Environmental Technologies Industries
||Environmental Technologies Industries
|India Environmental Export Market Plan|
|Chapter 4 - Energy Efficiency and Renewable Energy|
The market for energy efficiency and renewable energy technologies in India was estimated at $2.5 billion in 1999.
Energy conservation is recognized the world over as a major tangible resource that can compete economically with other supply options. Energy efficiency involves improvements in the efficiency of energy extraction, conservation, transmission, distribution, and use. Efficiency improvements produce increases in energy productivity because of optimization of fuel use patterns. Therefore, there is a reduction in energy costs - social and environmental - including carbon dioxide emissions reduction and reduction in future capital investments in energy.
Energy is an important factor of production, along with land, labor, and capital. India is an energy-deficient economy. Although India accounts for 16 percent of the world’s population, it uses only 3 percent of the world’s energy and emits 3 percent of all carbon dioxide produced. Per capita energy consumption is likely to reach 0.4 tons of oil equivalents versus the present 0.2 tons of oil equivalents because the projected population of 1.2 billion will consume 468 million tons of oil equivalents by 2012. India’s energy per unit of GDP is one of the highest among the developing countries. Electric intensity (the electricity consumed per unit of GDP produced) remains at 0.91 kilowatts per dollar of GDP, which is twice that of Taiwan or Malaysia. The rise in energy consumption patterns will lead to environmental problems requiring solutions through energy efficiency and conservation.
Historically in India, little effort has been made to manage energy demand and minimize its use. It was only during the oil crisis of the 1970s that real energy efficiency and energy conservation measures began. During this time, the Indian government mounted several conservation efforts and established the Petroleum Conservation Research Association in 1976 to propagate conservation of petroleum products. The Ministry of Power (MOP) adopted a key role beginning in 1985 and established the Energy Management Center with assistance from the European Union in 1989.
The government formulated policies and programs to achieve environmentally responsive energy and industrial development by establishing a framework in the eighth Five-Year Plan (Indian fiscal year 1992-1993 to 1996-1997) for achieving higher levels of energy efficiency and conservation and resource use in a comprehensive manner. This framework includes demand-side management programs and the introduction of appropriate trade, fiscal, and pricing policies; technological renovation; institutional development; and environmental preservation. The government’s goal is to achieve sustainable energy development through energy conservation and environmental protection. The Indian government chose to make the refinery sub-sector its model for energy efficiency and requested an Asian Development Bank loan (Loan No. 1212 - IND, amounting to $39.3 million, which was approved in 1992) to achieve this goal. One aim of the project was to encourage industry to start energy-efficiency investments that would lead to both energy savings and pollution reduction. The major drivers for energy efficiency in India are market based, but there is also a strong government effort to enforce policy initiatives in the power, fuel, and environmental sectors. Here are a number of factors that will contribute to increasing demands in this sector:
- India requires massive investments in new electronic generation capacity and must acquire fuel at a cost of $7 billion to $8 billion per year.
- India must lower the cost of energy transmission and distribution (it currently accounts for a 1 percent to 2 percent loss of GDP per year) vis-à-vis generation capacity.
- India must internalize environmental and pollution costs caused by power generation and industrial use of fuels by strictly enforcing environmental and pollution-control laws.
- India must increase the price of electricity and fuels by abolishing low tariffs and heavy cross-subsidies; it should also improve its revenue collection.
- India must take advantage of the relatively low cost of implementing energy efficiency. Studies show that energy conservation costs one-third to one-fifth as much as responding to energy needs on the supply side.
- India must adopt power-sector reforms: restructuring state electricity boards (SEBs) and privatizing the energy sector.
- India should adopt global market incentive mechanisms such as the Clean Development Mechanisms (CDMs).
Estimated Market Size and Growth Prospects
A USAID study estimates that India’s energy-efficiency market is $500 million, with a potential ranging between $3.1 and $4.4 billion. It estimates the market will grow 5 percent annually over the next two to three years. Forty-five to 50 percent of sales in this sector are expected to be to industry and roughly 35 percent to commercial establishments. This market potential also includes equipment leasing, which is estimated at $500 million and is growing 12 percent annually. The major consumers of electricity are the domestic, agriculture, and industrial sectors. The domestic and agriculture sectors constitute about 47 percent of total consumption, but tariffs for the two sectors are lower than the cost of supply. The industrial sector in India accounts for approximately 45 percent of energy consumption.
