Submitted to
UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION
Submitted by
DEVELOPMENT ENVIRONERGY SERVICES LTD
819, Antriksh Bhawan, 22 Kasturba Gandhi Marg, New Delhi -110001 Tel.: +91 11 4079 1100 Fax : +91 11 4079 1101; www.deslenergy.com
DECEMBER 2016
DISCLAIMER
Policy Advisory Services in Biomass Gasification Technology in Pakistan
BIOMASS MANAGEMENT & PRICING FOR POWER GENERATION
2
This report (including any enclosures and attachments) has been prepared for the exclusive use and
benefit of the addressee(s) and solely for the purpose for which it is provided. Unless we provide
express prior written consent, no part of this report should be reproduced, distributed or
communicated to any third party. We do not accept any liability if this report is used for an
alternative purpose from which it is intended, nor to any third party in respect of this report.
3
ACKNOWLEDGEMENT
This document has been prepared for the United Nations Industrial Development Organization
(UNIDO) under the project title “Policy advisory services (Biomass gasification technologies)” under
the SAP ID 100333: “Promoting sustainable energy production and use for biomass in Pakistan”.
Development Environergy Services Ltd. (DESL) acknowledges the consistent support provided by the
following UNIDO officials:
Mr. Alois Mhlanga, Project Manager
Mr. Ali Yasir, National Project Manager, Sustainable Energy, Biomass - Pakistan
Mr. Masroor Ahmed Khan, National Project Manager, Sustainable Energy RE & EE
Study Team
Team leader Dr. GC Datta Roy, DESL
Team member(s) Mr. R Rajmohan, Biomass technology expert, DESL
Mr. Qazi Sabir, PITCO
4
TABLE OF CONTENTS
1 INTRODUCTION ................................................................................................................................... 8
2 BIOMASS RESOURCE MANAGEMENT-KEY CHALLENGES ...................................................................... 9
2.1 BIOMASS RESOURCE ASSESSMENT .................................................................................................................. 9
2.2 BIOMASS SUPPLY CHAIN ............................................................................................................................ 16
2.3 BIOMASS ENERGY TECHNOLOGIES ................................................................................................................ 21
2.4 SUMMARIZING ........................................................................................................................................ 26
3 BIOMASS RESOURCE MANAGEMENT – STATUS QUO IN PAKISTAN ................................................... 28
3.1 BIOMASS RESOURCE AVAILABILITY SURVEY ..................................................................................................... 28
3.2 ESTIMATED ANNUAL BIOMASS PRODUCTION .................................................................................................. 29
3.3 COMPETING USE OF AGRO-RESIDUE ............................................................................................................. 29
3.4 SURPLUS AVAILABILITY FOR POWER GENERATION ............................................................................................ 30
3.5 BIOMASS POWER POTENTIAL ...................................................................................................................... 31
3.6 PROJECT MODELS .................................................................................................................................... 32
3.7 SUMMARIZING ........................................................................................................................................ 33
4 RECOMMENDATIONS-POLICY FOR PROMOTION OF BIOMASS POWER GENERATION ....................... 34
4.1 MANAGEMENT OF BIOMASS RESOURCES ....................................................................................................... 35
4.2 PROMOTING BIOMASS POWER PROJECTS ....................................................................................................... 35
4.3 BIOMASS PRICING..................................................................................................................................... 36
4.4 GLOBAL REVIEW ....................................................................................................................................... 41
4.5 PRICING OF BAGASSE BY NEPRA ................................................................................................................. 45
4.6 MONETARY & FISCAL INCENTIVES ................................................................................................................ 52
4.7 TECHNOLOGY DEVELOPMENT ...................................................................................................................... 52
4.8 INSTITUTIONAL ARRANGEMENT ................................................................................................................... 52
5 ANNEXES ........................................................................................................................................... 54
ANNEX-I: CHINA BIOMASS ENERGY POLICY EXTRACT ..................................................................................................... 54
5
LIST OF TABLES TABLE 1: RCR FOR MAIZE............................................................................................................................................ 11
TABLE 2: CROP RESIDUE RATIOS.................................................................................................................................... 11
TABLE 3: BULK DENSITY OF DIFFERENT BIOMASS .............................................................................................................. 16
TABLE 4: PRIMARY TRANSPORTATION COST13 .................................................................................................................. 20
TABLE 5: TRANSPORTATION & STORAGE LOSS ................................................................................................................. 21
TABLE 6: FEEDSTOCK REQUIREMENT AND BIOMASS POWER TECHNOLOGY ............................................................................. 26
TABLE 7: COMBUSTION VS. GASIFICATION ...................................................................................................................... 26
TABLE 8: CROP TO RESIDUE RATIO ................................................................................................................................. 29
TABLE 9 ESTIMATED ANNUAL BIOMASS PRODUCTION ........................................................................................................ 29
TABLE 10: SURPLUS AVAILABILITY OF AGRO RESIDUE FOR POWER GENERATION ...................................................................... 30
TABLE 11: SURPLUS AVAILABILITY OF AGRO-INDUSTRIAL RESIDUE FOR POWER GENERATION ..................................................... 31
TABLE 12: ENERGY POTENTIAL – COMBUSTION TECHNOLOGY ............................................................................................ 31
TABLE 13: ENERGY POTENTIAL – GASIFICATION TECHNOLOGY ............................................................................................ 31
TABLE 14: DIFFERENT PROJECT MODELS FOR POWER GENERATION ...................................................................................... 33
TABLE 15: RE POLICY MATRIX-SELECT COUNTRIES ............................................................................................................ 34
TABLE 16: FUEL PRICING OPTION EVALUATION ................................................................................................................ 36
TABLE 17: EQUIVALENT BIOMASS PRICE, DETERMINED FROM FOSSIL FUEL ALTERNATIVES........................................................ 38
TABLE 18: EQUIVALENT BIOMASS PRICE-FIREWOOD25 ..................................................................................................... 39
TABLE 19: BIOMASS PRICE COMPARATIVE ...................................................................................................................... 40
TABLE 20 : BIOMASS PRICE AS PER SURVEY ..................................................................................................................... 40
TABLE 21: PRICES OF BIOMASS-DIFFERENT METHODOLOGIES ............................................................................................. 41
TABLE 22: BIOMASS PRICE FOR TARIFF-INDIA .................................................................................................................. 44
TABLE 23: DETERMINATION OF BAGASSE PRICE FOR REFERENCE YEAR UNDER UPFRONT TARIFF .............................................. 46
TABLE 24: ILLUSTRATIVE FUEL PRICE INDEXATION METHODOLOGY (UPFRONT TARIFF) ........................................................... 46
TABLE 25: ILLUSTRATIVE FUEL PRICE DETERMINED FOR A BIOMASS POWER PLANT ................................................................. 47
TABLE 26 : BAGASSE PRICE FOR ‘FIT’ ............................................................................................................................ 48
TABLE 27: DETERMINED PRICE OF BIOMASS .................................................................................................................... 51
TABLE 28: INSTITUTIONAL ARRANGEMENT ...................................................................................................................... 53
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LIST OF FIGURES
FIGURE 1: BIOMASS RESOURCES ..................................................................................................................................... 9
FIGURE 2: AGRO-RESIDUE RESOURCE ASSESSMENT ........................................................................................................... 10
FIGURE 3: AGRO-INDUSTRIAL BIOMASS RESOURCE ASSESSMENT ......................................................................................... 10
FIGURE 4: COMPONENT OF MAIZE PLANT ....................................................................................................................... 11
FIGURE 5: TOOLS USED IN MANUAL HARVESTING ............................................................................................................. 12
FIGURE 6: GRAIN HARVESTING ..................................................................................................................................... 12
FIGURE 7: TYPES OF COMBINE HARVESTER ...................................................................................................................... 13
FIGURE 8: PICK TYPE COTTON HARVESTER ....................................................................................................................... 13
FIGURE 9: SUGARCANE HARVESTING ............................................................................................................................. 13
FIGURE 10: MECHANIZED HARVESTING OF WHEAT STRAW ................................................................................................. 14
FIGURE 11: COMPARATIVE HARVESTING EFFICIENCY ......................................................................................................... 14
FIGURE 12: COMPETITIVE DYNAMICS............................................................................................................................. 15
FIGURE 13: ESTIMATION OF CHANGE IN COMPETITION OF STRAW UTILIZATION IN CHINA ......................................................... 15
FIGURE 14: SUPPLY CHAIN OF RICE STRAW...................................................................................................................... 16
FIGURE 15: FUEL COLLECTION SYSTEM ........................................................................................................................... 18
FIGURE 16: BIOMASS FUEL PROCESSING PLANT................................................................................................................ 19
FIGURE 17: INNOVATIVE SYSTEM OF TRANSPORTATION ..................................................................................................... 19
FIGURE 18: COST COMPOSITION OF STRAW FOR A BIOMASS POWER PLANT IN CHINA 2013 ..................................................... 20
FIGURE 19: SCHEMATIC REPRESENTATION OF RANKINE CYCLE............................................................................................ 23
FIGURE 20: SCHEMATIC DIAGRAM OF GASIFIER COUPLED WITH PRODUCER GAS BASED GENERATOR SETS .................................. 24
FIGURE 21: BIO METHANATION-SCHEMATIC .................................................................................................................. 24
FIGURE 22: SEQUENTIAL STEPS FOR THE ESTIMATION OF BIOMASS AVAILABLE FOR POWER GENERATION ..................................... 28
FIGURE 23: COMPETING USE OF BIOMASS ...................................................................................................................... 30
FIGURE 24: EVOLUTION OF ENERGY GENERATION SCENARIO ............................................................................................. 37
FIGURE 25: COAL PRICE VOLATILITY ............................................................................................................................... 39
FIGURE 26: BIOMASS PRICE BASED ON SURVEY ............................................................................................................... 40
FIGURE 27: VARIATIONS IN DELIVERED COST ................................................................................................................... 42
FIGURE 28: HISTORICAL VARIATION IN PRICE OF COAL AND FIREWOOD ................................................................................. 49
FIGURE 29: VARIATION IN PRICE OF BAGASSE .................................................................................................................. 49
FIGURE 30: RANGE OF FUEL PRICE ................................................................................................................................ 50
FIGURE 31: REGIONAL VARIATION IN THE PRICE OF FIREWOOD25 ......................................................................................... 51
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ABBREVIATIONS
AEDB Alternative Energy Development Board AFBC Atmospheric Fluidized Bed Combustion CERC Central Electricity Regulatory Commission, India CIF Cost, Insurance and Freight DESL Development Environergy Services Ltd. ESMAP Energy Sector Management Assistance Program, World Bank FiT Feed in Tariff FO Furnace Oil HFO Heavy Fuel Oil HSD High Speed Diesel IEA International Energy Agency IRENA International Renewable Energy Agency IPP Independent Power Plant LNG Liquefied Natural Gas MoA Ministry of Agriculture, Pakistan MoF Ministry of Finance, Pakistan MNRE Ministry of New and Renewable Energy, India MW&P Ministry of Water & Power, Pakistan NCV Net Calorific Value NDRC National Development & Reform Commission, China NEPRA National Electric Power Regulatory Authority, Pakistan RCR Residue to Crop Ratio RFO Residual Fuel Oil RLNG Re Gasified Liquefied Natural Gas SERC State Electricity Regulatory Commission, India UOM Units of Measurement WPI Wholesale Price Index
UNITS OF MEASUREMENTS
Parameters UOM
Percentage %
British Thermal Units per Kilogram BTU/kg
Kilo calories per Kilogram kCal/kg
Kilogram/ kilo watt hour kg/kWh
Kilogram/ cubic meter kg/m3
Kilometers km
Kilo Watt kW
Kilo Watt hours kWh
Square meter m2
One million British Thermal Units MMBTU
Mega Watt MW
CURRENCY
United States Dollars US$
Indian Rupees INR
Pakistan Rupees Rs
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1 Introduction Biomass resources meet a large percentage of the energy demand, particularly in resource rich
countries in the Asian and African region. Forest and agriculture constitute the major source of
biomasses followed by wastes from anthropological activities. Somewhat formal markets have
developed for the forest-based biomass resources and to some extent for agro-industrial residues. A
formal system for agro-residues, which constitute the bulk of the available biomass resources, is still
to emerge in countries such as Pakistan.
Managing the supply chain for agro-residues is a formidable challenge because of the distributed
nature of the resources, availability over a short period of harvesting time and its physical
characteristics. “Fuel collection in majority of the cases in the biomass power plants is largely
unorganized. The major barrier indicated by the biomass power entrepreneurs is the fuel supply
particularly during the summer months”1. (India). Annual fuel requirement of the energy plant has to
be procured in a very short period available for harvesting. Materials of very low bulk density have
to be collected from a large number of small farms, transported and stored.
Energy conversion technologies for biomasses such as bagasse, rice husk and wood chips are well
developed. For other biomasses such straw and stalks (which are more abundantly available),
technologies are still being perfected particularly to make them suitable for utilization of locally
available resources. Institutional mechanisms are required for overcoming the supply chain and
technology barriers as has been seen from the successful development in some countries such as
China, India and Thailand.
Various kinds of policy and regulatory supports are required for promotion of biomass energy
market. Feed-in-tariff has been the key regulatory tool that has been deployed in all the countries,
which have succeeded in development of biomass energy. Mismatch in the prices paid by the project
developers to the biomass supplier and the prices determined by the regulators often well below the
market prices (information asymmetry arising out of non-formal nature of the market) have
seriously affected the viability and sustainability of operation of such projects.
“In recent years, the increasing costs for production caused by the growth in demand for fuel and the
lack of standard to guide the fuel market make the biomass power plants’ profit decline and even
completely loss, since the rising cost of fuel is out of the control for biomass power plants”2. (China)
Monetary and fiscal incentives, development of market tools such as renewable purchase
obligations, tradable certificates etc. are amongst the array of other policy tools that are being
increasingly deployed for promoting biomass energy globally.
An extensive biomass resource assessment survey has recently been concluded in Pakistan with
support from World Bank/ESMAP. This study has identified the biomass resources that can be
harnessed for commercial energy production deploying appropriate energy conversion technologies.
