Bagasse Based Cogeneration, India Marching Ahead
S. C. Natu, Sr. Vice President, Green Power Division,
MITCON Consultancy Services Ltd., Pune, India
1. Introduction
Indian sugar mills, both in the private and co-operative / joint sectors, have
acknowledged importance of implementing high efficiency grid connected cogen power
plants for generating exportable surplus. In fact, additional revenue stream by sale of
exportable power to State Electricity Boards (or third party customers), has become the
only way for achieving long term sustainability, given the fiercely competitive domestic
and international sugar markets.
2. Potential
The potential from about 575 operating sugar mills spread over 9 major States has
been identified at 3,500 MW of surplus power by using bagasse as the renewable
source of energy. The project involves employment of extra high-pressure boiler
configurations of 67 kg/cm2 or 87 kg/cm2 or 105 kg/cm2 (against the conventional 32
kg/cm2 or 42 kg/cm2 pressure boilers used in the sugar mills).
Sugar mills conventionally cogenerate their own requirements of steam and power
during the season operation of 150-200 days by using bagasse, the residue of
sugarcane generated after crushing. They, however, use a number of low-pressure
inefficient boilers for the purpose and consume/waste the entire bagasse during their
season operations.
Over the years, due to the expansion and diversification of sugar mills, their energy
needs, both during season and off-season, have multiplied. They often require high-cost
grid power and additional fuels both during season and off-season.
The high-efficiency cogeneration design not only uses the available bagasse efficiently,
but also yields substantial quantities of power for exporting to the grid, over and above
their enhanced energy needs.
Improved energy efficiency of sugar mill operations to a maximum possible extent is a
pre-requisite for building high-efficiency grid-connected cogeneration power plants.
Reduced captive steam and power consumptions enhance bagasse availability for extra
power generation and for extending their period of operation beyond the crushing
season.
The potential of 3,500 MW can be easily increased to over 5,000 MW by employing
equipment and systems for reduction of steam and power in sugar processes (from
present 50-52% steam on cane and 22 units of electricity per tonne of cane crushed to
42-45% steam on cane and 16 units of electricity per tonne of cane crushed), as well as
for the manufacture of by-products.
The following table gives the state-wise potential for existing conventional and energyefficient sugar mills in India:
Sr.
no.
State
1.
Maharashtra
2.
Uttar Pradesh
3.
Tamil Nadu
Potential for Exportable Surplus,
MW
Conventional
Energy-efficient
Sugar Mills
Sugar Mills
1,000
1,250
1,000
1,250
350
500
4.
Karnataka
300
400
5.
Andhra Pradesh
200
300
6.
Bihar
200
250
7.
Gujarat
200
400
8.
Punjab
150
250
9.
Haryana & others
100
400
3,500
5,000
Total
Source : MNES Annual Report 2003 & Estimates from MITCON
Cane trash and other agri / forest waste based biomass resources or even conventional
fuels to some extent, help sugar mills operate their cogeneration plants for over 300
days, thereby improving their commercial viability.
3. Achievements
Against this potential, the achievements as of December, 2004 cumulate to 432.53
MW from 56 projects. Additional capacity of about 322.97 MW from 36 projects in
various stages of construction.
Thus, a total of 92 projects, commissioned or under construction, have demonstrated
techno-commercial viability. These projects vary in size from 5 MW to 40 MW and
mainly use bagasse as fuel with biomass and conventional fuels like coal.
On account of substantial efforts by MNES, bilateral agencies, financial institutions and
others, the achievement of 8% of the potential has actually been realized, with another
7% under construction.
The barriers for accelerated development of this sector include lack of a sustainable and
conducive policy and regulatory framework, innovative financing mechanisms, high risks
of fuel linkage, and inadequate capacity.
4. Promotion & Development
The growth of this sector dates back to 1993-94, when the Ministry of Non Conventional
Energy Sources (MNES), Govt. of India, New Delhi, launched National Program on
Biomass Power / Bagasse based Cogeneration. This program focused on biomass as
renewable energy source since 1992-93. Since then, the Ministry has launched key
promotional programs including biomass resource assessment, bagasse- / biomassbased cogeneration, biomass-based power generation, R&D including advanced
biomass gasification and industrial cogeneration.
