biomass management & pricing for power generation · 1factors influencing grid interactive...

Submitted to

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION

Submitted by

DEVELOPMENT ENVIRONERGY SERVICES LTD

819, Antriksh Bhawan, 22 Kasturba Gandhi Marg, New Delhi -110001 Tel.: +91 11 4079 1100 Fax : +91 11 4079 1101; www.deslenergy.com

DECEMBER 2016

DISCLAIMER

Policy Advisory Services in Biomass Gasification Technology in Pakistan

BIOMASS MANAGEMENT & PRICING FOR POWER GENERATION

http://www.deslenergy.com/

2

This report (including any enclosures and attachments) has been prepared for the exclusive use and

benefit of the addressee(s) and solely for the purpose for which it is provided. Unless we provide

express prior written consent, no part of this report should be reproduced, distributed or

communicated to any third party. We do not accept any liability if this report is used for an

alternative purpose from which it is intended, nor to any third party in respect of this report.

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ACKNOWLEDGEMENT

This document has been prepared for the United Nations Industrial Development Organization

(UNIDO) under the project title “Policy advisory services (Biomass gasification technologies)” under

the SAP ID 100333: “Promoting sustainable energy production and use for biomass in Pakistan”.

Development Environergy Services Ltd. (DESL) acknowledges the consistent support provided by the

following UNIDO officials:

Mr. Alois Mhlanga, Project Manager

Mr. Ali Yasir, National Project Manager, Sustainable Energy, Biomass - Pakistan

Mr. Masroor Ahmed Khan, National Project Manager, Sustainable Energy RE & EE

Study Team

Team leader Dr. GC Datta Roy, DESL

Team member(s) Mr. R Rajmohan, Biomass technology expert, DESL

Mr. Qazi Sabir, PITCO

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TABLE OF CONTENTS

1 INTRODUCTION ................................................................................................................................... 8

2 BIOMASS RESOURCE MANAGEMENT-KEY CHALLENGES ...................................................................... 9

2.1 BIOMASS RESOURCE ASSESSMENT .................................................................................................................. 9

2.2 BIOMASS SUPPLY CHAIN ............................................................................................................................ 16

2.3 BIOMASS ENERGY TECHNOLOGIES ................................................................................................................ 21

2.4 SUMMARIZING ........................................................................................................................................ 26

3 BIOMASS RESOURCE MANAGEMENT – STATUS QUO IN PAKISTAN ................................................... 28

3.1 BIOMASS RESOURCE AVAILABILITY SURVEY ..................................................................................................... 28

3.2 ESTIMATED ANNUAL BIOMASS PRODUCTION .................................................................................................. 29

3.3 COMPETING USE OF AGRO-RESIDUE ............................................................................................................. 29

3.4 SURPLUS AVAILABILITY FOR POWER GENERATION ............................................................................................ 30

3.5 BIOMASS POWER POTENTIAL ...................................................................................................................... 31

3.6 PROJECT MODELS .................................................................................................................................... 32

3.7 SUMMARIZING ........................................................................................................................................ 33

4 RECOMMENDATIONS-POLICY FOR PROMOTION OF BIOMASS POWER GENERATION ....................... 34

4.1 MANAGEMENT OF BIOMASS RESOURCES ....................................................................................................... 35

4.2 PROMOTING BIOMASS POWER PROJECTS ....................................................................................................... 35

4.3 BIOMASS PRICING..................................................................................................................................... 36

4.4 GLOBAL REVIEW ....................................................................................................................................... 41

4.5 PRICING OF BAGASSE BY NEPRA ................................................................................................................. 45

4.6 MONETARY & FISCAL INCENTIVES ................................................................................................................ 52

4.7 TECHNOLOGY DEVELOPMENT ...................................................................................................................... 52

4.8 INSTITUTIONAL ARRANGEMENT ................................................................................................................... 52

5 ANNEXES ........................................................................................................................................... 54

ANNEX-I: CHINA BIOMASS ENERGY POLICY EXTRACT ..................................................................................................... 54

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LIST OF TABLES TABLE 1: RCR FOR MAIZE............................................................................................................................................ 11

TABLE 2: CROP RESIDUE RATIOS.................................................................................................................................... 11

TABLE 3: BULK DENSITY OF DIFFERENT BIOMASS .............................................................................................................. 16

TABLE 4: PRIMARY TRANSPORTATION COST13 .................................................................................................................. 20

TABLE 5: TRANSPORTATION & STORAGE LOSS ................................................................................................................. 21

TABLE 6: FEEDSTOCK REQUIREMENT AND BIOMASS POWER TECHNOLOGY ............................................................................. 26

TABLE 7: COMBUSTION VS. GASIFICATION ...................................................................................................................... 26

TABLE 8: CROP TO RESIDUE RATIO ................................................................................................................................. 29

TABLE 9 ESTIMATED ANNUAL BIOMASS PRODUCTION ........................................................................................................ 29

TABLE 10: SURPLUS AVAILABILITY OF AGRO RESIDUE FOR POWER GENERATION ...................................................................... 30

TABLE 11: SURPLUS AVAILABILITY OF AGRO-INDUSTRIAL RESIDUE FOR POWER GENERATION ..................................................... 31

TABLE 12: ENERGY POTENTIAL – COMBUSTION TECHNOLOGY ............................................................................................ 31

TABLE 13: ENERGY POTENTIAL – GASIFICATION TECHNOLOGY ............................................................................................ 31

TABLE 14: DIFFERENT PROJECT MODELS FOR POWER GENERATION ...................................................................................... 33

TABLE 15: RE POLICY MATRIX-SELECT COUNTRIES ............................................................................................................ 34

TABLE 16: FUEL PRICING OPTION EVALUATION ................................................................................................................ 36

TABLE 17: EQUIVALENT BIOMASS PRICE, DETERMINED FROM FOSSIL FUEL ALTERNATIVES........................................................ 38

TABLE 18: EQUIVALENT BIOMASS PRICE-FIREWOOD25 ..................................................................................................... 39

TABLE 19: BIOMASS PRICE COMPARATIVE ...................................................................................................................... 40

TABLE 20 : BIOMASS PRICE AS PER SURVEY ..................................................................................................................... 40

TABLE 21: PRICES OF BIOMASS-DIFFERENT METHODOLOGIES ............................................................................................. 41

TABLE 22: BIOMASS PRICE FOR TARIFF-INDIA .................................................................................................................. 44

TABLE 23: DETERMINATION OF BAGASSE PRICE FOR REFERENCE YEAR UNDER UPFRONT TARIFF .............................................. 46

TABLE 24: ILLUSTRATIVE FUEL PRICE INDEXATION METHODOLOGY (UPFRONT TARIFF) ........................................................... 46

TABLE 25: ILLUSTRATIVE FUEL PRICE DETERMINED FOR A BIOMASS POWER PLANT ................................................................. 47

TABLE 26 : BAGASSE PRICE FOR ‘FIT’ ............................................................................................................................ 48

TABLE 27: DETERMINED PRICE OF BIOMASS .................................................................................................................... 51

TABLE 28: INSTITUTIONAL ARRANGEMENT ...................................................................................................................... 53

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LIST OF FIGURES

FIGURE 1: BIOMASS RESOURCES ..................................................................................................................................... 9

FIGURE 2: AGRO-RESIDUE RESOURCE ASSESSMENT ........................................................................................................... 10

FIGURE 3: AGRO-INDUSTRIAL BIOMASS RESOURCE ASSESSMENT ......................................................................................... 10

FIGURE 4: COMPONENT OF MAIZE PLANT ....................................................................................................................... 11

FIGURE 5: TOOLS USED IN MANUAL HARVESTING ............................................................................................................. 12

FIGURE 6: GRAIN HARVESTING ..................................................................................................................................... 12

FIGURE 7: TYPES OF COMBINE HARVESTER ...................................................................................................................... 13

FIGURE 8: PICK TYPE COTTON HARVESTER ....................................................................................................................... 13

FIGURE 9: SUGARCANE HARVESTING ............................................................................................................................. 13

FIGURE 10: MECHANIZED HARVESTING OF WHEAT STRAW ................................................................................................. 14

FIGURE 11: COMPARATIVE HARVESTING EFFICIENCY ......................................................................................................... 14

FIGURE 12: COMPETITIVE DYNAMICS............................................................................................................................. 15

FIGURE 13: ESTIMATION OF CHANGE IN COMPETITION OF STRAW UTILIZATION IN CHINA ......................................................... 15

FIGURE 14: SUPPLY CHAIN OF RICE STRAW...................................................................................................................... 16

FIGURE 15: FUEL COLLECTION SYSTEM ........................................................................................................................... 18

FIGURE 16: BIOMASS FUEL PROCESSING PLANT................................................................................................................ 19

FIGURE 17: INNOVATIVE SYSTEM OF TRANSPORTATION ..................................................................................................... 19

FIGURE 18: COST COMPOSITION OF STRAW FOR A BIOMASS POWER PLANT IN CHINA 2013 ..................................................... 20

FIGURE 19: SCHEMATIC REPRESENTATION OF RANKINE CYCLE............................................................................................ 23

FIGURE 20: SCHEMATIC DIAGRAM OF GASIFIER COUPLED WITH PRODUCER GAS BASED GENERATOR SETS .................................. 24

FIGURE 21: BIO METHANATION-SCHEMATIC .................................................................................................................. 24

FIGURE 22: SEQUENTIAL STEPS FOR THE ESTIMATION OF BIOMASS AVAILABLE FOR POWER GENERATION ..................................... 28

FIGURE 23: COMPETING USE OF BIOMASS ...................................................................................................................... 30

FIGURE 24: EVOLUTION OF ENERGY GENERATION SCENARIO ............................................................................................. 37

FIGURE 25: COAL PRICE VOLATILITY ............................................................................................................................... 39

FIGURE 26: BIOMASS PRICE BASED ON SURVEY ............................................................................................................... 40

FIGURE 27: VARIATIONS IN DELIVERED COST ................................................................................................................... 42

FIGURE 28: HISTORICAL VARIATION IN PRICE OF COAL AND FIREWOOD ................................................................................. 49

FIGURE 29: VARIATION IN PRICE OF BAGASSE .................................................................................................................. 49

FIGURE 30: RANGE OF FUEL PRICE ................................................................................................................................ 50

FIGURE 31: REGIONAL VARIATION IN THE PRICE OF FIREWOOD25 ......................................................................................... 51

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ABBREVIATIONS

AEDB Alternative Energy Development Board AFBC Atmospheric Fluidized Bed Combustion CERC Central Electricity Regulatory Commission, India CIF Cost, Insurance and Freight DESL Development Environergy Services Ltd. ESMAP Energy Sector Management Assistance Program, World Bank FiT Feed in Tariff FO Furnace Oil HFO Heavy Fuel Oil HSD High Speed Diesel IEA International Energy Agency IRENA International Renewable Energy Agency IPP Independent Power Plant LNG Liquefied Natural Gas MoA Ministry of Agriculture, Pakistan MoF Ministry of Finance, Pakistan MNRE Ministry of New and Renewable Energy, India MW&P Ministry of Water & Power, Pakistan NCV Net Calorific Value NDRC National Development & Reform Commission, China NEPRA National Electric Power Regulatory Authority, Pakistan RCR Residue to Crop Ratio RFO Residual Fuel Oil RLNG Re Gasified Liquefied Natural Gas SERC State Electricity Regulatory Commission, India UOM Units of Measurement WPI Wholesale Price Index

UNITS OF MEASUREMENTS

Parameters UOM

Percentage %

British Thermal Units per Kilogram BTU/kg

Kilo calories per Kilogram kCal/kg

Kilogram/ kilo watt hour kg/kWh

Kilogram/ cubic meter kg/m3

Kilometers km

Kilo Watt kW

Kilo Watt hours kWh

Square meter m2

One million British Thermal Units MMBTU

Mega Watt MW

CURRENCY

United States Dollars US$

Indian Rupees INR

Pakistan Rupees Rs

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1 Introduction Biomass resources meet a large percentage of the energy demand, particularly in resource rich

countries in the Asian and African region. Forest and agriculture constitute the major source of

biomasses followed by wastes from anthropological activities. Somewhat formal markets have

developed for the forest-based biomass resources and to some extent for agro-industrial residues. A

formal system for agro-residues, which constitute the bulk of the available biomass resources, is still

to emerge in countries such as Pakistan.

Managing the supply chain for agro-residues is a formidable challenge because of the distributed

nature of the resources, availability over a short period of harvesting time and its physical

characteristics. “Fuel collection in majority of the cases in the biomass power plants is largely

unorganized. The major barrier indicated by the biomass power entrepreneurs is the fuel supply

particularly during the summer months”1. (India). Annual fuel requirement of the energy plant has to

be procured in a very short period available for harvesting. Materials of very low bulk density have

to be collected from a large number of small farms, transported and stored.

Energy conversion technologies for biomasses such as bagasse, rice husk and wood chips are well

developed. For other biomasses such straw and stalks (which are more abundantly available),

technologies are still being perfected particularly to make them suitable for utilization of locally

available resources. Institutional mechanisms are required for overcoming the supply chain and

technology barriers as has been seen from the successful development in some countries such as

China, India and Thailand.

Various kinds of policy and regulatory supports are required for promotion of biomass energy

market. Feed-in-tariff has been the key regulatory tool that has been deployed in all the countries,

which have succeeded in development of biomass energy. Mismatch in the prices paid by the project

developers to the biomass supplier and the prices determined by the regulators often well below the

market prices (information asymmetry arising out of non-formal nature of the market) have

seriously affected the viability and sustainability of operation of such projects.

“In recent years, the increasing costs for production caused by the growth in demand for fuel and the

lack of standard to guide the fuel market make the biomass power plants’ profit decline and even

completely loss, since the rising cost of fuel is out of the control for biomass power plants”2. (China)

Monetary and fiscal incentives, development of market tools such as renewable purchase

obligations, tradable certificates etc. are amongst the array of other policy tools that are being

increasingly deployed for promoting biomass energy globally.

An extensive biomass resource assessment survey has recently been concluded in Pakistan with

support from World Bank/ESMAP. This study has identified the biomass resources that can be

harnessed for commercial energy production deploying appropriate energy conversion technologies.

