POLICY FRAMEWORK STUDY FOR RENEWABLE ENERGY AND ENERGY POLICY DEVELOPMENT RENEWABLE ENERGY IS NOT ONLY SUSTAINABLE BUT

1. BANGKOK AUG 06 POLICY FRAMEWORK STUDY FOR RENEWABLE ENERGY AND ENERGY POLICY DEVELOPMENTRENEWABLE ENERGY IS NOT ONLY SUSTAINABLE BUT ALSO AFFORDABLE By S. Chandrasekhar Managing Director Bhoruka Power Corporation Limited #48 Lavelle Road Bangalore 560 001 India Tel:+91 80 2227 3285 Fax: +91 80 2224 5246 Email: sekhar@bhorukapower.com

2. ENERGY MIX DECISION AFFORDABILITY AVAILABILITY ENERGY MIX DECISION RELIABILITY

3. GENERAL PERCEPTION • CONVENTIONAL POWER (FOSSIL FUEL) :- • RESOURCE LIMITED – RELIABLE – AFFORDABLE • NON CONVENTIONAL POWER (RENEWABLES):- • RESOURCE UNLIMITED – NON RELIABLE – NON AFFORDABLE

4. ENERGY SECURITY VISION OF PRESIDENT OF INDIA H.E. MR. ABDUL KALAM “WE CAN ACHIEVE ENERGY INDEPENDENCE BY 2030” - IF WE FOCUS ON RENEWABLE ENERGY SOURCES - IF WE INCREASE RENEWABLE ENERGY SOURCES IN ENERGY MIX FROM 5% TO 25% THE FOCUS IS MORE ON ‘ENERGY SECURITY’ AND NOT JUST ‘COST ECONOMICS’

5. NATIONAL ELECTRICITY POLICY – GOVERNMENT OF INDIA - 2005 CLAUSE RELATED TO RENEWABLES CLAUSE 5.2.20: FEASIBLE POTENTIAL OF NON-CONVENTIONAL ENERGY SOURCES, MAINLY SMALL HYDRO, WIND AND BIO MASS WOULD ALSO NEED TO BE EXPLOITED FULLY TO CREATE ADDITIONAL POWER GENERATION CAPACITY WITH A VIEW TO INCREASE, THE OVERALL SHARE OF NON CONVENTIONAL ENERGY SOURCES IN THE ENERGY MIX, EFFORTS WILL BE MADE TO ENCOURAGE PRIVATE SECTOR PARTICIPATION THROUGH SUITABLE PROMOTIONAL MEASURES.

6. NATIONAL ELECTRICITY POLICY – GOVT. OF INDIA COGENERATION AND NON-CONVENTIONAL ENERGY SOURCES CLAUSE 5.12.1: NON-CONVENTIONAL SOURCES OF ENERGY BEING THE MOST ENVIRONMENT FRIENDLY THERE IS AN URGENT NEED TO PROMOTE GENERATION OF ELECTRICITY BASED ON SUCH SOURCES OF ENERGY. FOR THIS PURPOSE, EFFORTS NEED TO BE MADE TO REDUCE THE CAPITAL COST OF PROJECTS BASED ON NON-CONVENTIONAL AND RENEWABLE SOURCES OF ENERGY. COST OF ENERGY CAN ALSO BE REDUCED BY PROMOTING COMPETITION WITHIN SUCH PROJECTS. AT THE SAME TIME, ADEQUATE PROMOTIONAL MEASURES WOULD ALSO HAVE TO BE TAKEN FOR DEVELOPMENT OF TECHNOLOGIES AND A SUSTAINED GROWTH OF THESE SOURCES.

