The alternates
Fuel from algae
Gayatri Ramanathan
Given an estimated renewable energy potential of 220 Gw and a current utilization of 14.8 Gw, India has barely begun to scratch the surface of its renewable energy potential. This despite one of the most favourable climates for investments in renewables – Ernst & Young’s annual index of countries for attractiveness for renewable energy sources has consistently ranked India in the top five since 2006.
One of the reasons for this spurt in growth of the renewables sector is the kind of incentives that the state and central governments have begun giving the sector including 80 per cent accelerated depreciation for wind based projects as well as a 10 year tax holiday fro several categories of renewable sources. For instance, solar power generators get a generation based incentive (GBI) of up to Rs 12 a unit. (See box). Bio-mass and small hydro projects get 10-year tax holidays and favourable tariffs.
Recently, the government announced the National Solar Mission could see share of solar energy jump by an additional 20,000 Mw by 2020. The National Solar Mission, to be unveiled on 14 November this year, will offer subsidies to the sector to the tune of Rs 90,000 crore over the mission’s life absorbing the incremental cost of solar based generation. Currently, solar-based generation costs around Rs 12-15 a unit relative to a thermal generation cost of Rs 2-3 a unit. The subsidy is expected to give the solar players a more level-play ground.
Other sector drivers for renewables include a huge power supply deficit (12 per cent peaking), an increasing emphasis on energy security and rising environmental concerns. The solar mission and the recently announced energy efficiency mission (see Green News on page 38 for details) are also a part of the government’s initiatives to tackle climate change.
As a result, in the last couple of years the share of energy from renewable sources has jumped from 5 to 9.7 per cent.
A ministry of new and renewable energy estimate says that 32 per cent of the CDMs in the world are from India and 62 per cent of these come from renewable energy sources, valued at around Rs 5167 crore annually.
Until recently, renewables in India meant wind. The installed capacity in the sector has grown at a CAGR of 30 per cent between 2005 and 2009 with current installed capacity exceeding 10,000 Mw. Says Sumant Sinha chief operating officer Suzlon Energy, India’s largest wind energy company and among the top five in the world, “We expect a favourable outlook for the wind sector over next few years, given the government’s current focus on climate change and reducing emissions. globally too, the major chunk of growth for iwnd and other renewables companies will come from countries that are endeavoruing to lower their carbon footprints such as India, China and the US.” So much so, US wind energy major Gamesa Corporation, which is eyeing a chunk of Suzlon’s subsidiary the Belgian turbine maker Hansen, has recently set up shop in India.
But the sector has a fair number of challenges too – most wind farms in India operate at 15 per cent plant load factors (PLF) but have a high capital cost, makes wind farms expensive. Moreover, as the government does not extend GBIs to wind farms availing of accelerated depreciation, IPPs are reluctant to invest in the sector as IRRs could be quite low, says a report on the sector by Ernst & Young.
One solution to the low PLFs and low rates of return could be combined solar and wind farms says Ramesh Kymal, managing director Gamesa India. “When wind based generation is at its peak then the plant can wind down on its solar generation. A judicious combination of the two would ensure that the supply to the grid is consistent and returns for investors would be more viable.”
Apart from wind the other favourite till date has been solar energy. India has the largest potential for solar based generation apart from the US with a variety of applications being tried out in supplying energy to rural India. In terms of solar photovoltaic India is the seventh largest producer of solar PV cells with an installed capacity of 110 Mw and a net exporter of PV cells. But solar based power generation contributes only around 1 per cent of the renewables kitty in the country. The National Solar Mission is expected to hike generation capacity by 20,000 Mw by 2020.
One of the primary reasons for the slow growth of the sector is high cost of generation – Rs 12-15 a unit compared to Rs 2-3 for the conventional sector. The GBI scheme announced by the central government ensures that developers get a power purchase price of Rs 15 per unit of photovoltaic and Rs 13 per unit of thermal. However, the scheme has a cap of 5 Mw per developer and a budgetary cap of Rs 10 crore for the scheme.