The rich information in the report provides the platform for attracting private sector investment in
biomass energy technologies. It is the opportune time for deployment of appropriate policy and
regulatory tools for kick starting the investment market. Recommendations on various policy,
1Factors Influencing Grid Interactive Biomass Power Industry – India, TERI, India 2Dilemma &Strategy of Biomass Power Generation Industry Development in China: A Perspective of Industry Chain
9
regulatory and institutional mechanisms have been accordingly prepared based on review of global
scenario and status quo in Pakistan and taking into account information available in the survey
report, public domain and DESL database.
2 Biomass resource management-key challenges Unlike other energy resources, the sources of major constituents of biomass resources are farmers
and agriculture. A systematic approach is therefore required for understanding the issues involved in
managing biomass resources. The critical components of a biomass resource management system
include:
Estimation of overall production of biomass residues
Estimation of actual availability taking into account harvesting efficiency & competitive usages
Biomass supply chain
Biomass characterization and energy technologies
2.1 Biomass resource assessment
2.1.1 Estimation of residue generation
Biomass resource assessment study quantifies the existing or potential biomass material from
different sources (illustrated example of sources in Figure 1 below) in a given area.
Figure 1: Biomass resources
Pakistan is richly endowed with biomass resources with an energy potential of 0.5 Million
GWth/year3 from agro residues and agro industrial residues alone. Stalks and straws are the primary
agro-residues generated from the major crops such as wheat, paddy, maize and cotton in Pakistan4.
In many countries, riverside greens can provide an attractive option as an energy crop. Punjab
3 “Final Report on Biomass Atlas for Pakistan” developed as a part of the “World Bank Biomass Mapping for Pakistan: Phase 1-3” July 2016 4 Biomass atlas for Pakistan-April, 2016
10
province in Pakistan is potentially suitable for development of such crops. Different methodologies
are used for assessment of different types of biomasses as illustrated by the following figures.
Agro-residues
Figure 2: Agro-residue resource assessment
Agro-industrial residues
Figure 3: Agro-industrial biomass resource assessment
Actual availability of residues is usually less than the estimates as has been observed from project
specific surveys5. These differences occur due to variations in residue to crop ratios (RCR) and the
5 DESL Report on “Assessment of Options for Biomass Power Generation” to DfiD, June 1, 2011
Satelite survey-crop area
•Crop mapping for different agricultural seasons (Summer & winter crops)
•Estimation of crop area for different types of crops
•validation through physical sample survey
Crop yield estimate
•Sample survey and stakeholders interaction
•Historical trend analysis
•Recoconciliation with available data on crop production from Governmental records
Estimate of crop residue
ratio
•Sample survey and stakeholders interaction
•Literature survey-research data and information on CRR for different types of crops in different regions
•Identification of variables impacting CRR
•Freezing the CRR estimate
Production estimate
•Identification of key crops (Sugar cane, Paddy, Nuts) producing fuel residues
•Estimation of overall crop production
•Estimation of overall industrial capacities for processing of crops
•Estimate of crops processed in industries based on statistical analysis
Estimate of surplus
availability
•Sample survey for assessment of actula CRR based on data and information from individual processing units
•Historical and comparative analysis-regional, global
•Freezing average CRR
•Estimate of captive consumption based on historical analysis
•Assessment of surplus
11
efficiency of harvesting. In case of maize for example, there are six components of residues. Only
straw and stalk can be considered as residues available for use as fuel. Table 1: RCR for maize
Figure 4: Component of maize plant
The cob is also an important residue. However, cobs are usually not available at the farmer’s end
and as such would not be available as fuel for the energy plant located in the crop area.
DESL has carried out literature survey as well as field research to assess the situations for different
crops such as wheat, paddy, cotton, sugar cane, jowar, bajra, tur and soybean. The results obtained
from the field study were compared against the published data from different sources. The following
table summarizes the findings.
Table 2: Crop residue ratios
S. No
Crop Biomass portion as per RCR as per
IISc Bangalo
re
Other literatur
e
Biomass Regener
able Energy6
DESL IISc Bangalor
e
Other literature at %
moisture7
Biomass Regener
able Energy book
DESL*
1 Bajra Stalk Stalk Stalk 2 1.75 @15%
1.4 0.651
2 Cotton Seeds + Waste
Stalk Stalk 3.5 1.77-3.74 @12%
3.5
3 Jowar Stalk Stalk Straw Stalk 2 1.25 @15%
1.4 0.456
4 Maize Stalk Straw Straw Stalk 2.5 2.08 1 0.56
5 Soy bean
Straw Straw Straw 2.5@15% 2.1 0.55
6 Sugar cane
Bagasse + leaves
Bagasse + leaves
Trash 0.4 0.33+0.1 @48%
0.057
7 Tur Waste Straw Stalk 1.6 1.5 0.581
8 Wheat Straw Straw Straw Straw 1.6 1.75 @15%
1.3 0.613
*Includes harvesting efficiency
6 Biomass- regenerable energy, edited by D.O Hall and R P Overend, John Wiley and Sons 7 Paper presented at Regional Consultation on Modern Applications of Biomass Energy, 6-10 January 1997,
Kuala Lampur Malaysia
Part of plant At Field Considered for RCR
Female flower Left over No
Grains Product No
Husk Residue No
Straw & stalk Residue Yes
Root Left over No
Cob Residue No
Male flower Left over No
12
The gap between the assessed estimates based on survey and assumed RCR can be reduced by
carrying out regular satellite mapping and field survey. During the field study, sample survey should
be carried out to determine the actual amount of harvestable residues per unit of crop area. The
estimates derived from the mapping and field survey should be reconciled against the measured
value from sample survey for making more accurate estimate of residue production.
2.1.2 Harvesting efficiency
The entire quantity of biomass generated by the crops is not harvestable. Depending upon the types
of crops and the harvesting methodology (manual and mechanized), the actual amount harvested
would be less than the harvestable quantity.
Manual harvesting: It includes plucking the ears of grain directly by hand, cutting the grain stalks
with a sickle, cutting them with a scythe, or with a modified type of scythe known as a grain cradle8.
The different tools used in manual harvesting are shown in the figure below.
Sickle: a short-handled farming tool with a semicircular blade, used for cutting corn, lopping,
or trimming
Scythe: a tool used for cutting crops
such as grass or corn, with a long curved blade at the end of a long pole attached to one or two short handles.
Grain Cradle: A grain
cradle or cradle is a modification to a standard scythe to keep the
cut grain stems aligned.
Figure 5: Tools used in manual harvesting
Mechanized harvesting: In the developed countries, only mechanized methodology is used for
harvesting. Mechanized systems are being increasingly deployed in rest of the world too including
Pakistan. Some of the mechanized harvesting techniques for rice, wheat, maize, cotton and
sugarcane (major crops of Pakistan) are as follows.
GRAIN HARVESTING MACHINE: This machine is used to harvest grains, example, rice, wheat, maize,
barley and millets. A combine grain machine performs three separate operations comprising
Harvesting (Reaping) – process of cutting/ harvesting the crop from the land
Threshing – process of separation of grain from stalks and husks (biomass production)
Winnowing – blow a current of air through grain in order to remove the chaff
Rice harvester, Reaper
Wheat harvester, combine
Maize harvester
Figure 6: Grain harvesting
8 http://www.agriculturalproductsindia.com/agricultural-machinery-equipments/agricultural-machinery-harvesting-
machinery.html
13
Different types of combine harvesters are shown in the following figure.
Tractor mounted type
Wheel type Crawler type
Figure 7: Types of combine harvester
COTTON HARVESTING MACHINE: It is a machine for harvesting cotton bolls. Mechanical cotton
harvesters are of two basic types, strippers and pickers. Stripper-type harvesters strip the entire
plant of both open and unopened bolls along with many leaves and stems. Special devices at the gin
then remove the unwanted material.
Figure 8: Pick type cotton harvester
SUGAR CANE HARVESTING MACHINE: A sugar cane harvesting machine performs basal cutting, cleaning of
sugarcane through gravity (by fans/ blowers) and chopping of stalks into billets, unloading them
onto a transport unit for transshipment9.
Figure 9: Sugarcane harvesting
9 “The operation of mechanical sugarcane harvesters and the competence of operators: A ergonomic approach”, Africa
Journal of Agricultural Research, Academic Journals, Vol. 10 (15) pp 1832-1839, 9 April, 2015
14
Mechanized harvesting usually has a negative impact on harvesting efficiency of biomass resources
for a variety of reasons. DESL has been engaged in the field of biomass energy for close to two
decades. During the course of a large number of resource assessment studies, it has been observed
that harvested biomass is invariably less than the harvestable biomass. The extent of difference
varies widely influenced by local factors10.
The efficiency is much higher for manual harvesting. Several factors such as unevenness of the land
level, machine efficacy etc. have been found to have major impact on efficiency of mechanized
harvesting. The figure below shows one such challenge in improving reaping efficiency.
Figure 10: Mechanized harvesting of wheat straw
During the harvesting operation, quite a large quantity of residues is mowed down as indicated by
change in their orientation. This makes it difficult to cut these parts through the reaping operations.
There are similar other problems that have been identified in carrying out harvesting operation of
different types of residues.
Figure 11: Comparative harvesting efficiency
Opportunity price for biomass also plays an important role as farmers take more interest in
improving the efficiency for resources having higher market price. Wheat straw fetches very high
10 DESL Report on “Assessment of Options for Biomass Power Generation” to DfiD, June 1, 2011
Rice Wheat
Manual 50% 88%
Mechanized 30% 72%
0%10%20%30%40%50%60%70%80%90%
100%
Har
vest
ing
Effi
cien
cy
15
price in the market because of its fodder value and as such farmers do not mind investing in
technologies and additional efforts for increasing the harvesting efficiency.
The market price of a particular biomass can change dramatically as and when technologies are
developed for utilizing such biomasses for energy production or other commercial uses.
2.1.3 Competitive use
Farmers use residues for trash mulching of the fields as well as fodder and fuel and in some cases as
construction material too. Agro-industries use residues as fuel, bagasse for cogeneration to meet the
captive demand of power and steam in the sugar mills and the rice mills use husk as fuel for
generation of steam and hot water for rice processing. The competitive scenarios are rapidly
changing due to various reasons as illustrated below10.
Figure 12: Competitive dynamics
The following figure illustrates the dynamics of competitive use driven by market as well as
behavioral factors.
Figure 13: Estimation of change in competition of straw utilization in China11
11 Preparing national strategy for rural biomass renewable energy development, ADB (TA No. 4810-PRC), April
2008
•Optimisation of use for mulching-increased awareness
•Increasing access to cleaner commercial fuel
•Increased awareness about potential revenue from surplus biomassesAgro-residues
•Development of high efficiency & alternative technologies-High pressure bagasse cogen, husk gasification, bio technologies
•Availability and cost of commercial fuels
•Market opportunities from cleaner/carbon neutral energy production
Agro-industrial residues
4.6%
5.5%
10.4%
-9.1%-1.3%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
Feed Industry Edible Fungus Return to field +waste
Energy
2005
2010
2015
CAGR
16
The macro picture shown above only tells us part of the story. Practically, the change in the usage
can vary widely depending upon the local factors. As in case of production, the competitive use can
also change from year to year and as such, the macro data can only be used as guide. Periodic
surveys are required for establishing the trend and making projections on potential availability of
surplus biomass for energy production.
2.2 Biomass supply chain Agro-residues are available for a very short period ranging from two to three months depending
upon the crop-harvesting period. Agro-industrial residues such as rice husk are usually available
throughout the year whereas availability from other industrial operations fluctuates depending upon
the regional practices on processing of harvest. A biomass energy plant has to procure the fuel
during harvesting period and store it for meeting the fuel demand for the entire year. The following
figure illustrates a state of the art supply chain system for paddy straw, which is currently the most
abundantly available resource for energy production.
Figure 14: Supply chain of rice straw
The challenge starts with collection of the harvested mass from the field. As we move away from the
fields located near roads, it becomes increasingly more difficult to collect the biomass. Cost of labor
and primary transportation keeps on increasing often making the whole process non-remunerative.
The cost of transport of biomass from the field to the power plant (including primary and secondary)
is the highest among the other components and is a direct function of the distance of transport
between them and the bulk density of the different fuels. The following table provides details of the
bulk density of the different biomass:
Table 3: Bulk density of different biomass
Type of biomass Bulk Density (kg/m3)
Maize corn 510
Rice husk 150
Rice straw 125
17
Type of biomass Bulk Density (kg/m3)
Cotton stalk 103
Sugarcane trash 100
Wheat straw 55
Maize husk 55
Maize stalk 40
The low bulk density impacts both the storage and transportation cost directly. Densification helps in
reducing such cost. Energy requirement for densification is quite high.
Only liquid fuel driven devices can be used in remote areas, as electrical power would mostly not be
available in such locations.
Different biomass supply chain business models are emerging in different countries with partnership
amongst farmers that are more progressive, biomass traders and logistics management companies13.
A few operating models are illustrated as follows.
2.2.1 Direct purchase-cash and carry basis
Smaller biomass energy plants (heat or power or both) usually purchases either from the ‘Mandis’
(agricultural commodity markets) directly from the farmers or traders (Artiyas) registered with such
‘Mandis’. Some of the traders maintain some minimum storage capacity to take care of the
fluctuation in the daily arrival of fuel during both off-season and seasons. Marginal farmers usually
dispose all of their produce during the season whereas larger farmers store fuel to take advantage of
the higher off-seasonal prices. In this model, the transaction takes place on parcel basis and on cash
payment.
2.2.2 Direct purchase through contracts with individual farmers
In this model, biomass energy producer purchases fuel on a regular basis as per signed annual
contracts with farmers. Depending on the size of the holdings (fewer in high-income countries),
there could be a large number of individual contracts with farmers. The energy plants usually
appoint intermediaries on contract to manage the logistics. This is prevalent when the fuel is
procured from nearby locations and the requirement is small. (This concept is gaining popularity in
China and is called “Plant and Farms” model). Payment is made on cash as well as credit for which
established rural banks provide transaction services.