7. NATIONAL ELECTRICITY POLICY – GOVT. OF INDIA CLAUSE 5.12.2: THE ELECTRICITY ACT 2003 PROVIDES THAT CO-GENERATION AND GENERATION OF ELECTRICITY FROM NON-CONVENTIONAL SOURCES WOULD BE PROMOTED BY THE SERCs BY PROVIDING SUITABLE MEASURES FOR CONNECTIVITY WITH GRID AND SALE OF ELECTRICITY TO ANY PERSON AND ALSO BY SPECIFYING, FOR PURCHASE OF ELECTRICITY FROM SUCH SOURCES, A PERCENTAGE OF THE TOTAL CONSUMPTION OF ELECTRICITY IN THE AREA OF A DISTRIBUTION LICENSEE. SUCH PERCENTAGE FOR PURCHASE OF POWER FROM NON-CONVENTIONAL SOURCES SHOULD BE MADE APPLICABLE FOR THE TARIFFS TO BE DETERMINED BY THE SERCs AT THE EARLIEST. PROGRESSIVELY THE SHARE OF ELECTRICITY FROM NON-CONVENTIONAL SOURCES WOULD NEED TO BE INCREASED AS PRESCRIBED BY STATE ELECTRICITY REGULATORY COMMISSIONS. SUCH PURCHASE BY DISTRIBUTION COMPANIES SHALL BE THROUGH COMPETITIVE BIDDING PROCESS. CONSIDERING THE FACT THAT IT WILL TAKE SOME TIME BEFORE NON-CONVENTIONAL TECHNOLOGIES COMPETE, IN TERMS OF COST, WITH CONVENTIONAL SOURCES, THE COMMISSION MAY DETERMINE AN APPROPRIATE DIFFERENTIAL IN PRICES TO PROMOTE THESE TECHNOLOGIES.

8. NATIONAL ELECTRICITY POLICY – GOVT. OF INDIA CLAUSE 5.12.3: INDUTRIES IN WHICH BOTH PROCESS HEAT AND ELECTRICITY ARE NEEDED ARE WELL SUITED FOR COGENERATION OF ELECTRICITY. A SIGNIFICANT POTENTIAL FOR COGENERATION EXISTS IN THE COUNTRY, PARTICULARLY IN THE SUGAR INDUSTRY. SERCs MAY PROMOTE ARRANGEMENTS BETWEEN THE CO-GENERATOR AND THE CONCERNED DISTRIBUTION LICENSEE FOR PURCHASE OF SURPLUS POWER FROM SUCH PLANTS. COGENERATION SYSTEM ALSO NEEDS TO BE ENCOURAGED IN THE OVERALL INTREST OF ENERGY EFFICIENCY AND ALSO GRID STABILITY.

9. NATIONAL TARIFF POLCY – GOVT. OF INDIA CLAUSE 6.4: NON CONVENTIONAL SOURCES OF ENERGY GENERATION, INCLUDING COGEN. (1) PURSUANT TO PROVISIONS OF SECTION 86(1)(E) OF THE ACT, THE APPROPRIATE COMMISSION SHALL FIX A MINIMUM PERCENTAGE FOR PURCHASE OF ENERGY FROM SUCH SOURCES TAKING INTO ACCOUNT AVAILABILITY OF SUCH RESOURCES IN THE REGION AND ITS IMPACT ON RETAIL TARIFFS. SUCH PERCENTAGE FOR PURCHASE OF ENERGY SHOULD BE MADE APPLICABLE FOR THE TARIFFS TO BE DETERMINED BY THE SERCs LATEST BY APRIL 1, 2006. IT WILL TAKE SOME TIME BEFORE NON-CONVENTIONAL TECNOLOGIES CAN COMPETE WITH CONVENTIONAL SOURCES IN TERMS OF COST OF ELECTRICITY. THEREFORE, PROCUREMENT BY DISTRIBUTION COMPANIES SHALL BE DONE AT PREFERENTIAL TARIFFS DETERMINED BY THE APPROPRIATE COMMISSION

10. SUSTAINABLE ENERGY BASKET • SUSTAINABLE ENERGY BASKET • WIND • SMALL HYDRO • BIO MASS • PHOTO VOLTAIC • SOLAR THERMAL • SOLID WASTE • AND OF COURSE NEW ONES SUCH AS FUEL CELLS, OCEAN ENERGTY, TIDAL POWER ETC.

