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Energy Policy ] (]]]]) ]]]]]]

Comparison of options for distributed generation in India

Rangan Banerjee,1

Department of Engineering and Public Policy, Carnegie Mellon University, Pittsburgh, PA 15217, USA

Abstract

There is renewed interest in distributed generation (DG). This paper reviews the different technological options available for DG,

their current status and evaluates them based on the cost of generation and future potential in India. The non-renewable options

considered are internal combustion engines fuelled by diesel, natural gas and microturbines and fuel cells fired by natural gas. Therenewable technologies considered are wind, solar photovoltaic, biomass gasification and bagasse cogeneration. The cost of

generation is dependent on the load factor and the discount rate. Gas engines and Bagasse based cogeneration are found to be the

most cost effective DG options while wind and biomass gasifier fired engines are viable under certain conditions. PEM Fuel cells and

micro turbines based on natural gas need a few demonstrations projects and cost reductions before becoming viable. A strategy

involving pilot projects, tracking of costs and dissemination of information is likely to result in DG meeting 10% of Indias power

needs by 2012.

r 2004 Elsevier Ltd. All rights reserved.

Keywords: Distributed generation; Annualized life cycle cost; Load factor

1. Introduction

The earliest electric power systems were distributed

generation (DG) systems intended to cater to the

requirements of local areas. Subsequent technology

developments driven by economies of scale resulted in

the development of large centralized grids connecting up

entire regions and countries. The design and operating

philosophies of power systems have emerged with a

focus on centralized generation. During the last decade,

there has been renewed interest in DG. This paper

reviews the different technological options available for

DG, their current status and evaluates them based on

the cost of generation and future potential. Therelevance of these options for a developing country

context is examined using data for India.

Different definitions of DG have been proposed.

Some have linked this to the size of the plant, suggesting

that DG should be from a few kW to sizes less than 10

or 50 MW.Ackerman et al. (2001) provides a review of

alternative definitions of DG and suggests that DG be

defined as the installation and operation of electric power

generation units connected directly to the distribution

network or connected to the network on the customer site

of the meter. DG is also referred to as dispersed

generation or embedded generation. DG options can

be classified based on the prime movers usedengines,

turbines, fuel cells or based on the fuel source as

renewable or non-renewable. There are a large number

of possible system configurations.In this review the comparison is limited to the

following options:

(A) Non-Renewable

1. Internal combustion engine fuelled by diesel

2. Internal combustion engine fuelled by natural gas

3. Micro-turbine fuelled by natural gas

4. Proton exchange membrane (PEM) fuel cell with

reformer fuelled by natural gas

ARTICLE IN PRESS

www.elsevier.com/locate/enpol

0301-4215/$- see front matter r 2004 Elsevier Ltd. All rights reserved.

doi:10.1016/j.enpol.2004.06.006

Corresponding author. IIT Bombay, Energy Systems Engineering,

Powai, Mumbai 400076, India. Tel.: +91-22-2576-7883; fax: +91-22-

2572-6875.

E-mail address: [email protected] (R. Banerjee).1On leave from Indian Institute of Technology Bombay.
http://www.elsevier.com/locate/enpolhttp://www.elsevier.com/locate/enpol


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(B) Renewable

5. Wind turbine

6. Solar photovoltaic (PV)

7. Biomass gasifier connected to a spark ignition engine

(dedicated gas engine)

8. Bagasse cogeneration in sugar factories

Other options that have not been considered here are

small hydropower, geothermal, ocean thermal, tidal and

solar thermal power generation options. In order to

place DG in the context of the Indian power sector, a

brief background of the Indian power scenario is

provided before comparing the DG options.

2. Indian power sector

India had an installed capacity of 105,000 MW

(Ministry of Power, 2003a, b) in the centralized power

utilities on 31st March 2003. Of this 74,400 MW is

accounted for by thermal power plants, 26,300 MW of

large hydro plants and 2700 MW of nuclear. The focus

of power planning has been to extend the centralized

grid throughout the country. However the capacity

addition has not been able to keep pace with the

increasing demand for electricity. This is reflected by the

persistent energy and peak shortages in the country. The

transmission and distribution losses are extremely high

(estimated to be more than 25%, this includes theft).

India has a plan to add 100000MW of additional

power generation capacity by 2012 (MOP, 2001). This

requires an average capacity addition of more than10,000 MW per year. Centralized generation alone is

unlikely to meet this target. In this context DG is likely

to be important. DG also has the advantage of

improving tail-end voltages, reducing distribution losses

and improving system reliability.