2.2.3 Purchase through intermediaries
In this model, the energy plant purchases fuel under agreements with one or more fuel agencies or
traders, who in turn purchase biomass from the farms. They manage the entire operations including
logistics and fuel preparation. Such intermediaries supply biomass fuels to multiple users within a
manageable spatial distance (up to 100 km in India) as per their own business model. This system,
named fuel agency model, has become quite popular in China. In Europe too, this is now a common
practice. This model is gradually finding greater acceptance in many markets including Sri Lanka,
India etc (illustrative case examples follow).
18
2.2.4 Case study-corporatization Punjab Renewable Energy Systems Pvt. Ltd., a private sector company in India has pioneered
establishment of biomass depots and have signed long-term contracts to meet the fuel requirement
of three (three biomass power plants in the catchment area)12. The model involves establishment of
supply chain including fuel-processing plants based on a hub and spoke methodology illustrated
below.
Figure 15: Fuel collection system
Farmer supplies biomass to the nearest located collection center equipped with necessary
infrastructure for receiving, unloading and loading of fuels. Larger collection centers (called master
collection canters) are also equipped with processing facilities. Biomass collected in the smaller
12 DESL report on Validation of fuel supply linkage model, MNRE, 2009
Textbox 1: Case Study-Sri Lanka
Support is being provided to replace 10% of the fossil fuels used in the industry by 2017 by biomass-derived energy. To this end, it is proposed to develop /revitalize six supply chains to deliver quality-assured and cost-effective wood fuel to industrial or commercial end users in a reliable way. Under this project, it is proposed to establish biomass energy terminals as a pilot project. The expected outcome is to increase confidence in the biomass energy sector, increase benefit to the local economy and reduction in air pollution. The project intends to establish six biomass energy terminals in the following districts; - Kurunegala - Galle - Ratnapura - Gampaha - Moneragala – Nuwaraeliya. The project will support the establishment of the biomass energy terminals, which will adopt criteria and indicators developed for sustainable fuel wood production and source fuel wood accordingly. The processed biomass fuel output from the energy terminals would include the following: 1. Wood chips produced to the requirements of the industry or industries that it is supplying 2. Briquettes, and 3. Split logwood processed, dried and sized, to requirements of the industry or industries it is supplying.
Source: GEF PRO DOC: Promoting Sustainable Biomass Energy Production and Modern Bio-Energy Technologies in Sri Lanka
Power
Plant
19
centers is transported to nearby large centers for processing. Processed biomass is then transported
to the consuming plants as per supply calendars.
Step 1: Uprooting of Cotton stalk from
Farm Field
Per 3 Acre : 10 Jobs per Day X 180
Days (Harvest Season) = 1800
ManDays
Step 3: Transportation & Storage to
Storage Center / Plant Per Tractor
trolley : 8 Jobs X 180 Days = 1440
Mandays
Step 2: Processing/ Shredding of
Cotton Stalk per Shredder : 6
Jobs X 180 Days = 1080
ManDays
Total Mandays : 4320 Mandays Per Unit Shredder ( For 13 .2 MW Biomass Based Plant, Maharashtra)
Average Job Created due to Biomass ( Cotton Stalk) SCM Mechanism For Biomass Based Plant having 120
Shredders = (Number Of Shredders X Total Mandays )/ 365 Days
= (120 X 4320) / 365
= 1421 Green Jobs/Day
Socio- Economic Impact of Biomass Supply Chain (Cotton Stalk)
Figure 16: Biomass fuel processing plant
Master collection centers are responsible for managing the fuel quality and all accounts with the
consuming power plants. The power plant will pay the master collection center for biomass coming
from any collection center. The master collection center will make payment to branch collection
center for their deliveries. This mode of payment is adopted to ensure the quality of biomass and to
check the flow of biomass towards power plant only. This model has created a condition for farmers
to innovate storage and transportation at their end to deliver maximum quantity of fuel to the
master collection centers, which are equipped with better facilities for quality management. This
helps in reducing the discretion used by smaller collection centers on quality assessment.
With the establishment of a sustainable biomass energy system, farmers cooperative can also play a
very important role in managing the supply chain. Innovative system of transportations is also being
developed by rural entrepreneurs responding to the emerging biomass market.
Figure 17: Innovative system of transportation
It is common to see large capacity tractor trolleys carrying upto 8 MT of low-density biomass
thereby increasing the viability of biomass supply business.
20
The transportation cost of reasonably densified biomass (baled) varies from 10 to 20% depending
upon the distance of transportation. The overall cost of transportation and handling for the primary
and secondary transportation could be two to three times this amount depending upon the type of
biomass and extent of densification.
Table 4: Primary transportation cost13
Transportation distance Impact on delivered cost of fuel (Primary)
Up to 15 km 8%
16 to 35 km 13%
36 to 50 km 18%
Above 50 km 20%
For large capacity power plants, marginal cost of logistics (including primary and secondary) can be
as high as 50% of the cost of fuel as fired to the boiler against the purchase cost of about 25% only.
Figure 18: Cost composition of straw for a biomass power plant in China 201313
This shows the importance of logistics in the overall management framework for a biomass power
plant.
2.2.5 Transportation & storage losses
Some amount of biomass is lost during transportation and storage. Similarly, quality of stored
biomass can degrade resulting in loss of calorific value. The extent of physical and calorie loss can
vary depending upon the physical quality of the infrastructure (capital cost related) and
management practices. Following table illustrates the extent of variations observed from a study
carried out by DESL14 over a period of one year, tracking the transportation and storage loss in a
biomass energy plant in India.
13 DESL database 14 DESL Study: Biomass Fuel Supply Study in the state of Rajasthan, RRECL, 2011
Purchase, 25.22%
Transportation, 43.88%
Storage, 10.81%
Pretreatment, 2.37%
Trade margin, 17.72%
21
Table 5: Transportation & storage loss
Particulars UOM Heap-1 Heap-2 Heap-3 Heap-4
Fuel type - Mustard crop residue
Location of heap - Collection centre-1 Collection centre-2 Plant Plant
Nature - Uncovered Uncovered Uncovered Covered
Duration of storage Days 54 57 158 171
Carpet loss (L2) % 0.5 0.5 0.5 0.5
Transportation loss (L3) % 0.5 0.0 0.0 0.2
Windage Loss (L4) % 3.7 2.0 9.5 0.0
Degradation loss (L5) % - - 1.7 1.7
Total % 4.7 2.5 11.7 2.4
Improper and poor quality storage infrastructure was mainly responsible for the high loss of 11.7% in
case of heap 4. This has been the case despite close monitoring as the storage heap was in the open
without cover and water table was high in the storage area. On the other hand, even under the best
of conditions, 2.4% was lost.
On an average, about 5% of the fuel does get lost in transportation and storage. Losses can be
minimized by constructing waterproof storage bins. However, the cost of constructing such facilities
is high with poor payback in most cases. Some amount of optimization can be considered such as
constructing concrete floors with provision for covering of the stored mass by tarpaulins.
2.3 Biomass energy technologies Different biomasses have their own unique physical and chemical characteristics. Bagasse, rice husk
etc. are very good fuel for boilers. They can be used for high efficiency power generation projects.
Straw and husks on the other hand are difficult to use as fuel for boilers due to their low bulk density
and poor ash chemistry. Different types of pre-processing technologies are used for energy
generation from such biomasses. Biomass energy technologies can be broadly covered under the
following categories:
Fuel preparation
Energy conversion technologies
Biomass characteristics vis-à-vis energy conversion technologies
2.3.1 Fuel preparation
Various methods of pre-processing are as follows15:
Drying: Gasification and pyrolysis generally requires drying. However, it is not necessary for
direct combustion, but can result in the following benefits16:
o Improved efficiency: 5%-15%
o Increased steam production: 50%-60%
o Reduced ancillary power requirements
o Reduced fuel use
15 http://www.eai.in/ref/ae/bio/powr/biomass_power.html 16 http://www.tappi.org/content/Events/11BIOPRO/19.2Worley.pdf
22
o Lower emissions
o Improved boiler operation
Shredding/threshing: Straw and stalks are reduced to smaller and uniform sizes for feeding
to boiler furnaces. Paddy straw has high silica content, which causes rapid erosion of
shredder blades. Different types of shredders with different material of constructions are
being developed for reducing the erosion impact.
Briquetting: Screw extrusion is used to compact biomass into loose,
homogeneous briquettes. Briquettes are becoming very popular fuel
substitutes in various applications such as hotels and restaurants, micro and
small-scale industries in the rural areas. Market value of straw and stalks is
considerably enhanced by briquetting.
Pelletisation: Pelletizing is the process of compressing or molding of loose
biomasses into the shape of a pellet. Pellets can be made from any one of five
general categories of biomass: industrial waste and co-products, food waste,
agricultural residues, energy crops, and virgin lumber. Pellets are excellent fuel
for both combustion and gasification. Pellets are now widely traded globally as
green fuel for CHP and heating fuel.
Torrefaction: Torrefaction of biomass, e.g., wood or grain, is a mild form of
pyrolysis at temperatures typically between 200 and 320 °C. Torrefaction process
removes the tars thereby improving the gas quality, when torrefied biomass is
used as fuel for gasification plants.
The cost of pre-processing is impacted largely by the electrical energy requirement for the process
and cost of the same. Sugar cane bagasse is one of the finest fuels for use in a steam power plant but
cannot be used in gasifiers. Most of the low-density fuels such as straw and stalk are difficult to use
in gasifiers but can be used in combustion-based power plants. Such fuels can be used in gasifier if
these are densified.
2.3.2 Energy conversion technologies
Biomass resources are amenable to application of a wide array of conversion technologies for
producing thermal and electrical energy. These can be broadly categorized under two different
models:
Centralized power generation system
Decentralized power generation system
Centralized power generation system
A centralized power generation system (CGS) can have two categories of power plants- independent
power plants (IPP) and merchant power plants (MPP). Both are typically in the range of 5– 20 MW.
IPPs enter into long-term power purchase agreements (PPA) with the state utilities / single buyer or
consumers purchasing electricity through open access or facilities having captive power plants based
on conventional sources of energy (off-grid). On the other hand, MPPs enter either into short-term
contracts (daily or weekly contracts) and sell power on exchange.
Both MPPs & IPPs are based on well-established combustion based Rankine cycle with a steam
generator (boiler) and a steam driven TG set.
23
Figure 19: Schematic Representation of Rankine Cycle
CGS is based on mature combustion technologies such as pile burning (which are nowadays
obsolete)/ travelling grate/ vibrating grate spreader stoker or atmospheric fluidized bed combustion
(AFBC). The choice of combustion technology will depend upon the type of fuel i.e. size, uniformity
of size, variations in moisture content, ash content, ash fusion temperature, etc. For example, if the
primary fuel is rice husk, AFBC is the most preferred technology and if the fuel is mustard husk, then
travelling grate is the most preferred technology.
Decentralized Power Generation System
Amongst the decentralized power generation plants, various categories of power plants present are
as following:
Industrial cogeneration/ CHP plants
Grid connected tail end power plant
Off -grid power plant
Industrial cogeneration/CHP plants
A large number of industries such as sugar, textile, paper, tea etc. requires power as well as thermal
energy for heating and drying applications. Similarly, industries like steel, cement, melting furnaces
etc. produce large quantity of waste heat, which can be effectively utilized for power generation.
Large-scale industries in these segments have already adopted such technologies. These are mostly
based on Rankine cycle. Opportunities exist for application of this technology for the small-scale
sector too. These projects can be grid-connected for supplying surplus power to the grid.
Grid connected tail end power plants
Tail end power plants are typically in the range of 1-2 MW. The purpose of such plants is pumping of
energy into local distribution system of grid (at village or district level) rather than pumping of
energy into national/ state grid, as is the case with IPPs. Tail end power plant can also enter into long
term PPAs with distribution companies, single buyer or consumers purchasing electricity through
open access. The various technologies available for tail end power plants are:
i. Combustion based Rankine cycle
ii. Biomass Gasifier coupled with gas based generator sets
iii. Biomethanation based power generation
The combustion based Rankine cycle has already been explained in the preceding section on
centralized power generation.
24
Biomass Gasification based power generation
In gasification process, biomasses such as rice husk, wood, cotton sticks etc. are gasified (incomplete
combustion with air) to produce so called ´producer gas´ containing carbon monoxide, hydrogen,
methane and some other inert gases. Gasification system consists of a gasifier unit, purification
system and energy converters - burner or engine as shown in the figure below.
Figure 20: Schematic Diagram of Gasifier coupled with Producer Gas Based Generator Sets
Bio methanation based power generation
Biomethanation is an important biological conversion process, which converts biomass in the
absence of oxygen to methane and carbon dioxide, popularly known as biogas and leaves a
stabilized residue, which makes excellent organic manure. The drawback of the model is that, the
time needed for start-up of a Biomethanation process is too long. If no specifically suitable biomass
is available in sufficient quantities, start-up of the system may require up to several months. The
biogas is stored in gas chamber and burnt inside internal combustion engine coupled with generator
to produce electricity. The gas can also be fired in a conventional boiler in a Rankine cycle based
power plant. The gas can also be used for heating purposes such as cooking or heating water.
Further, biogas can also be purified and bottled up and sold as commercial fuel such as LPG or CNG.
Figure 21: Bio Methanation-Schematic
25
Off Grid systems
The second category of decentralized power generation is off grid power system, which is typically in
the range of a 50-500 kW and is generally used to meet demand of electricity in villages or cluster of
villages. Off grid power plants have to install distribution system along with metering system to
supply the electricity to the end users and the payment is also directly collected by the power plant.
The biomass based gasification system and bio-methanation are prevalent technologies for off grid
power plant.
2.3.3 Biomass characteristics & energy technologies
Physical and chemical characteristics of the different types of biomasses have important bearing on
choice of energy conversion technologies. The most important properties relating to thermal
conversion of biomass are as follows.
Moisture content
Thermal conversion requires low moisture content. However, Stoker and CFB boiler can
accept higher moisture content than gasifiers18. Bioconversion can accept high moisture
biomass17. High moisture content reduces the energy value of the feedstock, consequently
affecting the specific fuel consumptions.