The rich information in the report provides the platform for attracting private sector investment in

biomass energy technologies. It is the opportune time for deployment of appropriate policy and

regulatory tools for kick starting the investment market. Recommendations on various policy,

1Factors Influencing Grid Interactive Biomass Power Industry – India, TERI, India 2Dilemma &Strategy of Biomass Power Generation Industry Development in China: A Perspective of Industry Chain

9

regulatory and institutional mechanisms have been accordingly prepared based on review of global

scenario and status quo in Pakistan and taking into account information available in the survey

report, public domain and DESL database.

2 Biomass resource management-key challenges Unlike other energy resources, the sources of major constituents of biomass resources are farmers

and agriculture. A systematic approach is therefore required for understanding the issues involved in

managing biomass resources. The critical components of a biomass resource management system

include:

Estimation of overall production of biomass residues

Estimation of actual availability taking into account harvesting efficiency & competitive usages

Biomass supply chain

Biomass characterization and energy technologies

2.1 Biomass resource assessment

2.1.1 Estimation of residue generation

Biomass resource assessment study quantifies the existing or potential biomass material from

different sources (illustrated example of sources in Figure 1 below) in a given area.

Figure 1: Biomass resources

Pakistan is richly endowed with biomass resources with an energy potential of 0.5 Million

GWth/year3 from agro residues and agro industrial residues alone. Stalks and straws are the primary

agro-residues generated from the major crops such as wheat, paddy, maize and cotton in Pakistan4.

In many countries, riverside greens can provide an attractive option as an energy crop. Punjab

3 “Final Report on Biomass Atlas for Pakistan” developed as a part of the “World Bank Biomass Mapping for Pakistan: Phase 1-3” July 2016 4 Biomass atlas for Pakistan-April, 2016

10

province in Pakistan is potentially suitable for development of such crops. Different methodologies

are used for assessment of different types of biomasses as illustrated by the following figures.

Agro-residues

Figure 2: Agro-residue resource assessment

Agro-industrial residues

Figure 3: Agro-industrial biomass resource assessment

Actual availability of residues is usually less than the estimates as has been observed from project

specific surveys5. These differences occur due to variations in residue to crop ratios (RCR) and the

5 DESL Report on “Assessment of Options for Biomass Power Generation” to DfiD, June 1, 2011

Satelite survey-crop area

•Crop mapping for different agricultural seasons (Summer & winter crops)

•Estimation of crop area for different types of crops

•validation through physical sample survey

Crop yield estimate

•Sample survey and stakeholders interaction

•Historical trend analysis

•Recoconciliation with available data on crop production from Governmental records

Estimate of crop residue

ratio

•Sample survey and stakeholders interaction

•Literature survey-research data and information on CRR for different types of crops in different regions

•Identification of variables impacting CRR

•Freezing the CRR estimate

Production estimate

•Identification of key crops (Sugar cane, Paddy, Nuts) producing fuel residues

•Estimation of overall crop production

•Estimation of overall industrial capacities for processing of crops

•Estimate of crops processed in industries based on statistical analysis

Estimate of surplus

availability

•Sample survey for assessment of actula CRR based on data and information from individual processing units

•Historical and comparative analysis-regional, global

•Freezing average CRR

•Estimate of captive consumption based on historical analysis

•Assessment of surplus

11

efficiency of harvesting. In case of maize for example, there are six components of residues. Only

straw and stalk can be considered as residues available for use as fuel. Table 1: RCR for maize

Figure 4: Component of maize plant

The cob is also an important residue. However, cobs are usually not available at the farmer’s end

and as such would not be available as fuel for the energy plant located in the crop area.

DESL has carried out literature survey as well as field research to assess the situations for different

crops such as wheat, paddy, cotton, sugar cane, jowar, bajra, tur and soybean. The results obtained

from the field study were compared against the published data from different sources. The following

table summarizes the findings.

Table 2: Crop residue ratios

S. No

Crop Biomass portion as per RCR as per

IISc Bangalo

re

Other literatur

e

Biomass Regener

able Energy6

DESL IISc Bangalor

e

Other literature at %

moisture7

Biomass Regener

able Energy book

DESL*

1 Bajra Stalk Stalk Stalk 2 1.75 @15%

1.4 0.651

2 Cotton Seeds + Waste

Stalk Stalk 3.5 1.77-3.74 @12%

3.5

3 Jowar Stalk Stalk Straw Stalk 2 1.25 @15%

1.4 0.456

4 Maize Stalk Straw Straw Stalk 2.5 2.08 1 0.56

5 Soy bean

Straw Straw Straw 2.5@15% 2.1 0.55

6 Sugar cane

Bagasse + leaves

Bagasse + leaves

Trash 0.4 0.33+0.1 @48%

0.057

7 Tur Waste Straw Stalk 1.6 1.5 0.581

8 Wheat Straw Straw Straw Straw 1.6 1.75 @15%

1.3 0.613

*Includes harvesting efficiency

6 Biomass- regenerable energy, edited by D.O Hall and R P Overend, John Wiley and Sons 7 Paper presented at Regional Consultation on Modern Applications of Biomass Energy, 6-10 January 1997,

Kuala Lampur Malaysia

Part of plant At Field Considered for RCR

Female flower Left over No

Grains Product No

Husk Residue No

Straw & stalk Residue Yes

Root Left over No

Cob Residue No

Male flower Left over No

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The gap between the assessed estimates based on survey and assumed RCR can be reduced by

carrying out regular satellite mapping and field survey. During the field study, sample survey should

be carried out to determine the actual amount of harvestable residues per unit of crop area. The

estimates derived from the mapping and field survey should be reconciled against the measured

value from sample survey for making more accurate estimate of residue production.

2.1.2 Harvesting efficiency

The entire quantity of biomass generated by the crops is not harvestable. Depending upon the types

of crops and the harvesting methodology (manual and mechanized), the actual amount harvested

would be less than the harvestable quantity.

Manual harvesting: It includes plucking the ears of grain directly by hand, cutting the grain stalks

with a sickle, cutting them with a scythe, or with a modified type of scythe known as a grain cradle8.

The different tools used in manual harvesting are shown in the figure below.

Sickle: a short-handled farming tool with a semicircular blade, used for cutting corn, lopping,

or trimming

Scythe: a tool used for cutting crops

such as grass or corn, with a long curved blade at the end of a long pole attached to one or two short handles.

Grain Cradle: A grain

cradle or cradle is a modification to a standard scythe to keep the

cut grain stems aligned.

Figure 5: Tools used in manual harvesting

Mechanized harvesting: In the developed countries, only mechanized methodology is used for

harvesting. Mechanized systems are being increasingly deployed in rest of the world too including

Pakistan. Some of the mechanized harvesting techniques for rice, wheat, maize, cotton and

sugarcane (major crops of Pakistan) are as follows.

GRAIN HARVESTING MACHINE: This machine is used to harvest grains, example, rice, wheat, maize,

barley and millets. A combine grain machine performs three separate operations comprising

Harvesting (Reaping) – process of cutting/ harvesting the crop from the land

Threshing – process of separation of grain from stalks and husks (biomass production)

Winnowing – blow a current of air through grain in order to remove the chaff

Rice harvester, Reaper

Wheat harvester, combine

Maize harvester

Figure 6: Grain harvesting

8 http://www.agriculturalproductsindia.com/agricultural-machinery-equipments/agricultural-machinery-harvesting-

machinery.html

13

Different types of combine harvesters are shown in the following figure.

Tractor mounted type

Wheel type Crawler type

Figure 7: Types of combine harvester

COTTON HARVESTING MACHINE: It is a machine for harvesting cotton bolls. Mechanical cotton

harvesters are of two basic types, strippers and pickers. Stripper-type harvesters strip the entire

plant of both open and unopened bolls along with many leaves and stems. Special devices at the gin

then remove the unwanted material.

Figure 8: Pick type cotton harvester

SUGAR CANE HARVESTING MACHINE: A sugar cane harvesting machine performs basal cutting, cleaning of

sugarcane through gravity (by fans/ blowers) and chopping of stalks into billets, unloading them

onto a transport unit for transshipment9.

Figure 9: Sugarcane harvesting

9 “The operation of mechanical sugarcane harvesters and the competence of operators: A ergonomic approach”, Africa

Journal of Agricultural Research, Academic Journals, Vol. 10 (15) pp 1832-1839, 9 April, 2015

14

Mechanized harvesting usually has a negative impact on harvesting efficiency of biomass resources

for a variety of reasons. DESL has been engaged in the field of biomass energy for close to two

decades. During the course of a large number of resource assessment studies, it has been observed

that harvested biomass is invariably less than the harvestable biomass. The extent of difference

varies widely influenced by local factors10.

The efficiency is much higher for manual harvesting. Several factors such as unevenness of the land

level, machine efficacy etc. have been found to have major impact on efficiency of mechanized

harvesting. The figure below shows one such challenge in improving reaping efficiency.

Figure 10: Mechanized harvesting of wheat straw

During the harvesting operation, quite a large quantity of residues is mowed down as indicated by

change in their orientation. This makes it difficult to cut these parts through the reaping operations.

There are similar other problems that have been identified in carrying out harvesting operation of

different types of residues.

Figure 11: Comparative harvesting efficiency

Opportunity price for biomass also plays an important role as farmers take more interest in

improving the efficiency for resources having higher market price. Wheat straw fetches very high

10 DESL Report on “Assessment of Options for Biomass Power Generation” to DfiD, June 1, 2011

Rice Wheat

Manual 50% 88%

Mechanized 30% 72%

0%10%20%30%40%50%60%70%80%90%

100%

Har

vest

ing

Effi

cien

cy

15

price in the market because of its fodder value and as such farmers do not mind investing in

technologies and additional efforts for increasing the harvesting efficiency.

The market price of a particular biomass can change dramatically as and when technologies are

developed for utilizing such biomasses for energy production or other commercial uses.

2.1.3 Competitive use

Farmers use residues for trash mulching of the fields as well as fodder and fuel and in some cases as

construction material too. Agro-industries use residues as fuel, bagasse for cogeneration to meet the

captive demand of power and steam in the sugar mills and the rice mills use husk as fuel for

generation of steam and hot water for rice processing. The competitive scenarios are rapidly

changing due to various reasons as illustrated below10.

Figure 12: Competitive dynamics

The following figure illustrates the dynamics of competitive use driven by market as well as

behavioral factors.

Figure 13: Estimation of change in competition of straw utilization in China11

11 Preparing national strategy for rural biomass renewable energy development, ADB (TA No. 4810-PRC), April

2008

•Optimisation of use for mulching-increased awareness

•Increasing access to cleaner commercial fuel

•Increased awareness about potential revenue from surplus biomassesAgro-residues

•Development of high efficiency & alternative technologies-High pressure bagasse cogen, husk gasification, bio technologies

•Availability and cost of commercial fuels

•Market opportunities from cleaner/carbon neutral energy production


4.6%

5.5%

10.4%

-9.1%-1.3%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Feed Industry Edible Fungus Return to field +waste

Energy

2005

2010

2015

CAGR

16

The macro picture shown above only tells us part of the story. Practically, the change in the usage

can vary widely depending upon the local factors. As in case of production, the competitive use can

also change from year to year and as such, the macro data can only be used as guide. Periodic

surveys are required for establishing the trend and making projections on potential availability of

surplus biomass for energy production.

2.2 Biomass supply chain Agro-residues are available for a very short period ranging from two to three months depending

upon the crop-harvesting period. Agro-industrial residues such as rice husk are usually available

throughout the year whereas availability from other industrial operations fluctuates depending upon

the regional practices on processing of harvest. A biomass energy plant has to procure the fuel

during harvesting period and store it for meeting the fuel demand for the entire year. The following

figure illustrates a state of the art supply chain system for paddy straw, which is currently the most

abundantly available resource for energy production.

Figure 14: Supply chain of rice straw

The challenge starts with collection of the harvested mass from the field. As we move away from the

fields located near roads, it becomes increasingly more difficult to collect the biomass. Cost of labor

and primary transportation keeps on increasing often making the whole process non-remunerative.

The cost of transport of biomass from the field to the power plant (including primary and secondary)

is the highest among the other components and is a direct function of the distance of transport

between them and the bulk density of the different fuels. The following table provides details of the

bulk density of the different biomass:

Table 3: Bulk density of different biomass

Type of biomass Bulk Density (kg/m3)

Maize corn 510

Rice husk 150

Rice straw 125

17

Type of biomass Bulk Density (kg/m3)

Cotton stalk 103

Sugarcane trash 100

Wheat straw 55

Maize husk 55

Maize stalk 40

The low bulk density impacts both the storage and transportation cost directly. Densification helps in

reducing such cost. Energy requirement for densification is quite high.

Only liquid fuel driven devices can be used in remote areas, as electrical power would mostly not be

available in such locations.

Different biomass supply chain business models are emerging in different countries with partnership

amongst farmers that are more progressive, biomass traders and logistics management companies13.

A few operating models are illustrated as follows.

2.2.1 Direct purchase-cash and carry basis

Smaller biomass energy plants (heat or power or both) usually purchases either from the ‘Mandis’

(agricultural commodity markets) directly from the farmers or traders (Artiyas) registered with such

‘Mandis’. Some of the traders maintain some minimum storage capacity to take care of the

fluctuation in the daily arrival of fuel during both off-season and seasons. Marginal farmers usually

dispose all of their produce during the season whereas larger farmers store fuel to take advantage of

the higher off-seasonal prices. In this model, the transaction takes place on parcel basis and on cash

payment.

2.2.2 Direct purchase through contracts with individual farmers

In this model, biomass energy producer purchases fuel on a regular basis as per signed annual

contracts with farmers. Depending on the size of the holdings (fewer in high-income countries),

there could be a large number of individual contracts with farmers. The energy plants usually

appoint intermediaries on contract to manage the logistics. This is prevalent when the fuel is

procured from nearby locations and the requirement is small. (This concept is gaining popularity in

China and is called “Plant and Farms” model). Payment is made on cash as well as credit for which

established rural banks provide transaction services.