11. MOST SUITABLE TECHNOLOGIESFOR DEVELOPING ECONOMIES • MOST SUITABLE TECHNOLOGIESFOR DEVELOPING ECONOMIES • WIND • SMALL HYDRO • BIO MASS • SOLAR APPLICATIONS • GIVEN THE COMPULSIONS OF CONTAINING TARIFFS • REASON: MATURE TECHNOLOGIES

12. BIGGEST ADVANTGES OF RENEWABLE ENERGY OTHER THAN FROM ECOLOGICAL PERSPECTIVE. • BIGGEST ADVANTGES OF RENEWABLE ENERGY OTHER THAN FROM ECOLOGICAL PERSPECTIVE. • AVAILABILITY OF RENEWABLE RESOURCES MAINLY IN RURAL AREAS • IMPROVES RURAL ECONOMY – GIVES VALUE TO LOCAL RESOURCES • INCREASES EMPLOYMENT OPPORTUNITIES – NEW AVENUES IN THE RURAL AREAS • IMPROVES QUALITY OF POWER – DISTRIBUTED GENERATION • IMPROVES RURAL INFRASTRUCTURE – LOCAL FACILITIES BECOME BETTER

13. RURAL POWER – OTHER THAN POPULATION • RURAL POWER – OTHER THAN POPULATION • IRRIGATION CANALS / RIVULETS – SMALL HYDRO POWER • ABUNDANT WASTE LAND AND GOOD BREESE – WIND POWER • AGRICULTURAL WASTE – BIOMASS POWER • FROM VALUELESS RURAL RESOURCES TO HIGH VALUE RURAL PRODUCTS • FROM POVERTY TO PLENTY, INCREASE IN RURAL GDP

14. RENEWABLE ENERGY – EMPLOYMENT GENERATION • RENEWABLE ENERGY – EMPLOYMENT GENERATION A. SMALL HYDRO (<10 MW Capacity) • During Construction : An average of more than 150 persons mostly locals employed for more than a year at a salary of USD 3 – 10 per day • During Operation : Permanent direct employment - 20 – 30 persons at an average salary of USD 8-10 per day • . BIOMASS (< 5 MW) • During Operation : An average of more than 200 persons regularly for collection of Biomass at an average salary of USD 3 – 10 per day

15. ADDITIONAL EMPLOYMENT AVENUES • C. ADDITIONAL EMPLOYMENT AVENUES • Due to availability of power , the following businesses could thrive: • Rice Mills • Flour Mills • Oil Expeller / Extraction Units • Small workshops for farm equipment and pump repairs. • Ice making Units • Small Cold Storages

16. RENEWABLE ENERGY – QUALITY OF POWER • RENEWABLE ENERGY – QUALITY OF POWER • POWER GENERATED IN AND AROUND THE AREAS OF CONSUMPTION – DISTRIBUTED GENERATION • IF POWER TO THE RURAL AREA IS COMING FROM A DISTANCEOF 200 KMS THROUGH MULTIPLE LEVELSOF TRANSMISSION VOLTAGES, THERE WILL BE A SAVING OF NEARLY 10% IN TRANSMISSION LOSSES DUE TO DISTRIBUTED GENERATION. • ADDED TO THAT THE QUALITY OF POWER IN TERMS OF VOLTAGE AND FREQUENCY WLL BE AT DESIRED LEVELS. • LESSER IRRIGATION PUMPSETS BREAKDOWN, HIGHER PRODUCTIVITY, LESSER EXPENDITURE FOR THE FARMERS

17. RURAL INFRASTRUCTURE IMPROVEMENT • RURAL INFRASTRUCTURE IMPROVEMENT • BENEFICIAL FALLOUT OF IMPLEMENTING RENEWABLE ENERGY PROJECTS. • IMPROVEMENT TO VILLAGE ROADS / NEW ROADS • IMPROVEMENT TO EDUCATIONAL INFRASTRUCTURE • -IN OUR PROJECT SCHOOLS MORE THAN 1500 CHILDREN ARE STUDYING AT SUBSIDISED RATES.