Calorific value
Calorific value is the heating value of the fuel in energy terms per amount of matter. The
higher heating value (HHV) is the total energy content released when the fuel is burnt in air,
including the latent heat contained in the water vapor and therefore represents the
maximum amount of energy potentially recoverable from a given biomass source. The actual
amount of energy recovered will vary with the conversion technology, as will the form of
that energy i.e. combustible gas, oil, steam, etc17.
Ash content
It is the inorganic component within the biomass. Grasses, bark and field crop residues
typically have higher amounts of ash than wood. Ash can form deposits known as “slagging’
or “fouling”. It can be minimized by keeping combustion temperature low enough to
prevent ash from fusing. Alternatively, high temperature combustion could be designed to
encourage the formation of clinkers (hardened ash) which can be easily disposed of. Biomass
like rice husks needs special combustion system due to silica content of the husks18.
Shape, size, density
The size and density of biomass is important as it affects the rate of heating and drying.
Larger particles would heat up slowly and produce more char and less tar. In fixed bed
gasifier, fine grains or fluffy grains might cause flow problem in bunker section, resulting in
unacceptable pressure in reduction zone and high proportion of dust particles in the gas18.
The suitability of different types of biomasses and the feedstock requirement (size and moisture
content) for various biomass power technologies has been summarized in the table below.
17 http://faculty.washington.edu/stevehar/Biomass-Overview.pdf
26
Table 6: Feedstock requirement and biomass power technology18
Biomass conversion technology
Commonly used fuel types Particle size requirement
Moisture content requirement (wet
basis)
Capacity range
Stoker grate boilers
Sawdust, chips, bagasse, rice husk, straw and stalks
6-50 mm 10-50% 3 to 20 MW
Fluidized bed combustor
Rice husk, wood chips, pellets < 50 mm < 60% 3 to 50 MW
Fixed bed updraft gasifier
Chipped wood, rice husk, pellets
6-100 mm <20% 30-1000 KW
Downdraft gasifier
Wood chips, pellets, wood scrapes, corn cobs and stalks
< 50 mm < 15% 25-100 kW
Circulating bed gasifier
Most wood and chipped agricultural residues
6-50 mm 15-50% 5-10 MW
A comparison of combustion and gasification technology is given in the table below.
Table 7: Combustion vs. gasification
Combustion Gasification
Process Burning of biomass in air to convert the chemical energy stored in biomass into heat, mechanical power, or electricity using various items of process equipment, e.g. stoves, furnaces, boilers, steam turbines, turbo-generators, etc
Conversion of biomass into a combustible gas mixture by the partial oxidation of biomass at high temperatures. The low calorific value (CV) gas produced can be burnt directly or used as a fuel for gas engines and gas turbines. The product gas can be used as a feedstock (syngas) in the production of chemicals (e.g. methanol)
Technology Stoker grate boiler, fluidized bed combustor
Fixed bed gasifier, fluidized bed gasifier
Fuel moisture content High Low
Fuel size Flexible Uniform
Scale Small scale to large scale plants Upto 3000 MW
Small scale
Efficiency More Less
Emissions Greater NOx, CO, and particulate emissions
Lower NOx, CO, and particulate emissions
2.4 Summarizing It is important to develop a comprehensive strategy for management of biomass resources. This
should address all the critical issues such as:
Development and deployment of standard methodology for assessment of overall
generation of biomass
Biomass supply chain from the farmers to the factories
Physical infrastructure for managing logistics &
18 IRENA working paper on Renewable Energy Technologies: Cost Analysis Series- Volume -1: Biomass for Power
Generation, June 2012
27
Preparation of technology matrix
Satellite and field surveys are required at regular intervals for establishing the accuracy of the survey
results as well as capturing the changes in the cropping pattern and competitive usage scenarios.
The crop residue ratios and harvesting efficiencies are to be established for every geographic area
for making accurate assessment of the overall availability and surpluses for energy conversion.
The purchase price of biomass often constitutes only about 25% of the overall delivered cost. The
cost of primary and secondary transportation and storage accounts for higher percentage of overall
cost. An integrated biomass supply chain with well-established logistics system has therefore, to be
made an integral part of biomass resource development.
Certain biomass energy technologies such as bagasse cogeneration, rice husk boilers are well
established and normally require policy support only in respect of feed-in-tariff. Much larger policy
framework is required for development of a biomass energy market for other types of biomasses,
particularly agro-residues.
28
3 Biomass resource management – Status quo in Pakistan
3.1 Biomass resource availability survey An extensive biomass resource assessment study has been carried out in Pakistan covering the
entire country with support from World Bank/ESMAP. The objective of the mapping exercise was
macro-assessment of biomass feedstock availability and the potential use of biomass feedstock for
energy in Pakistan through a biomass atlas. The study covered the following types of biomass
resources:
Agro residues
Agro-industrial residues
Livestock residue
Municipal Solid Waste (MSW)
Forest harvesting and wood processing residues
However, the survey has covered mainly the agro and agro-industrial residues for which the
following methodology has been used.
Figure 22: Sequential steps for the estimation of biomass available for power generation
Estimated annual crop production
•Satellite mapping using Landsat 8 images for landuse classification with seven image datasets covering the area to be analyzed within Pakistan and distributed over one year covering the Kharif and Rabi cropping seasons in Pakistan for one year
Estimated annual biomass
production
•Considering national level average values of residue to crop ratio (RCR) derived from farmer survey and previous studies conducted by various institutions and validated with the values in the FAO’s Bioenergy and Food Security (BEFS) Rapid Appraisal Tool for crop residues assessment
Estimated annual surplus biomass
•Agro residues: Considering competing use derived from farmer survey
•Agro-industrial residues: All the resources were considered based on secondary data available for indutries and few sample surveys
Estimated availability for
energy production
•Agro residues: Considering willingness of farmers to sell biomass to energy plants derived from farmer survey
•Agro-industrial residues: All the resources except for maize husk and cobs have been considered for power generation
29
3.2 Estimated annual biomass production The average values of residue to crop (RCR) ratios have been determined based on survey inputs and
further validation from data available from other sources including. The following table shows the
RCR values.
Table 8: Crop to residue ratio
Crop Residue RCR, average RCR, minimum RCR, maximum
Cotton Stalk 3.4 2.76 4.25
Wheat Straw 1 .5 1.3
Rice Straw 1 .42 1.3
Husk 0.2 0.15 0.36
Sugar cane Trash 0.12 0.1 0.2
Bagasse 0.3 0.26 0.32
Maize Stalk 1.25 1 2.25
Husk 0.22 0.2 0.3
Cob 0.33 0.2 0.86
The wide range of variation is generally in line with what is generally experienced all over the world.
The residue production has been estimated accordingly as shown in the following table.
Table 9 Estimated annual biomass production
Type of crop Type of residue RCR (average) Estimated annual biomass production (‘000 t)
Agro-residue
Cotton Cotton stalk 3.40 49,405
Wheat Wheat stalk 1.00 34,581
Rice Rice straw 1.00 16,754
Sugarcane Sugarcane trash 0.12 7,831
Maize Maize stalk 1.25 5,325
Sub-total 113,896
Agro-industrial residue
Rice Rice husk 0.20 1,700 to 3,35119
Sugarcane Bagasse 0.30 17,100 to 19,577
Maize Maize cob 0.33 1,406
Maize Maize husk 0.22 937
Sub-total 21,193 to 25,271
Grand Total 135,089 to 139,167
The estimated annual surplus biomass production was arrived by assessing the competing use of
biomass through the field surveys.
3.3 Competing use of agro-residue The competitive use of biomass was determined by undertaking a structured survey soliciting
19 The World Bank report considered the lower values for biomass generation while estimating energy
potential
30
farmer’s response on prevailing practices in the following specific areas in few selected districts in
the Punjab province.
Fodder
Domestic fuel (cooking)
Sale to industries
Sale to biomass suppliers
Use as fertilizer
Field burning
The following graph summarizes the crop wise competing uses, as gathered for the districts in
Punjab province in Pakistan under the survey:
Figure 23: Competing use of biomass
3.4 Surplus availability for power generation The estimated annual biomass availability for power generation has been arrived by assessing the
willingness of the farmers to participate in the proposed system of biomass supply chain for
utilization of the surplus resources for energy production. A survey of industries using / generating
biomass was also conducted to assess the generation, utilization and disposal methods.
Table 10: Surplus availability of agro residue for power generation
Type of crop Type of residue Estimated annual technical potential of residues
(Discounting competing use) ('000 t)
Estimated annual technical potential of residues
(Discounting willingness of farmer) ('000 t)
Agro-residue
Cotton Cotton stalk 6,013 5,039
Wheat Wheat stalk 6,488 5,689
7.9%
24.6%20.3%
61.5%
32.5%
64.1%
19.1%
15.9%
4.0%
13.5%
1.2%
14.1%
2.0%
6.2%
2.1%
0.5%
5.0%
0.3%
3.6%
3.9%
21.9%
16.2%
9.7%
2.8%
5.4%
4.4%
19.3%
51.9%
21.9%
42.7%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Cotton Maize Sugar Cane Wheat Rice
Fodder Domestic burning (Cooking) Sale to industries
Sale to biomass suppliers Use as fertiliser Field burning
31
Type of crop Type of residue Estimated annual technical potential of residues
(Discounting competing use) ('000 t)
Estimated annual technical potential of residues
(Discounting willingness of farmer) ('000 t)
Rice Rice straw 8,314 6,534
Sugarcane Sugarcane trash 3,516 2,552
Maize Maize stalk 799 680
Sub-total 25,130 20,494
Table 11: Surplus availability of agro-industrial residue for power generation
Type of agro-industrial resource
Estimated annual technical potential of residues
('000 t)
Remarks
Rice husk 1,750 Considering 100% residue available for power generation
Bagasse 17,100 Considering 100% of bagasse generation available for high-pressure technology boiler from the present low-pressure technology. While only 10% of the residue was estimated to be available as surplus
Sub-total 18,850
3.5 Biomass power potential As discussed in the preceding section, depending upon the availability and quality of the fuel,
different conversion technologies can be used for both centralized and decentralized power
generation projects. Biomass power potential in Pakistan has been estimated taking into
consideration the surplus availability and their suitability as fuel for different power generation
technologies.
Table 12: Energy potential – Combustion technology
Fuel NCV SFC* Fuel Surplus PLF Potential #
kcal/kg MW/T MT % MW
Cotton stalk 3583 0.93 5,039,000 75% 711
Wheat stalk 3440 0.85 5,689,000 75% 733
Rice straw 2986 0.74 6,534,000 75% 731
Rice husk 3225 0.79 1,750,000 75% 212
Sugarcane straw 3010 0.74 2,552,000 75% 288
Bagasse 1792 0.51 17,100,000 50% 1976
Maize straw 3106 0.76 680,000 75% 79
Maize husk 2771 0.68 937,000 75% 97
Maize cob 3344 0.82 1,406,000 75% 176
Estimated power potential 5,003
* Calculated using boiler efficiency of 75% # Calculated considering PLF of 75% Table 13: Energy potential – Gasification technology
Fuel NCV SFC* Fuel Surplus Potential #
32
Fuel NCV SFC* Fuel Surplus Potential #
kCal/kg MW/T MT MW
Cotton stalk
Not suitable
Wheat stalk 3440 0.59 5,689,000 544@
Rice straw Not suitable
Rice husk 3225 0.63 1,750,000 178
Sugarcane straw 3010 0.67 2,552,000 278@
Bagasse 1792 Not suitable
Maize straw 3106 0.65 680,000 72
Maize husk Not suitable
Maize cob 3344 0.60 1,406,000 138
Estimated power potential
1,211
*The SFC for other fuels for gasification has been pro-rated based on data available for rice husk received from a biomass gasifier supplier during rice husk based gasification project in Pakistan for a rice mill # Calculated considering PLF of 70% @ The biomass would require densification as a pre-requisite
The estimated power potential for Pakistan using agro residues and agro industrial residues ranges
from 1,211 MW to 5,003 MW considering the variation in the choice of biomass combustion and
biomass gasification technologies.
3.6 Project Models The survey report has recommended different project configurations (both combustion and
gasification) taking into account surplus availability, farmers willingness and logistics considerations.
Combustion technology for bagasse and rice husk and gasification technology for wood and rice husk
have reached matured status. As such, large capacity and high technology projects can be developed
based on these two fuels. Large numbers of smaller capacity rice mills are located all over the
country. Building large capacity rice mills based on pooled resources from these mills may not offer
best economic option considering the cost of logistics. Gasification based distributed power
generation units can be an attractive option for these mills. Further, such units can also be equipped
with waste heat recovery boiler/hot water generator required for par boiling process, thereby
improving the utilization efficiency of husks.
Large numbers of straw-fired projects are now operating in China and India based on combustion
technologies. It should be possible to develop such projects of 5 to 10 MW capacities in Pakistan too.
Such projects can be set up under both captive and IPP models.
Maize stalks and cobs are good fuel for gasification. Such projects have been operating in China for
over two decades supplying clean cooking fuel as well as power. Rice husk gasification based power
generation units are also operating as off-grid solution for providing energy access in rural areas in
many countries including China, India, and Thailand etc. It should be possible to replicate these
global experiences in Pakistan and set up different types of biomass power projects based on the
locally available resources as illustrated in the following table.
33
Table 14: Different project models for power generation
Type of residue Project model (Option #1)
Project model (Option #2)
Straw based projects (Wheat stalk, Cotton stalk, Rice straw, Maize stalk and Maize husk)
Biomass combustion technology based projects for Independent, captive and cogeneration power plants
-
Rice husk Biomass gasification technology based projects around rice mills
Biomass combustion technology based projects with other locally available biomass as supplementary fuel
Maize cobs Biomass gasification technology based projects
-
Bagasse & Sugarcane trash
High technology cogeneration projects in sugar mills using bagasse as main fuel and cane trash as supplementary fuels (upto 20% supplementation possible on caloric basis)
-
3.7 Summarizing Recently conducted biomass resource assessment survey in Pakistan clearly shows a roadmap for
development of an integrated resource management and biomass power development strategy. The
authors of the survey report have highlighted the need and strategy for improving the survey quality
with a view to prepare more accurate estimate of surplus availability. The report has also included
recommendations on biomass supply chain and technologies. Time is opportune to put in place an
enabling policy and regulatory framework for attracting private sector investment for developing a
thriving biomass power industry in Pakistan.
