A Roadmap for 100% Biomass-based Energy Solutions

• Overview

  Air pollution has been a cause for increasing concern for many years, posing a significant risk to the health of citizens and the growth of the Indian economy. The National Capital Region is one of the worst-affected areas, grappling with the highest exposure to air pollution. A significant contributor is the practice of stubble (agricultural residue) burning in neighboring states like Punjab, Haryana, Rajasthan, and Uttar Pradesh.

  To address emissions from stubble burning and promote the utilisation of such agricultural residue for energy generation, the Ministry of Power, Government of India (MoP), and the Commission for Air Quality Management in National Capital Region and Adjoining Areas (CAQM) have issued a set of directions, notifications and rules (collectively, Biomass Directions) to all thermal power plants (TPP) to mandatorily use biomass pellets (along with coal) as co-fuel for power generation for a period of 25 years or till the useful life of the TPP, whichever is earlier. However, implementing these directions will be challenging and may compromise the goal of reducing pollution.

• Process for using biomass as a co-fuel for power generation

  The use of biomass, whether in the form of agricultural residue or pellets for power generation, involves the following steps.

  • Feedstock collection: Biomass feedstock, such as agricultural residue (e.g., paddy, crop residues, straw) or pellets, needs to be collected efficiently. This involves proper handling, transportation, and storage to maintain optimal quality of the biomass used for power generation.
  • Preparation and processing: Depending on the form of biomass, there may be a need for processing or preparation to allow for co-firing. This can include drying, grinding, or pelletisation, which enables boilers in coal-based generating stations to use agricultural residue as fuel, without damage to the boilers.
  • Combustion or gasification: Biomass can be used through combustion in a boiler to produce steam, which is then used to generate electricity. Alternatively, gasification converts biomass into a combustible gas, which can be used for power generation.
  • Power generation: The generated steam or combustible gas is used to drive a turbine connected to a generator, producing electricity. The efficiency of power generation is a critical factor in evaluating the feasibility of biomass-based power projects.

• Challenges in using biomass as a co-fuel for power generation

  The existing design parameters, operating norms, and financials of operating coal based TPPs are structured considering coal as the only fuel for power generation. The mandatory use of biomass pellets as co-fuel poses challenges, as discussed below.

  The existing design parameters, operating norms, and financials of operating coal based TPPs are structured considering coal as the only fuel for power generation.

  • Biomass availability and quality: Ensuring a consistent and sustainable supply of torrefied biomass which allows for firing in traditional coal-based boilers is crucial for power plants to prevent clogging, corrosion of boilers, etc. However, there is currently a shortage of torrefied biomass pellets in the country. This has been recognised by (a) MoP Notification dated 16 June 2023 and (b) CAQM’s Minutes of Meeting dated 12 September 2022. This has resulted in generators being unable to procure and fire biomass pellets. Due to this shortfall, TPPs mandated to use torrefied biomass pellets are likely to face compliance issues. This may necessitate (a) using non-torrefied biomass pellets (to meet the targeted level of co-firing); or (b) seeking exemption from compliance with the Biomass Directions from the CAQM, which would compound implementation challenges.
  • Technology compatibility and logistics: Co-firing biomass pellets with coal will often require retrofitting or modification of boilers and mills to enable them to use various types of biomass pellets, posing technological challenges and requiring significant capital investment. Obtaining financial for such expenditure, including procurement and transportation of biomass pellets, will be challenging due to a lack of regulatory certainty on recovery of costs.
  • Storage and handling of biomass: Biomass, especially in the form of agricultural residue or pellets, requires proper storage to prevent decay and maintain quality. Handling and storing biomass efficiently and safely pose technical challenges. This will entail capital expenditure by all TPPs to install biomass handling systems (i.e., infrastructure for unloading, storage, safety, and blending of biomass pellets).
  • Impact on operational parameters: Co-firing biomass pellets with coal affects operational parameters like station heat rate, auxiliary power consumption, and operation and maintenance expenses, leading to increased power generation costs. Installation or modification may require plant shutdowns, resulting in generation losses and affecting capacity charge recovery.