18. PROGRAMS FOR HUMAN DEVELOPMENT • - THROUGH SELF HELP GROUPS, VOCATIONAL TRAINING FOR WOMEN ETC. • WE HAVE TRAINED MORE THAN 1000 WOMEN IN VARIOUS TRADES LIKE TAILORING ETC. AND ALSO CREATE MORE THAN 100 SHG’S FOR MICROFRAME • NET RESULT – • ECONOMIC WELL BEING IN THE LONG TERM

19. ECONOMICS OF RENEWABLE ENERGY Sector Capital Cost (US$ Million/MW) Cost of Generation (US Cent/kWh) Small Hydro 0.9 to 1.3 5 - 6 Wind Energy 0.95 to 1.10 6 – 7 Biomass Power 0.8 to 1.00 5 to 6 Bagasse Cogeneration 0.6 to 0.8 4.5 to 5.5 Biomass Gasification 0.6 to 0.8 5 to 6 Solar PV 5.21 to 6.25 18.80 to 41.70

20. COMPARATIVE RETURNS

21. OBSERVATIONS • PVT. SECTOR THE MOST IMPORTANT PLAYER IN RENEWABLE ENERGY DEVELOPMENT WORLDOVER • THE OTHER KEY STAKE HOLDERS ARE GOVERNMENT, UTILITY, BANKERS & REGULATORS • GOALS AND RISK PERCEPTIONS DIFFERENT FOR EACH OF THEM

22. RISK PERCEPTION ENTITY GOAL RISK PERCEPTION VISION PVT. SECTOR - MAXIMISE PROFIT LEAST RISK LOSS / BANKRUPTCY MED. TERM BANKER - MAXIMISE PROFIT LEAST RISK LOAN TURNING NPA MED. TERM UTILITY - MAXIMISE GEN. LEAST RISK HIGH COST OF ENERGY PURCHASE SHORT TERM REGULATOR - CONSUMER INTEREST HIGH COST TO CONSUMER SHORT TERM GOVERNMENT - ENERGY SECURITY EMP. GEN. GHG RED OTHER EXTERN MISPLACED SUBSIDIES AND INCENTIVES LONG TERM

23. VIEW POINT • NO SINGLE POLICY CAN SATISFY ALL THE STAKEHOLDER • A BALANCED OUTLOOK SHOULD BE BASIS OF POLICY • ANY POLICY SHOULD BE DRIVEN BY LONG TERM VISION • EVERY RISK MITIGATION ADDS TO COST • MOSTLY WE TALK OF RISK MITIGATION THROUGH FISCAL POLICIES • THERE ARE NON FISCAL POLICIES OF EQUAL IMPORTANCE • RISK AVOIDANCE THROUGH MORE INFORMATION AND NOT SIMPLY RISK MITIGATION THROUGH FISCAL MEASURES SHOULD DRIVE POLICY INTERVENTION FOR PROMOTION OF RENEWABLE ENERGY

24. POWER PURCHASE – PRICE AND QUANTITY • IN AN EMERGING SCENARIO GUARANTEE OF PURCHASE AT A PRICE ONLY WAY TO FAST TRACK GROWTH • RENEWABLE ENERGY GENERATION NOT TO BE SUBJECTED TO MERIT ORDER PURCHASE OR OTHER CONDITIONALITIES • POLICY INTERVENTION – FEED IN TARIFF SHOULD BE THE POLICY DRIVER TO ENCOURAGE RENEWABLE ENERGY TILL AT LEAST 10% RE MIX IN OVERALL ENERGY IS ACHIEVED. SUBSEQUENTLY, ONE CAN SWITCH OVER TO MARKET PROCESSES SUCH AS TENDERING, RENEWABLE ENERGY PORTFOLIO STANDARDS ETC • THE HIGH RENEWABLE ENERGY SECTOR GROWTH IN INDIA DURING 1994-2004 WAS MAINLY DUE TO THE FEED IN TARIFF POLICY