2.2.3 Purchase through intermediaries

In this model, the energy plant purchases fuel under agreements with one or more fuel agencies or

traders, who in turn purchase biomass from the farms. They manage the entire operations including

logistics and fuel preparation. Such intermediaries supply biomass fuels to multiple users within a

manageable spatial distance (up to 100 km in India) as per their own business model. This system,

named fuel agency model, has become quite popular in China. In Europe too, this is now a common

practice. This model is gradually finding greater acceptance in many markets including Sri Lanka,

India etc (illustrative case examples follow).

18

2.2.4 Case study-corporatization Punjab Renewable Energy Systems Pvt. Ltd., a private sector company in India has pioneered

establishment of biomass depots and have signed long-term contracts to meet the fuel requirement

of three (three biomass power plants in the catchment area)12. The model involves establishment of

supply chain including fuel-processing plants based on a hub and spoke methodology illustrated

below.

Figure 15: Fuel collection system

Farmer supplies biomass to the nearest located collection center equipped with necessary

infrastructure for receiving, unloading and loading of fuels. Larger collection centers (called master

collection canters) are also equipped with processing facilities. Biomass collected in the smaller

12 DESL report on Validation of fuel supply linkage model, MNRE, 2009

Textbox 1: Case Study-Sri Lanka

Support is being provided to replace 10% of the fossil fuels used in the industry by 2017 by biomass-derived energy. To this end, it is proposed to develop /revitalize six supply chains to deliver quality-assured and cost-effective wood fuel to industrial or commercial end users in a reliable way. Under this project, it is proposed to establish biomass energy terminals as a pilot project. The expected outcome is to increase confidence in the biomass energy sector, increase benefit to the local economy and reduction in air pollution. The project intends to establish six biomass energy terminals in the following districts; - Kurunegala - Galle - Ratnapura - Gampaha - Moneragala – Nuwaraeliya. The project will support the establishment of the biomass energy terminals, which will adopt criteria and indicators developed for sustainable fuel wood production and source fuel wood accordingly. The processed biomass fuel output from the energy terminals would include the following: 1. Wood chips produced to the requirements of the industry or industries that it is supplying 2. Briquettes, and 3. Split logwood processed, dried and sized, to requirements of the industry or industries it is supplying.

Source: GEF PRO DOC: Promoting Sustainable Biomass Energy Production and Modern Bio-Energy Technologies in Sri Lanka

Power

Plant

19

centers is transported to nearby large centers for processing. Processed biomass is then transported

to the consuming plants as per supply calendars.

Step 1: Uprooting of Cotton stalk from

Farm Field

Per 3 Acre : 10 Jobs per Day X 180

Days (Harvest Season) = 1800

ManDays

Step 3: Transportation & Storage to

Storage Center / Plant Per Tractor

trolley : 8 Jobs X 180 Days = 1440

Mandays

Step 2: Processing/ Shredding of

Cotton Stalk per Shredder : 6

Jobs X 180 Days = 1080

ManDays

Total Mandays : 4320 Mandays Per Unit Shredder ( For 13 .2 MW Biomass Based Plant, Maharashtra)

Average Job Created due to Biomass ( Cotton Stalk) SCM Mechanism For Biomass Based Plant having 120

Shredders = (Number Of Shredders X Total Mandays )/ 365 Days

= (120 X 4320) / 365

= 1421 Green Jobs/Day

Socio- Economic Impact of Biomass Supply Chain (Cotton Stalk)

Figure 16: Biomass fuel processing plant

Master collection centers are responsible for managing the fuel quality and all accounts with the

consuming power plants. The power plant will pay the master collection center for biomass coming

from any collection center. The master collection center will make payment to branch collection

center for their deliveries. This mode of payment is adopted to ensure the quality of biomass and to

check the flow of biomass towards power plant only. This model has created a condition for farmers

to innovate storage and transportation at their end to deliver maximum quantity of fuel to the

master collection centers, which are equipped with better facilities for quality management. This

helps in reducing the discretion used by smaller collection centers on quality assessment.

With the establishment of a sustainable biomass energy system, farmers cooperative can also play a

very important role in managing the supply chain. Innovative system of transportations is also being

developed by rural entrepreneurs responding to the emerging biomass market.

Figure 17: Innovative system of transportation

It is common to see large capacity tractor trolleys carrying upto 8 MT of low-density biomass

thereby increasing the viability of biomass supply business.

20

The transportation cost of reasonably densified biomass (baled) varies from 10 to 20% depending

upon the distance of transportation. The overall cost of transportation and handling for the primary

and secondary transportation could be two to three times this amount depending upon the type of

biomass and extent of densification.

Table 4: Primary transportation cost13

Transportation distance Impact on delivered cost of fuel (Primary)

Up to 15 km 8%

16 to 35 km 13%

36 to 50 km 18%

Above 50 km 20%

For large capacity power plants, marginal cost of logistics (including primary and secondary) can be

as high as 50% of the cost of fuel as fired to the boiler against the purchase cost of about 25% only.

Figure 18: Cost composition of straw for a biomass power plant in China 201313

This shows the importance of logistics in the overall management framework for a biomass power

plant.

2.2.5 Transportation & storage losses

Some amount of biomass is lost during transportation and storage. Similarly, quality of stored

biomass can degrade resulting in loss of calorific value. The extent of physical and calorie loss can

vary depending upon the physical quality of the infrastructure (capital cost related) and

management practices. Following table illustrates the extent of variations observed from a study

carried out by DESL14 over a period of one year, tracking the transportation and storage loss in a

biomass energy plant in India.

13 DESL database 14 DESL Study: Biomass Fuel Supply Study in the state of Rajasthan, RRECL, 2011

Purchase, 25.22%

Transportation, 43.88%

Storage, 10.81%

Pretreatment, 2.37%

Trade margin, 17.72%

21

Table 5: Transportation & storage loss

Particulars UOM Heap-1 Heap-2 Heap-3 Heap-4

Fuel type - Mustard crop residue

Location of heap - Collection centre-1 Collection centre-2 Plant Plant

Nature - Uncovered Uncovered Uncovered Covered

Duration of storage Days 54 57 158 171

Carpet loss (L2) % 0.5 0.5 0.5 0.5

Transportation loss (L3) % 0.5 0.0 0.0 0.2

Windage Loss (L4) % 3.7 2.0 9.5 0.0

Degradation loss (L5) % - - 1.7 1.7

Total % 4.7 2.5 11.7 2.4

Improper and poor quality storage infrastructure was mainly responsible for the high loss of 11.7% in

case of heap 4. This has been the case despite close monitoring as the storage heap was in the open

without cover and water table was high in the storage area. On the other hand, even under the best

of conditions, 2.4% was lost.

On an average, about 5% of the fuel does get lost in transportation and storage. Losses can be

minimized by constructing waterproof storage bins. However, the cost of constructing such facilities

is high with poor payback in most cases. Some amount of optimization can be considered such as

constructing concrete floors with provision for covering of the stored mass by tarpaulins.

2.3 Biomass energy technologies Different biomasses have their own unique physical and chemical characteristics. Bagasse, rice husk

etc. are very good fuel for boilers. They can be used for high efficiency power generation projects.

Straw and husks on the other hand are difficult to use as fuel for boilers due to their low bulk density

and poor ash chemistry. Different types of pre-processing technologies are used for energy

generation from such biomasses. Biomass energy technologies can be broadly covered under the

following categories:

Fuel preparation

Energy conversion technologies

Biomass characteristics vis-à-vis energy conversion technologies

2.3.1 Fuel preparation

Various methods of pre-processing are as follows15:

Drying: Gasification and pyrolysis generally requires drying. However, it is not necessary for

direct combustion, but can result in the following benefits16:

o Improved efficiency: 5%-15%

o Increased steam production: 50%-60%

o Reduced ancillary power requirements

o Reduced fuel use

15 http://www.eai.in/ref/ae/bio/powr/biomass_power.html 16 http://www.tappi.org/content/Events/11BIOPRO/19.2Worley.pdf

22

o Lower emissions

o Improved boiler operation

Shredding/threshing: Straw and stalks are reduced to smaller and uniform sizes for feeding

to boiler furnaces. Paddy straw has high silica content, which causes rapid erosion of

shredder blades. Different types of shredders with different material of constructions are

being developed for reducing the erosion impact.

Briquetting: Screw extrusion is used to compact biomass into loose,

homogeneous briquettes. Briquettes are becoming very popular fuel

substitutes in various applications such as hotels and restaurants, micro and

small-scale industries in the rural areas. Market value of straw and stalks is

considerably enhanced by briquetting.

Pelletisation: Pelletizing is the process of compressing or molding of loose

biomasses into the shape of a pellet. Pellets can be made from any one of five

general categories of biomass: industrial waste and co-products, food waste,

agricultural residues, energy crops, and virgin lumber. Pellets are excellent fuel

for both combustion and gasification. Pellets are now widely traded globally as

green fuel for CHP and heating fuel.

Torrefaction: Torrefaction of biomass, e.g., wood or grain, is a mild form of

pyrolysis at temperatures typically between 200 and 320 °C. Torrefaction process

removes the tars thereby improving the gas quality, when torrefied biomass is

used as fuel for gasification plants.

The cost of pre-processing is impacted largely by the electrical energy requirement for the process

and cost of the same. Sugar cane bagasse is one of the finest fuels for use in a steam power plant but

cannot be used in gasifiers. Most of the low-density fuels such as straw and stalk are difficult to use

in gasifiers but can be used in combustion-based power plants. Such fuels can be used in gasifier if

these are densified.

2.3.2 Energy conversion technologies

Biomass resources are amenable to application of a wide array of conversion technologies for

producing thermal and electrical energy. These can be broadly categorized under two different

models:

Centralized power generation system

Decentralized power generation system

Centralized power generation system

A centralized power generation system (CGS) can have two categories of power plants- independent

power plants (IPP) and merchant power plants (MPP). Both are typically in the range of 5– 20 MW.

IPPs enter into long-term power purchase agreements (PPA) with the state utilities / single buyer or

consumers purchasing electricity through open access or facilities having captive power plants based

on conventional sources of energy (off-grid). On the other hand, MPPs enter either into short-term

contracts (daily or weekly contracts) and sell power on exchange.

Both MPPs & IPPs are based on well-established combustion based Rankine cycle with a steam

generator (boiler) and a steam driven TG set.

23

Figure 19: Schematic Representation of Rankine Cycle

CGS is based on mature combustion technologies such as pile burning (which are nowadays

obsolete)/ travelling grate/ vibrating grate spreader stoker or atmospheric fluidized bed combustion

(AFBC). The choice of combustion technology will depend upon the type of fuel i.e. size, uniformity

of size, variations in moisture content, ash content, ash fusion temperature, etc. For example, if the

primary fuel is rice husk, AFBC is the most preferred technology and if the fuel is mustard husk, then

travelling grate is the most preferred technology.

Decentralized Power Generation System

Amongst the decentralized power generation plants, various categories of power plants present are

as following:

Industrial cogeneration/ CHP plants

Grid connected tail end power plant

Off -grid power plant

Industrial cogeneration/CHP plants

A large number of industries such as sugar, textile, paper, tea etc. requires power as well as thermal

energy for heating and drying applications. Similarly, industries like steel, cement, melting furnaces

etc. produce large quantity of waste heat, which can be effectively utilized for power generation.

Large-scale industries in these segments have already adopted such technologies. These are mostly

based on Rankine cycle. Opportunities exist for application of this technology for the small-scale

sector too. These projects can be grid-connected for supplying surplus power to the grid.

Grid connected tail end power plants

Tail end power plants are typically in the range of 1-2 MW. The purpose of such plants is pumping of

energy into local distribution system of grid (at village or district level) rather than pumping of

energy into national/ state grid, as is the case with IPPs. Tail end power plant can also enter into long

term PPAs with distribution companies, single buyer or consumers purchasing electricity through

open access. The various technologies available for tail end power plants are:

i. Combustion based Rankine cycle

ii. Biomass Gasifier coupled with gas based generator sets

iii. Biomethanation based power generation

The combustion based Rankine cycle has already been explained in the preceding section on

centralized power generation.

24

Biomass Gasification based power generation

In gasification process, biomasses such as rice husk, wood, cotton sticks etc. are gasified (incomplete

combustion with air) to produce so called ´producer gas´ containing carbon monoxide, hydrogen,

methane and some other inert gases. Gasification system consists of a gasifier unit, purification

system and energy converters - burner or engine as shown in the figure below.

Figure 20: Schematic Diagram of Gasifier coupled with Producer Gas Based Generator Sets

Bio methanation based power generation

Biomethanation is an important biological conversion process, which converts biomass in the

absence of oxygen to methane and carbon dioxide, popularly known as biogas and leaves a

stabilized residue, which makes excellent organic manure. The drawback of the model is that, the

time needed for start-up of a Biomethanation process is too long. If no specifically suitable biomass

is available in sufficient quantities, start-up of the system may require up to several months. The

biogas is stored in gas chamber and burnt inside internal combustion engine coupled with generator

to produce electricity. The gas can also be fired in a conventional boiler in a Rankine cycle based

power plant. The gas can also be used for heating purposes such as cooking or heating water.

Further, biogas can also be purified and bottled up and sold as commercial fuel such as LPG or CNG.

Figure 21: Bio Methanation-Schematic

25

Off Grid systems

The second category of decentralized power generation is off grid power system, which is typically in

the range of a 50-500 kW and is generally used to meet demand of electricity in villages or cluster of

villages. Off grid power plants have to install distribution system along with metering system to

supply the electricity to the end users and the payment is also directly collected by the power plant.

The biomass based gasification system and bio-methanation are prevalent technologies for off grid

power plant.

2.3.3 Biomass characteristics & energy technologies

Physical and chemical characteristics of the different types of biomasses have important bearing on

choice of energy conversion technologies. The most important properties relating to thermal

conversion of biomass are as follows.

Moisture content

Thermal conversion requires low moisture content. However, Stoker and CFB boiler can

accept higher moisture content than gasifiers18. Bioconversion can accept high moisture

biomass17. High moisture content reduces the energy value of the feedstock, consequently

affecting the specific fuel consumptions.