The bagasse cogeneration program focused on the generation of exportable surplus by
deploying extra high pressure and temperature applications. This program included
capital grant support for demonstration projects, interest subsidy schemes for different
pressure/temperature configurations with higher levels of interest subsidy for higher
configurations, a Program Partnership Initiative for promotion across the country,
guidelines for States for purchase of exportable surplus, promotional efforts for
conducive policy/regulatory framework development, capacity building and awareness,
and fiscal support for SNAs, industry associations, consultants, etc. (Refer Appendix I
for details).
All the above initiatives were updated/revised every year, to suit the market
requirements and status of commercialization. The Ministry is likely to announce a backended capital subsidy scheme for these projects for the new financial year 2005-06,
with lower/reducing levels of capital grants.
United States Agency for Industrial Development (USAID), through its innovative capital
grant scheme for nine select bagasse cogeneration projects in the private sector during
1997-2002, as well as through specific technical assistance and capacity building
programs in this sector, has also contributed significantly. United Nations Development
Program (UNDP), along with the Government of India, has recently cleared an
innovative project in this sector named ‘Removal of Barriers to Biomass Power
Generation in India’. This project is expected to get operationalized in this year.
Successful implementation of various activities under this project are expected to
accelerate the growth. Under this project, one bagasse cogen project on IPP mode at
co-operative sugar mill will be supported.
State Nodal Agencies, particularly with predominant sugar mills and biomass resources,
have also contributed to the development of this sector in their States, through specific
programs and activities using available incentives from MNES.
A host of other fiscal and promotional incentives from the Government of India and
many States include accelerated depreciation, income tax holidays, concessions and
exemption on customs/excise duties, direct/indirect taxes, sales tax, etc. The Electricity
Bill 2003 duly enacted by the Indian Parliament and its conducive provisions for
renewable energy thereof, will provide further impetus to harness maximum potential
from this sector.
5. Financing
The Indian Renewable Energy Development Agency Ltd. (IREDA), a Government of
India enterprise and the lending arm of MNES, has provided promotional/development
finance for harnessing biomass energy in India over the last 10-12 years. IREDA has
made a major contribution in the development and commercialization of bagasse cogen
projects at sugar mills and other biomass power plants in India (refer IREDA web site
http://iredaltd.com for the prevailing lending norms for bagasse cogen and biomass
power projects).
Of late, a number of other financial institutions such as Housing & Urban Development
Corporation Ltd. (HUDCO), Rural Electrification Corporation of India Ltd. (REC), Power
Finance Corporation Ltd. (PFC), Industrial Credit & Investment Corporation of India Ltd.
(ICICI) at the Central level, and nationalized banks at decentralized locations, have
come forward to provide term loan finance to this sector, at attractive lending terms.
6. Key benefits to Indian Society & Rural Economy
The key benefits of these projects have been highlighted below:
 Decentralized power from renewable sources, thereby reducing huge
transmission and distribution losses
 Optimum resource utilization and reduction of oil imports
 Socio-economic benefits to rural populace
 Significant benefits with improved quality, reliability of power in rural areas
 Emission reduction and subsequent environmental benefits
 Low gestation period and capital cost (respectively 16-24 months from financial
closure and Rs 30-40 million/MW of installed capacity)
With the above key benefits, these projects provide truly win-win situation for all the
stakeholders, the producers, utilities and consumers. Awareness amongst utilities and
consumers regarding the benefits is still limited.
7. Key Barriers
For accelerated growth of the bagasse cogen sector in India, the following key barriers
have come to fore:
 Non-availability of a level-playing field and sustainable policy and regulatory
framework regime across different sugar producing States.
 Inadequate capacity building of sugar mills, project promoters, financial
institutions, SEBs, regulators and other stakeholders.
