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President Kalam sets road map to achieve energy independence
He calls for increasing power generation capacity to 400,000 MW by 2030
President A.P.J. Abdul Kalam has called for increasing the power generation capacity to 400,000 MW by 2030 from the existing 130,000 MW to achieve energy independence, keeping in mind the progress visualised for the nation in the next two decades.
This figure has been arrived at taking into account the use of efficient transmission and distribution system and minimisation of other losses, Mr. Kalam said after presenting The Energy and Research Institute (TERJ) Corporate Awards here on Monday. Energy independence has to be achieved through three different sources, namely hydel capacity, nuclear power and nonconventional energy sources primarily through solar energy, apart from thermal power in the wake of depleting reserves of fossil-based oil, coal and gas reserves.
Setting a target of 50,000 MW of power from the nuclear power plants, Mr. Kalam said the hydel capacity generated through normal water sources and interlinking of rivers is expected to contribute an additional 50,000 MW. Largescale solar energy farms of hundreds of megawatts capacity could contribute around 55,000 MW. The balance 115,000 MW has to be generated through the conventional thermal plants using coal and gas and other renewable sources of energy such as wind power, biomass, municipal waste and solar thermal power.
"The most significant aspect, however, would be that the power generated through renewable energy technologies has to be increased to 25 per cent against the present 5 per cent," he said. The energy mix for energy independence envisages the use of hydel and thermal till coal availability, solar power using high efficiency Carbon Nano Tube (CNT)-based Photo Voltaic (PV) cells, Thorium based nuclear reactors and bio-fuel for transportation.
"We need to embark on a programme in solar energy systems and technologies, for both large, centralised applications as well as small, decentralised requirements concurrently, for applications in both rural and urban areas,” he said. So far, the present nuclear power capacity of 14 reactors, that is 2,700 MW, is expected to go up to 7,400 MW by 2010 with the completion of nine reactors. Eventually, as per the plan of the Bhaba Atomic Research Centre (BARC) and the Nuclear Power Corporation, the capacity is expected to increase to 24,000 MW by 2020.
There is a need to plan right from now to increase this capacity to 50,000 MW by 2030. Mr. Kalam said that for realising the production of 60 million tonnes of bio-diesel per annum by 2030 (this would be 20 per cent of anticipated oil consumption in 2030), a coordinated plan for achieving 6 million tonnes production by 2010, which would be 5 per cent of the present import of oil, needed to be put in place.
The eight corporates that received the awards for excellence in environmental protection and for fulfilling social responsibility are: Sakthi Masala Ltd., Hindustan Lever Ltd., Singareni Colleries, Northern Coalfi elds, the Madras Aluminium Company, Mecpro Heavy Engineering Ltd., Usha Martin and Solaris Chemtech Ltd. (Source : The Hindu, June 27, 2006)
Taming the floods
(Contributed by Yogrnder Klagh)
The country is being ravaged by floods, unusual in at least some of the affected areas. The science and Technology Ministry owes us a serious assessment of the World Bank statement that India is entering a ‘wet’ phase that may last till the end of the century on account of climate change. Immediate concerns are more compelling as life and property take a massive battering. Some have used the misery of the floods to highlight their pet theme that dams cause damage. Some contradict a basic law that at a moment of time, other things remaining the same, a storage will impound water which would otherwise cause damage. I remember making this point in 1997 — while fl ying into Ahmedabad with my colleague, the then Agriculture Minister— to a journalist, who held that a large canal system to the north was ‘fl ooding’ the city. Told that my credentials were low, since my own house close to the canal, was flooded, I argued that the floodwaters would be higher if the storage system was not in place. But this time around, more thoughtful commentators have been making the valid point that through time, a badly managed storage can cause more damage than a free flow.
Left to themselves, our engineers are good professionals. Their rough and ready tools are time-tested and avoid great damage if faithfully followed, even if they are not the most efficient byway of costs. For irrigation engineers, the safety of the structure is of paramount concern. For the monsoons, they have simple, clear, rule-bound action- points for safety collected in the Manuals of Practice. According to one of Gujarat’s most popular vernacular Newspapers, such a manual existed for the Ukai dam and was violated —with devastating results.