A set of policy recommendations have been formulated taking into consideration the global scenario
and status quo in Pakistan.
34
4 Recommendations-policy for promotion of biomass power generation
In 2014 KPMG had carried out a study of incentive policies for promotion of renewable energy
technologies covering thirty-one (31) countries across the globe. The following table shows the
extent of policy support provided by the select few countries including Pakistan for the same.
Table 15: RE policy matrix-select countries20
( Indicates policy in place)
China and India have deployed largest number of policy tools as would be seen above. This has
helped in rapidly scaling up the private sector investment in RE technologies including biomass
power generation. China has made spectacular progress in developing different biomass energy
technologies including combustion of straw and stalks, waste to energy projects as well as
distributed power, heat and cogeneration projects based on gasification of husks, stalks and wastes.
“By the end of 2009, China had 61 biomass power projects put into operation (20 national energy
projects among them), in which the proportion of straw direct-fired power generation plants
accounted for more than 80%21.
Various promotional policies in practice in China have been summarized and annexed (Annex-I).
Government of India through the Ministry of New & Renewable Energy (MNRE) have been providing
supports for promotion of Biomass / bagasse cogeneration, Non-bagasse cogeneration, Biomass
gasifier and projects based on Urban & Industrial wastes.
20 Taxes & incentives for renewable energy-KPMG International, 2014 21 Development goal of 30 GW for China’s biomass power generation: Will it be achieved? Renewable and
Sustainable Energy Reviews Journal 25 (2013) 310-317
Coun
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Brazil
China
India
Kenya
Malaysia
Pakistan
Sri Lanka
Thailand
35
Such policies have covered all aspects of biomass power system including resource management,
promotion of projects, development of technologies, incentives and institutional arrangements for
monitoring so that laid out targets are achieved. It is recommended to adopt a similar
comprehensive policy in Pakistan too for developing biomass power in the country. The outlines of
various such policies have been prepared as follows.
4.1 Management of biomass resources The objective of a national policy is to ensure that the biomass resources are optimally utilized for
deriving maximum economic benefits from these resources, which are otherwise wasted.
4.1.1 Development of standardized methodology for biomass assessment survey
Based on the recommendations in the World Bank supported survey report, a manual may be
prepared on the survey methodologies at the level of individual districts and for individual project to
be developed in a particular area.
The variation in the RCR figures can hugely distort the availability figures thereby putting question
mark on the fundamental premise on which the project has been configured. This issue needs to be
widely deliberated at various levels-fields & academic institutions-and methodology for establishing
RCR for different crops in different geographic areas developed. The survey manual so developed
should be made available to prospective project developers and other stakeholders involved in
development of biomass power generation projects. A recommended scope of work for a periodic
survey is included as Annex-II.
4.1.2 Implementing one demonstration biomass supply chain project
One demonstration supply chain project may be developed under PPP mode with involvement of
one of the operating biomass/cogeneration plant with support from AEDB. Successful operation of
the model would help in removing the major barrier against investment in biomass power projects.
4.1.3 Preparing zonal plans for optimum utilization of biomass resources
In order to achieve long-term fuel availability, the catchment area or biomass collection zone for a
power plant should be well defined prior to allotment of any project. It should be possible to
prepare a biomass power development map based on the information available in the World Bank
survey report. A policy document can be prepared on methodology for registration of projects in
each zone (under different categories and including both solicited and unsolicited projects) in
consultation with Provincial Governments. Appropriate regulatory framework should be developed
empowering Provincial Governments to administer the registration process to ensure continued
availability of biomass for the operating projects.
4.1.4 Capacity building
A plan for developing a cadre of professionals, who can undertake the biomass assessment survey is
imperative, which can be developed and implemented by AEDB.
4.2 Promoting biomass power projects AEDB in collaboration with Government of Punjab province should identify a list of priority projects
based on the survey report. These projects then can be offered for private sector bidding under
solicited category.
36
As per RE policy, 2006, AEDB had developed transparent methodology for bidding of projects under
both solicited and unsolicited categories. This should be reviewed taking into consideration the
recommendations in the survey report and the list of priority projects. It is also recommended that
AEDB directly implement a few distributed generation projects based on gasification technology as
demonstration projects in the identified rural areas. Such projects can be implemented through
farmer’s cooperatives or social entrepreneurs working in the rural areas.
4.3 Biomass pricing The overall cost of fuel as delivered to a consuming plant consist of the base price and logistics cost.
In the absence of an operating and formal biomass market, regulators adopt different principles with
a view to establish the fair price of biomass for determination of feed-in-tariff. In principle, following
three different methodologies can be considered for determination of fair base prices of biomass:
Price of fuel alternative
Market price
Opportunity price of biomass disposal alternative
The merits and demerits of the three alternatives are:
Table 16: Fuel pricing option evaluation
Alternative Merits Demerits
Price of fuel alternative
Most transparent Lowest or highest marginal cost & rationale Impact of volatility
Market price Takes care of all the local factors Better social acceptability
Lack of transparency for informally traded biomass Higher cost of transactions
Opportunity price Can be transparent if there is only one alternative
Practical difficulty as there are always more than one alternative
Considering the status quo in Pakistan, either fuel alternative or market price of biomass can be
considered.
37
4.3.1 Fuel alternatives
The fossil fuel options for benchmarking biomass price are gas, furnace oil and coal. The present
(2014)22 and future power generation23 scenario in Pakistan is as follows:
Figure 24: Evolution of Energy Generation Scenario
Most of the future gas based growth will be on imported LNG (share of domestic gas in fuel-mix is
forecast to decrease from 21% to 12% while LNG is forecast to grow from 4% to 13%)23. Similarly,
most of the liquid fuel generation is currently based on imported furnace oil, and the contribution to
the fuel mix is marginally decreasing. Coal is projected to change the fuel mix significantly with
growth of both local (4%) and imported coal (20%). The methodology for coal based benchmarking is
well established. NEPRA has also determined the upfront tariff for LNG base power plants. A number
of RFO based power plants are operating in Pakistan, for whom fuel adjustments are regularly made
by NEPRA.
The equivalent biomass prices considering these three alternatives have been determined as shown
in the table below.
22 Power Systems Statistics, 2013-14, 39th Edition, NTDC 23 Presentation on Power Sector in Pakistan to OICCI, Secretary, Ministry of Water and Power, Dec-2015
32
%
46
%
18
%
1% 3%
0%
0%
26
%
25
%
14
%
24
%
3% 6
%
2%
H Y D E L G A S F O + H S D C O A L N U C L E A R R E I M P O R T S
2014 2020
38
Table 17: Equivalent Biomass Price, determined from fossil fuel alternatives
S. No .
Alternatives UOM Value Remarks
1 Imported Coal
CIF price of Coal US$/MT 96.21 NEPRA Determination of Upfront Tariff for Bagasse Cogeneration, 2015
NCV of Coal kCal/kg 6000 NEPRA Determination of Upfront Tariff for Bagasse Cogeneration, 2013 NCV of Bagasse kCal/kg 1740
Equivalent bagasse price US$/MT 27.90
NCV of other biomasses kCal/Kg 3300
Equivalent biomass price
US$/MT 50.72
2 RLNG
RLNG Price US$/MMBTU 10 NEPRA Determination of Upfront tariff for RLNG Projects, 2015
Conversion Factor MMBTU to GJ
1.06
LNG NCV BTU/ft3 950 NEPRA Determination of Upfront tariff for RLNG Projects, 2015
Bagasse NCV kCal/kg 1740 NEPRA determination of upfront tariff for bagasse cogeneration, 2013
MJ/kg 7.28
Equivalent bagasse price US$/MT 76.91
Other biomasses CV kCal/Kg 3300
Equivalent biomass price
US$/MT 139.83
3 Furnace Oil
RFO Cost (GCV Basis) Rs/MT 25,167.45
NEPRA fuel price adjustment for Hub Power Company, March 2016
NCV to GCV Adjustment Factor
1.05 NEPRA Tariff determination for Hub Power Company, May-2008
RFO Cost (NCV Basis) Rs/MT 26,425.82
NCV of RFO BTU/kg 40792 NEPRA Tariff determination for Hub Power Company, May-2008
NCV of Bagasse BTU/kg 6905 NEPRA determination of upfront tariff for bagasse cogeneration, 2013
Biomass price Rs/MT 4,473.19
Exchange Rate Rs/USD 105 Current Exchange rate
Equivalent bagasse price US$/MT 42.60
Other biomasses CV BTU/Kg 13068
Equivalent biomass price
US$/MT 80.62
Thus, coal offers the lowest cost option for biomass at US$ 50.72 against the highest of US$ 139.83
against RLNG.
39
Coal price is highly volatile in the international market. It has dropped from high of $119/T in 2011 to
a low of about $49/T in Dec-15 as would be seen from the following figure24.
Figure 25: Coal price volatility
4.3.2 Biomass alternative-firewood
In addition to power, it is also in national interest to provide market trigger for diverting biomass
from cooking to power generation with a view to promote efficiency over the entire value chain.
Based on the data for March 201625, the equivalent biomass price is determined as US$ 83/MT as
shown in the following table.
Table 18: Equivalent Biomass Price-firewood25
S. No. Particulars UOM Value Remarks
1 Firewood price (Wholesale Price)
Rs./40 kg 601.97 Pakistan Bureau of Statistics25
2 NCV of firewood kCal/kg 3010 Assumption
3 Biomass NCV kCal/kg 1740 NEPRA determination of upfront tariff for bagasse cogeneration, 2013
4 Biomass price Rs./MT 8,700
5 Exchange rate Rs/USD 105 Current Exchange rate
6 Firewood price US$/MT 143.33
7 Equivalent Biomass price US$/MT 82.85
4.3.3 Biomass prices in Pakistan-Status quo
The Consultants were engaged in carrying out a feasibility study for developing biomass gasification
based power project in two MSME industrial units in the Punjab province in Pakistan in 2014-15.
24 FOB price of South African Coal: http://www.indexmundi.com/commodities/?commodity=coal-south-
african&months=60 25 Source: Monthly review of price indices, Pakistan Bureau of Statistics, March, 2016
40
50
60
70
80
90
100
110
120Ju
l-1
1
Oct
-11
Jan
-12
Ap
r-1
2
Jul-
12
Oct
-12
Jan
-13
Ap
r-1
3
Jul-
13
Oct
-13
Jan
-14
Ap
r-1
4
Jul-
14
Oct
-14
Jan
-15
Ap
r-1
5
Jul-
15
Oct
-15
Jan
-16
Ap
r-1
6
Jul-
16
US$
/MT
(SO
UTH
AFR
ICA
N C
OA
L)
40
Field survey was carried out to assess the biomass fuel price and price variation trend for rice husk
and woodchips. The prevailing prices of biomass and the coal equivalent have been tabulated below.
Table 19: Biomass price comparative
Biomass CV kCal/Kg
Market price US$/T
Price as per fuel equivalent (Table 18 above) US$/T
Coal RLNG FO
Rice husk 3300 80 50.72 139.83 82.85
Wood chips 3800 100 55.03 151.71 89.89
It is seen that the market price of biomass is more closely linked to FO. This is also logical as most of
the industrial captive power plant runs on FO. During the study, it was also observed that the prices
of biomasses were escalating by about 8% annually.
An extensive biomass resource assessment survey has recently been concluded under a World
Bank/ESMAP support program. The survey included field survey of farmers (12,450) covering all
provinces (44 districts) as well as survey of end user industries (178 industries). We reviewed the
data from the farmer survey in the Punjab Province (4,650 farmers) as well as data from industries to
assess the selling price/ purchase price of biomasses including the commercially traded one such as
rice husk and wheat straw and informally traded ones such as rice and maize straw and stalks. The
survey has also addressed the issue of the prices at which farmers would be willing to sell biomasses
to energy production plants. The price range of different biomasses at different location as per the
survey report is as follows:
Figure 26: Biomass price based on Survey
Nearly 70% of the sample, indicated a selling price greater than Rs 5,000/MT. The average selling
price of various types of biomass is as follows:
Table 20 : Biomass price as per survey
Average Price % of samples
Rs./MT US$/MT
Cotton Stalk 6,703 64 40%
Maize Stalk 6,897 66 60%
Rice husk 9,093 87 91%
0
200
400
600
800
1000
1200
0-2,500 2,500-5,000 5,000-7,500 7,500-10,000 > 10,000
NO
. OF
SAM
PLE
S
BIOMASS PRICE RS./MT
Cotton Stalk Maize Stalk Rice Straw Rice Husk Wheat Straw
41
Average Price % of samples
Rice straw 6,710 64 43%
Wheat Straw 6,905 66 71%
The survey indicates that the largest end use of cotton stalks is domestic fuel while maize stalk, rice
straw and wheat straw find largest end use as animal fodder. Nearly 38% of rice straw and 25% of
maize stalk is burnt in the field. The market for rice husk appears to be well developed, with 92 out
of 178 industries surveyed using rice husk as fuel. The price of rice husk is also consistent with the
price determined by a field survey as ranging between Rs 6/kg during season to Rs 8/kg during off-
season26.
Summarizing
The prices of biomass determined from different principles are shown in the following table.
Table 21: Prices of biomass-different methodologies
Methodology Average price (US $/T)
Linkage to Coal 50.72
Linked to FO 80.62
Linkage to RLNG 139.83
Linkage to firewood 82.85
DESL survey (Rice husk) 80.0
DESL survey (Wood chips) 100.0
ESMAP survey (Rice husk) 87.0
ESMAP survey (Others) 65.0
The survey-based prices also seem to have closer linkage to FO and fuel wood prices.
