POLICY FRAMEWORK STUDY FOR RENEWABLE ENERGY AND ENERGY POLICY DEVELOPMENT

RENEWABLE ENERGY IS NOT ONLY SUSTAINABLE BUT ALSO AFFORDABLE

POLICY FRAMEWORK STUDY FOR RENEWABLE ENERGY AND ENERGY POLICY DEVELOPMENT

RENEWABLE ENERGY IS NOT ONLY SUSTAINABLE BUT ALSO AFFORDABLE

By

S. ChandrasekharManaging Director

Bhoruka Power Corporation Limited#48 Lavelle Road

Bangalore 560 001India

Tel:+91 80 2227 3285Fax: +91 80 2224 5246

Email: sekhar@bhorukapower.com

By

S. ChandrasekharManaging Director

Bhoruka Power Corporation Limited#48 Lavelle Road

Bangalore 560 001India

Tel:+91 80 2227 3285Fax: +91 80 2224 5246

Email: sekhar@bhorukapower.com

BANGKOK AUG 06

ENERGY MIX DECISION ENERGY MIX DECISION

AVAILABILITY

RELIABILITY

AFFORDABILITY

ENERGY MIX DECISION

GENERAL PERCEPTION GENERAL PERCEPTION

CONVENTIONAL POWER (FOSSIL FUEL) :-

RESOURCE LIMITED – RELIABLE – AFFORDABLE

NON CONVENTIONAL POWER (RENEWABLES):-

RESOURCE UNLIMITED – NON RELIABLE – NON AFFORDABLE

ENERGY SECURITY ENERGY SECURITY

VISION OF PRESIDENT OF INDIA

H.E. MR. ABDUL KALAM

“WE CAN ACHIEVE ENERGY INDEPENDENCE BY 2030”

- IF WE FOCUS ON RENEWABLE ENERGY SOURCES

- IF WE INCREASE RENEWABLE ENERGY SOURCES IN ENERGY MIX FROM 5% TO 25%

THE FOCUS IS MORE ON ‘ENERGY SECURITY’ AND NOT JUST ‘COST ECONOMICS’

NATIONAL ELECTRICITY POLICY – GOVERNMENT OF INDIA - 2005

NATIONAL ELECTRICITY POLICY – GOVERNMENT OF INDIA - 2005

CLAUSE RELATED TO RENEWABLES

CLAUSE 5.2.20:

FEASIBLE POTENTIAL OF NON-CONVENTIONAL ENERGY SOURCES, MAINLY SMALL HYDRO, WIND AND BIO MASS WOULD ALSO NEED TO BE EXPLOITED FULLY TO CREATE ADDITIONAL POWER GENERATION CAPACITY WITH A VIEW TO INCREASE, THE OVERALL SHARE OF NON CONVENTIONAL ENERGY SOURCES IN THE ENERGY MIX, EFFORTS WILL BE MADE TO ENCOURAGE PRIVATE SECTOR PARTICIPATION THROUGH SUITABLE PROMOTIONAL MEASURES.

NATIONAL ELECTRICITY POLICY – GOVT. OF INDIA

NATIONAL ELECTRICITY POLICY – GOVT. OF INDIA

COGENERATION AND NON-CONVENTIONAL ENERGY SOURCES

CLAUSE 5.12.1:

NON-CONVENTIONAL SOURCES OF ENERGY BEING THE MOST ENVIRONMENT FRIENDLY THERE IS AN URGENT NEED TO PROMOTE GENERATION OF ELECTRICITY BASED ON SUCH SOURCES OF ENERGY. FOR THIS PURPOSE, EFFORTS NEED TO BE MADE TO REDUCE THE CAPITAL COST OF PROJECTS BASED ON NON-CONVENTIONAL AND RENEWABLE SOURCES OF ENERGY. COST OF ENERGY CAN ALSO BE REDUCED BY PROMOTING COMPETITION WITHIN SUCH PROJECTS. AT THE SAME TIME, ADEQUATE PROMOTIONAL MEASURES WOULD ALSO HAVE TO BE TAKEN FOR DEVELOPMENT OF TECHNOLOGIES AND A SUSTAINED GROWTH OF THESE SOURCES.