 Inadequate information dissemination
 Lack of business, commercial and institutional mechanisms at decentralized
locations
8. Technology & Expertise
Extra high-pressure and temperature configurations of 67 kg/cm2 and 495°C, 87
kg/cm2 and 515°C, and 105 kg/cm2 & 520°C have been successfully demonstrated in a
number of sugar cogen plants. The technologies related to water treatment, Electro
Static Precipitator (ESP) for emission control, fuel linkage and efficient grid interface
have also been successfully demonstrated. The commissioned projects of 436 MW have
exported over 2 billion MUs successfully to adjacent State Electricity Board (SEB) grids,
with average 250 days of operation per year.
A number of technology/equipment suppliers and service providers in India have been
supplying know how, equipment and services to these projects.
9. Capacity Building Needs & Efforts
Following capacity building needs of this sector have been identified:
 Conceiving, designing, implementing, operating and maintaining these plants by
sugar mill engineers
 Fuel linkage for off season operation
 Assessment of techno-commercial viability
 Energy-efficiency improvement of sugar mills and cogeneration power plants
 Financing: MNES, financial institutions like IREDA/HUDCO/PFC/REC and others,
State Nodal Agencies, service providers and consultants, bilateral agencies and
other stakeholders, have been organizing awareness programs, business meets,
workshops, in-plant training programs, site visits to successful plants, study
tours, etc.
10. Policy & Regulatory Framework
In the year 1993-94, the Ministry of Non Conventional Energy Sources (MNES) advised
a single part tariff for purchase of power of Rs 2.25/kWh (5 US Cents/kWh), with a base
year of 1993-94 and compounding annual escalation of 5%. This tariff was
recommended by the Ministry based on the avoided cost of power at that time, capital
cost/MW of installed capacity of Rs 25-30 million/MW, as well as for the promotion of
this sector.
On account of sustained efforts from MNES through 1994-98, most States in India,
including Tamil Nadu, Maharashtra, Karnataka, Gujarat, Uttar Pradesh, Punjab,
Haryana, Rajasthan, Andhra Pradesh, etc. adopted the MNES-advised tariff and policy.
This led to significant development of this sector during this period. The available
promotional incentives, as well as soft financing schemes and fiscal incentives, helped
demonstration and commercialization of technologies involved. This created a
supportive environment for the steady growth of this sector in the country.
The Indian power sector reforms were initiated since 1997-98 onwards, with the
bifurcation or trifurcation of State Electricity Boards (SEBs) in different States. This,
however, was a major setback to this sector in the period 1999-2003. States went back
on their declared policies and power purchase tariffs. The growth of this sector was
seriously hampered. During this period, regulators at the Center and State levels came
into force and the regulatory processes for deciding the tariffs and other conditions of
the power purchase agreements were initiated. Due to reversal of policies and nonavailability of a level-playing field in this period, negative growth was registered.
The Electricity Bill 2003 enacted subsequently by the Government of India has provided
major impetus. The Bill has recommended that the States should generate a minimum
10% of energy from renewable sources. It also gave supreme powers to the State
Electricity Regulatory Commissions for deliberating and deciding tariffs and other terms
and conditions for all renewables, including bagasse cogeneration. For this purpose, the
regulators adopted processes of technical validation and public hearings. This however,
is still taking time and many States do not have conducive tariff orders providing longterm & sustainable policy/regulatory regimes.
The Maharashtra Electricity Regulatory Commission (MERC) gave a landmark tariff order
in the year 2002 for bagasse-based cogeneration power plants. This order announced a
tariff of Rs 3.05/kWh and 2% compounding escalation, and included other conducive
terms such as a 13-year PPA term, infirm power, 50% cost of evacuation to be borne by
the SEB, etc. (refer www.mercindia.com for details).
Industry associations like the Cogeneration Association of India, financial institutions
and other stakeholders are pursuing the Central Electricity Regulatory Commission
(CERC) to guide State Electricity Regulatory Commissions (SERCs) to adopt a uniform
tariff order for bagasse cogeneration in the entire country.
They are also putting efforts to secure conducive tariff orders at various States, better
than, or in line with the MERC tariff order.