4.4 Global review
4.4.1 Mauritius-Bagasse
Mauritius pioneered developing a methodology for biomass pricing. Government of Mauritius had
formulated a bagasse energy development program in partnership with the private sector over a 6-
month period in 1991 following the recommendations of a High Powered Committee27. The Ministry
of Energy set up a Technical Committee for addressing the prices and other PPA related issues. The
Committee developed an avoided cost model taking into account the cost of generation from a 22
MW diesel power plant proposed by the Central Electricity Board (CEB). The World Bank provided
support to the Committee to work out the principles and the guidelines.
26 Feasibility Study for 3 MW Combined Heat and Power Biomass Gasification Plant in Pakistan, UNIDO, Jan-14
(by DESL) 27 Sugar Cane Bagasse Energy Cogeneration – Lessons from Mauritius, Mauritius Sugar Authority, Oct 2005
42
This tariff was determined for export of power from cogeneration plant using this avoided cost
principle. Bagasse was priced at Rs 100 (or US$3.7) per ton28. This made a big impact and in about 3
years time (1997-2000), almost all the sugar mills invested in cogeneration projects exporting large
amount of power to the grid.
A transfer fund was also created to compensate growers, for the price realization by the sugar mill
for bagasse used for purposes other than the manufacture of sugar. Amount so determined was
directly credited by the Central Electricity Board for distribution to the beneficiaries of the fund. This
has been one of the most successful policy interventions on biomass prices considering the impact it
had in growing the bagasse cogeneration industry in the country.
4.4.2 New Zealand-Wood chips
A study documented by IEA29 compared the prices for collection and delivery of forestry residues to
a bio-energy plant. Several models for delivery were developed as part of the project planning,
yielding a wide variation in the delivered cost of biomass (US$/GJ) as shown in the figure below:
Figure 27: Variations in delivered cost
Residues taken from a single forest site, purchased for USD 4/dry ton, then delivered 80km over an
identical route to a proposed Bio-Energy processing plant gate, using 7 different options (A-G) for
collection and transport systems result in a wide range of costs. A few reasons for the variations are
as follows:
Harvesting and chipping: The range of equipment used for harvesting and preparation before
transportation is a function of the type of biomass. This includes mowers and balers for straws
and special harvesters for woody biomass, which are more expensive. Where size of holdings are
smaller, the cost of collection can be higher
Handling: Gaining access for heavy machines and trailers in different weather conditions,
requiring advance planning of layout in case of plantations to enable access and maneuvers
Transport: Logistic planning for availability of trailers to collect biomass, distance from main
roads/ access points
Storage: availability of space for temporary stock piling
28 Currently Rs 1225 (US$ 35) per ton – Source: Newsclip : Island Crisis Media Network, 15 December, 2015 29 IEA Good Practice Guide -Bio-energy project development and Biomass supply
43
This case illustrates the impact of variation in other costs, the source price of biomass remaining
constant in all cases, as would be the case with plantation-based biomasses in most of the countries
including Pakistan.
4.4.3 Europe-Wood pellets
In Europe, two market indices, the APX – ENDEX and Argus biomass have helped establish
transparency in the wood chip and pellet market. The APX ENDEX, introduced in 2008, is an
industrial wood pellet index, determined based on a pricing panel comprising a number market
participant contributed references prices for 3-month forward contracts, 3 quarter forward
contracts and 12-month forward contract30. In 2011, APX-ENDEX launched the World’s first biomass
exchange. The exchange envisages transitioning from bilateral transactions in the first phase
between counterparties to the implementation of clearing services for wood pellets, contract,
thereby providing further security to market participants.
Similarly, the ARGUS biomass index31 comprises a “volume -weighted average of deals done for
delivery within a rolling 90-day period”. An Asia- Pacific specific index, keeping in view the
specification of South Korean generators for wood pellets manufactured from wood fiber is also
maintained.
Such practice may not have much of relevance in informal market like Pakistan. However, it is
interesting to note that even in a century old market like Europe, a formal exchange has been
created only in 2011.
4.4.4 China
China, a late starter in the biomass energy field has made rapid stride in growing the market in the
last decade. Beginning with 2006, it had installed over 6000 MW capacity by 2010, 65% of this being
based on straw. It has set the target of 20000 MW capacity by 2020. Instead of fixing biomass prices,
China has fixed the overall feed-in tariff nationally allowing the individual provinces to do so for the
province. The tariff has been determined considering avoided cost of power generation from
desulphurised domestic coal plus an additional incentive under renewable energy program32. Unlike
elsewhere, the concern in China is that the farmers may not be getting remunerative prices for the
biomass, as there is no open and transparent trading market for biomass.
The establishment of a crop straw pricing advisory committee in order to guarantee the
transparency of straw’s price and protect farmers' interests in transactions with the large power
plants under the absence of competition in market is planned to overcome this.
30 Methodology & Specifications Guide, Argus Biomass Markets, Last updated April 2016 31 Argus Biomass Markets – Methodology and Specification Guide 32 Development goal of China’s 30 GW Biomass power generation etc-Science Direct, Sept 2013
44
4.4.5 India
As elsewhere, India too has been facing challenges in fixing biomass prices. This is more so as Power
is a concurrent subject in India and Provincial Regulators are free to develop their own methodology
for tariff determination including fuel pricing. Even then, a reasonable and fair system has now been
developed and the same has been working satisfactorily since last two years. In 1994, MNRE issued a
policy guideline fixing the overall tariff and providing for automatic annual escalation of 5% for the
whole country. Many of the biomass resource rich States adopted the MNRE guideline and tariff
notifications issued by SERC’s. However, biomass prices started escalating soon making many of the
projects financially unviable. Taking cognizance of the situations, SERC’s started adopting the
practice of issuing short-term regulations and determining biomass prices through a process of
stakeholder’s consultation. This process too failed to rectify the situation. In the year 2011, MNRE
commissioned several studies with a view to establish a rationale and methodology for biomass
pricing. Based on the findings from these studies, MNRE prepared a recommendation report on tariff
guideline for biomass power and forwarded the same to CERC. In the year 2014, CERC issued a new
regulation on renewable energy in which the biomass pricing principles were clearly articulated.
Base price was determined for individual States considering the inputs from MNRE and other reports
and through a process of public consultations as follows.
Table 22: Biomass price for Tariff-India33
Province Biomass Price (Rs/T) Bagasse price (Rs./T)
Andhra Pradesh 2807.74 1585.19
Haryana 3195.86 2254.67
Maharashtra 3268.62 2221.93
Punjab 3342.60 1984.22
Rajasthan 2789.54 -
Tamil Nadu 2761.64 1707.69
Uttar Pradesh 2856.25 1768.33
Other States 3003.01 1919.93
Following steps for reviewing and revisions of prices have been provided in the Regulation.
33 CERC: Determination of levelised generic tariff for FY 2016-17 under Regulation 8, March, 2016 (IUS$ - 67
Indian Rupees)
Textbox 2: Straw incentive China
Straw subsidy: For the enterprise with the registered capital of more than 10 million Yuan, whose straw energy utilization complies with the local straw comprehensive utilization planning and the amount of annual consumption of straw exceeds 10,000 MT (including 10,000 MT) and straw energy products have been on sale and which has stable users, the subsidy of about 140 Yuan will be granted for the straw per ton in energy utilization to the enterprise according to the types and quantities of straw energy products which are actually sold every year, as well as types and quantities of straw for converting the consumption. However, straw grid-connected power generation project does not enjoy the special subsidy. (More detailed presentation on China Biomass Energy Policy annexed)
45
Biomass fuel price is determined for the first year of a control period and linked to an
indexation formula for each subsequent year of the tariff period (current prices are as per
Table 22).
Alternatively, each state electricity regulatory commission can determine the biomass price
through an independent survey. This would then be finalized by a state level committee
Two different options for fuel price adjustment (every project developer can exercise the
option once during the regulation period) have been provided as follows:
o Application of an indexation formula (Text box 2)
o A flat normative escalation of 5% per year
The biomass base price is subject to revision at the end of each control period.
4.4.6 Kenya
Kenya is one of the few sub-Saharan African countries that have stipulated feed-in tariffs for
renewable energy (including bagasse-based cogeneration). The Ministry of Energy first introduced
the feed-in Tariff Policy in 2008. The 2008 feed-in tariffs for cogeneration provided for US¢ 7.0/kWh
for firm electricity generation and US¢ 4.5/kWh for non-firm electricity generation. In 2010, the
terms have been further improved by increasing the feed-in tariffs for firm and non-firm
cogeneration to a maximum of US¢ 8.0/kWh and US¢ 6.0/kWh, respectively.
However, at these tariffs, some of the existing cogeneration plants are finding it difficult to operate
the plants during off-crop periods as paper mills are offering more attractive prices for bagasse.
Kibot sugar has invested about $ 14 million in setting up a paper mill based on bagasse34.
Summarizing
It is seen that several and different methodologies have been developed and deployed at different
points of time in different countries, such as:
Avoided cost method-fuel alternative
Fiber price alternative
Survey method
Fixing price once and periodic escalation thereafter
In China on the other hand, it is looked from the perspective of fair prices to the farmers
4.5 Pricing of bagasse by NEPRA
4.5.1 Generic tariff (Upfront)
Pakistan’s National Electric Power Regulatory Authority (NEPRA), in their determination of upfront
tariff for bagasse based cogeneration projects35, fixed the price of bagasse linked to imported coal
based on the BTU value of each fuel. (Bagasse based cogeneration plants were free to use other
biomass fuels to supplement their fuel requirement, while plants envisaging use of coal for
cogeneration as supplementary fuel was excluded from eligibility for upfront tariff). In their initial
discussions with various stakeholders, several alternatives were considered including gas and local
34 Thomson Reuters Foundation-May 6, 2011 35 NEPRA – Determination of the authority in the matter of suo-moto proceedings for development of upfront tariff for new bagasse based cogeneration power projects, (29-May2013)
46
coal. Gas was not considered pragmatic in the long-term basis due to uncertainty of availability.
Local coal was also not considered since prices are not published by any government agency in the
country. The price for fuel adjustment is determined as per published coal price at Richards Bay
Terminal in the Argus API3 for each month and adding the cost of marine transportation and freight.
The basic reference price of bagasse was accordingly, determined as follows:
Table 23: Determination of Bagasse Price for Reference Year under Upfront Tariff
Particulars UOM Value
Reference year 2013
Net Calorific Value (Bagasse) BTU/kg 6,905
Net Calorific Value (Coal BTU/kg 23,810
Exchange Rate Rs/US$ 98
Bunker index 641.8
FOB Price of imported coal US$/MT 81.4
Marine freight US$/MT 19.19
Marine Insurance (0.1% of coal) US$/MT 0.0814
CIF Price of Coal US$/MT 100.7
Bagasse Price Rs./MT 2,861.1
The determination also provides for fuel price indexation as per methodology indicated below:
Table 24: Illustrative Fuel Price Indexation Methodology (Upfront Tariff)
S. No. Particulars UOM Value Reference
A Reference Price of Bagasse Rs./MT 2,861.12 2013 Determination
B Marine Freight Rs./MT 19.19 2013 Determination
C Revised FOB Price of Coal US$/MT 77.31 Argus API4 Index
D Bunker Index Reference 641.8 Bunker index price for 380-CST for 2013
E Bunker Index Revised 629.6 Bunker index price for 380-CST for 2015
F Revised Marine Freight US$/MT 18.83 (F =B x E/D)
G Marine Insurance US$/MT 0.08 0.1% of coal price
H Exchange Rate USD to Rs 101.60 for 2015
I Revised CIF Price of Coal Rs./MT 9,775.25 (I= (C+ F + G) x H)
J NCV of Bagasse BTU/kg 6,905.00 2013 Determination
K NCV of Coal BTU/kg 23,810.0 2013 Determination
L Revised Price of Bagasse Rs./MT 2,834.86 (L=I x J/K)
4.5.2 NEPRA-Project specific fuel pricing
In the determination of tariff for an IPP (SSJD Bio-Energy Ltd.), the following basis was used for fuel
pricing36:
36 Source : NEPRA - Determination of the Authority in the matter of Tariff Petition filed by SSJD Bio-Energy
Limited for approval of Generation Tariff in respect of 12 MW Biomass Energy Power Project (Case No. NEPRA/TRF-202/SSJD-2011), 28th June, 2012
47
• Fuel considered for the biomass are bagasse (80%) and other biomass (20%), procured within
100 km radius of the plant
• In the absence of established market for ascertaining the actual price of biomass, the price was
linked to the price of coal on BTU basis. Linkage to coal also provides for an index for adjustment
of fuel cost component of the tariff. Methodology to determine coal price was similar to the
that considered for determining the upfront tariff for bagasse cogeneration, viz. FOB price of
coal was determined based on prices published by Argus API4 index, corresponding to a
standard NCV of 6000 kCal/kg; marine freight was computed from data obtained from local
banks on the landed price of coal imported by cement manufacturers. The reference price was
fixed and indexed to the monthly average of Bunker Index 380-CST (for HFO – 380 Centi Stokes,
being the most widely shipped bunker fuel). Insurance was also determined based on data
provided by local banks and fixed at 0.1% per ton of FOB Coal price
• In determining, the inland transportation cost, a generic formula was established considering
average transportation distance of 50 km, average truck load of 10 T, truck mileage of 3 km per
liter of diesel, other truck overheads and profit at 50% of the fuel costs and loading and
unloading charges also at 50% of fuel cost.
