See Annexure A

Thus, For Internal Consumption of Sugar plant 2 MW power is used and Surplus 6 MW
is available to supply the grid.
Table 6 : Project Snapshots
S.
No.
1.
Assumption
Head
Power
Generation
Sub Head (2)
Unit
-Installed Power Generation
MW
8
-Internal Consumption for Sugar Mill
MW
2
-Capacity Auxiliary Consumption during
stabilisation
%
8.50%
%
8.50%
%
53%
%
53%
%
53%
Years
20
-Auxiliary Consumption after
stabilisation% 8.50%
-PLF(Stabilization for 6 months)
-PLF(during first year after Stabilization)
-PLF(second year onwards)
-Useful Life
2.
Project Cost
Power Plant Cost
3
Financials
Assumptions
Debt
Rs
3360
Lakhs/MW
%
70
Equity
%
30

Debt / Loan Amount
-Repayment Period
-Interest Rate
Rs lakhs
Years
%
2352
10
12.30%

Equity Amount
-Return on Equity
Rs lakhs
% P.A.
1008
14%
%
24%
Depreciation Rate
43
4.
Fuel Related
Assumptions
O&M Expenses for FY 2012-13
Rs. lakhs
64
Total O&M Escalation
%
5.72%
Interest on Working Capital
%
12.8%
Heat Rate
Kcal/Kwh
3600
Bagasse Price for FY 2012-13
Rs/Tonn
1859
GCV- Bagasse
Kcal/Kg
2200
Bagasse Price Escalation factor
5
Tariff Set by HERC for FY 2012-13
Tariff
5%
Rs/Kwh
5.73
Table 7 : Financials of the Project
Particulars
Energy
available for
sale
Revenue at
Rs 5.73 per
unit with
escalation rate
of 2%
Fuel, O&M,
Dep, Interest
etc / Total
Cost
Profit after
Tax
Year 1
24.89 MU
Year 2
24.89MU
Year 3
24.89MU
Year 4
24.89MU
1426.197
lakhs
1454.72 lakhs
1482.64 lakhs
1510.57 lakhs
1316 lakhs
1371 lakhs
1429 lakhs
1492lakh
110.197 lakhs
83.72 lakhs
53.64 lakhs
18.57 lakhs
Thus, we can see from the table that there is a huge potential to profit by investing in such
bagasse based cogeneration plants.
*See Annexure B
44
Chapter-4
REC MECHANISM
4.1 REC Mechanism in India
For catalyzing the necessary development of renewable energy in India, various policy
Instruments have been listed in NAPCC. Renewable Energy Certificate (REC) is one such policy
instrument prescribed in the plan. It is anticipated that this mechanism would enable large
number of stakeholders to purchase renewable energy in a cost effective manner.
When renewable power is produced, it entails accrual of certain non-energy and societal
Beneficial attributes (e.g. environmental and socioeconomic benefits). Renewable Energy
Certificates (RECs) or Green tags, Renewable Energy Credits, or Tradable Renewable
Certificates (TRCs) as they are at times referred to, represent an aggregation of such attributes of
electricity generated from renewable energy sources. These attributes are unbundled from the
physical electricity, and the two products—the attributes embodied in the certificates and the
commodity electricity—may be traded separately. RECs have at times been viewed as a
contractual right (property right) to the environmental attributes of electricity that is generated
from renewable energy.
In less than a decade RECs have become the pseudo currency of renewable energy markets,
primarily because of their flexibility and the fact that they are not subject to the geographic and
physical limitations of commodity electricity. In several countries RECs are being used by
utilities and marketers to supply renewable energy products to end-use customers as well as to
demonstrate compliance with renewable energy mandates.
The Renewable Energy Certificates (RECs) have the potential to address some of the key issues
preventing exploitation of renewable potential in India. Providing the generator or the buyer, an
option of cost compensation through sale of such certificates will incentivize development of
R.E. projects over and above the Renewable Purchase obligation set by regulatory commissions
at state level.
Drivers for REC in India
India has a huge RE potential-its midterm potential (till 2032) is estimated to be around 2, 22,000
MW; however this potential is not distributed uniformly across the country. The Electricity Act
2003 (EA 2003) mandates State Electricity Regulatory Commissions (SERC) with the function
of RE promotion within the State. The SERCs set targets for distribution companies to purchase
certain percentage of their total power requirement from renewable energy sources. This target is
termed as Renewable Purchase Obligation (RPO).Currently, the regulations governing RPO do
not recognize purchase of renewable energy from outside the State for the purpose of fulfillment
of RPO target set.