The industrial sector has become energy intensive because of the emphasis on self-reliance in India’s early development plans. Consequently there were substantial investments in basic and energy-intensive industries such as steel, cement, fertilizer, heavy chemicals, refineries, aluminum, textiles, and pulp and paper. In these sectors, the annual energy savings potential is estimated to be in the range of 7 million to 12 million tons of oil equivalents.
The results of phase 1 of the Asian Development Bank funded study mentioned earlier reveal the potential for improved energy-use patterns and pollution reduction in 12 sectors: fertilizer, textiles, sugar, petrochemicals, chlor-alkali, aluminum, mini steel, food processing, paper, glass and ceramics, cement, and foundry. These sectors were selected on the basis of their absolute energy consumption, energy-saving potential, environmental improvement potential, responsiveness to implementing energy conservation programs, and replication potential of identified energy-saving measures.
The Asian Development Bank report highlights the following 12 sectors as having the highest potential: pulp and paper, mini steel, fertilizer, cement, sugar, textiles, aluminum, glass and ceramics, petrochemicals, foundry, chlor-alkali, and food processing.
In the cement sector, coal and lignite are the main fuels used. Electricity is supplied by the grid and by captive power generation. Captive power plants supply about 19 percent of the total electricity consumed by the cement sector. Energy-efficient technologies that have been identified are electricity generation, low primary air burners, efficient clinkers and coolers, pre-homogenization of coal, and third-generation separators.
In the pulp and paper sector, coal and lignite are also the main fuels used. Energy-efficient technologies that have been identified are modified cooking processes, falling-film multiple-effect evaporators, lime sludge reburning, brown stock washing, screening and bleaching, innovative paper machine technologies, and improved pulp de-inking. The various energy-conservation surveys indicate a savings potential of 20 percent, equivalent to an annual savings potential of $60 million. The estimated investment required to achieve these savings is $100 million. The identified technologies will require an investment of $1 to $20 million and have an estimated payback period of three to four years, depending on the scale of operations.
There are 1,100 secondary steel sector units consisting of mini steel mills, arc furnaces, and rolling film furnaces, with annual energy consumption of $350 million where energy costs account for 25 percent of the manufacturing costs. The annual energy-saving potential in this sector has been estimated at $29 million, which requires an investment of $49 million. The identified technologies require an investment of $0.5 million to $1 million with a typical payback period of one to eight years, depending on technology and scale of operation.
The fertilizer industry is one of the major consumers of hydrocarbons. The absolute energy consumption by this sector has been estimated at 112 million Giga calories with specific energy consumption per ton of urea varying between 5.79 Giga calories for the most efficiently operating plant to 13 Giga calories for the most inefficient plant. The energy-saving potential in the sector is 10 percent of the total energy use. The identified technologies require an investment ranging from $20 thousand to $15 million with a payback time of one to six years, depending on scale of operations and technology.
The sugar industry has an annual energy consumption of around 100 million Giga calories with an average steam consumption of 0.55 tons of steam per ton of cane crushed. The average electricity consumption is around 24 kilowatt hours per ton of cane crushed. The adoption of energy-conservation measures can produce a reduction of 20 percent in energy consumption. The total cogeneration potential that has been identified in the sector is estimated at 3,500 megawatts.
The total energy consumption in the textile sector is estimated at 30.56 million Giga calories, of which coal, fuel oil, and electricity contribute 18 million Giga calories, 5.25 million Giga calories and 7.31 million Giga calories, respectively. Fuel and power account for 12 percent to 15 percent of the total cost of production, respectively. The investment required to implement the identified technologies ranges from $20 thousand to $1 million, with a payback period of one to three years.
The first steps in developing the market for energy efficiency are already being taken by donor agencies. The approaches adopted by major agencies to develop the market are given below.
USAID has three major projects that focus on achieving increased financial and environmental sustainability in the energy sector. First, the Energy Management Consultation and Training (EMCAT) Project uses a combination of technical assistance and training to identify and support policy reforms related to power-sector regulation and restructuring, increasing investments in energy, energy efficiency, and demand-side management, and promoting innovative financing of energy-efficiency projects. Second, the Greenhouse Gas Pollution Prevention Project is designed to reduce greenhouse gas emissions by providing specialized technical assistance for efficiency improvement in Indian industry. And third, the Energy Conservation Commercialization Project (ECO), which is a $25 million USAID-funded project that has been recently awarded. Some of the initiatives of USAID follow:
- Demand-Side Management (DSM): The Haryana Electricity Board - Adaptable Program Loan (APL) is a $35 million loan project approved in December 1997 for DSM capacity building, agricultural DSM, biomass cogeneration, regulatory reform, and distribution systems in Haryana.