The price determined for the base year is as follows:
Table 25: Illustrative Fuel Price determined for a biomass power plant
S. No. Particulars UOM Value Remarks
A FOB Price of Coal US$/T 97.75 Argus API 4 Index, April 2012
B Marine Freight US$/T 29.39 Coal imported from Richards Bay, South Africa by Cement Manufacturers in Pak
C Insurance US$/T 0.10 (C = A X 0.1%)
D CIF Price US$/T 127.23 (D= A + B+ C)
E Exchange Rate Rs/US$ 86.00 Month preceding tariff determination
F CIF Reference Price of Coal Rs./T 10,942.19 (F= D X E)
G NCV of Coal kCal/kg 6,000.00 Assumed for tariff determination
H NCV of Biomass kCal/kg 1740 Assumed for tariff determination
I Reference price of Biomass Rs./T 3,173.23 (I = F/G X H)
US$/T 36.9
J Average distance for transportation
km 50 Assumed for tariff determination
K Load per truck MT 10 Assumed for tariff determination
L Mileage km/Liter 3 Assumed for tariff determination
M Diesel cost Rs./Liter 107 HSD Price as determined by OGRA
N Fuel Cost of transportation Rs./T 178.33 [N = (M/L x J)/K]
O Truck Overheads Rs./T 89.17 [O= 50% x N]
P Handling Costs Rs./T 89.17 [P= 50% x N]
Q Total Logistics cost Rs./T 356.67 [Q= N +O+ P]
R Biomass cost including Logistics Rs./T 3,529.90 [R = I + Q]
Key differences in this determination as compared to the methodology for determination of upfront
tariff for bagasse cogeneration are
48
Addition of transportation cost
Indexation for transportation cost included
Working capital is only 30 days as against 45 days for normative principles
4.5.3 Review of the NEPRA price linkage methodology
NEPRA determined the price of bagasse with linkage to imported coal on heat value basis for
determination of tariff citing the following specific considerations.
There is no source of information that publishes the price of bagasse
No index is available for adjustment of bagasse price
Absence of source of information on price of local coal
Linkage to price of gas on BTU basis was not viewed as pragmatic due to uncertainty of the
future market and depletion of local reserves.
The tariff methodology thus links the price of bagasse to the imported coal price as published for
Richards Bay Terminal in the Argus McCloskey's API 4 (All Price Index) for each month while adding
to it the cost of marine freight and insurance. Bagasse price the year 2013 was accordingly revised
for 2015 as shown in the following table37.
Table 26 : Bagasse price for ‘FIT’
S. No. Parameter UOM Value Notation Reference
A Reference Price of Bagasse Rs./MT 2,861.12 BFP Ref 2013 Determination
B Marine Freight Rs./MT 19.19 2013 Determination
C Revised FOB Price of Coal US$/MT 77.31 CPFOB
Rev
Argus API4 Index
D Bunker Index Reference 641.8219 BIX Ref Bunker index price for 380-CST for
2013
E Bunker Index Revised 629.6417 BIX Rev Bunker index price for 380-CST for
2015
F Revised Marine Freight US$/MT 18.83 MF Rev (F =B x E/D)
G Marine Insurance US$/MT 0.08 MI Rev 0.1% of coal price
H Exchange Rate USD To
Rs
101.60 ER Rev for 2015
I Revised CIF Price of Coal Rs./MT 9,775.25 CPCIF
Rev
(I= (C+ F + G) x H)
J NCV of Bagasse BTU/kg 6,905.00 2013 Determination
K NCV of Coal BTU/kg 23,810.00 2013 Determination
L Revised Price of Bagasse Rs./MT 2,834.86 BFP Rev (L=I x J/K)
Thus, bagasse price in 2015 was fixed lower than what was provided in 2013. This has happened due
to downturn in the prices of coal globally. It may be possible to persuade sugar industry to accept
such a situation arising out of change in the global scenario and taking into consideration that
bagasse is only a by-product. However, it would be very difficult to convince farmers to reduce the
prices of residues, even though they may otherwise be wasting it. Farmers normally do not accept
37 NEPRA Tariff determination: NEPRA/R/TRF-UTB-2013/10164-10166 dated July 7, 2015
49
any linkage to global prices as would be evidenced from price trend of support price for farm
produces announced by Government annually.
There is very high volatility of prices of coal and other energy resources in the global market. We
undertook a review of the historical coal price (FOB)38, corresponding changes in the bunker index
values39 and exchange rates to determine the trajectory of movement of the CIF price of coal and
the corresponding biomass cost, if linked to coal. For same period, we plotted the corresponding
values of firewood price as used for determination of CPI Index40. The results are shown below.
Figure 28: Historical variation in price of coal and firewood
Based on the above, the movement of price of bagasse benchmarked to the price of coal and the
price of firewood is as follows41 :
Figure 29: Variation in price of bagasse
38 http://www.indexmundi.com/commodities/?commodity=coal-south-african&months=60 39 http://www.bunkerindex.com/prices/bixfree_1306.php?priceindex_id=2 40 http://www.pbs.gov.pk/cpi?page=1 41 Assuming 3,100 kCal/kg as the heating value of wood
-
1.00
2.00
3.00
4.00
5.00
6.00
Rs.
/kC
al
Coal Price CIF Firewood price
R² = 0.8182
R² = 0.9122
0
1
2
3
4
5
6
Rs.
/kC
al
Bagasse Price (Benchmarked to Coal) Bagasse Price (Benchmarked to Wood)
Linear (Bagasse Price (Benchmarked to Coal)) Linear (Bagasse Price (Benchmarked to Wood))
50
The CIF price of coal for the period (after the upfront tariff determination for bagasse) varied
between Rs 5,890 –11,125 per MT. During this period, the firewood price varied between Rs 12,650
–15,130 per MT. The bagasse price, benchmarked to the price of coal therefore varied between Rs
1,700 -3,200/MT (US$ 16-30) while the price when benchmarked to the price of firewood varied
between Rs 7,300-8,750/MT (US$ 70-83/MT).
Figure 30: Range of fuel price
The volatility of determined bagasse would fluctuate by over 100% if linked to coal compared to
about 20% if linked to firewood. It is obvious that the prices of other biomasses would find a range
closer to the price of rice husk i.e US$ 87/T as and when such residues are utilised on commercial
basis in energy plants.
Summarizing
Linking biomass price to an alternative fuel traded in the market is a good idea
However, linking the price to a highly volatile commodity such as coal would create both
economic and social problem-feeling of uncertainty amongst investors in projects and non-
acceptance of reduction in price by farmers
Rationale for considering coal, which is not permitted as fuel alternative in biomass power
plant has not been clearly stated nor reasons given why RLNG or RFO has not been
considered
Fuel wood is transparently traded in Pakistan and as such linkage with wood should have
wide acceptance and would also be fair to all
Alternatively, prices can be fixed on the basis of periodic survey as has been done by the
Biomass resource assessment study team recently
It has also been seen that the actual prices of biomass in the market obtained from surveys
are more closely linked to prices of furnace oil and fuel wood
4.5.4 Recommendations on pricing methodology
It is recommended to follow the principle of linkage to the prices of commercially traded fuel.
However, the same should be based on locally available fuel, prices of which do not fluctuate
heavily. Fortunately, for Pakistan, it would be easy to do this against fuel wood. There is already a
5,8
90
12
,64
9
1,7
08
7,3
12
11
,12
8
15
,13
0
3,2
27
8,7
46
C O A L C I F F I R E W O O D B A G A S S E ( B E N C H M A R K E D T O
C O A L )
B A G A S S E ( B E N C H M A R K E D T O
F I R E W O O D )
RS.
/MT
Minimum Maximum
51
system of tracking the fuel wood prices in the country. Pakistan Bureau of Statistics publishes
monthly price data for 53 commodities including firewood, based on which consumer price indices
are determined.
Figure 31: Regional variation in the price of firewood25
It should be possible to establish clear linkage between the prevalent fuel wood price and prices of
biomass, which can be used as fuel for power plant. This price may be established for a pre-
determined regulation period (2 to 5 years). The annual escalation factor can be either fixed at say,
8% or linked to price indices.
The principles for logistic cost developed by NEPRA can be adopted to determine the landed cost of
biomass to the projects. The following table illustrates the determined biomass price (the NCV has
been assumed 3000 kCal/Kg) based on the suggested methodology. Prices of all biomasses can be
fixed accordingly taking into NCV for the particular biomass.
Table 27: Determined price of biomass
S. No. Particulars UOM Value Remarks
A Firewood cost (Retail) Rs./40 kg 602
B Firewood cost (per kg) Rs./kg 15 (B=A/40)
C NCV of Wood kCal/kg 3,010 Assumption
D Firewood cost (Energy basis) Rs./1000 kCal 5 (D = B/C x 1000)
E Rice Husk Cost Rs./kg 8
F NCV of Rice husk kCal/kg 3,000 Assumption
G Rice husk cost (energy basis) Rs./1000 kCal 3 (G = E/Fx 1000)
H Source cost of fuel as a % of retail price 53% (H = G/D%)
I Reference price for biomass Rs./MT 8,027 (I=B x H% x 1000)
J Average distance for transportation km 50 Assumption
K Load per truck MT 10 Assumption
L Mileage km/Liter 3 Assumption
M Diesel cost Rs./Liter 73 OGRA Determination
N Fuel Cost of transportation Rs./T 121 [N = (M/L x J)/K]
788 742
700 675
773
600
500
607 625 618
550
400 400
692
490
625
450
-
100
200
300
400
500
600
700
800
900
RS.
/40
KG
52
S. No. Particulars UOM Value Remarks
O Truck Overheads Rs./T 60 [O= 50% x N]
P Handling Costs Rs./T 60 [P= 50% x N]
Q Total Logistics cost Rs./T 242 [Q= N +O+ P]
R Firewood cost including logistics Rs./T 8,268 [R = I + Q]
S Exchange rate US$/Rs 105 Current exchange rate
T Equivalent biomass cost US$/MT 79
It is seen that the price so determined is almost the same as was observed during the market survey
in 2014. It is recommended to adopt this methodology and test it out for few years for establishing
the validity.
4.6 Monetary & fiscal incentives The following incentive scheme as per RE policy of 2006 should be extended to all the different types
of biomass power projects.
i. Exemption from customs duty or sale tax for machinery equipment and spares (including
construction machinery, equipment, and specialized vehicles imported on temporary basis)
meant for the initial installation or for balancing, modernization, maintenance, replacement,
or expansion after commissioning of projects for power generation utilizing renewable
energy resources (specifically, small hydro, wind, and solar), subject to fulfillment of
conditions under the relevant SRO.
ii. Exemption from income tax, including turnover rate tax and withholding tax on imports.
iii. Repatriation of equity along with dividends freely allowed, subject to rules and regulations
prescribed by the State Bank of Pakistan.
iv. Parties may raise local and foreign finance in accordance with regulations applicable to
industry in general. GOP approval may be required in accordance with such regulations.
v. Non-Muslims and non-residents shall be exempted from payment of Zakat on dividends paid
by the company.
4.7 Technology development It is recommended that AEDB in cooperation with the few technical and agricultural universities
prepare and implement a plan for development of technology and local manufacturing and servicing
capabilities particularly for the following equipments and systems:
i. Harvesting, baling and fuel preparation machineries for straw, stalks and cotton sticks
ii. Storage bins for biomass
iii. Technologies and machines for briquetting and pelletisation of straw, trash and husks
iv. Biomass gasification and gas clean up devices
v. Bio-fuel manufacturing system for grain wastes
4.8 Institutional arrangement A number of governmental, non-governmental, academic and private sector players in the biomass
space would be involved in developing and implementing the policy framework for promoting
biomass power. Following table has been prepared to indicate the key stakeholders that are likely to
be involved in this and the role they would be playing. This table has been prepared based on the
experience of the Consultants in policy related work in China and India. It is recommended that
53
AEDB in consultation with the Ministry of Water and Power and Ministry of Agriculture of Federal
Government and relevant representatives from Provincial Governments form a working group to
design a formal structure for institutionalizing the arrangement.
Table 28: Institutional arrangement
Stakeholders Engagement level Resource management
Project development
Biomass pricing
Technology development
Incentives Capacity building
AEDB Nodal agency & coordinator
NEPRA - Medium High Low High -
MoW&P Medium Medium Low Low High Medium
MoA High - Medium High - High
MoF - - - - High -
Provincial Governments
High High High Low - High
Power utilities - Medium High - - -
Technical universities
- - - High - High
Agricultural universities
High Medium - High - High
Manufacturers of agricultural & power equipments
- High - High - High
PSQCA - - - High - -
54
5 Annexes
Annex-I: China biomass energy policy extract “Under the background of the global energy crisis and global warming, the development of biomass
energy utilization technology has very important practical and long-term significance in replacing the
fossil energy and realizing the sustainable development of human beings. China’s energy security has
become increasingly prominent, environmental constraints have increasingly enhanced and energy-
saving and emission-reduction situation is grim. In this context, to vigorously adjust the energy
structure and to develop the renewable alternative energy sources with the green, clean, low-
carbon as the core have become top priorities. Biomass energy, with huge amount of resources and
stable supply, can substitute coal, oil and gas in huge quantities. While effectively supplying the
energy, it can significantly reduce pollution and achieve the zero emissions of CO2, complying with
the idea of the sustainable development of the society. Therefore, in recent years, governments at
all levels in China have continuously increased attention on biomass and introduced a series of
policies and measures; at present, the basic biomass energy policy system has been formed. Basic
framework of China’s biomass energy development policy takes the Renewable energy law as the
basis, Medium- and long-term development plan for renewable energy as the long-term goal, each
five-year plan as the short-term plan, to attract producers and users to join and participate in the
development and utilization of biomass energy through the establishment of a series of effective
incentive mechanism to promote the rapid development of biomass energy industry and advance
the healthy and rapid development of the biomass energy industry.
Legal basis
Renewable Energy Law of the People’s Republic of China was issued in 2005 and was carried out
formally on January 1, 2006. This is the first law on energy in China. It indicates that the Chinese
government has explicated the position of the renewable energy including biomass energy in the
modern energy and has given great preferential support. Chapter I of this law points out that the
State encourages and supports the use of biomass energy; Chapter IV “Promotion and Application”
emphasizes again that the State encourages the clean and efficient development and utilization of
the biomass fuels, encourages the development of energy crops; if gas and heat produced by using
the biomass resources comply with the network technology standard of city gas pipeline network
and heat pipe network, enterprises operating gas pipeline network and heat pipe network shall
receive its network entry.
At the end of 2009, the State revised the Renewable energy law, and the revised edition was
implemented on April 1, 2010. The Amendment has established the Renewable Energy Development
Fund to arrange the dispatching of the additional cost of renewable energy from a national scope by
special arrangement and implemented full protection of the acquisition for renewable energy power
generation.