The present installed capacity of DG is about

13,000 MW (10,000 MW diesel, 3000 MW renewables).

The majority of this is accounted for by diesel engines

that are used for back-up power (in the event of grid

failure) and operate at very low load factors. The share

of the energy generation from DG is marginal (about

23% of the total generation). Apart from the dieselengines, the DG options that have been promoted in

India are modern renewables.

India is probably the only country with a separate

Ministry of Non-conventional Energy Sources (MNES).

The renewable energy installed capacity was 205.5MW

in 1993 (104.6 MW small hydro, 39.9 MW Wind). This

increased to 2978 MW in 2001 (as on 31st March 2001)

and accounted for almost 3% of Indias installed power

capacity (MNES, 2001; Annual Reports MNES, 2000,

2001, 2002). The growth rate of installed renewable

power capacity during the period 19932001 was 39%

per year. During the period January 2000April 2001

the installed capacity increased from 1600 MW to

2978 MW (an annual growth rate of 49%).

Fig. 1 shows the installed capacity of different

renewable energy technologies (Annual Report MNES,

2002). The major contributors are small hydro

o25 MW which accounts for 1341 MW (45%) and

wind which accounts for 1267 MW (42%). The installedcapacity in Biomass based power generation is 308 MW

(10.3%), with most of it coming from bagasse based

cogeneration. Most of the installed capacity available

from renewables is accounted for by grid connected

systems (wind, small hydro and biomass cogeneration).

This accounts for about 3% of Indias installed capacity

contribute to about 12% of the total generation (due to

low capacity factors on renewables). The growth rate

has been significant (above 30% per year). This has been

facilitated by an enabling policy environment and a

supportive government.

Despite the emphasis on extending the centralized

grid to the rural areas, 78 million rural households

(Ministry of Power, 2003b) or 56.5% of rural house-

holds are still unelectrified. The recently passed Elec-

tricity Act (2003) has made it a statutory obligation to

supply electricity to all areas including villages and

hamlets. The act suggests a two pronged approach

encompassing grid extension and through standalone

systems. The act provides for enabling mechanisms for

service providers in rural areas and exempts them from

licensing obligations. MNES has been given the

responsibility of electrification of 18,000 remote villages

through renewables. The ministry has set up an

ambitious target of meeting 10% of the power require-ments of India from renewables by 2012 . In most cases,

the areas to be electrified do not have sufficient paying

capacity. Most systems are subsidized by the Govern-

ment or the utility. The power sector has significant

losses and needs to ensure that the DG systems selected

are likely to be cost-effective. This paper examines the

cost effectiveness of the different DG options selected.

ARTICLE IN PRESS

1267 1341

63 35 15 47

210

0

200

400

600

800

1000

1200

1400

1600

Wind

SmallHydro

BioCombn

BioCogen

Gasifiers

Waste-

Energy

SolarPV

InstalledCapacity(M

W) Total Renewable Installed capacity 2978 MW

31/3/2001 MNES

Fig. 1. Installed capacity of renewables in India.

R. Banerjee / Energy Policy ] (]]]]) ] ]]]]]2


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3. Comparison methodology

In order to compare the costs of generation of

electricity from each of these options, the annualized

life cycle cost (ALCC) is used. The annualized life cycle

cost represents the annual cost of purchase and

operation of the system. The cost of generated electricity

is obtained by dividing the ALCC by the annual

generation.

The ALCC is computed as

ALCC C0 CRFd; n ACfACO&M; 1

whereC0 is the initial capital cost for the option, ACf is

the annual fuel cost for the option and ACO&M is the

annual operating and maintenance cost for the option.

The capital recovery factor (CRF) is computed based on

the discount ratedand the life of the option n using the

equation

CRFd; n d1dn=1dn 1: 2

The annual generation is dependent on the load factor.

The cost of generation is dependent on the size and the

application load factor. In this paper a 100 kW peak

rating is used as the basis except for wind and biomass

cogeneration that are considered to be in the range of a

few MW. The calculations are done with existing Indian

fuel and equipment prices. In the case of technologies

not commercially available in India the existing inter-

national prices in US $ have been converted to Indian

rupees at the prevalent exchange rates (1 US $ 47 Rs.

in 2003). An idea of the comparative costs of options

and impact of the load factor will provide an idea of the

viability of the DG option. The status of each option in

India is discussed along with some of the issues relevant

for its adoption.