45
The requirement of scheduling and prohibitive long term open access charges poses major
barrier for RE abundant states to undertake inter-State sale of their surplus RE based power to
the States which do not have sufficient RE based power. Consequently, the States with lower RE
potential have to keep their RPO target at lower level.
Besides the shortcomings of state level approach to renewable development, other inherent
disadvantages of energy produced from such resources such as high unit cost of the RE based
non-firm power compared to conventional power sources result in lack of motivation to produce
RE based power beyond that required to satisfy the RPO mandate within the State in RE
abundant States. Also RE scarce States are not able to procure RE generation from other States
due to the reasons mentioned above.
To overcome the challenges being faced in overall renewable development, a mechanism to
enable and recognize inter- State RE transactions was critically required for further promotion
and development of RE sources. The aim of introducing such a mechanism was to enable all the
SERCs to raise their States‘ RPO targets even if necessary resources are not available in some
States. The Renewable Energy Certificate Mechanism is a mechanism which fits the bill.
Control period, operative period and sunset date
Control period is a period during which the proposed REC Scheme will be in force while
operative period is a period in which projects implemented during control period. Sunset date
refers to the date on which scheme expires. It is proposed that the Scheme shall come into force
on April 1, 2010 and control period shall be five years i.e. March 31, 2015. And the sunset date
shall be 25 years from the date on which scheme came into force i.e. March 31, 2035.
Objectives for REC Mechanism in India
While effective implementation of inter-state transactions would be primary objective for the
REC mechanism in India, some of the other objectives identified for REC mechanism are:







Effective implementation of RPO regulation in all States in India
Increased flexibility for participants to carry out RE transactions
Overcoming geographical constraints to harness available RE sources
Reduce transaction costs for RE transactions
Create competition among different RE technologies
Development of all-encompassing incentive mechanism
Reduce risks for local distribution licensee.
Operational Framework for RECs
Step-1 Accreditation:
46
The proposed REC mechanism requires a procedure for accrediting generation plants which are
eligible to receive RECs. Accreditation is done to assess and establish eligibility of renewable
energy plants to receive RECs. The process of accreditation is largely one time activity where in
plants are validated on its renew able nature and other pre-requisites to be eligible for issuance of
REC. The State agency appointed by the State Electricity Regulatory Commission (SERC) shall
be responsible for Accreditation. Accreditation process involves processing of application,
verification of projects, transfer of information, creation and operation of accounts etc. The
process of accreditation of eligible renewable energy projects would also involve verification of
applications (projects) and sites and hence the accreditation agencies at state level would need to
have adequate monitoring capability.
Step-2 Registration
Every eligible entity shall apply for registration at central level. Only one central agency at
national level will be authorized to recognize attributes from renewable generation to avoid
double counting. Registration will result in creation of an account for all the entities participating
in the mechanism.
Step-3 Information of RE generation
Central agency would receive information about injection of RE power by the accredited RE
generators through State Load Dispatch Centre (SLDC) via Regional Load Dispatch Centre
(RLDC) and local distribution licensee.
Step-4 Issuance of REC by REC registry
The eligible entity shall receive a certificate for a specified quantity of electricity generated and
injected into the grid. One REC will be issued for each 1 MWh of electricity generated from
renewable energy plants. RECs will be created as electronic records in a register (because
electronic documents are easier to track than paper documents). The issued certificates will be
credited to the registered account of the plant operator/owner.
Step-5 Exchange of REC
RE generators with REC certificates can exchange their certificate at a common platform viz. the
power exchange approved by CERC. Obligated entities (as defined by the SERCs in their
regulations for RPO obligations) shall buy REC through power exchange. The price discovery of
REC will be based on the demand and supply of the RECs in the market, subject to a forbearance
price (ceiling price) determined by CERC. REC exchange will be connected to the central
agency to keep record of all the transaction in the REC exchange.
Step-6 Monitoring Mechanism
It is proposed that a panel of auditors shall be empanelled by CERC at the central level. The
remuneration charges for such panel of auditors will be met out of the funds which Central
Agency may collect from eligible entities.
47
Step-7 Compliance by Obligated Entities
Central registry will furnish details of REC purchase and redemption to respective SERCs to
enable them to assess compliance by obligated entities and impose penalties on them, if
applicable. As evolved by the Forum of Regulators, there is a provision for enforcement
mechanism in the draft model regulation for SERCs under section 86 (1) (e) of the Act. As per
this provision, in the event of default, obligated entities would be directed to deposit the amount
required for purchase shortfall of REC at forbearance price (i.e. maximum price) of REC in a
separate fund, which cannot be utilized without approval of the concerned State Commission. In
addition to this enforcement mechanism the penalty under Section 142 of the Electricity Act
2003 would also be applicable to the obligated entity. The concerned State Commission can
empower an officer of the State Agency to procure required shortfall of REC at the cost and
expense of Distribution licensee.