The procedural delays of ERCs, lack of consumer awareness related to socio-economic
environment-grid benefits, lack of a positive attitude by the SEBs (which are the
monopoly suppliers of electricity in India), etc. have been responsible for India not
having a level-playing field or conducive/sustainable policy and regulatory framework
across the country. Appendix II provides the policy framework of various States as of
March 2005, indicating major variations.
It is hoped that policy makers and regulators will take a quick and fair view
and come out with a long-term and conducive tariff regime for this sector.
11. Typical Case Studies
Typical case studies of commissioned bagasse cogeneration projects are listed below.
Case Study I
Company name & address
:
Davangere Sugar Co. Ltd.
73/1, P. B. No. 312,
Shamanur Road
Davangere– 577 004,
Karnataka State
Ownership structure
:
Private limited company
Project location
:
Kukkuwada village, Tehsil
Davangere, Karnataka State
Year of commissioning
:
March, 2004
Installed capacity, MW
:
24.00
No. of days of operation
per year, no.
:
300
:
5.66
:
2.10
:
12.34 (48.87)
:
21.20 (61.05)
:
15.88 (109.92)
:
103.50
:
Mill bagasse, procured bagasse, cane trash,
groundnut shells and imported coal
Technology configuration
:
Rankine cycle, multi-fuel fired boiler with 87
kg/cm2 pressure & 515°C temperature and
matching extraction-cum-condensing TG
set
Employment pattern
:
Total 60 (15 engineering and 45 skilled
labourers)
Capital cost, INR million
:
768.00
&
Dist.
Captive consumption, MW
Season
Off-season
Exportable
capacity, MW
kWh)
surplus
(million
Season
Off-season
Total
No. of units exported
since
commissioning,
million kWh
Types of biomass utilized
Case Study II
Company
address
:
M/s. SCM Sugars Limited
3-5-821, Flat No. 104
1st Floor, Doshi Ford Building
Hyderguda,
Hyderabad – 560 029
Andhra Pradesh
Ownership structure
:
Private limited company
Project location
:
S C M Sugars Ltd.
Koppa Village – 571 425
Tehsil Maddur, Dist. Mandya
Karnataka State
Year of commissioning
:
June, 2004
Installed capacity, MW
:
26.00
No. of days of operation
per year, no.
:
330 (200 season days & 130 off-season
days)
:
6.25
:
2.30
:
14.40 (66.53)
:
20.70 (64.58)
:
16.88 (131.11)
:
85.40
:
Mill bagasse, procured bagasse, wood
chips, cane trash and imported coal
Technology configuration
:
Rankine cycle, multi-fuel fired boiler with 87
kg/cm2 pressure & 515°C temperature and
matching extraction-cum-condensing TG
set
Employment pattern
:
Total 60 (15 engineering and 45 skilled
labourers)
Capital cost, INR million
:
832.00
Captive
MW
name
&
consumption,
Season
Off-season
Exportable
capacity, MW
Kwh)
surplus
(Million
Season
Off season
Total
No. of units exported
since
commissioning,
million kWh
Types of biomass utilized
Case Study III
Company name & address
:
Shree Doodhganga Krishna
Sakkare Karkhane Niyamit
Chikodi-591247
Dist Belgaum, Karnataka
Sahakari
Ownership structure
:
Co-operative society
Project location
:
Same as above
Year of commissioning
:
March, 2004
Installed capacity, MW
:
20.00
No. of days of operation
per year, no.
:
320 (180 season days & 140 off-season
days)
:
5.60
:
2.00
:
10.40 (41.18)
:
18.00 (60.48)
:
13.73 (101.66)
:
75.00
:
Mill bagasse, procured bagasse and cane
trash
Technology configuration
:
Rankine cycle, multi-fuel fired boiler with 67
kg/cm2 pressure & 495°C temperature and
matching extraction-cum-condensing TG
set
Employment pattern
:
Total 50 (10 engineering and 40 skilled
labourers)
Capital cost, INR million
:
580.00
Captive consumption, MW
Season
Off season
Exportable
capacity, MW
kWh)
surplus
(million
Season
Off-season
Total
No. of units exported
since
commissioning,
million Kwh
Types of biomass utilized
12. Environmental Benefits
Use of biomass resource for generation of exportable surplus reduces carbon dioxide
(CO2) emissions, as this power otherwise would have been generated mainly by coal.