4. Non-renewable cost of generation

Table 1 shows the input data used for the economic

calculations.

Fig. 2 shows the annualized life cycle costs of the

diesel, gas engine and micro-turbine options, as a

function of the load factor. It is clear that except at

very low load factors, the gas engine and microturbine

option seem cheaper than the diesel engine. One of the

main reasons for this is the availability of relatively

cheaper natural gas (Rs. 0.144/MJ of energy) in India as

compared to diesel (Rs. 0.464/MJ of energy). The ratio

of the diesel price to the natural gas price on a per unit

of delivered energy is 3.2. In the US the price of natural

gas in January 2003 (USDOE, 2003) was 4.47$/1000ft3

(Rs. 0.167/MJ) and the price of diesel oil to industrial

consumers was 82.5 c/gal (Rs. 0.297/MJ) resulting in aratio of 1.8 of diesel price to natural gas price. It is likely

that the differential between diesel and natural gas

prices in India would reduce in the future.

This comparison is done with a societal discount rate

of 10%. The price of power from diesel engine

generators is Rs. 4.8/kWh (10 c/kW h) at 80% load

factor with fuel cost accounting for 86% of the cost of

generation. Fig. 3 shows the cost of generation from

diesel engine-generators as a function of the load factor.

The industrial tariff prevalent in Maharashtra is shown

for comparison. It is seen that electricity from the grid

is cheaper for load factors greater than 15%. (Tariff

ARTICLE IN PRESS

Table 1

Input cost data used for calculations

Option Capital cost (Rs./kW) Life ZEfficiency O&M cost Rs./kW h

Diesel engine 25000 20 40% 0.25

Gas engine 33000 20 35% 0.25

Micro turbine 45000 20 28% 0.25

Fuel cell 141000 10 45% 0.25

Discount rated= 0.1; natural gas price = Rs. 5200/1000sm3; diesel price = Rs.16/l, density = 850kg/m3; LHV = 9700kcal/kg.

Sources:ICRA, 2003; Borbely and Kreider, 2001;Resources Dynamics Corporation, 2001.

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

0 0.2 0.4 0.6 0.8 1

Load Factor

AnnualisedLifeCycleC

ost(Rs/kW/year) Diesel

Gas Engine

MicroTurbine

Fuel Cell

Fig. 2. Comparison of annualized life cycle costs for non-renewables

(Discount rate = 10%).

R. Banerjee / Energy Policy ] (]]]]) ] ]]]]] 3


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for large industrial consumers receiving high tension

supply.)

For private sector companies that have a higher

discount rate1 d30%, the comparison is shown in

Fig. 4. It is seen that diesel engines are preferred at load

factors of 20% or less (less than 5 h per day). This is

probably the reason for the large base of diesel engine-

generators for back up power in India that provide

uninterrupted power supply in the event of grid failure.

Diesel engines are manufactured indigenously (major

companies include Cummins, Wartsila, Kirloskar and

Greaves) and there is significant experience in India in

the operation, maintenance and repair of diesel engine-

generators. About 10,000 MW of diesel engine capacity

exists in India. Only a small portion of this is connected

to the grid. Most of these operate with very low loadfactors. From the national viewpoint there is an attempt

to discourage diesel based power plants since India has a

middle distillate bulge (scarcity of middle distillates like

diesel) that is constrained by the refinery mix and

necessitates the import of petroleum products.

Natural Gas engines are not as common, probably

because natural gas was not available around the

country and the higher initial capital cost. The

improvement in natural gas availability and the presence

of gas distribution companies is likely to see an increase

in gas engines. Microturbines are not indigenously

available. A joint venture between Allied Signal andThermax was announced, but was subsequently discon-

tinued.

For fuel cells, the technology considered here is the

PEM fuel cells (USDOE, 1998) that operates at low

temperatures 80 C. The disadvantage is that it can

only withstand a small proportion of impurities (carbon

monoxide). Fuel cells are not indigenously available

commercially though there are prototype PEM cells

developed by SPIC Foundation in Chennai and BHEL.

Even considering an optimistic estimate of $3000/kW

for the fuel cell and the reformer, the cost of generation

is still high. At a discount rate of 10% the PEM fuel cell

competes with diesel engines at load factors of 70% and

higher. At a 80% load factor the price of electricity from

a PEM fuel cell is Rs. 4.7/kW h with the capital cost

accounting for 70% of the cost of generation. In case of

a discount rate of 30%, fuel cells do not compete at any

load factor.