Like most citizens of Gujarat, I was praying for Surat on the nights of August 10 and 11. The Tapti was ravaging Surat, but the damage would be unimaginable if the Ukai dam was breached. To my mind, it was not in danger because—as reported and as I knew—it was an earthen dam which, if properly designed and constructed, is quite safe. After all, lime and earthen constructions survive till date from the Indus Valley Civilisation. But if the flood was severe and a storage badly managed, the costs could be mind-boggling. The flood was severe and Surat suffered immensely, but the dam held.
A few months ago, in an influential think-tank in Delhi, I argued that we don’t have a national elite. Otherwise, given India’s energy and security concerns, I could not see how the meeting was advocating policies that would injure India’s chances of completing the nuclear fuel cycle in the shortest available time. Now, in any reasonably regulated society, there should be no question of anybody violating a safety rule. Life is too precious to play around with. But from all accounts available to the citizen, this happened in Ukai. The message is clear. For water, energy and security, there have to be some rules which will not, I repeat, not be tampered with. Our political leadership is very powerful since it carries the mandate of the people and it can decide whether we should or should not have a storage or an electricity system. But it cannot interfere with the working of systems to the detriment of the lives of the citizens. In fact, we must move over from the existing rough and ready rules to more sophisticated optimal operation systems. It was shown long ago that optimal scheduling of Bhakra yielded great benefits. For Sardar. Sarovar, in spite of what the philistines have to say, there exist models of operation with flows in all reservoirs upstream, so that there is a very high probability of a near-full reservoir at the end of the monsoons.
Drainage systems have to be built as mirror images of canals. Rivers have to be trained and drainages in cities have to be planned in land use. Because no dam will be large enough to hold back the really bad flood; that will always need to be managed. These rules are less expensive than the rough and ready rules we follow. Safety is the first principle protected. The first rule, however, has to be to keep some things above politics.
(Source : The Times of India, August 8, 2006)
Structural flaws in power projects
Inadequate Risk-sharing, Unrealistic Timelines Worry Finmin, Plan Panel
The Planning Commission and Finance Ministry have expressed concern over the inadequate risk sharing and ambitious time lines on ultra mega power projects.
These problems are likely to be taken up by the Energy Coordination Committee. In a letter to the Prime Minister, the Planning Commission has highlighted the structural flaws in the ultra mega power project. As of now For water, energy and security, there are some rules that cannot be tampered with. Our political leadership cannot interfere with the system to the detriment of the lives of citizens four plants are to be set up at Sasan (Madhya Pradesh), Mundra (Gujarat), Krishnapatnam (Andhra Pradesh) and another plant in Orissa. Of these the Sasan and Mundra plants will be handed over to developers by December 31. It has argued that the timeline for these projects are unrealistic and the risk sharing inadequate. The Planning Commission has expressed its doubts on the ‘shell company’s’ ability to procure all clearances by December 31 when the projects are supposed to be handed over to the successful bidder. It has also said that the shell companies, set up for the ultra mega power projects, will have too much on their plates like land acquisition, water linkage, captive coal blocks, and environmental clearances. While Power Ministry offi cials acknowledged that these doubts had a basis, a senior offi cial said, “the bidding process began a few months ago. As of now the projects will be awarded to the successful bidder as scheduled on December 31. Other clearances make take some more time.” But this will leave the issue of who takes the risk for delays in receiving clearances and possible cost overruns, still hanging. The letter has also raised the issue of force majeure, saying that the clauses for the projects have not spelled out who will cover the risk of non-performance like the different clearances and the possiblity of a promoter backing out from a project. There are other red flags as well. Sources said that the domestic players in the power sector do not have any experience of tariff-based competitive bidding and as such it may not be possible to carry out the award of the project in the tight timeline suggested. “The process of bidding isn’t as simple as it appears on paper. With no experience, awarding two power projects of 4000 mw each costing Rs 16,000 crore is not a simple matter”, said an industry expert. Power Finance Corporation, the nodal agency for the shell companies says that the Sasan and Mundra ultra mega power projects are on track. (Source : The Economic Times, August 23, 2006)
Coal pricing to come under regulatory body
Coal pricing may soon come under the purview of an independent