- Clean Technology Initiative (CTI): CTI Phase 3 is a $3.2 million project designed to improve energy efficiency and reduce greenhouse gas emissions in major greenhouse gas emitting sectors through targeted technical and financial assistance for implementing Environmental Management Systems (EMS) and financing demonstration projects.
The World Bank first explored the possibility of starting the DSM as a component of the ongoing State Power Sector Restructuring (SPSR) program in 1994. The following are the goals of this program:
- Improving electricity availability by reducing losses and improving overall efficiency across all sectors (e.g., industrial, agricultural, commercial/residential, municipal) and time periods through end-use customer electricity efficiency.
- Keeping the load shape as flat as possible during the removal of curtailments through the use of efficiency measures for selected customers, innovative tariffs, and other load management measures.
- Utilizing customers’ on-site generation (including cogeneration) to reduce power shortages and add power quality equipment (capacitors, transformers, and voltage regulators) to improve power quality.
- Increasing revenues by using savings from low-tariff sectors to meet unsatisfied demand in high-tariff sectors.
The World Bank has sought to achieve these broad DSM program goals through a variety of energy-efficiency and DSM activities. These activities vary from state to state and utility to utility, depending on their characteristics, including consumption by sector, state electricity board (SEB) load shape characteristics, and the nature and profile of energy-efficiency service providers available. The bank has focused on developing the technical and institutional capacity within a utility to develop, design, and implement DSM projects in end-user facilities. The bank has also attempted to create a load research function and organization, develop and implement a fast-track DSM pilot demonstration project, and design appropriate financial intermediation structures and procedures.
The Asian Development Bank (ADB) has focused on restructuring energy-efficiency projects at the state level (Gujarat and Madhya Pradesh) and providing assistance to development financial institutions such as the Industrial Development Bank of India (IDBI) and Industrial Credit and Investment Corporation of India (ICICI). Some ADB feasibility studies involve privatization of distribution systems and utility master plan preparation. The ADB had given the IDBI a $150 million line of credit for term lending to energy-efficiency and modernization projects sponsored by creditworthy industrial firms. The entire line of credit has been committed to industry projects in seven of the 13 sectors identified in the ADB report. A second line of credit is under discussion.
It is prudent to analyze the issues and barriers in the energy-efficiency market because it is in the developmental stage. It seems clear that energy saving will remain an important part of the national energy policy in India. National policies and programs on energy efficiency, however, have yet to focus on the mechanisms to intensify the pace of the energy conservation movement. Energy and energy-efficiency issues are compounded by an exponential increase in greenhouse gas emissions and other environmental constraints. The global response to climate change and the emergence of the Clean Development Mechanism (CDM) and the evolution of energy service companies (ESCOs) provides a framework for application of environmentally beneficial energy-efficiency projects. These energy-efficiency projects may provide the least-cost strategy for achieving emission reductions. Additional factors such as high energy intensities, rising energy demand, capital and capacity shortages, and environmental constraints augur well for continued growth in the energy-efficiency market in India.
Some of the barriers to energy efficiency that have been identified are lack of consumer awareness, absence of adequate data bases and expertise, technological obsolescence, inefficiency of pricing policies, and lack of effective coordination among utilities, consumers, and other agencies. A strong data base should be compiled, collated, and made available so that the consumers may be trained in technical and economic aspects of energy efficiency. Lack of incentives and capital for energy-efficiency projects has led to technological obsolescence. It can be inferred that broad national, economic, and institutional factors can sometimes impede investments to improve energy efficiency even when it is cost-effective and might offer attractive rates of return.
The energy-efficiency market is still in its inception stage. ESCOs will play a major role in developing the energy-efficiency market. U.S. ESCOs might consider entering the market through Indian partners, which will also provide a catalyst for the growth of the U.S. technology and equipment market in India.
Renewable Energy Market
Growing environmental concerns and decreasing reserves of fossil fuels have forced India to consider renewable sources of energy. In 1982, a full-fledged Ministry of Non-Conventional Energy Sources (MNES) was established to give specific attention to renewable energy development programs. Subsequently, a separate financial institution, the Indian Renewable Energy Development Agency (IREDA), was organized to provide financing for renewable energy technology projects.
The MNES estimates that the total potential in India for renewable energy is 100,000 megawatts.