5. Cost of generation from renewables

5.1. Wind turbines

Most of the installed wind capacity is grid-connected.

The total installed capacity in September 2002 was

1702MW (MNES, October 2002). Most of this

(1639 MW) is from commercial projects. Individual

machines range from 55 to 1250kW. There are a

number of Indian companies with foreign collaborators

(Suzlon, Enercon, Vestas, REPL, BHEL) who aremanufacturing and marketing wind turbines and gen-

erators. The wind resources of India have been mapped

(data from 1000 monitoring stations throughout the

country). A potential site is considered viable in case the

average winds speeds at a height of 50m is above

200W=m2. Wind speeds are high during the monsoonmonths (June to August) with relatively weak winds

during the rest of the year. The viability of wind is

critically dependent on the capacity factor that is site

specific. The average capacity factor for wind installa-

tions in India can be computed by dividing the average

power generation by the sum of the rated capacities of

ARTICLE IN PRESS

Fig. 3. Cost of generation from diesel engine-generator.0

5000

10000

15000

20000

25000

30000

35000

40000

45000

0 0.2 0.4 0.6 0.8 1

Load Factor

AnnualisedLifeC

ycleCosts

Rs/kWi

nstalled

Diesel

Gas Engine

Micro Turbine

Fig. 4. Comparison of non-renewable options (d= 0.3).

1Private companies in the manufacturing sector India perceive a

scarcity of capital and have high discount rates. The bank interest rate

in India has recently been reduced and it is expected that this would

result in a lowering of company discount rates.



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all the installations. The annual generation in 20012002

was 1966 GW h resulting in an average capacity factor of

only 13.3%. Table 2 shows the input data, the ALCC

and costs of generation for wind.

The average cost of generation (at the average load

factor of 13.3%) is Rs. 5.14/kW h. This implies that

several unviable wind turbines have been installed. Thiswas due to the intial incentives based on capital

subsidies and tax benefits due to 100% depreciation.

Incentives were not linked to generation. Profit making

companies set up wind farms to avail of the tax benefits.

In many cases due to improper siting, the actual

generation and capacity factors were low. There have

been policy correlations. This resulted in a slow down of

capacity additions during 19961998 followed by a more

sustainable wind capacity addition. The initial experi-

ence had many unviable wind machines being installed

in a hurry to avail tax benefits without considering wind

siting issues. Many of the machines were designed for

European wind regimes that are different from the

Indian wind regime (more seasonal and monsoon

driven). The MNES has tried to improve the capacity

utilization through technology development and em-

phasis on micro-siting. The MNES has established a

dedicated research center for wind energy technology

(CWET).

India has a large wind resource assessment effort with

more than 1000 wind monitoring stations. The wind

energy programme operates commercially and is facili-

tated by the availability of innovative financing schemes

from the Indian Renewable Energy Development

Agency (IREDA).In order to promote wind, the government has

provided several incentives like 100% accelerated

depreciation. Many state governments have provided

capital subsidies (Andhra Pradesh, Maharashtra, Kar-

nataka upto 20%), sales tax exemption. Most utilities

permit wheeling, banking and buy-back (purchase price

of Rs. 2.25/kW h in 19941995 with an escalation of 5%

per year). Often wind farms are permitted to carry out

third party sale. In states that have energy shortages, a

company could install a wind farm to shield itself from

mandatory power cuts. A chemical company in Gujarat

(Excel Industries) invested in a wind farm in Dhag thathad a low capacity factor of 10%. This was still

considered to be a viable investment by the industry

since the Bhavnagar plant was exempt from power cuts

by the Gujarat Electricity Board during periods of

shortage because of its wind generation.

A wind turbine is different from the non-renewable

options for DG discussed earlier since its output

fluctuates during the day and over the year. Figs. 5a

and b show the hourly variation and the monthlyvariation in the wind for a site on the west coast of

India. This implies that wind needs to have a grid

backup to meet the requirements for DG. The potential

for wind power has been estimated to be 45,000 MW

with 15,000 MW being the technical potential (assuming

a low grid penetration).

Though most state regulatory commissions are

allowing a preferential tariff for wind power, the state

electricity boards feel that large wind farms (e.g. more

than 300 MW at Vankasuwde in Satara district of

Maharashtra) supply the maximum output to the grid in

the monsoon months when the system demand is at its

lowest. An additional 5000 MW from wind is being

targeted by 2012. For isolated systems wind diesel and

WindDieselPV hybrids have a significant potential.