regulatory body. The Coal Ministry has initiated discussions to set up an autonomous body of experts that will replace the government committee which determines coal prices for different user industries. According to offi cial sources, the move for an independent regulator for the sector gained momentum after two expert committees of the government endorsed it. Both the expert committee on coal sector reforms headed by T.L. Sankar and Planning Commission expert group on integrated energy policy headed by Kirit Parikh have favoured independent regulation for domestic coal prices. According to the initial blueprint being considered by the ministry of coal, the proposed regulatory organisation will comprise experts who have wide experience of the sector. The regulator is expected to help in improving exploitation and allocation of available resources, regulate pricing of coal under e-auction and will enable a competitive coal market to emerge for user industries. At present, coal prices are fixed by the Coal Ministry in consultation with coal PSUs — Coal India Limited (CIL) and Singareni Collieries Company (SCCL). Prices are determined on the basis of costs incurred in coal production from different mines in a coal company plus a reasonable amount of profi t. However, this method is considered grossly inadequate in the present context and results in coal prices rift refl ecting market realities. The Parikh Committee, which is likely to finalise its report on integrated energy policy this month, has also suggested that the powers of the proposed regulator should also include determining the quantity of coal, annually required from each mine to be put under e-auction route. It has proposed that 20% of total coal production should be brought under e-auction and remaining coal should be sold through a Fuel Supply and Transport Agreement (FSTA). Other consumers should be allowed partial FSTA, leaving them to meet the shortfall through e-auction and imports. Pithead price of coal under FSTA should be revised annually by the coal regulator based on a formula that reflects prices obtained through e-auction, FOB price of imported coal and production cost, the committee has said. Earlier, in the fi rst part of the report submitted to the Coal Ministry, Sankar Committee also favoured the proposal for setting up a coal regulator, primarily to regulate prices for the prime consumer —the power sector. (Source : The Economic Times, August 15, 2006)
NTPC to invite global bids for 20mt flyash sale
Following its successful sale of 6,500 tonnes of fl yash to Qatar in April, NTPC plans to sell at least 20 million tonnes (mt) of fl yash through its subsidiary NTPC Vidyut Vyapar Nigam on the basis of longterm contracts of at least 10 years.
The group plans to invite global bids for sale of the byproduct on 10-year contracts towards the end of August. NTPC’s coal-based plants generates 40 million tonnes of flyash every year. Of this, 20 million tonnes is given away free to cement companies, brick makers and other companies. The rest is stored in dykes constructed by the company. The exercise is both costly and poses environmental risks.
Under the 1999 environmental regulatory framework, all coalbased power plants have to give away flyash without charging for it for at least 10 years, irrespective of their location or size’. Further, power plants have to get all the fl yash gainfully utilised within nine years for existing plants and 14 years for future plants. To be able to sell the, fl yash, NTPC has to transfer the “product” to its subsidiary and trading arm, NTPC Vidyut Vyapar Nigam, which can effect a sale.
In April, NTPC, through its subsidiary NTPC Vidyut Vyapar Nigam, sold a fl yash consignment of 6,500 tonnes at $27 per tonne from its Simhadri power plant in
Andhra Pradesh to Lebanon-based Environment Building Materials (EBM) to be used for construction activities in Qatar. This has prompted the power major to take a second look at the possibility of a new revenue stream through the sale of fl yash. Experts
suggest that in the domestic retail market, traders sell fl yash at anywhere between Rs 1,200 to Rs. 1,400 per tonne, while a longterm contract could net them a
price of Rs. 300 per tonne. A senior company executive said the cement industry would be the most affected by this move. “Till now, they have been receiving the
fl yash at no cost. Nearly 60% of the flyash we give away is consumed by the cement industry. Fact is, neither the power plants or generating company gets anything
by way of revenue, nor does the electricity consumer get any benefi ts in the form of lower tariffs. However, cement companies have been claiming carbon credits, and
there has been no pass through to consumers.”
Sources said that for the proposed global tender, bidders will be asked to quote a price comprising two elements — commodity price and a charge for facilitation towards packaging and handling. NTPC will stipulate an escalation factor
in the sale contract, which will be linked to the prevailing cement prices. “Cement prices have been shooting up like anything and we want to take advantage of
situation by charging a price for the commodity which is otherwise given away for free,” a company official said. (Source : The Economic Times, August
15, 2006)
IEP wants sops for all power projects
The Integrated Energy Policy has suggested that fi scal sops given to mega power projects should be extended to all power sector projects, irrespective of fuel used
or size of the project. The report suggests that in order to claim the fi scal incentives, states opt for the mega power projects, and then “swap power among
themselves to meet the guidelines of the mega power policy.” What this does according to the expert group is create unnecessary transmission capacity and movement of power back and forth. The report states that “while world
is recognising the higher efficiency of distributed generating facilities,
India is providing incentives to mega projects there should be
no discrimination in available incentives based on size or type of
technology or fuel used” Clarifying the issue,; Planning Commission
member for energy Kirit Parekh said, that the expert group and
the Planning Commission were not against large sized power
projects. “We are not against mega or ultra mega power projects. We
suggest that incentives given to these plants should be extended
to all power projects” said Parekh. The report goes on to state that
incentives should be similar for each of the energy subsectors so that balanced development can take place. “Any tax concession or duty exemption provided should
be available to all energy sub sectors unless it supports a well documented economic benefit”, the report states.