4.2 Salient Features of REC Framework
● Cost of electricity generation from renewable energy sources is classified as cost of
electricity generation equivalent to conventional energy sources and the cost for environmental
attributes.
● RE generators will have two options:
– either to sell the renewable energy at preferential tariff , or
– to sell electricity generation and environmental attributes associated with RE generation in the
form of REC separately
Grid connected RE Technologies approved by MNRE would be eligible under this scheme
● Existing projects having firm PPA would not be eligible till the end of the contract period or a
period of three years from the date of premature termination of the agreement, whichever is
earlier.
● Captive Generators (including their self-consumption) shall be eligible for REC if they do not
avail promotional / concessional Wheeling Charges, Banking Facility and enjoy Electricity Duty
Waiver. However, if they forgo such benefits, they will not be eligible to access the market for 3
years. Provided that the 3 year limit does not apply if the concessions are withdrawn by the state
or state commission
● Under REC Mechanism, RE generating company sells the electricity generated either
– to the distribution licensee at a price not exceeding the pooled cost of power purchase of
such distribution licensee, or
– to any other licensee or to an open access consumer at a mutually agreed price, or through
power exchange at market determined price.
● Central Agency would issue REC to RE generators
48
● One REC will be issued to the RE generators for 1 MWh of electricity injected into the grid
from renewable energy sources
● REC would be issued to RE generators only
● Categories of Certificates: Solar and Non-solar
● CERC may, in consultation with the Central Agency, appoint from time to time compliance
auditors to inquire into and report on the compliance of these Regulations by the person applying
for registration, or on the compliance by the renewable energy generators in regard to the
eligibility of the Certificates and all matters connected thereto.
49
REC Concept
Validity of Certificates
Eligible entity should apply for Certificates within three months after corresponding generation
from the eligible RE projects. Also the certificate would be valid for 365 days from the date of
issuance of such certificate.
50
Denomination and issue of Certificates
The detailed procedure for issuance of REC would be covered under the detailed procedure to be
issued by the Central Agency later. Each certificate would represent one megawatt hour of
electricity generated from renewable energy sources and injected into the grid.
Fees and charges
Fees and Charges payable under this mechanism would include onetime registration fee and
charges, annual fee and charges, the transaction fee and charges for issue of certificate and
charges for dealing in the certificate.
The details of fees and charges for different procedures of REC are as under:
Table 8 : Fee& Charges for REC
Fee and Charges towards Accreditation
Processing Fees (One Time)
Amount in Rs
5,000
Accreditation Charges (One Time)
30,000
Annual Charges
Revalidation Charge at the end of five (5)
years 15,000
Fee and Charges towards Registration
10,000
15,000
Processing Fees (One Time)
1, 000
Registration Charges (One Time)
5, 000
Annual Charges
1,000
Revalidation Charge at the end of five (5)
years
Fee and Charges towards Issuance of
REC
Fees per Certificate
5,000
Amount in Rs
Amount in Rs
10
The fees and charges under this mechanism would be collected by the Central Agency and
utilized for the purpose of meeting the cost and expense under the mechanism including the
remuneration payable to the compliance auditors, the officers, employees, consultants and
representatives engaged to perform the functions under these regulations.
51
Funding for capacity building of State Agency
State Agency is an important institution in the process of effective implementation of REC
mechanism. Considering the role envisaged for such an agency, it is necessary to build up
capacity for the agency. Hence certain percentage of the proceeds from the sale of Certificates
would be provided for the purpose of training and capacity building of the State Agency as
designated by the concerned State Commission and for other facilitative mechanism required as
per the detailed procedure by the Central Agency.
Pricing of Certificates:
The price of REC will be as discovered in the power exchange, subject to a floor and forbearance
price determined by CERC. The forbearance price will not only ensure optimum incentive for
the RE technologies but also save the obligated entities purchasing RECs at unrealistic high
price. It is should be noted that the REC purchase expense for meeting compliance by
distribution licensees should be treated as ‗pass through‘ expense in the Annual Revenue
Requirement.
CERC, declared the floor and forbearance prices for the solar and non-solar RECs.