Table 4.1 - Renewable Energy Potential
MW = megawatt
|Biogas plants||12 million|
|Improved wood stoves||120 million|
|Solar energy||20 MW/Km2|
|Wind energy||20,000 MW|
|Small hydro power||10,000 MW|
|Ocean energy||50,000 MW|
Km2 = square kilometer
Source: Ministry of Non-Conventional Energy Sources.
The MNES recognized the importance of the renewable energy sector. The comprehensive National Renewable Energy Policy, which helps promote renewable energy in a systematic manner, is a step in this direction. Renewable energy programs have been categorized under two basic sections. The first section concentrates on providing details of renewable energy sources: biomass, wind, and solar. The second section lists details of various renewable energy technologies that have been broadly categorized as wind energy conversion systems, small hydro-based power generation, solar energy conversion systems, and biomass-based energy conversion systems. The ninth Five-Year Plan record (1992-1997) has been the most significant in the development of the renewable energy sector in India. The following are primary MNES goals under the plan:
- 3,000 megawatts of additional power from renewable energy;
- Installation of 10,000 photo-voltaics-based water pumping systems;
- Solar water heating systems (SWHSs) for more than 500,000 households;
- A thrust on small hydro power of up to 15 megawatts.
An example of the increased attention to the MNES programs is the fact that the installed capacity of grid-connected wind farms was only 47 megawatts in the early 1990s, but had grown to 1,378 megawatts by 1997, accounting for 1.5 percent of the total installed power capacity in the country. Solar, wind, biomass, and small hydro power are the main sources of renewable energy used for power generation that are receiving increased attention from the private sector. The progress achieved so far in developing the renewable energy program and the emerging trends in the various sub-sectors are described below:
- Biomass: During 1998–1999, 31 biomass gasifier systems were installed with a combined capacity of 3085 kilowatts. Although this capacity load seems insignificant, the benefits to remote villages have been enormous.
- Wind energy: India ranks fourth in the world, with 995 megawatts of installed capacity of wind-based power generation. The estimated technical potential for wind energy is now 9,000 megawatts, but this value is likely to increase. One hundred sixty locations with a potential for generating approximately 5,000 megawatts have been identified.
- Solar photo-voltaic systems (SPVs): The SPVs were negligible in the beginning of the eighth Five-Year Plan (1992), but today more than 170,000 individual and community lighting systems and 1-megawatt power generation units have been launched (thermal as well as photo-voltaic) in the desert areas of Rajasthan.
- Small hydroelectric: Small hydroelectric projects have the estimated potential for generating 10,000 megawatts of power. So far 225 small hydro projects (up to three megawatts) have been completed. One hundred eighty-five projects with an aggregate capacity of 188 megawatts are under construction.
Estimated Market Size and Growth Prospects
It is estimated that a total investment of $3.81 billion will be required to meet targets set under the ninth Five-Year Plan discussed above. This amount includes government support amounting to $1.23 billion from budgetary allocations with the remainder being met by the private sector. It is anticipated that a growth rate of 7 percent will be achievable over the next three to four years.
The market potential in non-conventional energy sources and the presence of supportive policies and financing presents diverse business opportunities for domestic as well as foreign investors. Brief descriptions of the market and the associated opportunities follow:
The first energy source with market potential is biomass-based energy. Biomass is essentially defined as all forms of matter derived from biological activities that can be burned directly for heat or fermented to alcohol based fuels, anaerobically digested for biogas production, or gasified to produce high-energy gas.
Biomass is in abundant supply in India (approximately 400 million tons from crop residue alone) from the vast tracts of land and the water bodies lying inland as well as on the coasts. India’s huge population of livestock and the rapid growth of human population have augmented the supply of biomass found from the natural environment. Though biomass alone meets 57 percent of the total national energy requirements, it is rarely accounted for and is generally regarded as a low-status fuel because of the scattered nature of the resource, an insufficient data base, and unreliable estimates on consumption patterns. The principal sources of biomass may be categorized as forest wood, agricultural residue, animal wastes, and municipal wastes.
In regard to market opportunities, biomass-based energy is currently used for the following purposes: improved chullas (indigenous stoves), biogas production, and biomass briquetting.
The technologies for biomass conversion include combustion, gasification, incineration, and pyrolysis. The combustion technology is similar to that of coal-based thermal power generation; the biomass is burned in a boiler to generate steam that is used to drive a turbine to generate electricity. The gasification technology involves the conversion of solid biomass into a combustible gas through thermo-chemical combustion that is used in dualfuel or gas engine/turbines to generate electricity.