NATIONAL ELECTRICITY POLICY – GOVT. OF INDIA

NATIONAL ELECTRICITY POLICY – GOVT. OF INDIA

CLAUSE 5.12.2:

THE ELECTRICITY ACT 2003 PROVIDES THAT CO-GENERATION AND GENERATION OF ELECTRICITY FROM NON-CONVENTIONAL SOURCES WOULD BE PROMOTED BY THE SERCs BY PROVIDING SUITABLE MEASURES FOR CONNECTIVITY WITH GRID AND SALE OF ELECTRICITY TO ANY PERSON AND ALSO BY SPECIFYING, FOR PURCHASE OF ELECTRICITY FROM SUCH SOURCES, A PERCENTAGE OF THE TOTAL CONSUMPTION OF ELECTRICITY IN THE AREA OF A DISTRIBUTION LICENSEE. SUCH PERCENTAGE FOR PURCHASE OF POWER FROM NON-CONVENTIONAL SOURCES SHOULD BE MADE APPLICABLE FOR THE TARIFFS TO BE DETERMINED BY THE SERCs AT THE EARLIEST. PROGRESSIVELY THE SHARE OF ELECTRICITY FROM NON-CONVENTIONAL SOURCES WOULD NEED TO BE INCREASED AS PRESCRIBED BY STATE ELECTRICITY REGULATORY COMMISSIONS. SUCH PURCHASE BY DISTRIBUTION COMPANIES SHALL BE THROUGH COMPETITIVE BIDDING PROCESS. CONSIDERING THE FACT THAT IT WILL TAKE SOME TIME BEFORE NON-CONVENTIONAL TECHNOLOGIES COMPETE, IN TERMS OF COST, WITH CONVENTIONAL SOURCES, THE COMMISSION MAY DETERMINE AN APPROPRIATE DIFFERENTIAL IN PRICES TO PROMOTE THESE TECHNOLOGIES.

NATIONAL ELECTRICITY POLICY – GOVT. OF INDIA

NATIONAL ELECTRICITY POLICY – GOVT. OF INDIA

CLAUSE 5.12.3:

INDUTRIES IN WHICH BOTH PROCESS HEAT AND ELECTRICITY ARE NEEDED ARE WELL SUITED FOR COGENERATION OF ELECTRICITY. A SIGNIFICANT POTENTIAL FOR COGENERATION EXISTS IN THE COUNTRY, PARTICULARLY IN THE SUGAR INDUSTRY. SERCs MAY PROMOTE ARRANGEMENTS BETWEEN THE CO-GENERATOR AND THE CONCERNED DISTRIBUTION LICENSEE FOR PURCHASE OF SURPLUS POWER FROM SUCH PLANTS. COGENERATION SYSTEM ALSO NEEDS TO BE ENCOURAGED IN THE OVERALL INTREST OF ENERGY EFFICIENCY AND ALSO GRID STABILITY.

NATIONAL TARIFF POLCY – GOVT. OF INDIA

NATIONAL TARIFF POLCY – GOVT. OF INDIA

CLAUSE 6.4:

NON CONVENTIONAL SOURCES OF ENERGY GENERATION, INCLUDING COGEN.

(1) PURSUANT TO PROVISIONS OF SECTION 86(1)(E) OF THE ACT, THE APPROPRIATE COMMISSION SHALL FIX A MINIMUM PERCENTAGE FOR PURCHASE OF ENERGY FROM SUCH SOURCES TAKING INTO ACCOUNT AVAILABILITY OF SUCH RESOURCES IN THE REGION AND ITS IMPACT ON RETAIL TARIFFS. SUCH PERCENTAGE FOR PURCHASE OF ENERGY SHOULD BE MADE APPLICABLE FOR THE TARIFFS TO BE DETERMINED BY THE SERCs LATEST BY APRIL 1, 2006.

IT WILL TAKE SOME TIME BEFORE NON-CONVENTIONAL TECNOLOGIES CAN COMPETE WITH CONVENTIONAL SOURCES IN TERMS OF COST OF ELECTRICITY. THEREFORE, PROCUREMENT BY DISTRIBUTION COMPANIES SHALL BE DONE AT PREFERENTIAL TARIFFS DETERMINED BY THE APPROPRIATE COMMISSION

SUSTAINABLE ENERGY BASKETSUSTAINABLE ENERGY BASKET

WIND

SMALL HYDRO

BIO MASS

PHOTO VOLTAIC

SOLAR THERMAL

SOLID WASTE

AND OF COURSE NEW ONES SUCH AS FUEL CELLS, OCEAN ENERGTY, TIDAL POWER ETC.