Forbearance price
CERC determined RE tariff across RE technologies and the Average Pooled Power Purchase
Costs (APPC‘s) of 2010-11 across respective states have been mapped. The highest difference
between RE tariff and Average Pooled Power Purchase Costs (APPC‘s) has been taken as the
forbearance price
Floor Price
1 The detailed calculation of floor and forbearance price can be seen in Annexure C
a) Using the gap between the minimum requirement for project viability of Renewable Energy
Technologies and respective state average power pool cost of previous year, an incremental
supply curve is plotted with capacity (in MU) on one axis and gap price (Rs/kWh) in ascending
order on the other axis.
b) The RPO targets for 2011-2012 have been marked on the supply curve. In the present case
using NAPCC targets, a target of 7% for 2011-2012has been taken.
c) The supply (RE supply) and demand (RE target) have been matched to Determine the Market
Equilibrium Price (MEP) that shall act as the floor price for RECs.
52
CERC‘s proposal is shown below for FY(2012-13):
Solar REC ( Rs/MWh)
Forbearance Price
Non Solar REC
(Rs/MWh)
3900
Floor Price
1500
12000
17000
Average Power Purchase Cost (APPC): The APPC for a state represents the weighted average
pooled power purchase by distribution licensees (without transmission charges) in the state
during the last financial year
4.3 REC Potential Market Assessment
To analyze the potential REC market in India, Renewable energy generation thus
available has been compared with the current scenario (RE capacity addition as planned) to
quantify incremental RE generation due to target set out in NAPCC.
Table 9 : NAPCC target implementation
NAPCC Target
implementation
Scenario
Energy Requirement
NAPCC Target
RE Energy
Incremental Energy
Unit
2009-10 2010-11
2010-11
BU
848.39
906.32
%
5%
6%
BU
42.4195
BU
-
2011-12
2012-13
2013-14
2014-15
12.7567
15.8205
19.6201
7%
8%
9%
10%
54.3792
67.7824
81.3672
96.1146
112.134
11.9597
13.4032
13.5848
14.7474
16.0194
968.32
Current Scenario
Renewable Installed
Capacity
MW
15765.9 19553.1
%
25%
24250
25%
25%
CUF
53
30075
25%
37299.
25%
46258
25%
RE Energy
Availability
BU
34.5273 42.8213
81.6848
53.1075
RE Energy
Availability
4.07%
%
Incremental
Renewable Energy
Availability
BU
-
101.305
65.8642
7.65%
4.72%
5.48%
8.29397
10.2862
9.0%
6.48%
12.7567
15.8205
19.6201
At estimated CUF of 25% on aggregate basis, total renewable energy generation is expected to
increase from 34.53Bn units (2009‐10) to 101.305Bn units (2014‐15), which translate to share of
RE quantum in overall energy mix to increase from 4.07% to 9.03%, which is marginally
lower than the RPO trajectory outlined under NAPCC. Thus, incremental RE generation
varies from 8.29Bn units to 19.6201Bn units. If RECS are proposed to be introduced for new
RE projects, this translates to REC market potential of around 8 to 20Bn units per annum.
RE Power Requirement in different states in India to Fulfill RPO
As discussed above that 21 states have declared their RPO. It is interesting to see how
much electricity these states need to procure from RE sources in order to fulfill their
RPO?
Table 10: Demand Potential of RE Power Requirement (in MUs)
State
2010-11
2011-12
2012-13
Andhra Pradesh
4190
4793
5483
Assam
65
139
224
Delhi
227
241
254
Gujarat
2514
2949
3425
Haryana
3787
4557
5484
Himachal Pradesh
662
776
902
Jammu & Kashmir
101
317
554
Jharkhand
287
308
330
Karnataka
4924
5465
6066
Madhya Pradesh
2247
2288
2330
Maharashtra
5889
7460
8602
54
Manipur
15
26
48
Mizoram
18
23
29
Orissa
1098
1222
1418
Punjab
1722
1794
1869
Rajasthan
3688
4161
5159
Tamil Nadu
6609
6518
6934
Tripura
10
22
24
Uttar Pradesh
2497
3201
3800
Uttarakhand
723
845
889
West Bengal
663
1146
2199
As shown above, a large amount of Renewable Energy generation is required by
obligated entities to fulfill their RPO condition as defined by their respective states and but as
shown in Table 10, as per the projection of Renewable Energy generation in future is not going to
be sufficient for obligated entities to fulfill their RPO criteria.
So in order to complete their RPO these obligated entities should have to purchase REC.