Calorific value

Calorific value is the heating value of the fuel in energy terms per amount of matter. The

higher heating value (HHV) is the total energy content released when the fuel is burnt in air,

including the latent heat contained in the water vapor and therefore represents the

maximum amount of energy potentially recoverable from a given biomass source. The actual

amount of energy recovered will vary with the conversion technology, as will the form of

that energy i.e. combustible gas, oil, steam, etc17.

Ash content

It is the inorganic component within the biomass. Grasses, bark and field crop residues

typically have higher amounts of ash than wood. Ash can form deposits known as “slagging’

or “fouling”. It can be minimized by keeping combustion temperature low enough to

prevent ash from fusing. Alternatively, high temperature combustion could be designed to

encourage the formation of clinkers (hardened ash) which can be easily disposed of. Biomass

like rice husks needs special combustion system due to silica content of the husks18.

Shape, size, density

The size and density of biomass is important as it affects the rate of heating and drying.

Larger particles would heat up slowly and produce more char and less tar. In fixed bed

gasifier, fine grains or fluffy grains might cause flow problem in bunker section, resulting in

unacceptable pressure in reduction zone and high proportion of dust particles in the gas18.

The suitability of different types of biomasses and the feedstock requirement (size and moisture

content) for various biomass power technologies has been summarized in the table below.

17 http://faculty.washington.edu/stevehar/Biomass-Overview.pdf

26

Table 6: Feedstock requirement and biomass power technology18

Biomass conversion technology

Commonly used fuel types Particle size requirement

Moisture content requirement (wet

basis)

Capacity range

Stoker grate boilers

Sawdust, chips, bagasse, rice husk, straw and stalks

6-50 mm 10-50% 3 to 20 MW

Fluidized bed combustor

Rice husk, wood chips, pellets < 50 mm < 60% 3 to 50 MW

Fixed bed updraft gasifier

Chipped wood, rice husk, pellets

6-100 mm <20% 30-1000 KW

Downdraft gasifier

Wood chips, pellets, wood scrapes, corn cobs and stalks

< 50 mm < 15% 25-100 kW

Circulating bed gasifier

Most wood and chipped agricultural residues

6-50 mm 15-50% 5-10 MW

A comparison of combustion and gasification technology is given in the table below.

Table 7: Combustion vs. gasification

Combustion Gasification

Process Burning of biomass in air to convert the chemical energy stored in biomass into heat, mechanical power, or electricity using various items of process equipment, e.g. stoves, furnaces, boilers, steam turbines, turbo-generators, etc

Conversion of biomass into a combustible gas mixture by the partial oxidation of biomass at high temperatures. The low calorific value (CV) gas produced can be burnt directly or used as a fuel for gas engines and gas turbines. The product gas can be used as a feedstock (syngas) in the production of chemicals (e.g. methanol)

Technology Stoker grate boiler, fluidized bed combustor

Fixed bed gasifier, fluidized bed gasifier

Fuel moisture content High Low

Fuel size Flexible Uniform

Scale Small scale to large scale plants Upto 3000 MW

Small scale

Efficiency More Less

Emissions Greater NOx, CO, and particulate emissions

Lower NOx, CO, and particulate emissions

2.4 Summarizing It is important to develop a comprehensive strategy for management of biomass resources. This

should address all the critical issues such as:

Development and deployment of standard methodology for assessment of overall

generation of biomass

Biomass supply chain from the farmers to the factories

Physical infrastructure for managing logistics &

18 IRENA working paper on Renewable Energy Technologies: Cost Analysis Series- Volume -1: Biomass for Power

Generation, June 2012

27

Preparation of technology matrix

Satellite and field surveys are required at regular intervals for establishing the accuracy of the survey

results as well as capturing the changes in the cropping pattern and competitive usage scenarios.

The crop residue ratios and harvesting efficiencies are to be established for every geographic area

for making accurate assessment of the overall availability and surpluses for energy conversion.

The purchase price of biomass often constitutes only about 25% of the overall delivered cost. The

cost of primary and secondary transportation and storage accounts for higher percentage of overall

cost. An integrated biomass supply chain with well-established logistics system has therefore, to be

made an integral part of biomass resource development.

Certain biomass energy technologies such as bagasse cogeneration, rice husk boilers are well

established and normally require policy support only in respect of feed-in-tariff. Much larger policy

framework is required for development of a biomass energy market for other types of biomasses,

particularly agro-residues.

28

3 Biomass resource management – Status quo in Pakistan

3.1 Biomass resource availability survey An extensive biomass resource assessment study has been carried out in Pakistan covering the

entire country with support from World Bank/ESMAP. The objective of the mapping exercise was

macro-assessment of biomass feedstock availability and the potential use of biomass feedstock for

energy in Pakistan through a biomass atlas. The study covered the following types of biomass

resources:

Agro residues


Livestock residue

Municipal Solid Waste (MSW)

Forest harvesting and wood processing residues

However, the survey has covered mainly the agro and agro-industrial residues for which the

following methodology has been used.

Figure 22: Sequential steps for the estimation of biomass available for power generation

Estimated annual crop production

•Satellite mapping using Landsat 8 images for landuse classification with seven image datasets covering the area to be analyzed within Pakistan and distributed over one year covering the Kharif and Rabi cropping seasons in Pakistan for one year

Estimated annual biomass

production

•Considering national level average values of residue to crop ratio (RCR) derived from farmer survey and previous studies conducted by various institutions and validated with the values in the FAO’s Bioenergy and Food Security (BEFS) Rapid Appraisal Tool for crop residues assessment

Estimated annual surplus biomass

•Agro residues: Considering competing use derived from farmer survey

•Agro-industrial residues: All the resources were considered based on secondary data available for indutries and few sample surveys

Estimated availability for

energy production

•Agro residues: Considering willingness of farmers to sell biomass to energy plants derived from farmer survey

•Agro-industrial residues: All the resources except for maize husk and cobs have been considered for power generation

29

3.2 Estimated annual biomass production The average values of residue to crop (RCR) ratios have been determined based on survey inputs and

further validation from data available from other sources including. The following table shows the

RCR values.

Table 8: Crop to residue ratio

Crop Residue RCR, average RCR, minimum RCR, maximum

Cotton Stalk 3.4 2.76 4.25

Wheat Straw 1 .5 1.3

Rice Straw 1 .42 1.3

Husk 0.2 0.15 0.36

Sugar cane Trash 0.12 0.1 0.2

Bagasse 0.3 0.26 0.32

Maize Stalk 1.25 1 2.25

Husk 0.22 0.2 0.3

Cob 0.33 0.2 0.86

The wide range of variation is generally in line with what is generally experienced all over the world.

The residue production has been estimated accordingly as shown in the following table.

Table 9 Estimated annual biomass production

Type of crop Type of residue RCR (average) Estimated annual biomass production (‘000 t)

Agro-residue

Cotton Cotton stalk 3.40 49,405

Wheat Wheat stalk 1.00 34,581

Rice Rice straw 1.00 16,754

Sugarcane Sugarcane trash 0.12 7,831

Maize Maize stalk 1.25 5,325

Sub-total 113,896

Agro-industrial residue

Rice Rice husk 0.20 1,700 to 3,35119

Sugarcane Bagasse 0.30 17,100 to 19,577

Maize Maize cob 0.33 1,406

Maize Maize husk 0.22 937

Sub-total 21,193 to 25,271

Grand Total 135,089 to 139,167

The estimated annual surplus biomass production was arrived by assessing the competing use of

biomass through the field surveys.

3.3 Competing use of agro-residue The competitive use of biomass was determined by undertaking a structured survey soliciting

19 The World Bank report considered the lower values for biomass generation while estimating energy

potential

30

farmer’s response on prevailing practices in the following specific areas in few selected districts in

the Punjab province.

Fodder

Domestic fuel (cooking)

Sale to industries

Sale to biomass suppliers

Use as fertilizer

Field burning

The following graph summarizes the crop wise competing uses, as gathered for the districts in

Punjab province in Pakistan under the survey:

Figure 23: Competing use of biomass

3.4 Surplus availability for power generation The estimated annual biomass availability for power generation has been arrived by assessing the

willingness of the farmers to participate in the proposed system of biomass supply chain for

utilization of the surplus resources for energy production. A survey of industries using / generating

biomass was also conducted to assess the generation, utilization and disposal methods.

Table 10: Surplus availability of agro residue for power generation

Type of crop Type of residue Estimated annual technical potential of residues

(Discounting competing use) ('000 t)

Estimated annual technical potential of residues

(Discounting willingness of farmer) ('000 t)

Agro-residue

Cotton Cotton stalk 6,013 5,039

Wheat Wheat stalk 6,488 5,689

7.9%

24.6%20.3%

61.5%

32.5%

64.1%

19.1%

15.9%

4.0%

13.5%

1.2%

14.1%

2.0%

6.2%

2.1%

0.5%

5.0%

0.3%

3.6%

3.9%

21.9%

16.2%

9.7%

2.8%

5.4%

4.4%

19.3%

51.9%

21.9%

42.7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Cotton Maize Sugar Cane Wheat Rice

Fodder Domestic burning (Cooking) Sale to industries

Sale to biomass suppliers Use as fertiliser Field burning

31

Type of crop Type of residue Estimated annual technical potential of residues

(Discounting competing use) ('000 t)


(Discounting willingness of farmer) ('000 t)

Rice Rice straw 8,314 6,534

Sugarcane Sugarcane trash 3,516 2,552

Maize Maize stalk 799 680

Sub-total 25,130 20,494

Table 11: Surplus availability of agro-industrial residue for power generation

Type of agro-industrial resource


('000 t)

Remarks

Rice husk 1,750 Considering 100% residue available for power generation

Bagasse 17,100 Considering 100% of bagasse generation available for high-pressure technology boiler from the present low-pressure technology. While only 10% of the residue was estimated to be available as surplus

Sub-total 18,850

3.5 Biomass power potential As discussed in the preceding section, depending upon the availability and quality of the fuel,

different conversion technologies can be used for both centralized and decentralized power

generation projects. Biomass power potential in Pakistan has been estimated taking into

consideration the surplus availability and their suitability as fuel for different power generation

technologies.

Table 12: Energy potential – Combustion technology

Fuel NCV SFC* Fuel Surplus PLF Potential #

kcal/kg MW/T MT % MW

Cotton stalk 3583 0.93 5,039,000 75% 711

Wheat stalk 3440 0.85 5,689,000 75% 733

Rice straw 2986 0.74 6,534,000 75% 731

Rice husk 3225 0.79 1,750,000 75% 212

Sugarcane straw 3010 0.74 2,552,000 75% 288

Bagasse 1792 0.51 17,100,000 50% 1976

Maize straw 3106 0.76 680,000 75% 79

Maize husk 2771 0.68 937,000 75% 97

Maize cob 3344 0.82 1,406,000 75% 176

Estimated power potential 5,003

* Calculated using boiler efficiency of 75% # Calculated considering PLF of 75% Table 13: Energy potential – Gasification technology

Fuel NCV SFC* Fuel Surplus Potential #

32

Fuel NCV SFC* Fuel Surplus Potential #

kCal/kg MW/T MT MW

Cotton stalk

Not suitable

Wheat stalk 3440 0.59 5,689,000 544@

Rice straw Not suitable

Rice husk 3225 0.63 1,750,000 178

Sugarcane straw 3010 0.67 2,552,000 278@

Bagasse 1792 Not suitable

Maize straw 3106 0.65 680,000 72

Maize husk Not suitable

Maize cob 3344 0.60 1,406,000 138

Estimated power potential

1,211

*The SFC for other fuels for gasification has been pro-rated based on data available for rice husk received from a biomass gasifier supplier during rice husk based gasification project in Pakistan for a rice mill # Calculated considering PLF of 70% @ The biomass would require densification as a pre-requisite

The estimated power potential for Pakistan using agro residues and agro industrial residues ranges

from 1,211 MW to 5,003 MW considering the variation in the choice of biomass combustion and

biomass gasification technologies.

3.6 Project Models The survey report has recommended different project configurations (both combustion and

gasification) taking into account surplus availability, farmers willingness and logistics considerations.

Combustion technology for bagasse and rice husk and gasification technology for wood and rice husk

have reached matured status. As such, large capacity and high technology projects can be developed

based on these two fuels. Large numbers of smaller capacity rice mills are located all over the

country. Building large capacity rice mills based on pooled resources from these mills may not offer

best economic option considering the cost of logistics. Gasification based distributed power

generation units can be an attractive option for these mills. Further, such units can also be equipped

with waste heat recovery boiler/hot water generator required for par boiling process, thereby

improving the utilization efficiency of husks.

Large numbers of straw-fired projects are now operating in China and India based on combustion

technologies. It should be possible to develop such projects of 5 to 10 MW capacities in Pakistan too.

Such projects can be set up under both captive and IPP models.

Maize stalks and cobs are good fuel for gasification. Such projects have been operating in China for

over two decades supplying clean cooking fuel as well as power. Rice husk gasification based power

generation units are also operating as off-grid solution for providing energy access in rural areas in

many countries including China, India, and Thailand etc. It should be possible to replicate these

global experiences in Pakistan and set up different types of biomass power projects based on the

locally available resources as illustrated in the following table.

33

Table 14: Different project models for power generation

Type of residue Project model (Option #1)

Project model (Option #2)

Straw based projects (Wheat stalk, Cotton stalk, Rice straw, Maize stalk and Maize husk)

Biomass combustion technology based projects for Independent, captive and cogeneration power plants

-

Rice husk Biomass gasification technology based projects around rice mills

Biomass combustion technology based projects with other locally available biomass as supplementary fuel

Maize cobs Biomass gasification technology based projects

-

Bagasse & Sugarcane trash

High technology cogeneration projects in sugar mills using bagasse as main fuel and cane trash as supplementary fuels (upto 20% supplementation possible on caloric basis)

-

3.7 Summarizing Recently conducted biomass resource assessment survey in Pakistan clearly shows a roadmap for

development of an integrated resource management and biomass power development strategy. The

authors of the survey report have highlighted the need and strategy for improving the survey quality

with a view to prepare more accurate estimate of surplus availability. The report has also included

recommendations on biomass supply chain and technologies. Time is opportune to put in place an

enabling policy and regulatory framework for attracting private sector investment for developing a

thriving biomass power industry in Pakistan.

A set of policy recommendations have been formulated taking into consideration the global scenario

and status quo in Pakistan.