Biomass power generation has several fiscal incentives. One is accelerated depreciation: 1000 percent depreciation can be claimed in the first year for fluidized bed boilers; back pressure, pass out, controlled and condensing turbines with power generation with boilers; high-efficiency boilers; and waste heat recovery equipment. Another incentive is a five years’ income tax holiday with 30 percent exemption for the next five years. There is also a customs duty leviable for non-conventional and renewable sources of energy power projects of less than 50 megawatts capacity (under project import category) that is 220 percent ad valorum. That covers machinery and equipment component parts required for generation of electric power. In addition, there is a central excise duty and central sales tax exempted for renewable energy devices, including raw materials, components, and assemblies. In certain states, a general sales tax exemption is also available.
A second marketable energy source is wind energy. Although winds are, by nature, variable, there are certain predictable patterns of wind velocity and direction. In India, from March to August, the winds are uniformly strong over the majority of the peninsula (all except for the eastern peninsula coast). The Indian Institute of Tropical Meteorology (IITM) has identified a number of areas where the annual wind speeds are in excess of 18 kilometers per hour. Potential windy locations have been identified in the flat coastal terrains in southern Tamil Nadu, Kerala, Gujarat, Lakshwadeep, and Maharashtra. Favorable locations have also been identified in some inland locations of Karnataka, Andhra Pradesh, and Madhya Pradesh. One hundred sixty locations with a potential for generating approximately 5,000 megawatts of power have been identified in these states. Some of the hilly terrains of northeast India should prove to be well suited for wind energy farming. There are several estimates, as high as 50,000 megawatts, on the total potential for wind power generation based on the coastal length and land area.
Large public sector power-generation entities such as the National Thermal Power Corporation (NTPC), National Hydro Power Corporation (NHPC), and state power development corporations have been asked to earmark a certain share of all new capacity additions for renewable sources. Annual sales receipts of the wind power generation industry have reached more than 150 million rupees.
In regard to market opportunities, wind-based energy is predominantly used to generate power from shaft-based gear systems. The other notable uses are windmills for drawing water and grinding grain.
Wind-based energy has technological uses as well. Wind turbines that have been installed so far in the country are the fixed-pitch “stall” regulated design; however, the recent trend is toward better aerodynamic design, use of lighter and larger blades, higher towers, direct drives, and variable-speed gearless operations using advanced power electronics. Electronically-operated wind turbines do not consume reactive power, which is favorable for maintaining a good power factor in the typically weak local grid networks.
A large number of firms have formal joint ventures with foreign wind turbine firms for joint venture/licensed production of wind electric generators in India. The Center for Wind Energy Technology (C-WET) is being established as an autonomous registered society in Chennai.
There are also fiscal incentives for wind-based energy. IREDA has a revolving fund for development, promotion, and commercialization of renewable energy technologies that provides soft loans. India has been a recipient of international funds from the World Bank, the Global Environment Fund (GEF), ADB, and Danish Agency for International Development (DANIDA). In addition, the Indian government is negotiating with the government of Germany and the Overseas Economic Cooperation Fund (OECF). Indian financial institutions such as the IDBI, ICICI, Industrial Finance Corporation of India (IFCI), Rural Electricity Corporation, and the Power Finance Corporation (PFC) have also been financing wind power projects, and financing and leasing firms in the private sector have been extending support. IREDA’s interest rates have been brought down to 14 percent with a repayment period of 10 years and financing for 75 percent of project costs.
A host of incentives for the promotion of wind farms have been established. These include tax concessions, such as accelerated depreciation, tax holidays, soft loans, customs and excise duty reliefs, and liberalized foreign investment procedures.
A third energy source is solar energy. Long-term data on sunshine intensity and duration is very important for the planning of harvesting solar energy. Because of its location, India offers abundant scope for harvesting solar energy. The annual average daily total solar radiation in India varies from 4.5 kilowatt hours per square meter per day to 6.4 kilowatt hours per square meter per day depending upon the location. The annual average availability of solar radiation is in the range of 2,100 kilowatt hours per square meter per year. The annual sunshine hours vary between 3,200 (northwest Rajasthan) and 2,000 (northeast region). In most parts of India the minimum number of annual sunshine hours is more than 2,600. The total estimated potential for solar energy generation in the country is 20 megawatts per square kilometer.
The solar thermal program also covers solar cookers, solar air heating systems, and solar architecture.