The key driving factors for demand and supply of RECs in India are detailed below:
a) Demand for RECs: The demand for the RECs will be mainly driven by the states which
are not able to meet their RPO targets by purchase of RE power. A review of RPO target
and actual achievement shows that very few states have been able to meet their RPO
targets. In long term, factors like RPO targets, total electricity consumption of the states
and the gap between targets & achievement will vary, which will eventually change the
demand for RECs.
b)
Supply for RECs: The supply of RECs will depend upon the new renewable energy
capacity addition, RE projects getting eligible for issuance of RECs, players
participating in the REC market etc .
55
4.4 Comparison of REC & Preferential Tariff Sale option for FY 2011-12
Scope: The analysis is done on seven states of India i.e. Andhra Pradesh, Haryana,
Maharashtra, Madhya Pradesh, Punjab, Tamil Nadu, Uttar Pradesh have total potential worth
3900 MW. This along with GoI’s emphasis on clean energy presents a great opportunity for
Renewable Energy power producers.
Assumptions:
1. Project life is 20 years as per CERC guidelines. Different SERCs have different project life
ranging from 20 to 25 years, that’s why for the sake of uniformity CERC’s guidelines have
been used here.
2. If the difference between the two options is less than 0.1 Rs/kWh, both the options are
considered at par.
Data Gathering: Data related to this analysis has been gathered from CERC and various state
regulatory commissions’ sites. Floor price and forbearance price for REC has been taken as Rs
1.4 and Rs 3.84 per unit respectively as per the latest CERC guidelines. Mean price for REC comes
out to be 2.62 Rs/unit.
Case 1: Considering REC Floor Price
Table 11: REC Floor Price + APCC vs. Preferential Tariff
Sr.No.
State
APCC
REC
Rs/Unit
Floor
Preferential
APCC Tariff
+
REC Rs/unit
Price
Preferred
Benefit
Mode
Over
other
Rs/Unit
Mode
1.
Andhra Pradesh
2.5
1.4
3.9
3.28
REC
0.62
2.
Haryana
2.77
1.4
4.17
4.04
REC
0.13
3.
Maharashtra
2.77
1.4
4.17
4.79
FIT
0.54
4.
Madhya
1.85
1.4
3.25
3.1
REC
0.15
2.87
1.4
4.27
4.57
FIT
0.3
Pradesh
5.
Punjab
56
6.
Tamil Nadu
2.69
1.4
4.09
4.19
FIT
0.41
We can see from above Table that for the state of Maharashtra, Punjab, Tamil Nadu Preferential
Tariff is preferable.
For all the other states REC options is better.
Chart below shows the Comparison of REC Floor Price vs Preferential Tariff.
6
5
4
3
REC Rs/Kwh
2
FIT Rs/KWh
1
0
State PLF
45
53
53
53
53
60
State
Andhra
Pradesh
Haryana
Maharashtra
Madhya
Pradesh
Punjab
Tamil Nadu
Figure 2: REC Floor price vs Preferential Tariff
57
Case 2: Considering REC Mean Price
Table 12: REC Mean Price + APCC vs. Preferential tariff
Sr.No.
State
APCC
REC
Preferential Preferred
Benefit
Rs/Unit
Mean
APCC
Tariff
Over
Price
+
Rs/unit
Rs/Unit
REC
Mode
other
Mode
1.
Andhra Pradesh
2.5
2.62
5.12
3.28
REC
1.84
2.
Haryana
2.77
2.62
5.39
4.04
REC
1.35
3.
Maharashtra
2.77
2.62
5.39
4.79
REC
0.6
4.
Madhya
1.85
2.62
4.47
3.1
REC
1.37
Pradesh
5.
Punjab
2.87
2.62
5.49
4.57
REC
0.92
6.
Tamil Nadu
2.69
2.62
5.31
4.19
REC
1.12
In this case all the states should opt for REC option.
Chart below shows the comparison of REC Mean price vs Prefertil tariff.
6
5
4
3
REC Mean Rs/KWh
Pref. Tarrif Rs/KWh
2
1
0
StatePLF
45
53
State
Andhra
Pradesh
Haryana
53
53
Maharashtra 58Madhya
Pradesh
53
60
Punjab
Tamil Nadu
Case 3: Considering REC Forbearance Price
Table 13 : REC Forbearance Price vs. Preferential Tariff
Sr.No.
State
APCC +
Prferential
Preferred
Benefit Over
REC Rs/Unit
Tariff(2011-12)
Mode
other Mode
Rs/Unit
1.
Andhra Pradesh
5.98
3.28
REC
2.7
2.
Haryana
6.25
4.04
REC
2.21
3.
Maharashtra
6.33
4.79
REC
1.54
4.