SUSTAINABLE ENERGY BASKETSUSTAINABLE ENERGY BASKETSUSTAINABLE ENERGY BASKETSUSTAINABLE ENERGY BASKET

MOST SUITABLE TECHNOLOGIESFOR DEVELOPING ECONOMIES

WIND

SMALL HYDRO

BIO MASS

SOLAR APPLICATIONS

GIVEN THE COMPULSIONS OF CONTAINING TARIFFS

REASON: MATURE TECHNOLOGIES

MOST SUITABLE TECHNOLOGIESFOR DEVELOPING ECONOMIESMOST SUITABLE TECHNOLOGIESFOR DEVELOPING ECONOMIES

BIGGEST ADVANTGES OF RENEWABLE ENERGY BIGGEST ADVANTGES OF RENEWABLE ENERGY OTHER THAN FROM ECOLOGICAL PERSPECTIVEOTHER THAN FROM ECOLOGICAL PERSPECTIVE.

AVAILABILITY OF RENEWABLE RESOURCES MAINLY IN RURAL AREAS

IMPROVES RURAL ECONOMY – GIVES VALUE TO LOCAL RESOURCES

INCREASES EMPLOYMENT OPPORTUNITIES – NEW AVENUES IN THE RURAL AREAS

IMPROVES QUALITY OF POWER – DISTRIBUTED GENERATION

IMPROVES RURAL INFRASTRUCTURE – LOCAL FACILITIES IMPROVES RURAL INFRASTRUCTURE – LOCAL FACILITIES

BECOME BETTERBECOME BETTER

BIGGEST ADVANTGES OF RENEWABLE ENERGY OTHER THAN FROM ECOLOGICAL PERSPECTIVEBIGGEST ADVANTGES OF RENEWABLE ENERGY OTHER THAN FROM ECOLOGICAL PERSPECTIVE .BIGGEST ADVANTGES OF RENEWABLE ENERGY OTHER THAN FROM ECOLOGICAL PERSPECTIVEBIGGEST ADVANTGES OF RENEWABLE ENERGY OTHER THAN FROM ECOLOGICAL PERSPECTIVE .

RURAL POWER – OTHER THAN POPULATIONRURAL POWER – OTHER THAN POPULATION

IRRIGATION CANALS / RIVULETS – SMALL HYDRO

POWER

ABUNDANT WASTE LAND AND GOOD BREESE – WIND

POWER

AGRICULTURAL WASTE – BIOMASS POWER

FROM VALUELESS RURAL RESOURCES TO HIGH VALUE RURAL PRODUCTS

FROM POVERTY TO PLENTY, INCREASE IN RURAL GDP

RURAL POWER – OTHER THAN POPULATIONRURAL POWER – OTHER THAN POPULATION

RENEWABLE ENERGY – EMPLOYMENT GENERATION

A. SMALL HYDRO (<10 MW Capacity)

During Construction : An average of more than 150 persons mostly locals employed for more than a year at a salary of USD 3 – 10 per day

During Operation : Permanent direct employment - 20 – 30 persons at an average salary of USD 8-10 per day

B. BIOMASS (< 5 MW)

During Operation : An average of more than 200 persons regularly for collection of Biomass at an average salary of USD 3 – 10 per day

RENEWABLE ENERGY – EMPLOYMENT GENERATIONRENEWABLE ENERGY – EMPLOYMENT GENERATION

C. ADDITIONAL EMPLOYMENT AVENUES

Due to availability of power , the following businesses could thrive:

Rice Mills

Flour Mills

Oil Expeller / Extraction Units

Small workshops for farm equipment and

pump repairs.

Ice making Units

Small Cold Storages

ADDITIONAL EMPLOYMENT AVENUESADDITIONAL EMPLOYMENT AVENUES

RENEWABLE ENERGY – QUALITY OF POWERRENEWABLE ENERGY – QUALITY OF POWER

POWER GENERATED IN AND AROUND THE AREAS OF CONSUMPTION – DISTRIBUTED GENERATION

IF POWER TO THE RURAL AREA IS COMING FROM A DISTANCEOF 200 KMS THROUGH MULTIPLE LEVELSOF TRANSMISSION VOLTAGES, THERE WILL BE A SAVING OF NEARLY 10% IN TRANSMISSION LOSSES DUE TO DISTRIBUTED GENERATION.

ADDED TO THAT THE QUALITY OF POWER IN TERMS OF VOLTAGE AND FREQUENCY WLL BE AT DESIRED LEVELS.