25. LONG TERM ENERGY COST • LOW / NO INPUT RESOURCE COST FOR RENEWABLE ENERGY IN ITS LIFE CYCLE • CONTINUOUS INCREASE IN INPUT RESOURCE COST FOR FOSSIL FUEL / CONVENTIONAL ENERGY GENERATION • STUDIES INDICATE COST OF RE POWER WHICH IS 130% INITIALLY DROPS TO 60 – 65% OF CONVENTIONAL ENERGY AFTER 15 YEARS AND CONTINUES LOWER THEREAFTER • HIGHER THE RE MIX IN ELECTRICITY PORTFOLIO LOWER THE AVERAGE TARIFF IN A LONG TERM SCENARIO

26. HOW TO MAKE A START • HOW TO MAKE A START • ENUNCIATE AN ENDURING RENEWABLE ENERGY POLICY • LET IT BE INCLUSIVE TO ADDRESS EVERY STAKEHOLDER’S CONCERN, BE IT THE PUBLIC,DEVELOPERS, BANKER’S OR CONSUMERS. • POLICY SHOULD HELP EVERY STAKEHOLDER’S VIEW TO BE CONVERGENT AND NOT DIVERGENT. • CREATE PUBLIC AWARENESS OF THE POLICY INITIATIVES

27. RECOMMENDATION • RECOMMENDATION • RESOURCE AVAILABILITY STUDIES ON A LONG TERM BASIS IS KEY FOR VIABILITY PROJECTIONS ON A REALISTIC BASIS • AUTHENTIC DATA NEED TO BE MADE AVAILABLE BY GOVERNMENT DEPARTMENTS. • BANKS COULD HELP IN KEEPING LOCAL CURRENCY INTEREST RATES BELOW 10%. • BANKS COULD ALSO HELP IN INCREASING THE LOAN TENURE TO 15 YEARS WHICH COULD HELP IN KEEPING TARIFF’S DOWN IN THE INITIAL FEW YEARS. • WORLD BANK THROUGH IFC COULD HELP IN ACHIEVING BOTH THE ABOVE OBJECTIVES THROUGH LONG TERM DEDICATED FUNDS. • THE FUNDS COULD BE FOR DEVELOPMENT OF AT LEAST 200 MW RENEWABLE PROJECTS INITIALLY. • RE PROJECTS COULD SERVE WORLD BANKS OBJECTIVES OF RURAL DEVELOPMENT AS WELL AS SUSTAINABLE ENERGY DEVELOPMENT

28. ABOUT US Bhoruka Power Corporation Limited The Company is a leader in the Renewable Energy Sector in India. The Company remains the first in the post independence period to set up and operate a Hydel project in the private sector (Nov. 1992) The Company spearheads environmentally friendly Renewable Energy projects. Current portfolio is mainly Small Hydel and to some extent Wind. By early next year the capacity will touch 80 MW and by 2007, 100 MW. The Company has to its credit many honours and has received the ISO 9001and ISO 14001 Certifications. It is currently working for the ISO 18001 recognition The Company is backed by a unique mix of Engineering Intellect, Project Management Capability, Deep Industry experience and committed man power.

29. PHOTOS MADHAVAMANTRI

30. PHOTOS WIND PROJECT - JAISELMER SRD KATTE NERIA CHAYADEVI

31. Contact Details Mr. S. Chandrasekhar Managing Director Bhoruka Power Corporation Limited # 48 Lavelle Road Bangalore 560 001 – India Tel: +91 80 2227 3285 (D) 2227 2271(O) Fax: +91 80 222 45246 Email: sekhar@bhorukapower.com

32. THANK YOU THANK YOU