CHP Power in India & Status of Legislation for Funding

1. CHP Power in India & Status of Legislation for Funding By R V Nesari

2. Power Scenario in India • Total Installed capacity: 126,176 MW (at the end 2005-06) • Gross Generation : 635 BUs • Per capita consumption: 606 kWh/ year • Electricity shortage : about 7% • Peaking shortage : about 13 %

3. Power Mix in IndiaTotal Installed capacity: 126,076 MW

4. Projections for Installed Capacity 2006-07 : 140,500 MW 2011-12 : 197,060 MW 2016-17 : 276,385 MW 2021- 22 : 387,645 MW 2026-27 : 543,690 MW 2031-32 : 762,555 MW

5. Potential & Actual Installed Capacity of Renewable Sources (incl. Cogeneration)

6. Achievements of Biomass Power/Cogeneration(as on 30.06.2003) Source: MNES

7. Potential for CHP in IndiaSource:Paper for UNIDO Expert Group Meeting by Mr. S. C. Natu, MITCON (Dec.1999)

8. Potential for Bagasse based Cogeneration(Source: MNES)

9. Policy Reforms in Power Sector Highlights of Electricity Act 2003- came into force from 10th June 2003: • Provided liberal framework for power sector development by ensuring a competitive environment. • Facilitated in unbundling of power sector. • First major statute providing promotion of non-conventional energy sources including cogeneration.

10. Electricity Act-2003(Provisions related to Cogeneration) Sec.3: Central Govt. to prepare National Electricity Policy and Tariff policy for optimal utilization of all resources of power generation including Non-conventional. Sec.4: Central Govt. to prepare National Policy for standalone system for rural areas including those based on non-conventional sources of energy. Sec.61 (h): The appropriate commission to specify the terms and conditions for determination of tariff and it shall be guided by: • The promotion of cogeneration and generation of electricity from renewable sources of energy.

11. Electricity Act-2003(Provisions related to Cogeneration) contd.. Sec. 86 (1) (e): The state commission shall • Promote cogeneration and generation of electricity from renewable sources by providing suitable measures for connectivity with the grid; • Sale of electricity to any person and • Also specify for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licensee.

12. National Electricity Policy 2005 Regarding NCES, the policy states: • Being environment friendly, needs urgent promotion. • Efforts to reduce capital cost by promoting competition in such projects. • State Electricity Regulatory Commissions (SERCs) to fix a percentage of the total consumption in the area of a distribution licensee and this share to increase progressively. • Purchase of NCES power by distribution companies by competitive bidding.

13. National Electricity Policy 2005 (contd.) • Industries with need of heat and power are well suited for cogeneration. • Significant potential for cogeneration in the country particularly in Sugar Industry. • SERCs to promote arrangements between the co-generator and the concerned distribution licensee for purchase of surplus power from such plants. • Cogeneration system needs encouragement in the overall interest of energy efficiency and also grid stability.

14. National Electricity Policy 2005Financing Power Sector programmes • To meet the objective of rapid economic growth and ‘power for all”, a sizeable part of investments from private sector required. • The Act provides a conducive environment for investments in all segments of the power industry by removing barrier to entry in different segments. • Participation of suppliers on competitive basis encouraging private investment. • Return on Investment on the capital of private sector should be at par with investment opportunities in other sectors.

15. National Electricity Policy 2005 (contd..) • Central and the State Governments need to develop workable and successful models for public-private partnership. • Mechanism for streamlining procedures for encouraging private participation in power sector.

16. Investment Policy • Foreign Investors (FI) can enter into a JV with an Indian partner for financial and /or technical collaboration and setting up of NCES based power generation projects. • Liberalized foreign investment approval regime to facilitate foreign investment and transfer of technology through joint ventures. • The proposals for up to 74% foreign equity participation in a JV qualifies automatic approval. • 100% foreign investment as equity is permissible with approval of Foreign Investment Promotion Board (FIPB).

17. Fiscal Incentives and FacilitiesTo Manufacturers and users of NCES Systems (contd..) • Facility for Banking and wheeling of power • Facility for Third Party sale of power from NCES. • Financial incentives/ subsidies.

18. State Government Policy • A set of guidelines issued by MNES for consideration of States. • A number of States announced policy packages including wheeling, banking, Third Party Sale and Buy-back. • Some states provide concession/exemption in State Sales Tax and Octroi duty etc.

19. Investment Policy (contd..) • Various Chambers of Commerce and Industry Associations in India can be approached for guidance to Foreign Investors in finding appropriate partners. • Govt. of India encourages FI to set up renewable energy based generation projects on Built-Own and Operate basis.

20. Fiscal Incentives and FacilitiesTo Manufacturers and users of NCES Systems • 100% accelerated depreciation for tax purpose in the first year. • No excise duty on manufacture of most of the finished goods. • Low import tariffs on capital equipment and most of materials and components. • Soft loans to manufacturers and users. • Five Year tax holiday. • Remunerative price under alternate power purchase policy by State Govt. for power fed to the grid.