LESSER IRRIGATION PUMPSETS BREAKDOWN, HIGHER PRODUCTIVITY, LESSER EXPENDITURE FOR THE FARMERS

RENEWABLE ENERGY – QUALITY OF POWERRENEWABLE ENERGY – QUALITY OF POWERRENEWABLE ENERGY – QUALITY OF POWERRENEWABLE ENERGY – QUALITY OF POWER

RURAL INFRASTRUCTURE IMPROVEMENTRURAL INFRASTRUCTURE IMPROVEMENT

BENEFICIAL FALLOUT OF IMPLEMENTING RENEWABLE ENERGY PROJECTS.

IMPROVEMENT TO VILLAGE ROADS / NEW ROADS

IMPROVEMENT TO EDUCATIONAL INFRASTRUCTURE

-IN OUR PROJECT SCHOOLS MORE THAN 1500 CHILDREN ARE STUDYING AT SUBSIDISED RATES.

RURAL INFRASTRUCTURE IMPROVEMENTRURAL INFRASTRUCTURE IMPROVEMENT

PROGRAMS FOR HUMAN DEVELOPMENT

- THROUGH SELF HELP GROUPS, VOCATIONAL TRAINING FOR WOMEN ETC.

- WE HAVE TRAINED MORE THAN 1000 WOMEN IN VARIOUS TRADES LIKE TAILORING ETC. AND ALSO CREATE MORE THAN 100 SHG’S FOR MICROFRAME

NET RESULT –

ECONOMIC WELL BEING IN THE LONG TERM

ECONOMICS OF RENEWABLE ENERGY ECONOMICS OF RENEWABLE ENERGY Sector Capital Cost

(US$ Million/MW)

Cost of Generation(US Cent/kWh)

Small Hydro 0.9 to 1.3 5 - 6

Wind Energy 0.95 to 1.10 6 – 7

Biomass Power 0.8 to 1.00 5 to 6

Bagasse Cogeneration

0.6 to 0.8 4.5 to 5.5

Biomass Gasification

0.6 to 0.8 5 to 6

Solar PV 5.21 to 6.25 18.80 to 41.70

COMPARATIVE RETURNSCOMPARATIVE RETURNS

( Value in US$)

10 YR TERM 15 YR TERMTARIFF IRR TARIFF IRR

GRID 0.075 0.074

HYDRO 0.065 10% 0.032 14%

THERMAL 0.052 9% 0.048 14%

OBSERVATIONS OBSERVATIONS

PVT. SECTOR THE MOST IMPORTANT PLAYER IN RENEWABLE ENERGY DEVELOPMENT WORLDOVER

THE OTHER KEY STAKE HOLDERS ARE GOVERNMENT, UTILITY, BANKERS & REGULATORS

GOALS AND RISK PERCEPTIONS DIFFERENT FOR EACH OF THEM

 

ENTITY   GOAL RISK PERCEPTION VISION

PVT. SECTOR  -

MAXIMISE PROFITLEAST RISK

 LOSS / BANKRUPTCY

MED. TERM

BANKER - MAXIMISE PROFITLEAST RISK

LOAN TURNINGNPA

MED. TERM

UTILITY - MAXIMISE GEN.LEAST RISK

HIGH COST OF ENERGY PURCHASE

SHORT TERM

REGULATOR - CONSUMER INTEREST

HIGH COST TO CONSUMER SHORT TERM

GOVERNMENT - ENERGY SECURITYEMP. GEN.GHG REDOTHER EXTERN

MISPLACEDSUBSIDIES ANDINCENTIVES

LONG TERM 

RISK PERCEPTIONRISK PERCEPTION

VIEW POINT VIEW POINT

NO SINGLE POLICY CAN SATISFY ALL THE

STAKEHOLDER

A BALANCED OUTLOOK SHOULD BE BASIS OF POLICY

ANY POLICY SHOULD BE DRIVEN BY LONG TERM

VISION

EVERY RISK MITIGATION ADDS TO COST

MOSTLY WE TALK OF RISK MITIGATION THROUGH

FISCAL POLICIES

THERE ARE NON FISCAL POLICIES OF EQUAL

IMPORTANCE

RISK AVOIDANCE THROUGH MORE INFORMATION

AND NOT SIMPLY RISK MITIGATION THROUGH FISCAL

MEASURES SHOULD DRIVE POLICY INTERVENTION FOR

PROMOTION OF RENEWABLE ENERGY

POWER PURCHASE – PRICE AND QUANTITY

POWER PURCHASE – PRICE AND QUANTITY

IN AN EMERGING SCENARIO GUARANTEE OF PURCHASE AT A PRICE ONLY WAY TO FAST TRACK GROWTH

RENEWABLE ENERGY GENERATION NOT TO BE SUBJECTED TO MERIT ORDER PURCHASE OR OTHER CONDITIONALITIES

POLICY INTERVENTION – FEED IN TARIFF SHOULD BE THE POLICY DRIVER TO ENCOURAGE RENEWABLE ENERGY TILL AT LEAST 10% RE MIX IN OVERALL ENERGY IS ACHIEVED. SUBSEQUENTLY, ONE CAN SWITCH OVER TO MARKET PROCESSES SUCH AS TENDERING, RENEWABLE ENERGY PORTFOLIO STANDARDS ETC