34

4 Recommendations-policy for promotion of biomass power generation

In 2014 KPMG had carried out a study of incentive policies for promotion of renewable energy

technologies covering thirty-one (31) countries across the globe. The following table shows the

extent of policy support provided by the select few countries including Pakistan for the same.

Table 15: RE policy matrix-select countries20

( Indicates policy in place)

China and India have deployed largest number of policy tools as would be seen above. This has

helped in rapidly scaling up the private sector investment in RE technologies including biomass

power generation. China has made spectacular progress in developing different biomass energy

technologies including combustion of straw and stalks, waste to energy projects as well as

distributed power, heat and cogeneration projects based on gasification of husks, stalks and wastes.

“By the end of 2009, China had 61 biomass power projects put into operation (20 national energy

projects among them), in which the proportion of straw direct-fired power generation plants

accounted for more than 80%21.

Various promotional policies in practice in China have been summarized and annexed (Annex-I).

Government of India through the Ministry of New & Renewable Energy (MNRE) have been providing

supports for promotion of Biomass / bagasse cogeneration, Non-bagasse cogeneration, Biomass

gasifier and projects based on Urban & Industrial wastes.

20 Taxes & incentives for renewable energy-KPMG International, 2014 21 Development goal of 30 GW for China’s biomass power generation: Will it be achieved? Renewable and

Sustainable Energy Reviews Journal 25 (2013) 310-317

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Brazil

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Kenya

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Pakistan

Sri Lanka

Thailand

35

Such policies have covered all aspects of biomass power system including resource management,

promotion of projects, development of technologies, incentives and institutional arrangements for

monitoring so that laid out targets are achieved. It is recommended to adopt a similar

comprehensive policy in Pakistan too for developing biomass power in the country. The outlines of

various such policies have been prepared as follows.

4.1 Management of biomass resources The objective of a national policy is to ensure that the biomass resources are optimally utilized for

deriving maximum economic benefits from these resources, which are otherwise wasted.

4.1.1 Development of standardized methodology for biomass assessment survey

Based on the recommendations in the World Bank supported survey report, a manual may be

prepared on the survey methodologies at the level of individual districts and for individual project to

be developed in a particular area.

The variation in the RCR figures can hugely distort the availability figures thereby putting question

mark on the fundamental premise on which the project has been configured. This issue needs to be

widely deliberated at various levels-fields & academic institutions-and methodology for establishing

RCR for different crops in different geographic areas developed. The survey manual so developed

should be made available to prospective project developers and other stakeholders involved in

development of biomass power generation projects. A recommended scope of work for a periodic

survey is included as Annex-II.

4.1.2 Implementing one demonstration biomass supply chain project

One demonstration supply chain project may be developed under PPP mode with involvement of

one of the operating biomass/cogeneration plant with support from AEDB. Successful operation of

the model would help in removing the major barrier against investment in biomass power projects.

4.1.3 Preparing zonal plans for optimum utilization of biomass resources

In order to achieve long-term fuel availability, the catchment area or biomass collection zone for a

power plant should be well defined prior to allotment of any project. It should be possible to

prepare a biomass power development map based on the information available in the World Bank

survey report. A policy document can be prepared on methodology for registration of projects in

each zone (under different categories and including both solicited and unsolicited projects) in

consultation with Provincial Governments. Appropriate regulatory framework should be developed

empowering Provincial Governments to administer the registration process to ensure continued

availability of biomass for the operating projects.

4.1.4 Capacity building

A plan for developing a cadre of professionals, who can undertake the biomass assessment survey is

imperative, which can be developed and implemented by AEDB.

4.2 Promoting biomass power projects AEDB in collaboration with Government of Punjab province should identify a list of priority projects

based on the survey report. These projects then can be offered for private sector bidding under

solicited category.

36

As per RE policy, 2006, AEDB had developed transparent methodology for bidding of projects under

both solicited and unsolicited categories. This should be reviewed taking into consideration the

recommendations in the survey report and the list of priority projects. It is also recommended that

AEDB directly implement a few distributed generation projects based on gasification technology as

demonstration projects in the identified rural areas. Such projects can be implemented through

farmer’s cooperatives or social entrepreneurs working in the rural areas.

4.3 Biomass pricing The overall cost of fuel as delivered to a consuming plant consist of the base price and logistics cost.

In the absence of an operating and formal biomass market, regulators adopt different principles with

a view to establish the fair price of biomass for determination of feed-in-tariff. In principle, following

three different methodologies can be considered for determination of fair base prices of biomass:

Price of fuel alternative

Market price

Opportunity price of biomass disposal alternative

The merits and demerits of the three alternatives are:

Table 16: Fuel pricing option evaluation

Alternative Merits Demerits

Price of fuel alternative

Most transparent Lowest or highest marginal cost & rationale Impact of volatility

Market price Takes care of all the local factors Better social acceptability

Lack of transparency for informally traded biomass Higher cost of transactions

Opportunity price Can be transparent if there is only one alternative

Practical difficulty as there are always more than one alternative

Considering the status quo in Pakistan, either fuel alternative or market price of biomass can be

considered.

37

4.3.1 Fuel alternatives

The fossil fuel options for benchmarking biomass price are gas, furnace oil and coal. The present

(2014)22 and future power generation23 scenario in Pakistan is as follows:

Figure 24: Evolution of Energy Generation Scenario

Most of the future gas based growth will be on imported LNG (share of domestic gas in fuel-mix is

forecast to decrease from 21% to 12% while LNG is forecast to grow from 4% to 13%)23. Similarly,

most of the liquid fuel generation is currently based on imported furnace oil, and the contribution to

the fuel mix is marginally decreasing. Coal is projected to change the fuel mix significantly with

growth of both local (4%) and imported coal (20%). The methodology for coal based benchmarking is

well established. NEPRA has also determined the upfront tariff for LNG base power plants. A number

of RFO based power plants are operating in Pakistan, for whom fuel adjustments are regularly made

by NEPRA.

The equivalent biomass prices considering these three alternatives have been determined as shown

in the table below.

22 Power Systems Statistics, 2013-14, 39th Edition, NTDC 23 Presentation on Power Sector in Pakistan to OICCI, Secretary, Ministry of Water and Power, Dec-2015

32

%

46

%

18

%

1% 3%

0%

0%

26

%

25

%

14

%

24

%

3% 6

%

2%

H Y D E L G A S F O + H S D C O A L N U C L E A R R E I M P O R T S

2014 2020

38

Table 17: Equivalent Biomass Price, determined from fossil fuel alternatives

S. No .

Alternatives UOM Value Remarks

1 Imported Coal

CIF price of Coal US$/MT 96.21 NEPRA Determination of Upfront Tariff for Bagasse Cogeneration, 2015

NCV of Coal kCal/kg 6000 NEPRA Determination of Upfront Tariff for Bagasse Cogeneration, 2013 NCV of Bagasse kCal/kg 1740

Equivalent bagasse price US$/MT 27.90

NCV of other biomasses kCal/Kg 3300

Equivalent biomass price

US$/MT 50.72

2 RLNG

RLNG Price US$/MMBTU 10 NEPRA Determination of Upfront tariff for RLNG Projects, 2015

Conversion Factor MMBTU to GJ

1.06

LNG NCV BTU/ft3 950 NEPRA Determination of Upfront tariff for RLNG Projects, 2015

Bagasse NCV kCal/kg 1740 NEPRA determination of upfront tariff for bagasse cogeneration, 2013

MJ/kg 7.28


Other biomasses CV kCal/Kg 3300


US$/MT 139.83

3 Furnace Oil

RFO Cost (GCV Basis) Rs/MT 25,167.45

NEPRA fuel price adjustment for Hub Power Company, March 2016

NCV to GCV Adjustment Factor

1.05 NEPRA Tariff determination for Hub Power Company, May-2008

RFO Cost (NCV Basis) Rs/MT 26,425.82

NCV of RFO BTU/kg 40792 NEPRA Tariff determination for Hub Power Company, May-2008

NCV of Bagasse BTU/kg 6905 NEPRA determination of upfront tariff for bagasse cogeneration, 2013

Biomass price Rs/MT 4,473.19

Exchange Rate Rs/USD 105 Current Exchange rate


Other biomasses CV BTU/Kg 13068


US$/MT 80.62

Thus, coal offers the lowest cost option for biomass at US$ 50.72 against the highest of US$ 139.83

against RLNG.

39

Coal price is highly volatile in the international market. It has dropped from high of $119/T in 2011 to

a low of about $49/T in Dec-15 as would be seen from the following figure24.

Figure 25: Coal price volatility

4.3.2 Biomass alternative-firewood

In addition to power, it is also in national interest to provide market trigger for diverting biomass

from cooking to power generation with a view to promote efficiency over the entire value chain.

Based on the data for March 201625, the equivalent biomass price is determined as US$ 83/MT as

shown in the following table.

Table 18: Equivalent Biomass Price-firewood25

S. No. Particulars UOM Value Remarks

1 Firewood price (Wholesale Price)

Rs./40 kg 601.97 Pakistan Bureau of Statistics25

2 NCV of firewood kCal/kg 3010 Assumption

3 Biomass NCV kCal/kg 1740 NEPRA determination of upfront tariff for bagasse cogeneration, 2013

4 Biomass price Rs./MT 8,700

5 Exchange rate Rs/USD 105 Current Exchange rate

6 Firewood price US$/MT 143.33

7 Equivalent Biomass price US$/MT 82.85

4.3.3 Biomass prices in Pakistan-Status quo

The Consultants were engaged in carrying out a feasibility study for developing biomass gasification

based power project in two MSME industrial units in the Punjab province in Pakistan in 2014-15.

24 FOB price of South African Coal: http://www.indexmundi.com/commodities/?commodity=coal-south-

african&months=60 25 Source: Monthly review of price indices, Pakistan Bureau of Statistics, March, 2016

40

50

60

70

80

90

100

110

120Ju

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Oct

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Jan

-12

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Jul-

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/MT

(SO

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40

Field survey was carried out to assess the biomass fuel price and price variation trend for rice husk

and woodchips. The prevailing prices of biomass and the coal equivalent have been tabulated below.

Table 19: Biomass price comparative

Biomass CV kCal/Kg

Market price US$/T

Price as per fuel equivalent (Table 18 above) US$/T

Coal RLNG FO

Rice husk 3300 80 50.72 139.83 82.85

Wood chips 3800 100 55.03 151.71 89.89

It is seen that the market price of biomass is more closely linked to FO. This is also logical as most of

the industrial captive power plant runs on FO. During the study, it was also observed that the prices

of biomasses were escalating by about 8% annually.

An extensive biomass resource assessment survey has recently been concluded under a World

Bank/ESMAP support program. The survey included field survey of farmers (12,450) covering all

provinces (44 districts) as well as survey of end user industries (178 industries). We reviewed the

data from the farmer survey in the Punjab Province (4,650 farmers) as well as data from industries to

assess the selling price/ purchase price of biomasses including the commercially traded one such as

rice husk and wheat straw and informally traded ones such as rice and maize straw and stalks. The

survey has also addressed the issue of the prices at which farmers would be willing to sell biomasses

to energy production plants. The price range of different biomasses at different location as per the

survey report is as follows:

Figure 26: Biomass price based on Survey

Nearly 70% of the sample, indicated a selling price greater than Rs 5,000/MT. The average selling

price of various types of biomass is as follows:

Table 20 : Biomass price as per survey

Average Price % of samples

Rs./MT US$/MT

Cotton Stalk 6,703 64 40%

Maize Stalk 6,897 66 60%

Rice husk 9,093 87 91%

0

200

400

600

800

1000

1200

0-2,500 2,500-5,000 5,000-7,500 7,500-10,000 > 10,000

NO

. OF

SAM

PLE

S

BIOMASS PRICE RS./MT

Cotton Stalk Maize Stalk Rice Straw Rice Husk Wheat Straw

41

Average Price % of samples

Rice straw 6,710 64 43%

Wheat Straw 6,905 66 71%

The survey indicates that the largest end use of cotton stalks is domestic fuel while maize stalk, rice

straw and wheat straw find largest end use as animal fodder. Nearly 38% of rice straw and 25% of

maize stalk is burnt in the field. The market for rice husk appears to be well developed, with 92 out

of 178 industries surveyed using rice husk as fuel. The price of rice husk is also consistent with the

price determined by a field survey as ranging between Rs 6/kg during season to Rs 8/kg during off-

season26.

Summarizing

The prices of biomass determined from different principles are shown in the following table.

Table 21: Prices of biomass-different methodologies

Methodology Average price (US $/T)

Linkage to Coal 50.72

Linked to FO 80.62

Linkage to RLNG 139.83

Linkage to firewood 82.85

DESL survey (Rice husk) 80.0

DESL survey (Wood chips) 100.0

ESMAP survey (Rice husk) 87.0

ESMAP survey (Others) 65.0

The survey-based prices also seem to have closer linkage to FO and fuel wood prices.

4.4 Global review

4.4.1 Mauritius-Bagasse

Mauritius pioneered developing a methodology for biomass pricing. Government of Mauritius had

formulated a bagasse energy development program in partnership with the private sector over a 6-

month period in 1991 following the recommendations of a High Powered Committee27. The Ministry

of Energy set up a Technical Committee for addressing the prices and other PPA related issues. The

Committee developed an avoided cost model taking into account the cost of generation from a 22

MW diesel power plant proposed by the Central Electricity Board (CEB). The World Bank provided

support to the Committee to work out the principles and the guidelines.

26 Feasibility Study for 3 MW Combined Heat and Power Biomass Gasification Plant in Pakistan, UNIDO, Jan-14

(by DESL) 27 Sugar Cane Bagasse Energy Cogeneration – Lessons from Mauritius, Mauritius Sugar Authority, Oct 2005

42

This tariff was determined for export of power from cogeneration plant using this avoided cost

principle. Bagasse was priced at Rs 100 (or US$3.7) per ton28. This made a big impact and in about 3

years time (1997-2000), almost all the sugar mills invested in cogeneration projects exporting large

amount of power to the grid.