Reduction of about 0.8 to 1.2 Kg of CO2 per kWh have been estimated based on type of
technology configuration employed in these projects and the local / national base line.
Government of India signed the Kyoto Protocol in the year 2002 and recently it has
come to force globally. Implementation of biomass based power projects in India not
only will reduce environmental emissions but also will qualify for Certified Emission
Reductions (CERs) under the Clean Development Mechanism (CDM). The Indian project
promoters can sale the CERs internationally and ensure additional financial benefits
every year.
A number of bagasse cogen projects have been identified for approval by the Ministry of
Environment & Forest (MoEF), the Nodal Agency. The validation process and approvals
from CDM board will shortly follow. This will enable the sugar mills and project
promoters to sign emission trade agreements with eligible partners from Annex 1
countries.
13. Conclusions
Bagasse based cogeneration of power in India has come to a take-off stage. The
lessons learned during the last decade have been extremely useful for achieving
accelerated growth in the near future. The enactment of the Electricity Bill 2003 and its
early adoption by different States will ensure a desired level-playing field and
sustainable policy regime. The upcoming initiatives from the Government of India, and
innovative financial mechanisms, including trade of emission reductions from these
projects under the Clean Development Mechanism (CDM) of the Kyoto Protocol, are
expected to remove the barriers for accelerated growth of this sector in India.
Internationally, financing, technology transfer and project development opportunities,
as well as trade of emission reductions will have immense business potential. Due to
inadequacy of capital with the Indian promoters, particularly in the cooperative sugar
mill sector, excellent potential for international independent power producers, investors
and promoters exists for investing in these projects in India. Apart from setting up high
efficiency cogen power plants adjacent to the sugar mills, the promoters can also invest
in modernization of the sugar mills.
The CERs from such projects can be sourced by international emission reduction buyers
for meeting their targets under the Kyoto Protocol during 2008-12 period.
14. About the Author & Organization
The author is Sr. Vice President of the Green Power Division of MITCON Consultancy
Services Ltd., Pune, India. He has extensive experience in consultancy of over 20 years
in the areas of energy efficiency, renewable energy, biomass/cogeneration power
plants, captive power plants and emission reduction trade under CDM of the Kyoto
Protocol. He is a mechanical engineer and cost accountant by profession, is 45 years of
age, and has been working with MITCON since 1984. He also acts as Member Secretary,
Cogeneration Association of India, and Vice Chairman, World Alliance for Decentralized
Energy (WADE), UK.
MITCON Consultancy Services Ltd. is an ISO 9001 and dividend paying company
promoted by India’s major financial institutions, public commercial banks and State
Corporations of Maharashtra. MITCON works in diverse areas of consultancy services in
energy and environment or green power, agri business, market research,
entrepreneurship development, IT education & training. Visit MITCON’s web site at
www.mitconindia.com for details. The Green Power Division of MITCON headed by the
author provides a diverse range of consultancy services both at the micro and macro
levels, ranging from energy audits, renewable energy, biomass / cogeneration / captive
power, to environment and climate change. The micro level consultancy services for
biomass / bagasse cogeneration includes concept to commissioning services and
MITCON has provided these services to various plants equivalent to 200 MW for
commissioned projects and 1,000 MW equivalent projects under construction. The unit
level services include pre-investment consultancy, pre-contract engineering consultancy
and post-contract project management services.
MITCON also works hand-in-hand with MNES as their Program Partner for promotion &
development of these projects as well as with financial institutions like IREDA, HUDCO,
REC, PFC and bilateral agencies like USAID and UNDP. MITCON bagged the Business
Leadership Award for Cogeneration in 2004, awarded by the Solar Energy Society of
India, and has been selected as the local implementing agency for the MNES-UNDP-GEF
project “Removal of Barriers to Biomass Power Generation in India”.
Appendix – I
Bagasse/Biomass Based Cogeneration Program
Sr.
No.
1.
2.