As a fiscal incentive for solar energy, SEBs are allowed to support the manufacture of solar cells and modules. The ministry provides two-thirds of the project cost, subject to a maximum of 20 million rupees ($0.5 million) per 100 kilowatts, mainly for the procurement of SPV modules, structures, cables, power conditioning units, and grid interfacing equipment. The remaining cost of civil works, foundations, extension of grid lines, installation, testing, and startups must be met by the implementing agencies. In addition, the ministry provides 100,000 rupees ($2,500) for the preparation of detailed project reports and 2.5 percent of its share subject to a maximum of 500,000 rupees ($12,500) for coordination, monitoring, evaluation, data collection, and preparation of reports to the state nodal agencies.
A final energy source to consider is small hydro power. Among the various types of renewable energy sources, small hydro power is significant from the point of view of decentralized power generation, especially in the hilly regions where other forms of energy have limited potential for generation. Recognizing this fact and the fact that hydro power is environmentally benign, the MNES has taken a number of steps to promote small hydro projects of up to three-megawatt station capacity. India has ample opportunity to generate power from small hydro projects, considering the number of rivers that flow in the hill country. It is estimated that 10,000 megawatts of power could be generated from small hydro projects.
As part of the United Nations Development Program/Global Environment Fund (UNDP/GEF) Hilly Hydro Project, a detailed exercise was undertaken to prepare zonal plans in 13 participating states in the Himalayan and sub-Himalayan regions. Models have been developed taking into consideration the regional flow duration curves, geological and seismological data, and vegetation cover. The data base now includes 3,349 potential sites with an aggregate capacity of 2,852 megawatts for projects up to a three-megawatt capacity and 662 identified sites with an aggregate capacity of 5,519 megawatts for projects of a 3- to 15-megawatt capacity.
As fiscal incentives for small hydro projects, the MNES provides financial assistance for surveys, investigations, preparation of detailed project reports, government-owned demonstration projects, interest subsidies for commercial demonstration projects, renovation and modernization of older projects, and the development and upgrading of water mills.
The inference is that the Indian government and the private sector are taking a number of initiatives to exploit non-conventional energy sources. Since the inception of the MNES, the number of initiatives has increased tremendously. Although the potential for generation of power from non-conventional and renewable sources of energy is immense, the potential has yet to be fully exploited. Exploiting the potential will take careful planning and steady support from the government, research organizations, and financial institutions.
Given that the renewable energy industry is in its nascent stage, there are not many private-sector firms in this field. Most of the ongoing programs receive technical and financial support from the Indian government and its subsidiary organizations. There are numerous private suppliers for biomass-based energy generation, but there are not many private firms for other forms of renewable energy (solar, wind, and small hydro). There are only a few firms that are known manufacturers and suppliers of equipment for renewable energy, including Central Electronics Limited; Energy Research Institute (TERI); Tata; BP Solar; and NEPC MICON, BHEL (Wind Power).
Clean Coal Technologies
Coal plays an important role in the growth of India’s economy. It is a major indigenous source of commercial energy. Coal production rose from 30 million tons in 1947 to 290.04 million tons in 1998-1999 and is estimated to reach 607.10 million tons by 2006-2007. According to 1999 estimates, total coal reserves in India are 208.75 billion tons, of which 79.11 billion tons are proven while 83.42 and 41.21 billion tons are indicated and inferred reserves, respectively. The projected annual growth rate during India’s 10th Five-Year Plan is expected to be 4.14 percent. Fifteen percent to 35 percent of the net geological reserves are underground mining extractable/recoverable reserves. Fifty percent to 70 percent of the net geological reserves are extractable/recoverable in opencast mining ranges. Coal will probably remain the mainstay of power generation in India for some years to come. The quality of raw coal received currently by the power plants varies as follows:
- Ash Content - 25 to 55 percent (average 40 percent)
- Moisture Content - 4 to 7 percent
- Sulfur Content - 0.2 to 0.7 percent
- Gross Calorific Value - 3100 to 5100 kilocalorie per kilogram
- Volatile Matter - 20 to 25 percent
The major consumers of coal are the power, cement, and steel sectors. The projected growth rate of the power, cement, and steel sectors during the next decade is estimated at 8 percent, 5 percent, and 4 percent, respectively. Coal-based power-generation capacity is projected to exceed 80,000 megawatts out of total anticipated installed capacity of 140,000 megawatts by 2020.