The Commission admitted privatisation of distribution utilities may not be politically possible in all states but said agricultural consumers must atleast be given separate feeders and the subsidy provided on account of free
power must be borne by the state government. The report of the Expert Committee on an Integrated Energy Policy also observed a lack of level playing fi eld between
central public sector companies and private firms. Central PSUs get an assured
return on equity of 14-16%, while private generation companies did not have the comfort of pay-merit security mechanism and state power utilities did not get assured post-tax returns. Power Ministry should facilitate large-scale capacity addition of 20,000 MW or more, the report said, adding for faster execution of
projects, bulk orders could be given to equipment suppliers, while at the same time enhancing domestic manufacturing and engineering capacities. Estimating a capacity
addition requirement of 600,000 MW in the next 25 years, the report said there was no danger of pre-empting future competition or limiting technology options by
placing bulk orders. In transmission sector, the report said inter-state grid networks must be managed by a regulated monopoly. Private companies should be encouraged in laying of transmission lines except those critical for inter-state fl ows of power and system stability, which should be managed by a central body.
(Source : The Economic Times, August 31, 2006)
Coal e-auctions fetching only 25% premium now
E-auction of coal which was fetching an average price realisation of 48% above the notifi ed price of coal when introduced a year back, has now decreased to nearly half the level. E-auctions through June-July- August have reported an average
price that is only 25% above the declared or notifi ed price which has been in the range of Rs 760 per tonne. The department of coal (DoC) is watching the trend to see
if it is a temporary phenomenon seen in lean months or a true reflection of the market. According to sources in the DoC, 36 million tonne (MT) of coal have been earmarked for e-auctions in 2006-07, more than the 19.52MT sold through Coal India Limited (CIL) in 2005-06. Sources said that in June, when CIL through
its various subsidiaries offered 8.47 MT coal for sale through eauctions, the price realisation was 29.10% of the notifi ed price. This is only 7.6% over the fl oor price. The floor price is a basic minimum fixed price for bids on the e-auction
route. It is 20% more than the notified price. CIL sources told ET that the aver
age notifi ed price to date this year hovered around Rs 837 per tonne, with the fl oor price at Rs 1,004 per tonne. Consequently, the price realisation per bid was Rs. 1,077 pertonne. “We have injected larger volumes of coal into the e-auction
route. Our offer was for 16.4 million tonne, but only 8.47 MT was picked up.
This has had a salutory effect as all those who bids were successful.
We are not looking for windfall gains, we only want a wider and more equitable distribution among non-core consumers and new industry,” the sources explained.
The present dip is also attributed to the subdued season for the brick burning industry. “The bids may climb by October! Last year also,
this period saw only 3.7 MT sold on the auction,” sources pointed out.
For the whole ot 2005-06, the average gain over the average notifi ed price was 48.1% and that over the fl oor price was 23.1 %. With Rs 982 per tonne, as the
average, notifi ed price, the floor price was Rs 1,178 leading to a price realisation ot Rs 1,450 per tonne. E-auctions gained momentum last year — 27,739
bidders participated, out of which 18,563 emerged successful, generating additional revenues of Rs 920 crore for CIL. E-auctions address the needs of consumers
of non-core sectors, who do not have linkages. (Source : The Economic Times, August
31, 2006)
Royalty hike to make coal dearer
Fixed Plus Ad Valorem Basis May Raise Royalty Rates By 10-15%
The input cost of power, steel and cement companies is all set to
move upwards with the Ministry of Coal deciding to revise upwards
royalty rates on coal by 10 to 15%, taking it closer to internationally
acceptable ad-valorem system. The new system of royalty
would jack up coal prices by 10 to 15% taking up the overall
royalty component on coal prices to 15-20% level. This is one of
the highest levels globally where royalty percentage is normally a
single digit number. A cabinet note implementing new royalty rates has been circulated by the ministry of coal for comments of other ministries. Thereafter the
fi nal note would soon be put up before the Cabinet, an offi cial
source said. While the changes would mean a further increase in coal prices for
consuming sectors, seven states including Chattisgarh, Jharkhand,
Orissa, Andhra Pradesh, West Bengal, Maharashtra and Madhya
Pradesh stand to gain in excess of Rs. 800 crore.