THE HIGH RENEWABLE ENERGY SECTOR GROWTH IN INDIA DURING 1994-2004 WAS MAINLY DUE TO THE FEED IN TARIFF POLICY

LONG TERM ENERGY COST LONG TERM ENERGY COST

LOW / NO INPUT RESOURCE COST FOR RENEWABLE

ENERGY IN ITS LIFE CYCLE

CONTINUOUS INCREASE IN INPUT RESOURCE COST FOR

FOSSIL FUEL / CONVENTIONAL ENERGY GENERATION

STUDIES INDICATE COST OF RE POWER WHICH IS 130%

INITIALLY DROPS TO 60 – 65% OF CONVENTIONAL ENERGY

AFTER 15 YEARS AND CONTINUES LOWER THEREAFTER

HIGHER THE RE MIX IN ELECTRICITY PORTFOLIO LOWER

THE AVERAGE TARIFF IN A LONG TERM SCENARIO

HOW TO MAKE A STARTHOW TO MAKE A START

ENUNCIATE AN ENDURING RENEWABLE ENERGY POLICY

LET IT BE INCLUSIVE TO ADDRESS EVERY STAKEHOLDER’S CONCERN, BE IT THE PUBLIC,DEVELOPERS, BANKER’S OR CONSUMERS.

POLICY SHOULD HELP EVERY STAKEHOLDER’S VIEW TO BE CONVERGENT AND NOT DIVERGENT.

CREATE PUBLIC AWARENESS OF THE POLICY INITIATIVES

HOW TO MAKE A STARTHOW TO MAKE A START

RECOMMENDATIONRECOMMENDATION

RESOURCE AVAILABILITY STUDIES ON A LONG TERM BASIS IS KEY FOR VIABILITY PROJECTIONS ON A REALISTIC BASIS

AUTHENTIC DATA NEED TO BE MADE AVAILABLE BY GOVERNMENT DEPARTMENTS.

BANKS COULD HELP IN KEEPING LOCAL CURRENCY INTEREST RATES BELOW 10%.

BANKS COULD ALSO HELP IN INCREASING THE LOAN TENURE TO 15 YEARS WHICH COULD HELP IN KEEPING TARIFF’S DOWN IN THE INITIAL FEW YEARS.

WORLD BANK THROUGH IFC COULD HELP IN ACHIEVING BOTH THE ABOVE OBJECTIVES THROUGH LONG TERM DEDICATED FUNDS.

THE FUNDS COULD BE FOR DEVELOPMENT OF AT LEAST 200 MW RENEWABLE PROJECTS INITIALLY.

RE PROJECTS COULD SERVE WORLD BANKS OBJECTIVES OF RURAL DEVELOPMENT AS WELL AS SUSTAINABLE ENERGY DEVELOPMENT

RECOMMENDATIONRECOMMENDATION

ABOUT US ABOUT US

Bhoruka Power Corporation Limited The Company is a leader in the Renewable Energy Sector in India. The Company remains the first in the post independence period to set up and operate a Hydel project in the private sector (Nov. 1992) The Company spearheads environmentally friendly Renewable Energy projects. Current portfolio is mainly Small Hydel and to some extent Wind. By early next year the capacity will touch 80 MW and by 2007, 100 MW. The Company has to its credit many honours and has received the ISO 9001and ISO 14001 Certifications. It is currently working for the ISO 18001 recognition The Company is backed by a unique mix of Engineering Intellect, Project Management Capability, Deep Industry experience and committed man power.

PHOTOSPHOTOS

MADHAVAMANTRIMADHAVAMANTRI

PHOTOSPHOTOS

SRD KATTEWIND PROJECT - JAISELMER

NERIA CHAYADEVI

Mr. S. ChandrasekharManaging DirectorBhoruka Power Corporation

Limited# 48 Lavelle RoadBangalore 560 001 – IndiaTel: +91 80 2227 3285 (D) 2227

2271(O)Fax: +91 80 222 45246Email: sekhar@bhorukapower.com

Contact Details

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