3.
Particulars
Pressure
configuration
Interest
subsidy
Projects by cooperative/public/ joint 40 bar & above
sector sugar mills
3%
60 bar & above
4%
80 bar & above
5%
100 bar & above
6%
Projects in Independent Power 60 bar & above
Producer
(IPP)
mode
in
cooperative/public/joint sector sugar
mills
2%
80 bar & above
3%
100 bar & above
4%
60 bar & above
1%
80 bar & above
2%
100 bar & above
3%
Projects by private sector sugar mills
(for bagasse cogeneration by cooperative/public sector sugar mills, the floor rates of interest
shall not be lower than 6%, otherwise 8% for general category of projects)
Source : MNES, New Delhi
Appendix - II
Policy framework of various States as of March, 2005
State
Participati
on
Wheeling
Andhra
Pradesh **
Private
(Pvt.)
2%
Chattisgarh
Pvt.
-
Gujarat##
Pvt.
for cogen
only
~~ 4% of
energy
Haryana**
Pvt.
6-12% of
energy
Karnataka*
*
Pvt.
6-12% of
energy
Kerala
Pvt.
5% of
energy
Allowed 4
months
Banking
Buy Back
Third
Party Sale
Allowed at @ Rs 2.88 allowed
2% for 8- per unit up
12 months
to 80% PLF
escalated at
1% (04-05)
(high court
ordered
interim rate
of Rs 3.14
from June
04) Not
@ Rs 2.25 Allowed
per unit
~~ Allowed @ Rs 2.25 ~~ Allowed
12 months
per
unit,
escalated at
5% (94-95)
Allowed at Rs 2.80 per
2% charge unit,
#
on monthly escalated at
basis @
2% on base
Allowed at
2% charge
on monthly
basis @
Other
Incentives
-
As to other
industry;
electricity
duty
exempted
for first five
years
-
Subsidy @
Rs 25 lakh/
MW
for
cogen
Rs 2.80 per
unit,
#
escalated at
2% on base
tariff -
Subsidy @
Rs 25 lakh/
MW
for
cogen
@ Rs 2.80 Not allowed
per
unit,
escalated at
5% for five
years
(2000-01)
50% cost
of
power
evacuation
line to be
borne
by
Karnataka
Power
Corporation
Ltd.
(KPTCL)
Appendix – VI (contd.)
Policy framework of various States as of March, 2005
State
Participat
ion
Wheeling
Banking
of Allowed
Buy Back
Third
Party
Sale
@ Rs 3.05 Allowed
per
unit,
escalated
at
2%
from year
of
commissio
ning
Maharasht Pvt./
ra ** for Cooperativ
cogen only e
7%
energy
MP
Pvt.
Punjab
Pvt.
Rajasthan
Pvt.
Tamil
Nadu
Pvt.
UP**
Pvt.
2%
of
@ Rs 2.25
energy Not
per unit
allowed
2%
of Allowed 12 @ Rs 3.01
energy
months
per
unit,
escalated
at 3% for
5
years
(01-02)
2%
of Allowed 12 @ Rs 2.25
energy
months
per
unit,
escalated
at 5% (9495)
2% - 10% Allowed at @ Rs 2.73
2% charge per
unit,
***
escalated
at 5% for
9
years
(2000-01)
12.5%*
24 months 2.25
per
Allowed
@ Rs
unit,
escalated
at 5% (9900)
Allowed
Other
Incentives
50% cost of
power
evacuation
line to be
borne
by
Maharashtra
State
Electricity
Board
(MSEB)
-
Allowed
As to other
industry
Allowed
-
Not
allowed
-
Allowed
-
(*not allowed for cogen, ** SERC policy announced, *** Rs. 2.48 per unit at 5% escalation for
9 years (2000-01) for off season power generation using coal / lignite (subject to ceiling of
90% of HT tariff, # Govt. order dated June, 03 for biomass only, ## Govt. resolution no. REP102000-502-B dated Sept. 27, 01, ~~not allowed for cogen. For biomass only., ~notification
dated Apr 8, 02)
Source : MNES, New Delhi