The market for clean technologies is driven by the enforcement of legislative requirements. The environmental impacts that result from using coal with high ash content have necessitated the imposition of restrictions on the use of coal by the Ministry of Environment and Forests (MOEF). The MOEF notification dated September 19, 1997 (and an amendment dated June 30, 1998) is driving the market for clean technology. Business opportunities - mainly fluidized bed combustion, circulating fluidized bed combustion, atmospheric fluidized combustion, and pressurized or integrated gasification combined cycle technologies - are available in clean coal technologies.
According to this notification, any thermal power plant located (1) beyond 1,000 kilometers from a pithead or (2) in urban, sensitive, or critically polluted areas, irrespective of distance from a pithead, shall use beneficiated coal with an ash content not exceeding 34 percent.
This notification was further amended on June 30, 1998. According to the amendment, the phrase “beneficiated coal with an ash content not exceeding 34 percent” has been replaced by “raw or blended or beneficiated coal with an ash content not exceeding 34 percent on an annual average basis.”
Another amendment to this notification stated “Any thermal power plants using fluidized bed combustion, circulating fluidized bed combustion, atmospheric fluidized combustion, pressurized fluidized bed combustion, or integrated gasification combined cycle technologies or any other clean technologies as may be notified by the central government in the official Gazette shall be exempted from the above mentioned notification on usage of beneficiated coal.” Urban areas have been further defined as areas having a population of more than 1 million according to the 1991 census.
Other major market drivers for coal are the following:
1. The amendment of the Coal Mines Act Nationalization in 1993, allowing firms engaged in the generation of power and production of iron and steel to mine coal for their captive consumption
2. A separate notification in 1996 that allows cement firms to mine coal for their captive consumption
3. Identification by the government of India’s 47 noncoking coal blocks and nine coking coal blocks for privatization
4. The dismantling of the Administered Pricing Mechanism for coal and the linking of coal prices to market price by the year 2000
According to recommendations of the planning commissions’ committee on Integrated Coal Policy, the use of clean coal technologies was cited as an important step toward meeting the demand for coal. The committee recommended formulation of a policy to import clean coal technologies through private sector firms or joint ventures, washing of low-volatile-medium coking coal, and better capacity utilization of washeries.
MOEF Definitions from 1997 Notification
- “Beneficiated coal” is defined as coal containing a higher calorific value and a lower ash content. Beneficiated coal is obtained from raw coal through a physical separation or washing process.
- “Pithead power plants” are defined as power stations having captive transportation systems for their exclusive use for transporting coal from the loading point at the mining end to the unloading point at the power station without using normal public transportation systems.
- “Sensitive areas” are defined as areas with an ecological balance that is prone to being easily disturbed.
- “Critically polluted areas” are defined as areas where pollution levels have reached or are likely to reach critical levels and that have been identified as such by the central government or the Central Pollution Control Board (CPCB) or a State Pollution Control Board (SPCB).
Estimated Market Size and Growth Prospects
The demand for energy could be minimized by efficient use of energy resources through clean coal technologies. Clean coal technologies are generally defined as technologies designed to enhance both efficiency and environmental acceptability of coal extraction, preparation, and use. Clean coal technologies offer the twofold potential of significant reductions in environmental emissions and improved efficiencies when used for power generation. These technologies include use of the integrated gasification combined cycle (IGCC), pressurized fluidized bed combustion (PFBC), and atmospheric fluidized bed combustion (AFBC) to improve the efficiency of combustion. Clean coal technologies have the potential to create 23,777 megawatts of energy capacity, equivalent to $22 billion, in India. The present market size in sales receipts is approximately $200 million, with an expected annual growth rate of 10 percent.
The high ash content of Indian coal that is available to the power sector produces several operational and environmental problems. The transportation of inert material and the management of 70 million tons of ash require a huge investment. Apart from resulting in an additional burden on transportation systems because of the presence of large stones, shales, and other heavy material, it leads to the jamming of coal conveyors and systems, the breaking of hammers, and a high rate of wear and tear on coal-handling plants. Bad coal also causes erosion of boiler tubes. The directive issued by the MOEF beginning July 1, 2001, that all power plants situated 1,000 kilometers from a coal field or in sensitive areas must use washed/blended coal containing no more than 34 percent ash has given a tremendous thrust to coal beneficiation. In addition to reduced cost of transportation, energy conservation, and pollution control, there has been a significant increase in the beneficiation of non-coking coals for use by the power sector.