Madhya Pradesh 5.33
3.1
REC
2.23
5.
Punjab
6.35
4.57
REC
1.78
6.
Tamil Nadu
6.17
4.19
REC
1.98
7.
Uttar Pradesh
6.23
REC
In this case again, all states should go for REC option.
Chart below shows the comparison of REC Forbearance Price vs Preferential Tariff.
59
7
6
5
4
REC Forebearance Rs/Unit
3
FIT(2011-12) Rs/Unit
2
1
0
State PLF
State
45
53
53
53
53
Andhra
Pradesh
Haryana
Maharashtra
Madhya
Pradesh
Punjab
Fig 4 REC Forbearance vs Preferential Tariff
60
Chapter-4”Conclusion and Recommendations”
4.1 Conclusion
There is a large scope of production of surplus electricity from bagasse- the residue of sugarcane
in Haryana. The potential is huge and the return on investment is also very good.
This investment in the sugar factories will not only help these industries but will help the whole
nation and more over it is clean mechanism of generating electricity.
REC and CDM are promotional scheme for this.
REC Mechanism in India is playing a major role in compliance to Renewable Purchase
Obligation. Selling of Power at APCC and REC component is definitely a better option in
Haryana in Comparison to Preferential Tariff option.
4.2 Recommendation
The project should be made fast track in order to gain the benefits to both the sugar industry and
to the overall electricity requirement of the nation.
Financials and Legal Hurdles should be cleared as early as possible to avoid delays in these
projects.
Trained and efficient manpower is also needed in completion of these projects.
4.3 Limitations of Project






Financial Constraints is a huge problem.
Trained and Efficient manpower.
Legal Hurdles.
Fuel (sugarcane) shortage.
Land acquisition problems.
Water availability constraints
61
4.4 Future Scope of Project
The project is not feasible due to the several constraints listed above. In Panipat, land acquisition
and its availability is a huge problem.
Moreover, this concept of project can be applied to other sugar industries of several different
states of India.
Return on investment is good from these projects and will play a major role to fulfill Renewable
Purchase Obligations of different states.
These projects will definitely play a major role in decreasing the energy deficit percentage of the
Indian Power Sector.
Less AT&C losses are there because of local distribution of power generated from these projects
to small towns and villages.
62
BIBLIOGRAPHY
[1] Khatvkar (2006), Cogeneration An Emerging trend in India for Energy Crisis
[2] S.C. Kamate (2011), Exergetic comparison of Bagasse based Cogeneration Plants
[3] Barbara Haya (2011), Barriers to sugar mill cogeneration in India: Insights into the structure
of post-2012 climate financing instruments
[4] S.C. Kamate (2009), Cogeneration in Sugar Industries: Technology Options and Performance
Parameters—A Review
[5] T.G. Chuah (2007), Biomass as the Renewable Energy Sources in Malaysia: An Overview
[6] Simone Pulver (2011), Carbon market participation by sugar mills in Brazil
[7] Uturbey (2009), Investment assessment in co-generation with biomass in the presence of
uncertainty and flexibility
[8] Singh (2010), Analysis of renewable promotional policies and their current status in Indian
restructured power sector
[9] Singh (2009), Transmission tariff for restructured Indian power sector with special