  • Regulatory and policy support: Inconsistent or unclear regulations and policies for biomass energy production can create uncertainty for power plant operators. The Biomass Directions (specifically, the Revised Biomass Policy of 2021) allow projects set up under Section 63 of the Electricity Act, 2003, to claim the increase in Energy Charge Rate due to biomass co-firing under the Change in Law provisions of the power purchase agreement (PPA). However, this does not account for the following ground realities:

    • Change in Law clauses under a majority of the Section 63 PPAs do not provide a formula to compute the compensation for a change in law event during the operating period. In such situations, distribution licensees (Discoms) often dispute pass through of certain cost components raising issues of prudency of the cost incurred, etc.
    • Discoms almost always delay the payment of supplementary bills raised for Change in Law events. Expenditure towards co-firing biomass pellets is a recurring monthly expenditure for the TPPs. Consequently, any payment delays by the Discom will adversely affect the financials of TPPs.

    Amendments to the regulatory framework are therefore necessary to provide a fixed formula for compensation and ensuring financial restitution for TPPs facing disputes over cost components due to regulatory changes or payment delays by Discoms, which add to the implementation challenges.

  Such challenges are not new for the power generation industry. TPPs faced similar implementation issues when the revised emission norms were introduced in 2015. To comply with these norms, TPPs were required to install pollution control technology i.e., Flue Gas Desulfurisation (FGD). However, ground realities like regulatory delays in approving capex, regulatory uncertainty in terms of tariff revisions and cost pass throughs, and lack of clarity on funding and recovery, have resulted in limited progress in the new norms being implemented. Consequently, multiple extensions have been granted by the government to TPPs to comply with the requirement of installing FGDs, the latest being till the end of December 2024.

• Potential of 100% biomass-based power generation

  In these circumstances, an alternative approach to fulfil the dual objective of pollution reduction and effective utilisation of the agricultural-residue/biomass produced in India is 100% biomass-based power generation. The cost-effectiveness and reliability of a 100% biomass power plant, compared to a power plant using 5% co-firing of biomass pellets with coal, depend on various factors.

  • Fuel costs: A 100% biomass power plant relies entirely on biomass in its unprocessed form as its fuel source, which may have varying costs depending on the type of biomass used (wood, crop residues, etc.). This is likely to be more efficient and cost-effective as it will not require the processing of biomass into torrefied/non-torrefied pellets before firing in conventional TPPs. Co-firing involves using a smaller percentage of biomass along with coal. Cost-effectiveness depends on the relative costs of coal and biomass, and the logistics of procuring and handling agricultural residue, which coal-based projects lack, and would require building up and establishing a robust supply chain.
  • Emissions and environmental regulations: A 100% biomass power plant typically has lower carbon emissions as compared to a coal-based plant, which should help to comply with environmental regulations and address climate change concerns. Co-firing with biomass can also reduce emissions, though not as significantly as in a dedicated biomass plant.
  • Infrastructure and technology: Converting a coal-based power plant to 5% co-firing with biomass will require retrofitting and modification, with additional cost and time implications. Constructing a new 100% biomass power plant may be more economical.
  • Reliability and energy output: Biomass power plants can be designed for baseload or peak-load operation, similar to coal-based plants, but with significant benefits in terms of consuming agri-residue in unprocessed form, providing additional revenue sources for farmers.

• Opportunity to increase the viability of 100% biomass-based power plants

  To realise the potential of the alternative approach of promoting biomass power plants, the government should focus on making 100% biomass-based power generation more viable than it currently is, both operationally and financially.

  CERC has the opportunity to carry out field studies, call for financial and operational data from operational and under construction 100% biomass-based projects, and update its norms to promote the financial viability of these projects.

  The roadblocks faced by 100% biomass-based projects stem primarily from the regulations for tariff determination from renewable energy sources, that have remained largely stagnant since they were first introduced by the Central Electricity Regulatory Commission (CERC) in 2012. Consequently, tariffs determined through these regulations do not reflect the actual expenditure incurred by the developer, leading to under-recovery, making such projects commercially unviable.

  The statement of reasons for the tariff determination regulations itself highlights a deficiency in data and comprehensive analysis of on-ground issues that impact financial and operational norms as well as the performance of 100% biomass-based projects.

  Since the tariff determination regulations of 2021 will expire in March 2024 and the regulations for the next control period of 2024 to 2028 are yet to be notified, CERC has the opportunity to carry out field studies, call for financial and operational data from operational and under construction 100% biomass-based projects, and update its norms to promote the financial viability of these projects.

  Moreover, promoting 100% biomass-based projects aligns with India’s commitment of achieving 500 GW of non-fossil fuel-based energy by 2030¹. This would not only create a market for agricultural residue and by-products, but the use of locally available biomass resources could also provide a lucrative source of income for farmers and local communities.

^[1]https://www.investindia.gov.in/sector/renewable-energy

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