A source in Ministry of Coal said that the ministry is likely to
change the present system of charging royalty at specific rate
to combined royalty rates (fixed plus ad-valorem) to balance the
aspirations of the coal producing states and apprehensions of the
consumers. The proposed changes are based on the recommendations of the
committee on coal and lignite royalty, which submitted its report
to Ministry of Coal recently. Earlier, even the Economic Advisory
Council (EAC) of the Prime Minister headed by C. Rangarajan
had suggested revising the royalty based on the new system.
(Source : The Economic Times, September 9, 2006)
Customs duty on LNG for power sector to go The government has decided to
remove Customs duty on LNG when it is used as a fuel for the power sector. At present, there is a 5% duty on LNG. The present waiver is applicable to LNG imports
by power projects which have a capacity of 2,000 mw or more, defunct projects which have been restructured and revived though a special purpose vehicle and
projects which supply power to state electricity boards under a power purchase agreement. Earlier, the government had given this exemption to the Dabhol power
plant. The present notifi cation expands the ambit of the exemption to include a larger list of power plants. At present, gasbased power generation capacity
accounts for 12,700 mw. Due to gas shortages, these plants are operating at a plant load factor less than 60% — as a result 5,000 mw of gas turbine capacity
is stranded for want of gas. Gas shortage resulted in a loss of 24 billion units of power in 2005-06, pushing down the rate of growth of power generation from 8% to 5.1%. The shortage of gas supplies and the rising demand for electricity
has meant that gas-based station use expensive fuels like naphtha to tide over peak demand. In the current fi scal, 2006-07, the power sector will require at least 119
mmscd of gas, domestic sources provide for nearly 91 mmscd. The cost of fuel for coal fi red stations ranges from 70 paise per kwh to 110 paise per kwh, while that for gas based plants varies from 105 paise per kwh to 200 paise per kwh.
(Source : The Economic Times, September 1, 2006)
Watchdog wants shockproof power bills, flaunts 5-year plan
The government is working on a proposal to spare power consumers yearly tariff shocks by introducing a multi-year tariff regime. The Central Electricity Regulatory Authority (CERC) has asked all state power regulators to embrace a multi-year (fi ve-year) tariff regime from next year instead of the annual tariff revisions.
State regulators across the country now follow the annual system of tariff revision, which is often resisted by consumers. The CERC has appointed KPMC- as its principal consultant for speedy implementation of the new programme in states. The consultant will discuss the policy modalities with State regulators and help them fi x tariff, based on fuel price adjustments. “We have already been following the multi-yearly tariff regime, but at the state level it needs to be implemented expeditiously. We
hope to put it in place by next year. The only impediment in its implementation is inauthentic baseline data like AT&C losses and depreciation,” CERC chairman
Ashok Basu told ET. He said the regime change would be implemented in phases. It
would kick off initially in a few states that are in agreement with CERC suggestions, before being implemented by the rest, Sources said the state governments are unlikely to oppose the changes as it works to the benefi t of
consumers. Mr. Basu said the changes would also be easy to implement as it
would not require any amendment to the Electricity Act 2003. “The current provision of the Act lays down guidelines for multi-year tariff system. It is just a question when we actually start implementing it,” he said. Shift to the new tariff regime
is also in concurrence with the recommendation of a Planning Commission expert committee headed by Dr Kirit Parikh. The final recommendations for the integrated energy policy, which is likely to be submitted later this month, has favoured the multi-year tariff regime, sources, said. The initial draft of the committee’s report
that was released late last year: remained silent on implementing the new system.
Sources said recommendations on the Integrated Energy Policy may favour differential tariffs based on the time of use. Once implemented, the changes would mean that
power tariffs may vary depending on the time. The rates would be higher during
peak hours when the load on the system is the highest and lower during lean periods.
(Source : The Economic Times, August 23, 2006)
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