consideration to promotion of renewable energy sources
[10] Singh (2009), Development of renewable energy sources for indian power sector moving
towards competitive electricity market
[11] Das (2009), Biomass: A Sustainable Source of Energy
[12] IEEE General Meeting, Calgary, Canada (2009), Recent Advances of Sugarcane Biomass
Cogeneration in Brazil
[13] http://cercind.gov.in/ dated 13.06.2012
[14 ] http://www.cea.nic.in/ dated 15.06.2012
[15] http://www.cdmindia.com/ dated 15.06.2012
[16] http://cdm.unfccc.int dated 25.06.2012
[17] http://moef.nic.in dated 29.06.2012
[ 18] http://mnre.gov.in/ dated 2.07.2012
[19] http://www.powermin.nic.in/ dated 3.07.2012
63
[20] http://www.berc.co.in/ dated 5.07.2012
[21] http://www.derc.gov.in/ dated 6.07.2012
[22] http://www.rerc.gov.in/ dated 6.07.2012
[23] http://www.mercindia.org.in/ dated 6.07.2012
[24] http://www.gerc.co.in dated 6.07.2012
[25] http://www.uerc.in/ dated 6.07.2012
[26] http://www.mperc.org/ dated 6.07.2012
[27] http://www.kerc.org/ dated 6.07.2012
[28] http://tnerc.tn.nic.in/ dated 6.07.2012
[29] http://www.erckerala.org/ dated 8.07.2012
[30] http://jerc.mizoram.gov.in/ dated 8.07.2012
[31] http://www.aperc.gov.in dated 8.07.2012
[32] http://orierc.org dated 8.07.2012
[33] http://www.hperc.org dated 8.07.2012
[34] www.jkserc.nic.in/ dated 8.07.2012
[35] http://www.orer.gov.au/ dated 8.07.2012
[36] http://www.ofgem.gov.uk dated 9.07.2012
[37] http://www.pserc.nic.in/ dated 12.07.2012
[38] http://www.wberc.net/ dated 15.072012
[39] http://jserc.org/ dated 17.07.2012
[40] http://cserc.gov.in/ dated 18.07.2012
[41] http://www.aes.com/ dated 19.07.2012
[42] http://tripura.nic.in/terc/ dated 20.07.2012
64
[43] http://www.herc.nic.in/ dated 22.07.2012
[44] http://www.nldc.in/ dated 22.07.2012
[45] http://www.wrpc.gov.in/ dated 22.07.2012
[46] http://reconnectenergy.com/ dated 23.07.2012
65
ANNEXURES
Annexure A
66
Annexure B
INTEGRATED PROJECT COST SHEET
Fuel Price Escalation
O&M Escalation
Units Generation
Instal ed Capacity
Gross Generation
Internal Consumption
Auxiliary Consumption
Net Generation
5%
6%
YEAR
Total Project Cost
ULB contribution
Private sector contribution
70% Loan @ 12.5% Int.
30% Equity with ROE of 14%
Interest@12.5%
Pr. Repayment - 10 Yrs
Profit Margin- ROE - 15%
Manpower Cost
Operation & Maintenance Costs/year
Rs Lakhs
Rs Lakhs
Rs Lakhs
Rs Lakhs
Rs Lakhs
Rs Lakhs/Yr
Rs Lakhs/Yr
Rs Lakhs/Yr
Rs Lakhs/Yr
Rs Lakhs/Yr
Total Funds Reqt.
Rs Lakhs/Yr 1316 1371 1429 1492 1558 1629 1704 1784 1869 1959 1985 2096 2213 2337 2468 2607 2753 2908 3072 3245 3428 3621 3826 4042 4271
Unit Year
MW
MU
MU
MU
MU
1
8
37.14
9.28
2.97
24.89
2
8
37.14
9.28
2.97
24.89
1
3360
2352
1008
706
302
88
71
45
600
512
2
3
4
5
6
7
8
635
302
79
71
45
634
541
564
302
71
71
45
671
572
494
302
62
71
45
709
605
423
302
53
71
45
750
640
353
302
44
71
45
792
676
282
302
35
71
45
838
715
212
302
26
71
45
886
756
3
8
37.14
9.28
2.97
24.89
4
8
37.14
9.28
2.97
24.89
5
8
37.14
9.28
2.97
24.89
6
8
37.14
9.28
2.97
24.89
9 10
141
302
18
71
45
936
799
7
8
37.14
9.28
2.97
24.89
67
11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
71 0 0 0 0
302 302 302 302 302
9 0 0 0 0
71
45 45 45 45 45
990 1046 1106 1170 1237
845 893 944 998 1055