A transfer fund was also created to compensate growers, for the price realization by the sugar mill

for bagasse used for purposes other than the manufacture of sugar. Amount so determined was

directly credited by the Central Electricity Board for distribution to the beneficiaries of the fund. This

has been one of the most successful policy interventions on biomass prices considering the impact it

had in growing the bagasse cogeneration industry in the country.

4.4.2 New Zealand-Wood chips

A study documented by IEA29 compared the prices for collection and delivery of forestry residues to

a bio-energy plant. Several models for delivery were developed as part of the project planning,

yielding a wide variation in the delivered cost of biomass (US$/GJ) as shown in the figure below:

Figure 27: Variations in delivered cost

Residues taken from a single forest site, purchased for USD 4/dry ton, then delivered 80km over an

identical route to a proposed Bio-Energy processing plant gate, using 7 different options (A-G) for

collection and transport systems result in a wide range of costs. A few reasons for the variations are

as follows:

Harvesting and chipping: The range of equipment used for harvesting and preparation before

transportation is a function of the type of biomass. This includes mowers and balers for straws

and special harvesters for woody biomass, which are more expensive. Where size of holdings are

smaller, the cost of collection can be higher

Handling: Gaining access for heavy machines and trailers in different weather conditions,

requiring advance planning of layout in case of plantations to enable access and maneuvers

Transport: Logistic planning for availability of trailers to collect biomass, distance from main

roads/ access points

Storage: availability of space for temporary stock piling

28 Currently Rs 1225 (US$ 35) per ton – Source: Newsclip : Island Crisis Media Network, 15 December, 2015 29 IEA Good Practice Guide -Bio-energy project development and Biomass supply

43

This case illustrates the impact of variation in other costs, the source price of biomass remaining

constant in all cases, as would be the case with plantation-based biomasses in most of the countries

including Pakistan.

4.4.3 Europe-Wood pellets

In Europe, two market indices, the APX – ENDEX and Argus biomass have helped establish

transparency in the wood chip and pellet market. The APX ENDEX, introduced in 2008, is an

industrial wood pellet index, determined based on a pricing panel comprising a number market

participant contributed references prices for 3-month forward contracts, 3 quarter forward

contracts and 12-month forward contract30. In 2011, APX-ENDEX launched the World’s first biomass

exchange. The exchange envisages transitioning from bilateral transactions in the first phase

between counterparties to the implementation of clearing services for wood pellets, contract,

thereby providing further security to market participants.

Similarly, the ARGUS biomass index31 comprises a “volume -weighted average of deals done for

delivery within a rolling 90-day period”. An Asia- Pacific specific index, keeping in view the

specification of South Korean generators for wood pellets manufactured from wood fiber is also

maintained.

Such practice may not have much of relevance in informal market like Pakistan. However, it is

interesting to note that even in a century old market like Europe, a formal exchange has been

created only in 2011.

4.4.4 China

China, a late starter in the biomass energy field has made rapid stride in growing the market in the

last decade. Beginning with 2006, it had installed over 6000 MW capacity by 2010, 65% of this being

based on straw. It has set the target of 20000 MW capacity by 2020. Instead of fixing biomass prices,

China has fixed the overall feed-in tariff nationally allowing the individual provinces to do so for the

province. The tariff has been determined considering avoided cost of power generation from

desulphurised domestic coal plus an additional incentive under renewable energy program32. Unlike

elsewhere, the concern in China is that the farmers may not be getting remunerative prices for the

biomass, as there is no open and transparent trading market for biomass.

The establishment of a crop straw pricing advisory committee in order to guarantee the

transparency of straw’s price and protect farmers' interests in transactions with the large power

plants under the absence of competition in market is planned to overcome this.

30 Methodology & Specifications Guide, Argus Biomass Markets, Last updated April 2016 31 Argus Biomass Markets – Methodology and Specification Guide 32 Development goal of China’s 30 GW Biomass power generation etc-Science Direct, Sept 2013

44

4.4.5 India

As elsewhere, India too has been facing challenges in fixing biomass prices. This is more so as Power

is a concurrent subject in India and Provincial Regulators are free to develop their own methodology

for tariff determination including fuel pricing. Even then, a reasonable and fair system has now been

developed and the same has been working satisfactorily since last two years. In 1994, MNRE issued a

policy guideline fixing the overall tariff and providing for automatic annual escalation of 5% for the

whole country. Many of the biomass resource rich States adopted the MNRE guideline and tariff

notifications issued by SERC’s. However, biomass prices started escalating soon making many of the

projects financially unviable. Taking cognizance of the situations, SERC’s started adopting the

practice of issuing short-term regulations and determining biomass prices through a process of

stakeholder’s consultation. This process too failed to rectify the situation. In the year 2011, MNRE

commissioned several studies with a view to establish a rationale and methodology for biomass

pricing. Based on the findings from these studies, MNRE prepared a recommendation report on tariff

guideline for biomass power and forwarded the same to CERC. In the year 2014, CERC issued a new

regulation on renewable energy in which the biomass pricing principles were clearly articulated.

Base price was determined for individual States considering the inputs from MNRE and other reports

and through a process of public consultations as follows.

Table 22: Biomass price for Tariff-India33

Province Biomass Price (Rs/T) Bagasse price (Rs./T)

Andhra Pradesh 2807.74 1585.19

Haryana 3195.86 2254.67

Maharashtra 3268.62 2221.93

Punjab 3342.60 1984.22

Rajasthan 2789.54 -

Tamil Nadu 2761.64 1707.69

Uttar Pradesh 2856.25 1768.33

Other States 3003.01 1919.93

Following steps for reviewing and revisions of prices have been provided in the Regulation.

33 CERC: Determination of levelised generic tariff for FY 2016-17 under Regulation 8, March, 2016 (IUS$ - 67

Indian Rupees)

Textbox 2: Straw incentive China

Straw subsidy: For the enterprise with the registered capital of more than 10 million Yuan, whose straw energy utilization complies with the local straw comprehensive utilization planning and the amount of annual consumption of straw exceeds 10,000 MT (including 10,000 MT) and straw energy products have been on sale and which has stable users, the subsidy of about 140 Yuan will be granted for the straw per ton in energy utilization to the enterprise according to the types and quantities of straw energy products which are actually sold every year, as well as types and quantities of straw for converting the consumption. However, straw grid-connected power generation project does not enjoy the special subsidy. (More detailed presentation on China Biomass Energy Policy annexed)

45

Biomass fuel price is determined for the first year of a control period and linked to an

indexation formula for each subsequent year of the tariff period (current prices are as per

Table 22).

Alternatively, each state electricity regulatory commission can determine the biomass price

through an independent survey. This would then be finalized by a state level committee

Two different options for fuel price adjustment (every project developer can exercise the

option once during the regulation period) have been provided as follows:

o Application of an indexation formula (Text box 2)

o A flat normative escalation of 5% per year

The biomass base price is subject to revision at the end of each control period.

4.4.6 Kenya

Kenya is one of the few sub-Saharan African countries that have stipulated feed-in tariffs for

renewable energy (including bagasse-based cogeneration). The Ministry of Energy first introduced

the feed-in Tariff Policy in 2008. The 2008 feed-in tariffs for cogeneration provided for US¢ 7.0/kWh

for firm electricity generation and US¢ 4.5/kWh for non-firm electricity generation. In 2010, the

terms have been further improved by increasing the feed-in tariffs for firm and non-firm

cogeneration to a maximum of US¢ 8.0/kWh and US¢ 6.0/kWh, respectively.

However, at these tariffs, some of the existing cogeneration plants are finding it difficult to operate

the plants during off-crop periods as paper mills are offering more attractive prices for bagasse.

Kibot sugar has invested about $ 14 million in setting up a paper mill based on bagasse34.

Summarizing

It is seen that several and different methodologies have been developed and deployed at different

points of time in different countries, such as:

Avoided cost method-fuel alternative

Fiber price alternative

Survey method

Fixing price once and periodic escalation thereafter

In China on the other hand, it is looked from the perspective of fair prices to the farmers

4.5 Pricing of bagasse by NEPRA

4.5.1 Generic tariff (Upfront)

Pakistan’s National Electric Power Regulatory Authority (NEPRA), in their determination of upfront

tariff for bagasse based cogeneration projects35, fixed the price of bagasse linked to imported coal

based on the BTU value of each fuel. (Bagasse based cogeneration plants were free to use other

biomass fuels to supplement their fuel requirement, while plants envisaging use of coal for

cogeneration as supplementary fuel was excluded from eligibility for upfront tariff). In their initial

discussions with various stakeholders, several alternatives were considered including gas and local

34 Thomson Reuters Foundation-May 6, 2011 35 NEPRA – Determination of the authority in the matter of suo-moto proceedings for development of upfront tariff for new bagasse based cogeneration power projects, (29-May2013)

46

coal. Gas was not considered pragmatic in the long-term basis due to uncertainty of availability.

Local coal was also not considered since prices are not published by any government agency in the

country. The price for fuel adjustment is determined as per published coal price at Richards Bay

Terminal in the Argus API3 for each month and adding the cost of marine transportation and freight.

The basic reference price of bagasse was accordingly, determined as follows:

Table 23: Determination of Bagasse Price for Reference Year under Upfront Tariff

Particulars UOM Value

Reference year 2013

Net Calorific Value (Bagasse) BTU/kg 6,905

Net Calorific Value (Coal BTU/kg 23,810

Exchange Rate Rs/US$ 98

Bunker index 641.8

FOB Price of imported coal US$/MT 81.4

Marine freight US$/MT 19.19

Marine Insurance (0.1% of coal) US$/MT 0.0814

CIF Price of Coal US$/MT 100.7

Bagasse Price Rs./MT 2,861.1

The determination also provides for fuel price indexation as per methodology indicated below:

Table 24: Illustrative Fuel Price Indexation Methodology (Upfront Tariff)

S. No. Particulars UOM Value Reference

A Reference Price of Bagasse Rs./MT 2,861.12 2013 Determination

B Marine Freight Rs./MT 19.19 2013 Determination

C Revised FOB Price of Coal US$/MT 77.31 Argus API4 Index

D Bunker Index Reference 641.8 Bunker index price for 380-CST for 2013

E Bunker Index Revised 629.6 Bunker index price for 380-CST for 2015

F Revised Marine Freight US$/MT 18.83 (F =B x E/D)

G Marine Insurance US$/MT 0.08 0.1% of coal price

H Exchange Rate USD to Rs 101.60 for 2015

I Revised CIF Price of Coal Rs./MT 9,775.25 (I= (C+ F + G) x H)

J NCV of Bagasse BTU/kg 6,905.00 2013 Determination

K NCV of Coal BTU/kg 23,810.0 2013 Determination

L Revised Price of Bagasse Rs./MT 2,834.86 (L=I x J/K)

4.5.2 NEPRA-Project specific fuel pricing

In the determination of tariff for an IPP (SSJD Bio-Energy Ltd.), the following basis was used for fuel

pricing36:

36 Source : NEPRA - Determination of the Authority in the matter of Tariff Petition filed by SSJD Bio-Energy

Limited for approval of Generation Tariff in respect of 12 MW Biomass Energy Power Project (Case No. NEPRA/TRF-202/SSJD-2011), 28th June, 2012

47

• Fuel considered for the biomass are bagasse (80%) and other biomass (20%), procured within

100 km radius of the plant

• In the absence of established market for ascertaining the actual price of biomass, the price was

linked to the price of coal on BTU basis. Linkage to coal also provides for an index for adjustment

of fuel cost component of the tariff. Methodology to determine coal price was similar to the

that considered for determining the upfront tariff for bagasse cogeneration, viz. FOB price of

coal was determined based on prices published by Argus API4 index, corresponding to a

standard NCV of 6000 kCal/kg; marine freight was computed from data obtained from local

banks on the landed price of coal imported by cement manufacturers. The reference price was

fixed and indexed to the monthly average of Bunker Index 380-CST (for HFO – 380 Centi Stokes,

being the most widely shipped bunker fuel). Insurance was also determined based on data

provided by local banks and fixed at 0.1% per ton of FOB Coal price

• In determining, the inland transportation cost, a generic formula was established considering

average transportation distance of 50 km, average truck load of 10 T, truck mileage of 3 km per

liter of diesel, other truck overheads and profit at 50% of the fuel costs and loading and

unloading charges also at 50% of fuel cost.

The price determined for the base year is as follows:

Table 25: Illustrative Fuel Price determined for a biomass power plant


A FOB Price of Coal US$/T 97.75 Argus API 4 Index, April 2012

B Marine Freight US$/T 29.39 Coal imported from Richards Bay, South Africa by Cement Manufacturers in Pak

C Insurance US$/T 0.10 (C = A X 0.1%)

D CIF Price US$/T 127.23 (D= A + B+ C)

E Exchange Rate Rs/US$ 86.00 Month preceding tariff determination

F CIF Reference Price of Coal Rs./T 10,942.19 (F= D X E)

G NCV of Coal kCal/kg 6,000.00 Assumed for tariff determination

H NCV of Biomass kCal/kg 1740 Assumed for tariff determination

I Reference price of Biomass Rs./T 3,173.23 (I = F/G X H)

US$/T 36.9

J Average distance for transportation

km 50 Assumed for tariff determination

K Load per truck MT 10 Assumed for tariff determination

L Mileage km/Liter 3 Assumed for tariff determination

M Diesel cost Rs./Liter 107 HSD Price as determined by OGRA

N Fuel Cost of transportation Rs./T 178.33 [N = (M/L x J)/K]

O Truck Overheads Rs./T 89.17 [O= 50% x N]

P Handling Costs Rs./T 89.17 [P= 50% x N]

Q Total Logistics cost Rs./T 356.67 [Q= N +O+ P]

R Biomass cost including Logistics Rs./T 3,529.90 [R = I + Q]

Key differences in this determination as compared to the methodology for determination of upfront

tariff for bagasse cogeneration are

48

Addition of transportation cost

Indexation for transportation cost included

Working capital is only 30 days as against 45 days for normative principles

4.5.3 Review of the NEPRA price linkage methodology

NEPRA determined the price of bagasse with linkage to imported coal on heat value basis for

determination of tariff citing the following specific considerations.

There is no source of information that publishes the price of bagasse

No index is available for adjustment of bagasse price

Absence of source of information on price of local coal

Linkage to price of gas on BTU basis was not viewed as pragmatic due to uncertainty of the

future market and depletion of local reserves.