The other large renewable energy source in India is biomass. While waste to energy technologies have been around for a while, the maximum capacity in the sector is available in the sugar sector which has developed large captive capacities for internal consumption.
The total installed capacity of all biomass based generation is 2000 Mw, of which bagasse-based cogeneration plants account for 52 per cent. Other agri-residue based generation accounts for 35 per cent of installed capacity.
One of the biggest reasons is the non-availability of bagasse itself says Prakash Naik-Navare, managing director Maharahstra State Sugar Cooperative Federation Ltd. “The acreage under sugar has come down and has affected the availability of bagasse for cogeneration.” The issue of incentives for cogen plants is another impediment says Navare. “Our tariff has been fixed at Rs 3.05 per unit and has not changed for many years. This has now become unviable given the volatility in the price of bagasse.” Despite these challenges 23 additional units are coming up in Maharashtra adding 375 Mw as opposed to the present installed capacity of 88 Mw.
Says Gamesa’s Kymal, “It is not a case of wind or solar being more favoured than other renewable sources, it is more a case of availability of technology and willing investors. Wind and solar technologies are the most advanced at the moment and commercially viable and are not politically sensitive as the sugar sector. And given the right kind of support, these sectors can deliver a good part of the renewable sector target set by the government.”
These are yet baby-steps, says Akashdeep Jyoti, head infrastructure advisory at Crisil, a unit of Standard & Poor’s. “This is good beginning, even a great beginning. But my big question to the government is how will it ensure accountability and delivery? Our planning has always been great but we have fallen flat on implementation. Unless there is a mechanism to ensure accountability and delivery, these schemes and incentives will make little difference,” says Jyoti.
While a slew of incentives are available for generators, it is not uniform across the country. For instance, states such as Uttar Pradesh do not allow the sale of electricity outside the state and with tariff structures within the state being unfavourable there are fewer incentives to generate additional power for the grid. As a result several cane processing units in the state prefer to let their additional capacity lie idle than supply power to the state grid, says a sugar industry analyst.
In order to bring uniformity in tariff structures across the sector, the Central Electricity Regulatory Commission (CERC) initiated an exercise to develop uniform tariff regulations for renewable energy projects that are expected to be notified sometime in later this month. “These regulations will bring uniformity in the pricing of renewable energy in the country,” says Pramod Deo, chairman CERC. Other Initiatives
Indian national oil companies too have taken the search for alternative sources seriously – from Jatropha cultivation to experimenting with blending hydrogen and compressed natural gas for automotive fuel. Indian largest public refiner Indian Oil Corporation (IOC) is planning hike its R& D budget from Rs 500 crore to Rs 2300 crore. Part of this money will be spent on some cutting edge research in collaboration with Golden, Colorado-based National Renewable Energy Laboratory (NREL) on oil-producing algae. The company has also signed a MoU with Petro-algae a US firm to test the viability of growing such oil bearing algae in Indian conditions. SaysAnand Kumar, director R& D at IOC, “At lab scales we have seen that these algae produce up to 30% oil; the two MoUs will help us identify the right strains of algae to make our refineries carbon neutral.”
Reducing carbon footprints is also on the agenda of Bharat Petroleum Corporation. Bharat Renewable Energy Ltd (BREL) a three-way joint venture between Bharat Petroleum Corporation (BPCL), agro-products company Nandan Biomatrix and engineering giant Shapoorji & Pallonji (S&P) will invest around Rs 2100 crore over the next 10 years to produce one million tons of bio-diesel. The JV will cultivate jatropha and karanj crops on a million acres of arid land and create a million jobs for poor farmers in Uttar Pradesh.
“After the encouraging results we got from jatropha farming on surplus lands at our refineries, gas bottling plants and storage facilities, we are now starting on a programme of jatropha farming on a mass scale to meet our need for bio-diesel,” says A K Bansal executive director and the man in charge of the jatropha farming programme.
BREL recently signed an agreement with the Uttar Pradesh state government to undertake jatropha farming on a large scale and in the first phase the company plans to undertake plantation on 20,000 acres of land in Uttar Pradesh.