8
8
37.14
9.28
2.97
24.89
9
8
37.14
9.28
2.97
24.89
10
8
37.14
9.28
2.97
24.89
0 0 0 0 0 0 0 0 0 0 0
302 302 302 302 302 302 302 302 302 302 302
0 0 0 0 0 0 0 0 0 0 0
45 45 45 45 45 45 45 45 45 45 45
1307 1382 1461 1545 1633 1726 1825 1930 2040 2157 2280
1116 1179 1247 1318 1393 1473 1557 1647 1741 1840 1946
11
8
37.14
9.28
2.97
24.89
12
8
37.14
9.28
2.97
24.89
13
8
37.14
9.28
2.97
24.89
14
8
37.14
9.28
2.97
24.89
15
8
37.14
9.28
2.97
24.89
16
8
37.14
9.28
2.97
24.89
17
8
37.14
9.28
2.97
24.89
18
8
37.14
9.28
2.97
24.89
19
8
37.14
9.28
2.97
24.89
20
8
37.14
9.28
2.97
24.89
Annexure C
NON SOLAR FORBEAREANCE PRICE
STATE/RET
Uttaranchal SHP
Tamil Nadu Wind
AP Biomass
Karnataka SHP
Uttar Pradesh Biomass
Punjab SHP
Maharashtra SHP
Maharashtra Biomass
Gujarat SHP
TN SHP
Maharashtra Bagasse
Rajasthan SHP
Karnataka Biomass
AP SHP
Rajasthan Biomass
Gujarat Biomass
Maharashtra Wind
HP SHP
TN Biomass
Karnataka Bagasse
TN Bagasse
Gujarat Wind
Uttar Pradesh Bagasse
AP Bagasse
Haryana Biomass
Andhra Pradesh Wind
WB SHP
Punjab Biomass
Kerala SHP
Chhatisgarh Biomass
MP SHP
West Bengal Biomass
Kerela Wind
Rajasthan Wind
WB Wind
Madhya Pradesh Wind
APCC FOR 2011-12
Tariff as per Tariff
Difference between
(Rs/Kwh)
Regulation (Rs/Kwh)
RE Tariff & APCC
3.5
3.95
3.78
4.17
4.06
4.17
4.17
4.31
4.17
4.17
4.34
4.17
4.41
4.17
4.28
4.41
4.63
3.5
4.58
4.68
4.6
4.63
4.76
4.51
4.94
4.63
4.17
4.97
4.17
4.41
4.17
4.41
4.63
5.33
5.33
5.33
( Rs/Kwh)
1.04
1.26
1.28
1.39
1.31
1.3
1.32
1.46
1.47
1.48
1.49
1.57
1.63
1.67
1.68
1.71
1.78
1.8
1.89
1.9
1.91
1.93
2.01
2.01
2.17
2.13
2.19
2.1
2.26
2.26
2.32
2.43
2.72
2.73
3.35
3.48
2.46
2.69
2.5
2.78
2.75
2.87
2.85
2.85
2.7
2.69
2.85
2.6
2.78
2.5
2.6
2.7
2.85
1.7
2.69
2.78
2.69
2.7
2.75
2.5
2.77
2.5
1.98
2.87
1.91
2.15
1.85
1.98
1.91
2.6
1.98
1.85
68
NON ‐SOLAR FLOOR PRICE
STATE/RET
RE required in
2013
APCC for 201112 (Rs/Kwh)
Viability
required
( Rs/Kwh)
Karnataka Wind
Tamil Nadu Wind
Punjab SHP
Maharashtra SHP
Karnataka SHP
Gujarat SHP
TN SHP
Maharashtra Wind
Rajasthan SHP
Gujarat Wind
AP SHP
Uttaranchal SHP
AP Biomass
Uttar Pradesh
Biomass
Andhra Pradesh
Wind
Maharashtra
Bagasse
Maharashtra
Biomass
Karnataka Biomass
WB SHP
Rajasthan Biomass
Kerala SHP
Gujarat Biomass
Rajasthan Wind
Karnataka Bagssse
MP SHP
Uttarpradesh
Bagasse
AP Bagasse
TN Bagasse
TN Biomass
61692
63720
63738
63771
63963
63968
63970
64629
64629
66092
66098
66157
66364
66379
2.78
2.69
2.87
2.85
2.78
2.7
2.69
2.85
2.6
2.7
2.5
2.46
2.5
2.75
2.94
2.94
3.27
3.27
3.27
3.27
3.27
3.46
3.27
3.46
3.27
3.31
3.43
3.71
Difference
between
Project
viability
required &
APCC
(Rs/Kwh)
0.15
0.25
0.4
0.41
0.48
0.57
0.58
0.6
0.66
0.76
0.77
0.85
0.94
0.95
66424
2.5
3.46
0.96
66749
2.85
3.9
1.05
66873
2.85
3.96
1.11
66954
66954
67024
67050
67050
67943
68237
68264
68774
2.78
1.98
2.6
1.91
2.7
2.6
2.78
1.85
2.75
4.06
3.27
3.93
3.27
4.06
3.97
4.18
3.27
4.17
1.27
1.28
1.33
1.36
1.36
1.37
1.4
1.41
1.41
68909
69273
69449
2.5
2.69
2.69
3.92
4.16
4.23
1.42
1.47
1.54
69
Kerela Wind
HP SHP
Punjab Biomass
Haryana Biomass
Chhatisgarh
Biomass
WB Wind
West Bengal
Biomass
Madhya Pradesh
Wind
69460
69828
69878
69882
70104
1.91
1.7
2.87
2.77
2.15
3.46
3.31
4.59
4.62
4.06
1.55
1.61
1.72
1.85
1.91
70104
70120
1.98
1.98
3.97
4.06
1.99
2.07
70371
1.85
3.97
2.12
70