The tariff methodology thus links the price of bagasse to the imported coal price as published for

Richards Bay Terminal in the Argus McCloskey's API 4 (All Price Index) for each month while adding

to it the cost of marine freight and insurance. Bagasse price the year 2013 was accordingly revised

for 2015 as shown in the following table37.

Table 26 : Bagasse price for ‘FIT’

S. No. Parameter UOM Value Notation Reference

A Reference Price of Bagasse Rs./MT 2,861.12 BFP Ref 2013 Determination

B Marine Freight Rs./MT 19.19 2013 Determination

C Revised FOB Price of Coal US$/MT 77.31 CPFOB

Rev

Argus API4 Index

D Bunker Index Reference 641.8219 BIX Ref Bunker index price for 380-CST for

2013

E Bunker Index Revised 629.6417 BIX Rev Bunker index price for 380-CST for

2015

F Revised Marine Freight US$/MT 18.83 MF Rev (F =B x E/D)

G Marine Insurance US$/MT 0.08 MI Rev 0.1% of coal price

H Exchange Rate USD To

Rs

101.60 ER Rev for 2015

I Revised CIF Price of Coal Rs./MT 9,775.25 CPCIF

Rev

(I= (C+ F + G) x H)

J NCV of Bagasse BTU/kg 6,905.00 2013 Determination

K NCV of Coal BTU/kg 23,810.00 2013 Determination

L Revised Price of Bagasse Rs./MT 2,834.86 BFP Rev (L=I x J/K)

Thus, bagasse price in 2015 was fixed lower than what was provided in 2013. This has happened due

to downturn in the prices of coal globally. It may be possible to persuade sugar industry to accept

such a situation arising out of change in the global scenario and taking into consideration that

bagasse is only a by-product. However, it would be very difficult to convince farmers to reduce the

prices of residues, even though they may otherwise be wasting it. Farmers normally do not accept

37 NEPRA Tariff determination: NEPRA/R/TRF-UTB-2013/10164-10166 dated July 7, 2015

49

any linkage to global prices as would be evidenced from price trend of support price for farm

produces announced by Government annually.

There is very high volatility of prices of coal and other energy resources in the global market. We

undertook a review of the historical coal price (FOB)38, corresponding changes in the bunker index

values39 and exchange rates to determine the trajectory of movement of the CIF price of coal and

the corresponding biomass cost, if linked to coal. For same period, we plotted the corresponding

values of firewood price as used for determination of CPI Index40. The results are shown below.

Figure 28: Historical variation in price of coal and firewood

Based on the above, the movement of price of bagasse benchmarked to the price of coal and the

price of firewood is as follows41 :

Figure 29: Variation in price of bagasse

38 http://www.indexmundi.com/commodities/?commodity=coal-south-african&months=60 39 http://www.bunkerindex.com/prices/bixfree_1306.php?priceindex_id=2 40 http://www.pbs.gov.pk/cpi?page=1 41 Assuming 3,100 kCal/kg as the heating value of wood

-

1.00

2.00

3.00

4.00

5.00

6.00

Rs.

/kC

al

Coal Price CIF Firewood price

R² = 0.8182

R² = 0.9122

0

1

2

3

4

5

6

Rs.

/kC

al

Bagasse Price (Benchmarked to Coal) Bagasse Price (Benchmarked to Wood)

Linear (Bagasse Price (Benchmarked to Coal)) Linear (Bagasse Price (Benchmarked to Wood))

50

The CIF price of coal for the period (after the upfront tariff determination for bagasse) varied

between Rs 5,890 –11,125 per MT. During this period, the firewood price varied between Rs 12,650

–15,130 per MT. The bagasse price, benchmarked to the price of coal therefore varied between Rs

1,700 -3,200/MT (US$ 16-30) while the price when benchmarked to the price of firewood varied

between Rs 7,300-8,750/MT (US$ 70-83/MT).

Figure 30: Range of fuel price

The volatility of determined bagasse would fluctuate by over 100% if linked to coal compared to

about 20% if linked to firewood. It is obvious that the prices of other biomasses would find a range

closer to the price of rice husk i.e US$ 87/T as and when such residues are utilised on commercial

basis in energy plants.

Summarizing

Linking biomass price to an alternative fuel traded in the market is a good idea

However, linking the price to a highly volatile commodity such as coal would create both

economic and social problem-feeling of uncertainty amongst investors in projects and non-

acceptance of reduction in price by farmers

Rationale for considering coal, which is not permitted as fuel alternative in biomass power

plant has not been clearly stated nor reasons given why RLNG or RFO has not been

considered

Fuel wood is transparently traded in Pakistan and as such linkage with wood should have

wide acceptance and would also be fair to all

Alternatively, prices can be fixed on the basis of periodic survey as has been done by the

Biomass resource assessment study team recently

It has also been seen that the actual prices of biomass in the market obtained from surveys

are more closely linked to prices of furnace oil and fuel wood

4.5.4 Recommendations on pricing methodology

It is recommended to follow the principle of linkage to the prices of commercially traded fuel.

However, the same should be based on locally available fuel, prices of which do not fluctuate

heavily. Fortunately, for Pakistan, it would be easy to do this against fuel wood. There is already a

5,8

90

12

,64

9

1,7

08

7,3

12

11

,12

8

15

,13

0

3,2

27

8,7

46

C O A L C I F F I R E W O O D B A G A S S E ( B E N C H M A R K E D T O

C O A L )

B A G A S S E ( B E N C H M A R K E D T O

F I R E W O O D )

RS.

/MT

Minimum Maximum

51

system of tracking the fuel wood prices in the country. Pakistan Bureau of Statistics publishes

monthly price data for 53 commodities including firewood, based on which consumer price indices

are determined.

Figure 31: Regional variation in the price of firewood25

It should be possible to establish clear linkage between the prevalent fuel wood price and prices of

biomass, which can be used as fuel for power plant. This price may be established for a pre-

determined regulation period (2 to 5 years). The annual escalation factor can be either fixed at say,

8% or linked to price indices.

The principles for logistic cost developed by NEPRA can be adopted to determine the landed cost of

biomass to the projects. The following table illustrates the determined biomass price (the NCV has

been assumed 3000 kCal/Kg) based on the suggested methodology. Prices of all biomasses can be

fixed accordingly taking into NCV for the particular biomass.

Table 27: Determined price of biomass


A Firewood cost (Retail) Rs./40 kg 602

B Firewood cost (per kg) Rs./kg 15 (B=A/40)

C NCV of Wood kCal/kg 3,010 Assumption

D Firewood cost (Energy basis) Rs./1000 kCal 5 (D = B/C x 1000)

E Rice Husk Cost Rs./kg 8

F NCV of Rice husk kCal/kg 3,000 Assumption

G Rice husk cost (energy basis) Rs./1000 kCal 3 (G = E/Fx 1000)

H Source cost of fuel as a % of retail price 53% (H = G/D%)

I Reference price for biomass Rs./MT 8,027 (I=B x H% x 1000)

J Average distance for transportation km 50 Assumption

K Load per truck MT 10 Assumption

L Mileage km/Liter 3 Assumption

M Diesel cost Rs./Liter 73 OGRA Determination

N Fuel Cost of transportation Rs./T 121 [N = (M/L x J)/K]

788 742

700 675

773

600

500

607 625 618

550

400 400

692

490

625

450

-

100

200

300

400

500

600

700

800

900

RS.

/40

KG

52


O Truck Overheads Rs./T 60 [O= 50% x N]

P Handling Costs Rs./T 60 [P= 50% x N]

Q Total Logistics cost Rs./T 242 [Q= N +O+ P]

R Firewood cost including logistics Rs./T 8,268 [R = I + Q]

S Exchange rate US$/Rs 105 Current exchange rate

T Equivalent biomass cost US$/MT 79

It is seen that the price so determined is almost the same as was observed during the market survey

in 2014. It is recommended to adopt this methodology and test it out for few years for establishing

the validity.

4.6 Monetary & fiscal incentives The following incentive scheme as per RE policy of 2006 should be extended to all the different types

of biomass power projects.

i. Exemption from customs duty or sale tax for machinery equipment and spares (including

construction machinery, equipment, and specialized vehicles imported on temporary basis)

meant for the initial installation or for balancing, modernization, maintenance, replacement,

or expansion after commissioning of projects for power generation utilizing renewable

energy resources (specifically, small hydro, wind, and solar), subject to fulfillment of

conditions under the relevant SRO.

ii. Exemption from income tax, including turnover rate tax and withholding tax on imports.

iii. Repatriation of equity along with dividends freely allowed, subject to rules and regulations

prescribed by the State Bank of Pakistan.

iv. Parties may raise local and foreign finance in accordance with regulations applicable to

industry in general. GOP approval may be required in accordance with such regulations.

v. Non-Muslims and non-residents shall be exempted from payment of Zakat on dividends paid

by the company.

4.7 Technology development It is recommended that AEDB in cooperation with the few technical and agricultural universities

prepare and implement a plan for development of technology and local manufacturing and servicing

capabilities particularly for the following equipments and systems:

i. Harvesting, baling and fuel preparation machineries for straw, stalks and cotton sticks

ii. Storage bins for biomass

iii. Technologies and machines for briquetting and pelletisation of straw, trash and husks

iv. Biomass gasification and gas clean up devices

v. Bio-fuel manufacturing system for grain wastes

4.8 Institutional arrangement A number of governmental, non-governmental, academic and private sector players in the biomass

space would be involved in developing and implementing the policy framework for promoting

biomass power. Following table has been prepared to indicate the key stakeholders that are likely to

be involved in this and the role they would be playing. This table has been prepared based on the

experience of the Consultants in policy related work in China and India. It is recommended that

53

AEDB in consultation with the Ministry of Water and Power and Ministry of Agriculture of Federal

Government and relevant representatives from Provincial Governments form a working group to

design a formal structure for institutionalizing the arrangement.

Table 28: Institutional arrangement

Stakeholders Engagement level Resource management

Project development

Biomass pricing

Technology development

Incentives Capacity building

AEDB Nodal agency & coordinator

NEPRA - Medium High Low High -

MoW&P Medium Medium Low Low High Medium

MoA High - Medium High - High

MoF - - - - High -

Provincial Governments

High High High Low - High

Power utilities - Medium High - - -

Technical universities

- - - High - High

Agricultural universities

High Medium - High - High

Manufacturers of agricultural & power equipments

- High - High - High

PSQCA - - - High - -

54

5 Annexes

Annex-I: China biomass energy policy extract “Under the background of the global energy crisis and global warming, the development of biomass

energy utilization technology has very important practical and long-term significance in replacing the

fossil energy and realizing the sustainable development of human beings. China’s energy security has

become increasingly prominent, environmental constraints have increasingly enhanced and energy-

saving and emission-reduction situation is grim. In this context, to vigorously adjust the energy

structure and to develop the renewable alternative energy sources with the green, clean, low-

carbon as the core have become top priorities. Biomass energy, with huge amount of resources and

stable supply, can substitute coal, oil and gas in huge quantities. While effectively supplying the

energy, it can significantly reduce pollution and achieve the zero emissions of CO2, complying with

the idea of the sustainable development of the society. Therefore, in recent years, governments at

all levels in China have continuously increased attention on biomass and introduced a series of

policies and measures; at present, the basic biomass energy policy system has been formed. Basic

framework of China’s biomass energy development policy takes the Renewable energy law as the

basis, Medium- and long-term development plan for renewable energy as the long-term goal, each

five-year plan as the short-term plan, to attract producers and users to join and participate in the

development and utilization of biomass energy through the establishment of a series of effective

incentive mechanism to promote the rapid development of biomass energy industry and advance

the healthy and rapid development of the biomass energy industry.

Legal basis

Renewable Energy Law of the People’s Republic of China was issued in 2005 and was carried out

formally on January 1, 2006. This is the first law on energy in China. It indicates that the Chinese

government has explicated the position of the renewable energy including biomass energy in the

modern energy and has given great preferential support. Chapter I of this law points out that the

State encourages and supports the use of biomass energy; Chapter IV “Promotion and Application”

emphasizes again that the State encourages the clean and efficient development and utilization of

the biomass fuels, encourages the development of energy crops; if gas and heat produced by using

the biomass resources comply with the network technology standard of city gas pipeline network

and heat pipe network, enterprises operating gas pipeline network and heat pipe network shall

receive its network entry.

At the end of 2009, the State revised the Renewable energy law, and the revised edition was

implemented on April 1, 2010. The Amendment has established the Renewable Energy Development

Fund to arrange the dispatching of the additional cost of renewable energy from a national scope by

special arrangement and implemented full protection of the acquisition for renewable energy power

generation.

Target system

In Medium- and long-term development plan for renewable energy issued in 2007, emphasis should

be laid on the development of biomass power generation, biogas, densified biofuels and fuel and

biology liquid fuel. According to the requirements of China’s economic and social development and

55

the biomass energy utilization technology, emphasis should be laid on the development of biomass

power generation, biogas, densified biofuels and fuel and biology liquid fuel. By 2010, the total

installed capacity of the biomass power generation had reached 5,500,000 KW; the annual utilization

rate of the densified biofuels had been up to 1,000,000 MT and that of the biogas to 19,000,000,000

cubic meters, that of the non-grain raw material fuel ethanol had been increased by 2,000,000 MT

and that of the biodiesel had reached 200,000 MT. By 2020, the total installed capacity of the

biomass power generation will have reached 30,000,000 kW; the annual utilization rate of the

densified biofuels will have been up to 50,000,000 MT and that of the biogas to 44,000,000,000

cubic meters that of the non-grain raw material fuel ethanol to 10,000,000 MT and that of the

biodiesel to 2,000,000 MT.