Target system
In Medium- and long-term development plan for renewable energy issued in 2007, emphasis should
be laid on the development of biomass power generation, biogas, densified biofuels and fuel and
biology liquid fuel. According to the requirements of China’s economic and social development and
55
the biomass energy utilization technology, emphasis should be laid on the development of biomass
power generation, biogas, densified biofuels and fuel and biology liquid fuel. By 2010, the total
installed capacity of the biomass power generation had reached 5,500,000 KW; the annual utilization
rate of the densified biofuels had been up to 1,000,000 MT and that of the biogas to 19,000,000,000
cubic meters, that of the non-grain raw material fuel ethanol had been increased by 2,000,000 MT
and that of the biodiesel had reached 200,000 MT. By 2020, the total installed capacity of the
biomass power generation will have reached 30,000,000 kW; the annual utilization rate of the
densified biofuels will have been up to 50,000,000 MT and that of the biogas to 44,000,000,000
cubic meters that of the non-grain raw material fuel ethanol to 10,000,000 MT and that of the
biodiesel to 2,000,000 MT.
Since 1995, China has brought the biomass energy into the national five-year plan system. In the
9thfive-year plan (from 1996 to 2000), high efficient anaerobic technology applied in treating high-
concentration organic wastewater and urban garbage were listed as key science and technology
programs. During the 10th five-year plan (from 2001 to 2005), Planning of the development of
agricultural biomass energy industry was introduced. Since the 11th five-year plan, each five-year plan
contains the special planning for the biomass energy industry. Scheme for the comprehensive
utilization and implementation of the crop straws during the 12th five-year plan issued in 2011 points
out to further develop and utilize the crop straw in huge output in China, and it is planned to achieve
the straw comprehensive utilization rate of over 80% and the straw energy utilization rate of 13% by
2015. “12thFive-Year Plan” for renewable energy development and “12th Five-Year Plan” for biomass
energy development (2011-2015) issued in 2012 stipulates that by 2015, the annual utilization rate
of the biomass energy will have exceeded 50,000,000 MT of standard coal. And when the total
installed capacity of the biomass power generation reaches 13,000,000kw and the annual power
generation is up to about 78,000,000,000 kW, the annual biomass supply shall be up to
22,000,000,000 cubic meters, densified biofuels to 10,000,000 MT and biology liquid fuel to
5,000,000 MT. At present, planning for biomass energy in the 13th five-year plan is being developed.
Incentive mechanisms
Considering that the development and utilization of biomass energy has the remarkable
comprehensive benefit for the traditional energy replacement and the protection of the ecological
environment, but its development and utilization cost is temporarily unable to compete with the
traditional energy, so the Chinese government has adopted a series of incentive measures to share
the cost which is higher than that of the development and utilization of the traditional energy with
the community, or the finance departments at all levels commit huge sums of money to grant
subsidies for the development and utilization of biomass energy to encourage enterprises and users
to participate in the development of biomass energy. Main incentive means include front-end
incentive for encouraging the biomass energy industry production chain, and market back-end
incentive to stimulate the sales and use, as well as some indirect incentive measures to promote the
development of the whole industry.
Front-end incentive
1) Subsidies for feedstock
56
Feedstock base subsidies: Forestry raw materials base subsidy criterion is 30 Yuan/are; the amount
of subsidy is checked and ratified by the Ministry of Finance according to this criterion and the raw
materials base implementation plan verified. In principle, agricultural raw materials base subsidy is
verified as 27yuan/are; the specific criterion is approved according to saline-alkali soil, that and
other different types of land. The amount of subsidy is appraised and decided by the Ministry of
Finance according to the specific criterion and the raw materials base implementation plan verified.
Straw subsidy: For the enterprise with the registered capital of more than 10 million Yuan, whose
straw energy utilization complies with the local straw comprehensive utilization planning and the
amount of annual consumption of straw exceeds 10,000 MT (including 10,000 MT) and straw energy
products have been on sale and which has stable users, the subsidy of about 140 Yuan will be
granted for the straw per ton in energy utilization to the enterprise according to the types and
quantities of straw energy products which are actually sold every year, as well as types and
quantities of straw for converting the consumption. However, straw grid-connected power
generation project does not enjoy the special subsidy.
Fuel ethanol subsidy: For the production of the denatured fuel ethanol and losses incurred during
the process of allocation and sales of the denatured fuel ethanol, the state finance sets quotas for
subsidies to the production enterprises; in 2012, the amounts of subsidy for the grain ethanol and
non-grain ethanol are respectively 500 Yuan/ton and 750 Yuan/ton.
2) Project funding
Rural household biogas project : In 2003, China listed the rural biogas construction into the scope of
national debt fund support; during the period of 2003 to 2013, China has invested more than billions
in supporting rural household biogas, biogas service system and the construction of breeding
aquatics village and co-peasant household biogas in average every year.
Green Energy County project: The highest subsidy granted by the central finance to each green
energy county is about 25 million Yuan; the construction contents include biogas centralized gas
supply engineering, biomass gasification engineering, biomass briquette fuel engineering and other
renewable energy development and utilization engineering.
Urban heating engineering project: Notice on developing the construction of the biomass briquette
boiler heating demonstration project issued in 2014 stipulates that it is planned to build 120 biomass
briquette boiler heating demonstration projects on a national scale during the period from 2014 to
2015, especially in Beijing, Tianjin, Hebei and Shandong, Yangtze River Delta region, Pearl River Delta
region and other areas with serious atmospheric pollution prevention and control situation and
heavier tasks in reducing coal consumption, and the total investment is about 5 billion Yuan.
3) Low-interest loan
For the renewable energy development and utilization project which is listed in the national
renewable energy industry development guidance catalogue and which meets the credit conditions,
discount interest funds may be arranged under the premises that bank loans are in place and project
contracting unit or individual has paid the interest. Discount interest fund is determined according to
the actual bank loans in place, contract rate of interest and the actual amount rate of interest paid;
the discount period is 1-3 years and the maximum annual discount rate does not exceed 3%.
57
4) Tax relief
Value added tax (VAT) relief: The tax authorities implement the measures for the refund upon
collection of VAT for the self-produced comprehensive utilization of products (see Appendix for the
product catalogue) sold by taxpayers with the 4 kinds of agricultural and forestry residues as the raw
materials, such as: three residues (logging residues, bucking residues and processing residues), small
firewood, crop straw and bagasse. The specific proportion of tax rebates are respectively 100% in
2009 and 80% in 2010.
Income tax relief: 90% tax of the income of the enterprise from producing products which are not
restricted and forbidden by the state and which comply with the relevant national and industry
standards and whose main raw materials are resources specified in Catalogue of Resources for
Comprehensive Utilization Entitling Enterprises to Income Tax Preferences is reduced and included in
the total income.
Back-end incentives
1) Quota system
Under the Renewable energy law, National Development and Reform Commission and other
relevant departments have developed the targets for the overall medium- and long-term
development of biomass energy and introduced quota system policy in the fields of biomass power
generation and biology liquid fuel to request that power companies and oil companies should have a
certain portion of the energy from the biomass energy in the supply of electricity and fuel, thus
turning the policies completely rely on government financial support in the past to the market
mechanism under the control of the government to create conditions for the large-scale
development of biomass energy. At present, the main quota policy is carried out on the closed
measures to promote fuel ethanol; 5 provinces and 27 cities in China have forced to promote E10
gasoline. In addition, the design idea about renewable energy power quota system has been formed,
and the policy on the biomass green power quota will soon be implemented.
2) Pricing mechanism
Fixed feed-in tariff: Since 2010, the new agricultural and forestry biomass power generation projects
have uniformly implemented the benchmark feed-in tariff of 0.75 Yuan per kilowatt-hour (including
tax). But the mixed fuel power generation projects of which conventional energy exceeds 20% in the
power generation heat consumed, as the conventional energy power generation projects implement
the benchmark feed-in tariff of the local coal-fired power plants and do not enjoy the subsidiary
feed-in tariff.
Fuel ethanol price: Fuel ethanol sales channels uniformly take the result from 90# gasoline price over
the same period published by the National Development and Reform Committee multiplying the
equivalent coefficient of 0.9111 of the sales cost of vehicle ethanol gasoline deployment as the
domestic sales settlement price of fuel ethanol, providing price protection for the fuel ethanol
production enterprises.
Other auxiliary incentive measures
58
1) Environmental protection measures: Among the environmental protection measures of local
governments at all levels, instructions for the ban on burning coal, restrictions on automobile
exhaust and air pollutants emissions promote the development of biomass briquette fuel and fuel
ethanol in another way. Meanwhile, environmental protection indexes for the ban on burning straw
guarantee the adequate supply of biomass.
2) Development of the standards: Biogas Standardization Technical Committee has developed the
biogas industry standards to regulate the development of the industry. Fuel ethanol E10 and
biodiesel B5 standards have been widely accepted by the industry. In addition, product standard of
the biomass briquette fuel, standard equipment, engineering and service system are being
developed.
BE Sustainable, May 2015: An overview of biomass energy policy in China-Jie Xu and Zhenhong
Yuan, Guangzhou Institute of Energy Conversion, Chinese Academy of Sciences, Guangzhou China
59
Annex-II: Scope of Work for Biomass Assessment Survey The Scope of work covers biomass fuel supply studies along with their prices and price trend
in <<name of province>>. The study report should result in detailed estimates of district wise surplus
biomass that is available for energy production on a long- term sustainable basis. The report should
also indicate the district wise current price of biomass fuel (i.e. for FY 20XX-XX) with increase in their
price during last 3 years. The annual escalation factor in biomass fuel prices and their periodic
revision thereof and losses in storage and average calorific value of biomass fuel is required in the
study report.
The methodology and scope of work must cover at least the following:
The biomass fuel supply study should verify the district wise surplus biomass that is
available for energy production, based on macro level assessment, as well as actual field
visits.
Published statistical data and the field data should be compiled and the trend of the
biomass growth should be established that can be used as a valid estimate for the
subsequent period. The reported data from the Ministry of
Agriculture/ Agriculture Department for annual crop production may be used as the
strong statistical ground reference data sets. Other reported and published data should also
be used appropriately.
Biomass utilization pattern for societal purposes should be derived. Biomass utilization in
other industries like brick manufacturing, small and medium boilers and captive power
plants should also be ascertained. Based on these utilization patterns, net quantity available
for power generation to renewable power projects in different districts may be arrived at.
The Crop-to-Residue Ratios (CRR) for different biomass species should also be verified with
reported documents and using direct measurement methods. These should also be
cross verified and updated to provide better aggregated figure at district level.
Biomass growth should be estimated using the established reported data from Ministry
of agriculture/ Agriculture Department or other reported and published data.
Biomass fuel supply study should be carried out by actual data collection from various users,
industries etc.
Recent trend of biomass price shall be assessed by verifying ac t ua l price spread by the
existing consumers, through verification of relevant records for the last harvesting season
(specify period) including date of purchase, name of supplier, weighment slips, proof of
payments made, mode of transportation, charges paid for labour, loading/unloading &
transportation charges, additional charges like royalty, taxes, cess, etc. if applicable.
The calorific value of biomass fuel, that is available for power generation, is to be estimated
district wise based on its ash and moisture contents and these data included in the report.
Based on the study and its findings, the consultant is required to recommend in
tabulated form, district wise biomass availability for power generation, price, price
escalation per year based on historical data for that district, periodic revision there of
required, losses in storage, average calorific value
Assist the client in r e p r e s e n t i n g t h e c a s e t o t h e regulatory commission, if needed.
60
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approach”, Africa Journal of Agricultural Research, Academic Journals, Vol. 10 (15) pp 1832-1839, 9 April, 2015
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April 2008 10 DESL report on Validation of fuel supply linkage model, MNRE, 2009 11 DESL database 12 DESL Study: Biomass Fuel Supply Study in the state of Rajasthan, RRECL, 2011 13 http://www.eai.in/ref/ae/bio/powr/biomass_power.html 14 http://www.tappi.org/content/Events/11BIOPRO/19.2Worley.pdf 15 http://faculty.washington.edu/stevehar/Biomass-Overview.pdf 16 IRENA working paper on Renewable Energy Technologies: Cost Analysis Series- Volume -1: Biomass for
Power Generation, June 2012 17 The World Bank report considered the lower values for biomass generation while estimating energy
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14 (by DESL) 25 Sugar Cane Bagasse Energy Cogeneration – Lessons from Mauritius, Mauritius Sugar Authority, Oct 2005 26 Currently Rs 1225 (US$ 35) per ton – Source: Newsclip : Island Crisis Media Network, 15 December, 2015 27 IEA Good Practice Guide -Bio-energy project development and Biomass supply 28 Methodology & Specifications Guide, Argus Biomass Markets, Last updated April 2016 29 Argus Biomass Markets – Methodology and Specification Guide 30 Development goal of China’s 30 GW Biomass power generation etc-Science Direct, Sept 2013 31 CERC: Determination of levelised generic tariff for FY 2016-17 under Regulation 8, March, 2016 (IUS$ - 67
Indian Rupees) 32 Thomson Reuters Foundation-May 6, 2011 33 NEPRA – Determination of the authority in the matter of suo-moto proceedings for development of
upfront tariff for new bagasse based cogeneration power projects, (29-May2013) 34 NEPRA - Determination of the Authority in the matter of Tariff Petition filed by SSJD Bio-Energy Limited
for approval of Generation Tariff in respect of 12 MW Biomass Energy Power Project (Case No. NEPRA/TRF-202/SSJD-2011), 28th June, 2012
35 NEPRA Tariff determination: NEPRA/R/TRF-UTB-2013/10164-10166 dated July 7, 2015 36 http://www.indexmundi.com/commodities/?commodity=coal-south-african&months=60 37 http://www.bunkerindex.com/prices/bixfree_1306.php?priceindex_id=2 38 http://www.pbs.gov.pk/cpi?page=1 39 Assuming 3,100 kCal/kg as the heating value of wood
61