Small Biomass based Grid interactive Projects

Social Benefits
The small biomass projects provide a host of developments to the entire region of the plant.

 Generation of direct and indirect employment in the biomass fuel supply chain.
 Availability of the Power in the tail end areas, enabling the economic empowerment of
community.
 Avoided costs of losses and infrastructure for state utilities to supply power to rural areas.
 Generates waste heat that can be used by the consumers.

Regulatory Support
 Facilities for banking available with 10 states in varying extent as follows
Andhra Pradesh, Gujarat, Karnataka, Kerala, Maharashtra, MP, Punjab, Uttar Pradesh
T.N, Rajasthan

 Third Party sale is allowed in following regions

Chhattisgarh, Haryana, Gujarat, Kerala, Maharashtra, MP, Punjab, Rajasthan, Uttar Pradesh

 Buy Back

Allowed in most of the States which have third party and banking facilites.Major variations
include the provision for escalations or not, and the ceiling of maximum limit.

 Others
Provision for cost sharing in power evacuation in Kerala and Maharashtra; Electricity duty
exemption for first 5 years in Chhattisgarh.

Central Financial Assistance/Incentives

 Eligibility:
 Minimum 62 bar pressure
 Allowance to have 15% fossil fuel only.
 For new boilers and turbines in position with assessed potential in the state.

 Capital subsidy provisions

 Different provisions for the two types of areas, a special category hilly state regions,
and other regions.
 25 L x (C MW)^0.646 for special category and 20 L x (C MW ) ^0.646
 Provision for Advanced Tech Based Biomass Projects; 1.2 Crore x C ^ 0.646 (special
states) and 1 Crore x C^ 0.646
 Fiscal Incentives
 Provision for accelerated depreciation on various parts of the Plant.
 10 years Income Tax holiday.
 Concessional customs and excise duty for initial setting up.
 Certain States have provisions for GST exemption.

 Legal Issues Involved

 Arrangement of sustainable fuel supply agreements/fuel linkages.
 O & M Provider’s availability.

 Karnataka – 2009 Regulations.

 Capital Cost including transmission infrastructure costs – 4.87 Cr /MW.

 The PLF is retained at 75%. The Commission was not in favour of adopting different
PLFs for different periods.
 O & M Expenses - 4.0% of Capital Cost including insurance, with annual escalation
of 5.00%.
 IWC at 1.5% above rates approved for term-loans. Thus IWC to be allowed would be
13.25% p.a.
 Aux Cons @ 9 %.
 Fuel costs @ Rs 1280/MT with escalation of 5 % per annum with specific
consumption at 1.16Kg/unit.
 10 year tariff rates starting from Rs 3.66/unit to 4.13 /unit.
 DDG Regulations – REC
 The capital subsidy for eligible projects is given subject to conditionality not
following which they will be converted to loans.
 Projects would be owned by State Government. The State Governments will decide
the implementing agency for their respective states.
 Identification of villages / hamlets- list of villages / hamlets to be electrified through
DDG is to be finalized by the State Renewable Energy Development Agency /
departments
 The villages / hamlets are to be prioritized and those villages where grid connectivity
is not foreseen in next 5 to 7 years must be taken up first for setting up DDG
projects.
 Infrastructure for these projects is to be established in a manner so that they are
grid compatible.
 Selection of technology feasible options-
 Diesel Generating sets powered by bio fuels (non-edible vegetable oils like
Jatropha, Pongamia etc)
  Diesel Generating sets powered by producer gas generated through biomass
gasification (100 % producer gas engines)(only when sustainable biomass supply is ensured with
plantations)

 Diesel sets powered by the animal waste.

 DDG Project appraisal components

 The Project Developer shall implement the project on Build, Operate, and
Maintain & Transfer (BOMT) basis for a period of 5 years. The plant will be
handed over to the State Government in working condition after 5 years.

 While preparing DPR, shall estimate the capacity of the project and shall also
estimate the electricity load and energy required to be generated for five
years from the date of commissioning. While computing the load, provision
of 2 light points (11/18 W each) and one socket (40 W) may be considered
for each household.
 Project Developer shall be responsible for collecting the tariff from villagers.

 Selection of the Project developer shall be on the basis of tenders which will
be called by the Implementing agencies in two parts, one part covering
capital cost and another covering cost of providing power for five years.

 The reimbursement of gap between operation and maintenance cost and

revenue recovery to the project developer (after adjusting the collected
tariff) will be paid out of service charges of the Implementing Agencies (@
8% for State Governments & 9% for CPSUs).
 The second part bid cannot exceed the service charges mentioned above.
Only those state governments which undertake to provide the service
charges to the project developer will be eligible for taking up the DDG
Projects. The tenders will be evaluated jointly for both the parts taken
together for 5 years.

 A tripartite agreement will be signed between SREDA/State Utility/State

Energy Deptt. and REC on behalf of the Ministry of Power and the Project
Developer for agreeing to the commitments and conditions of RGGVY-DDG
sub component. This tripartite agreement will be approved by Ministry of
Power. As part of agreement (a) the project developer will be authorized to
collect tariff in project area and (b) The state government will agree to
reimburse the gap between O&M expenditure and revenue income from
out of the service charges of implementing agencies to the project
developer.