Since 1995, China has brought the biomass energy into the national five-year plan system. In the

9thfive-year plan (from 1996 to 2000), high efficient anaerobic technology applied in treating high-

concentration organic wastewater and urban garbage were listed as key science and technology

programs. During the 10th five-year plan (from 2001 to 2005), Planning of the development of

agricultural biomass energy industry was introduced. Since the 11th five-year plan, each five-year plan

contains the special planning for the biomass energy industry. Scheme for the comprehensive

utilization and implementation of the crop straws during the 12th five-year plan issued in 2011 points

out to further develop and utilize the crop straw in huge output in China, and it is planned to achieve

the straw comprehensive utilization rate of over 80% and the straw energy utilization rate of 13% by

2015. “12thFive-Year Plan” for renewable energy development and “12th Five-Year Plan” for biomass

energy development (2011-2015) issued in 2012 stipulates that by 2015, the annual utilization rate

of the biomass energy will have exceeded 50,000,000 MT of standard coal. And when the total

installed capacity of the biomass power generation reaches 13,000,000kw and the annual power

generation is up to about 78,000,000,000 kW, the annual biomass supply shall be up to

22,000,000,000 cubic meters, densified biofuels to 10,000,000 MT and biology liquid fuel to

5,000,000 MT. At present, planning for biomass energy in the 13th five-year plan is being developed.

Incentive mechanisms

Considering that the development and utilization of biomass energy has the remarkable

comprehensive benefit for the traditional energy replacement and the protection of the ecological

environment, but its development and utilization cost is temporarily unable to compete with the

traditional energy, so the Chinese government has adopted a series of incentive measures to share

the cost which is higher than that of the development and utilization of the traditional energy with

the community, or the finance departments at all levels commit huge sums of money to grant

subsidies for the development and utilization of biomass energy to encourage enterprises and users

to participate in the development of biomass energy. Main incentive means include front-end

incentive for encouraging the biomass energy industry production chain, and market back-end

incentive to stimulate the sales and use, as well as some indirect incentive measures to promote the

development of the whole industry.

Front-end incentive

1) Subsidies for feedstock

56

Feedstock base subsidies: Forestry raw materials base subsidy criterion is 30 Yuan/are; the amount

of subsidy is checked and ratified by the Ministry of Finance according to this criterion and the raw

materials base implementation plan verified. In principle, agricultural raw materials base subsidy is

verified as 27yuan/are; the specific criterion is approved according to saline-alkali soil, that and

other different types of land. The amount of subsidy is appraised and decided by the Ministry of

Finance according to the specific criterion and the raw materials base implementation plan verified.

Straw subsidy: For the enterprise with the registered capital of more than 10 million Yuan, whose

straw energy utilization complies with the local straw comprehensive utilization planning and the

amount of annual consumption of straw exceeds 10,000 MT (including 10,000 MT) and straw energy

products have been on sale and which has stable users, the subsidy of about 140 Yuan will be

granted for the straw per ton in energy utilization to the enterprise according to the types and

quantities of straw energy products which are actually sold every year, as well as types and

quantities of straw for converting the consumption. However, straw grid-connected power

generation project does not enjoy the special subsidy.

Fuel ethanol subsidy: For the production of the denatured fuel ethanol and losses incurred during

the process of allocation and sales of the denatured fuel ethanol, the state finance sets quotas for

subsidies to the production enterprises; in 2012, the amounts of subsidy for the grain ethanol and

non-grain ethanol are respectively 500 Yuan/ton and 750 Yuan/ton.

2) Project funding

Rural household biogas project : In 2003, China listed the rural biogas construction into the scope of

national debt fund support; during the period of 2003 to 2013, China has invested more than billions

in supporting rural household biogas, biogas service system and the construction of breeding

aquatics village and co-peasant household biogas in average every year.

Green Energy County project: The highest subsidy granted by the central finance to each green

energy county is about 25 million Yuan; the construction contents include biogas centralized gas

supply engineering, biomass gasification engineering, biomass briquette fuel engineering and other

renewable energy development and utilization engineering.

Urban heating engineering project: Notice on developing the construction of the biomass briquette

boiler heating demonstration project issued in 2014 stipulates that it is planned to build 120 biomass

briquette boiler heating demonstration projects on a national scale during the period from 2014 to

2015, especially in Beijing, Tianjin, Hebei and Shandong, Yangtze River Delta region, Pearl River Delta

region and other areas with serious atmospheric pollution prevention and control situation and

heavier tasks in reducing coal consumption, and the total investment is about 5 billion Yuan.

3) Low-interest loan

For the renewable energy development and utilization project which is listed in the national

renewable energy industry development guidance catalogue and which meets the credit conditions,

discount interest funds may be arranged under the premises that bank loans are in place and project

contracting unit or individual has paid the interest. Discount interest fund is determined according to

the actual bank loans in place, contract rate of interest and the actual amount rate of interest paid;

the discount period is 1-3 years and the maximum annual discount rate does not exceed 3%.

57

4) Tax relief

Value added tax (VAT) relief: The tax authorities implement the measures for the refund upon

collection of VAT for the self-produced comprehensive utilization of products (see Appendix for the

product catalogue) sold by taxpayers with the 4 kinds of agricultural and forestry residues as the raw

materials, such as: three residues (logging residues, bucking residues and processing residues), small

firewood, crop straw and bagasse. The specific proportion of tax rebates are respectively 100% in

2009 and 80% in 2010.

Income tax relief: 90% tax of the income of the enterprise from producing products which are not

restricted and forbidden by the state and which comply with the relevant national and industry

standards and whose main raw materials are resources specified in Catalogue of Resources for

Comprehensive Utilization Entitling Enterprises to Income Tax Preferences is reduced and included in

the total income.

Back-end incentives

1) Quota system

Under the Renewable energy law, National Development and Reform Commission and other

relevant departments have developed the targets for the overall medium- and long-term

development of biomass energy and introduced quota system policy in the fields of biomass power

generation and biology liquid fuel to request that power companies and oil companies should have a

certain portion of the energy from the biomass energy in the supply of electricity and fuel, thus

turning the policies completely rely on government financial support in the past to the market

mechanism under the control of the government to create conditions for the large-scale

development of biomass energy. At present, the main quota policy is carried out on the closed

measures to promote fuel ethanol; 5 provinces and 27 cities in China have forced to promote E10

gasoline. In addition, the design idea about renewable energy power quota system has been formed,

and the policy on the biomass green power quota will soon be implemented.

2) Pricing mechanism

Fixed feed-in tariff: Since 2010, the new agricultural and forestry biomass power generation projects

have uniformly implemented the benchmark feed-in tariff of 0.75 Yuan per kilowatt-hour (including

tax). But the mixed fuel power generation projects of which conventional energy exceeds 20% in the

power generation heat consumed, as the conventional energy power generation projects implement

the benchmark feed-in tariff of the local coal-fired power plants and do not enjoy the subsidiary

feed-in tariff.

Fuel ethanol price: Fuel ethanol sales channels uniformly take the result from 90# gasoline price over

the same period published by the National Development and Reform Committee multiplying the

equivalent coefficient of 0.9111 of the sales cost of vehicle ethanol gasoline deployment as the

domestic sales settlement price of fuel ethanol, providing price protection for the fuel ethanol

production enterprises.

Other auxiliary incentive measures

58

1) Environmental protection measures: Among the environmental protection measures of local

governments at all levels, instructions for the ban on burning coal, restrictions on automobile

exhaust and air pollutants emissions promote the development of biomass briquette fuel and fuel

ethanol in another way. Meanwhile, environmental protection indexes for the ban on burning straw

guarantee the adequate supply of biomass.

2) Development of the standards: Biogas Standardization Technical Committee has developed the

biogas industry standards to regulate the development of the industry. Fuel ethanol E10 and

biodiesel B5 standards have been widely accepted by the industry. In addition, product standard of

the biomass briquette fuel, standard equipment, engineering and service system are being

developed.

BE Sustainable, May 2015: An overview of biomass energy policy in China-Jie Xu and Zhenhong

Yuan, Guangzhou Institute of Energy Conversion, Chinese Academy of Sciences, Guangzhou China

59

Annex-II: Scope of Work for Biomass Assessment Survey The Scope of work covers biomass fuel supply studies along with their prices and price trend

in <<name of province>>. The study report should result in detailed estimates of district wise surplus

biomass that is available for energy production on a long- term sustainable basis. The report should

also indicate the district wise current price of biomass fuel (i.e. for FY 20XX-XX) with increase in their

price during last 3 years. The annual escalation factor in biomass fuel prices and their periodic

revision thereof and losses in storage and average calorific value of biomass fuel is required in the

study report.

The methodology and scope of work must cover at least the following:

The biomass fuel supply study should verify the district wise surplus biomass that is

available for energy production, based on macro level assessment, as well as actual field

visits.

Published statistical data and the field data should be compiled and the trend of the

biomass growth should be established that can be used as a valid estimate for the

subsequent period. The reported data from the Ministry of

Agriculture/ Agriculture Department for annual crop production may be used as the

strong statistical ground reference data sets. Other reported and published data should also

be used appropriately.

Biomass utilization pattern for societal purposes should be derived. Biomass utilization in

other industries like brick manufacturing, small and medium boilers and captive power

plants should also be ascertained. Based on these utilization patterns, net quantity available

for power generation to renewable power projects in different districts may be arrived at.

The Crop-to-Residue Ratios (CRR) for different biomass species should also be verified with

reported documents and using direct measurement methods. These should also be

cross verified and updated to provide better aggregated figure at district level.

Biomass growth should be estimated using the established reported data from Ministry

of agriculture/ Agriculture Department or other reported and published data.

Biomass fuel supply study should be carried out by actual data collection from various users,

industries etc.

Recent trend of biomass price shall be assessed by verifying ac t ua l price spread by the

existing consumers, through verification of relevant records for the last harvesting season

(specify period) including date of purchase, name of supplier, weighment slips, proof of

payments made, mode of transportation, charges paid for labour, loading/unloading &

transportation charges, additional charges like royalty, taxes, cess, etc. if applicable.

The calorific value of biomass fuel, that is available for power generation, is to be estimated

district wise based on its ash and moisture contents and these data included in the report.

Based on the study and its findings, the consultant is required to recommend in

tabulated form, district wise biomass availability for power generation, price, price

escalation per year based on historical data for that district, periodic revision there of

required, losses in storage, average calorific value

Assist the client in r e p r e s e n t i n g t h e c a s e t o t h e regulatory commission, if needed.

60

REFERENCES (FOOTNOTES)

1 Factors Influencing Grid Interactive Biomass Power Industry – India, TERI, India 2 Dilemma &Strategy of Biomass Power Generation Industry Development in China: A Perspective of

Industry Chain 3 “Final Report on Biomass Atlas for Pakistan” developed as a part of the “World Bank Biomass Mapping

for Pakistan: Phase 1-3” July 2016 4 Biomass atlas for Pakistan-April, 2016 5 Paper presented at Regional Consultation on Modern Applications of Biomass Energy, 6-10 January 1997,

Kuala Lampur Malaysia 6 http://www.agriculturalproductsindia.com/agricultural-machinery-equipments/agricultural-machinery-

harvesting-machinery.html 7 “The operation of mechanical sugarcane harvesters and the competence of operators: A ergonomic

approach”, Africa Journal of Agricultural Research, Academic Journals, Vol. 10 (15) pp 1832-1839, 9 April, 2015

8 DESL Report on “Assessment of Options for Biomass Power Generation” to DfiD, June 1, 2011 9 Preparing national strategy for rural biomass renewable energy development, ADB (TA No. 4810-PRC),

April 2008 10 DESL report on Validation of fuel supply linkage model, MNRE, 2009 11 DESL database 12 DESL Study: Biomass Fuel Supply Study in the state of Rajasthan, RRECL, 2011 13 http://www.eai.in/ref/ae/bio/powr/biomass_power.html 14 http://www.tappi.org/content/Events/11BIOPRO/19.2Worley.pdf 15 http://faculty.washington.edu/stevehar/Biomass-Overview.pdf 16 IRENA working paper on Renewable Energy Technologies: Cost Analysis Series- Volume -1: Biomass for

Power Generation, June 2012 17 The World Bank report considered the lower values for biomass generation while estimating energy

potential 18 IRENA working paper on Renewable Energy Technologies: Cost Analysis Series- Volume -1: Biomass for

Power Generation, June 2012 19 Taxes & incentives for renewable energy-KPMG International, 2014 20 Development goal of 30 GW for China’s biomass power generation: Will it be achieved?, Renewable and

Sustainable Energy Reviews Journal 25 (2013) 310-317 21 Power Systems Statistics, 2013-14, 39th Edition, NTDC 22 Presentation on Power Sector in Pakistan to OICCI, Secretary, Ministry of Water and Power, Dec-2015 23 Monthly review of price indices, Pakistan Bureau of Statistics, March, 2016 24 Feasibility Study for 3 MW Combined Heat and Power Biomass Gasification Plant in Pakistan, UNIDO, Jan-

14 (by DESL) 25 Sugar Cane Bagasse Energy Cogeneration – Lessons from Mauritius, Mauritius Sugar Authority, Oct 2005 26 Currently Rs 1225 (US$ 35) per ton – Source: Newsclip : Island Crisis Media Network, 15 December, 2015 27 IEA Good Practice Guide -Bio-energy project development and Biomass supply 28 Methodology & Specifications Guide, Argus Biomass Markets, Last updated April 2016 29 Argus Biomass Markets – Methodology and Specification Guide 30 Development goal of China’s 30 GW Biomass power generation etc-Science Direct, Sept 2013 31 CERC: Determination of levelised generic tariff for FY 2016-17 under Regulation 8, March, 2016 (IUS$ - 67

Indian Rupees) 32 Thomson Reuters Foundation-May 6, 2011 33 NEPRA – Determination of the authority in the matter of suo-moto proceedings for development of

upfront tariff for new bagasse based cogeneration power projects, (29-May2013) 34 NEPRA - Determination of the Authority in the matter of Tariff Petition filed by SSJD Bio-Energy Limited

for approval of Generation Tariff in respect of 12 MW Biomass Energy Power Project (Case No. NEPRA/TRF-202/SSJD-2011), 28th June, 2012

35 NEPRA Tariff determination: NEPRA/R/TRF-UTB-2013/10164-10166 dated July 7, 2015 36 http://www.indexmundi.com/commodities/?commodity=coal-south-african&months=60 37 http://www.bunkerindex.com/prices/bixfree_1306.php?priceindex_id=2 38 http://www.pbs.gov.pk/cpi?page=1 39 Assuming 3,100 kCal/kg as the heating value of wood

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