India is predominantly an agricultural economy. The estimated\u00a0food grain\u00a0production in India in 2011-12 is estimated as a little over 250 MT (Source: PIB). Since biomass<\/strong> energy is primarily derived from the agricultural waste, this sanctify India with huge potential for Biomass power generation.\u00a0However\u00a0reality eludes this. The growing O&M costs and stagnant tariffs have made biomass power development financially unviable for the developers. As a result, despite the country having a biomass potential of 8,000 MW; the current installed capacity for the same stands way below – only 1050 MW.<\/p>\n Before we analyze the major bottleneck in the development of biomass based power plant, we need to look at the factors on which the cost of production of biomass power depends. The various\u00a0financial\u00a0and operational factors affecting the same are:<\/p>\n The debt equity ratio for a biomass based power plant has been taken as 70:30 and the average life span of a biomass based power plant being 20 years.<\/p>\n While initiating the upward tariff revision<\/em> for the biomass power generation CERC<\/strong> considered the above factors as well as inputs from IREDA and developers submitting application for Clean development Mechanism (CDM). The lowest tariff is being offered in Madhya Pradesh at Rs. 3.87\/unit<\/em> and the highest being at Punjab at Rs. 4.95\/unit<\/em>.<\/p>\n CERC claims the capital cost for Biomass power plant as Rs. 44.5 million per MW. However, developers\u00a0believe\u00a0that this cost is far from the realistic feasibility cost for the same. On an estimate the actual capital cost that comes out for the same is between Rs. 57.5 Million\/MW to Rs. 60 Million\/MW<\/em>.<\/p>\n Similarly, Inflation has been recorded as 9% but CERC assumes it to be 5%. Also, the estimate by CERC doesn\u2019t include the evacuation cost for the generated power. No provision for the cost used in collection and storage of biomass, which\u00a0happens\u00a0to be a labor intensive process has been taken into account.<\/p>\n i) Fuel <\/strong>cost for biomass varies between Rs 2,000 per ton to Rs 2,800 per ton depending upon the type of fuel used. Thus for a Unit of power generated, the cost comes out to be between Rs 3.60\/unit to Rs 3.90\/unit.<\/p>\n ii) The O&M <\/strong>cost depending upon the age of the plant comes out to be Re 0.60 to 0.80 per unit.<\/p>\n iii) Interest<\/strong>\u00a0charges of \u00a0Re. 0.70 to 0.80 depending upon the type and amount of borrowing<\/p>\n iv) Depreciation<\/strong> cost as Re 0.50 to Re 0.80.<\/p>\n Hence, the total cost comes as\u00a0Rs 6 per unit<\/strong>. (Source: Renewable Watch May, 2012). Thus, the\u00a0calculated\u00a0cost comes out to be substantially higher than the revised cost proposed by CERC.<\/p>\n Another major issue lies in the financing<\/strong> of biomass projects.\u00a0Majorly\u00a0the\u00a0financing\u00a0is done through domestic banks as the International banks have been reluctant in financing biomass project. The developers have been pushing the Government to treat it as a priority sector, since the fuel availability and procurement for biomass hugely depends on agriculture sector and involves direct procurement from the farmers on a cash basis. The fuel price depends on crop which varies from year to year.<\/p>\n Thus we see increasing Project cost and uncertainty in fuel supply<\/em> has led to stagnation in the biomass power development. Only 5-6 projects have been commissioned<\/em> in the last two years and not a single project has been able to receive its financial closure in the last year.<\/p>\n Studies suggest if the financing and tariff issues are resolved, close to 3,000 MW of projects can come up in the 12th five year plan, majority of them being from the state of Maharashtra<\/strong>, Punjab<\/strong> and Bihar<\/strong>.<\/p>\n Also Read on GWI:<\/strong><\/p>\nFactors Affecting the Cost of Production Of Biomass<\/strong><\/h3>\n
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Calculation of Cost<\/strong><\/h3>\n