According to an ADB study conducted in 1998, the investment requirement for coal-preparation plants to respond to this demand for coal will be approximately $820 million. Blending of high-ash coal with imported low-ash coal is emerging as a cheaper alternate because the cost of blending is much less than the cost of washing; in addition, the capital investment is smaller. Several power stations are importing Australian or South African higher quality coal and are blending it in their plants with indigenous coal. However, the benefits of using beneficiated coal are many. For example, consider the following advantages of using beneficiated coal from Nandan Washery at Satpura Power Station:
- Improvement in the plant utilization factor for the unit (from 73 percent to 96 percent)
- Reduction in coal consumption (from 0.77 to 0.55 kilograms per kilowatt hour)
- Reduction in auxiliary power consumption (1.5 percent)
- Reduction in outage/downtime of coal mills because of the absence of foreign material
- Reduction or elimination of fuel oil support
- Reduction of furnace wall slagging, boiler tube leakage, clinker formation, and abnormal erosion
- Improvement in boiler efficiency (2 percent)
- Reduction in smoke and dust emission
- Reduction in maintenance on boilers and auxiliaries
- Reduction in ash generation and consequent reduction in ash disposal
The demonstrated advantages seem to fit well with the potential use of this technology in the power sector. Some of the power utilities are adopting this technology:
- Mumbai Suburban Supply Company (BSES) has formed a joint venture with Spectrum Technologies Inc., USA (ST), to establish a 2.5 metric ton per annum washery at the Dipika mine in the Korba coal field owned by South Eastern Coal Fields, Ltd., (SECL) to supply washed coal to the Dahanu Power Plant in Maharashtra.
- Calcutta Electricity Supply Company (CESC) is exploring the possibility of establishing a coal washery, as it recognizes the possibility of capital cost reductions when washed coal is used in power plants.
- Maharashtra State Electricity Board (MSEB) is considering the possibility of developing, in collaboration with Lurgi A.G. (Germany), a coal washery at the mine head and at the power plant site apart from coal gasification.
The MOC believes that third-party involvement should be encouraged for developing coal washeries because it does not perceive economic benefits for the coal firms in washing the coal under the present pricing regime. There are two possible options:
1. The firms can install washeries and washed coal can be sold to power plants at a negotiated price under legally enforceable supply agreements.
2. Power plants can install washeries near the coal mine on their own or through private parties.
Earlier steps taken by Coal India, Ltd., to establish washeries on a build-own-operate basis in the private sector have not yielded significant results. This appears to be due to nonviable commercial terms and conditions with power producers. The cost of constructing a coal washery may be included in the capital cost of a power project, and the tariffs of power should be adjusted accordingly. Construction of washeries by private parties that are promoters of power stations, however, must be supported to make it a successful venture. Option two has been successfully demonstrated in the case of the STBSES joint venture. The coal-mining firm is responsible for delivering raw coal to the washery. The washery operator for and on behalf of the power plants washes the coal, which obviates the need for tripartite agreements and other related legal arrangements.
IGCC technology promises to be the technology for mid-sized power plants in the near future. Initially Bharat Heavy Electricals Limited (BHEL) installed a 6.2-megawatt Combined Cycle Demonstration Plant (CCDP) at its Tiruchirapalli unit with an indigenously designed pressurized moving bed gasification (PMBG) plant with a 150-tons-per-day coal capacity to develop this technology. In addition, an 18-tons-per-day pressurized fluidized bed gasification (PFBG) pilot plant was developed in Hyderabad by BHEL.
New coal-fired capacity is expected to be largely conventional
in design (i.e., sub-critical pressurized and fluidized,
pulverized fuel), although there is increasing
interest in the more advanced fluidized bed combustion
(FBC) and gasification technologies. Indian manufacturers have already developed the capability of supplying small atmospheric pressure “bubbling” FBC units, which are already widely used for industrial boilers. BHEL is currently commissioning a 2-by-125 megawatt circulating fluidized bed combustion (CFBC) boiler to Gujarat Industries Power Projects Limited at Surat. More such projects are in the pipeline.
The market for FBC technologies should grow at a rapid pace and produce benefits once a few units are operational in India.
There are very few suppliers of clean coal technologies in the world today. Asea Brown Boveri (ABB) and BHEL are the major players in the large sector, while Thermax and Cethar Vessels are the players in the medium and small sector. The market drivers indicate rapid growth in this sector because of compliance requirements that will be enacted and enforced by June 2001. One U.S. firm has already established its presence through washery demonstration projects implemented by BSES. In view of enforcement requirements, U.S. firms will have the opportunity to exploit advantages in clean coal technologies.
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