The wind energy programme in India has made the

transition from demonstration to commercialization

and can be further strengthened by indigenous technol-

ogy development (especially for wind turbines of smaller

rating in the kW range and controllers). It is expected

that for the new installations optimal equipment

selection and siting will result in higher capacity factors.

ARTICLE IN PRESS

Table 2

Cost of generation from wind

0.1 0.2 0.3 0.4

d 0:1 ALCC Rs. 5960 6048 6136 6223Rs./kW h 6.80 3.45 2.33 1.78

d 0:3 ALCC Rs. 15 167 15 255 15 342 15 430Rs./kW h 17.31 8.71 5.84 4.40

Capital cost Rs. 50,000/kW, O&M cost Rs. 0.1/kWh, Life 20 years.

0

1

2

3

4

5

6

7

8

9

Time of day (hours)

Avgwindspeedm/s

0

20

40

60

80

100

January

February

March

AprilMay

JuneJuly

August

September

October

Novem

ber

Decem

ber

Month

NormalizedPowerOutput(%)

0 4 8 12 16 20 24

(a)

(b)

Fig. 5. (a) Daily variation of wind (Sanodar, West Coast); (b)

Monthly variation of wind power (Sanodar, West coast India).



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Annual capacity factors of 38% have been reached at

some of the Indian sites.

5.2. Solar photovoltaic

The daily average solar insolation incident over India

varies from 4 to 7kWh=m2 depending on the location.Most regions in the country get about 300 clear sunny

days a year. Figs. 6a and b show the variation in the

solar insolation for a typical day and for different

months during the year for Mumbai. A solar PV system

converts the incident solar radiation directly into

electricity using silicon based solar cells. For the

modules available, the efficiencies range between

1015%. In PV systems the capacity factor is decided

by the insolation characteristics at the site with a

maximum capacity factor of 25%. The advantage of

PV is ease of operation and negligible operating cost.India has both monocrystalline silicon and polycrys-

talline silicon cells. Manufacturers include Tata-BP,

Shell, BHEL, and Central Electronics limited. The total

installed capacity of solar PV in India was 65 MW in

2002. This includes home lighting, street lighting, water

pumping and stand-alone power systems. The grid

connected systems account for only about 2.5 MW (31

systems average about 80 kW and largest about 240 kW

peak). The annual production of PV cells in 19992000

was 9.6 MW and 11MW of PV modules (Annual

ReportsMNES, 2000, 2001, 2002).

The economics is computed for a grid connected

system with no requirement for storage. For isolated

systems there is an additional cost of storage batteries.

Table 3shows the cost of generation from solar PV. PV

is expected to have niche markets in remote areas,

islands etc. The main advantage is the maintenance free

operation. For the PV systems installed for village

electrification (Sunderbans in West Bengal) almost the

entire capital cost has been provided as a capital

subsidy. If subsidies are continued, there may be a

number of remote villages electrified through PV since

systems are modular and can be quickly installed.

However the costs are significantly higher than the

other renewable options.

5.3. Biomass gasifiers operating gas engines

Fuelwood, agricultural residues (rice husk, sugarcane

trash, coconut shells...) and animal waste are the main

biomass fuels available in India. The advantage of

biomass fuels is that they are available throughout the

country. Different biomass sources are available indifferent regions. Biomass (fuelwood, crop residues and

cattle dung) accounts for about 40% of Indias primary

energy use (TERI, 2000). At present biomass is mainly

used for cooking in chulhas (cookstoves) with poor

efficiency.

Aggregate estimates of biomass availability can be

made from the crop production data and the residue to

product ratio. Using this approach, Mukunda (1999)

estimated the biomass produced in India in 19971998

to be 545 million tons. Of this, about 150 million tons is

expected to be available for power generation. This is

estimated to be made up of 23% rice straw, 18% wheatstraw, 16% other straw, 15% bagasse and 12% plant

stalks. These residues are estimated to have a generation

capacity of 16,000 to 18,000 MW with a plant load

factor of 68.5% (6000 h per year). MNES estimates a

potential of 3500MW from Bagasse based power

generation and an additional 16,000 MW from other

biomass that is already available (Annual Report

MNES, 2002).

In addition to residues that are available, it is possible

to have dedicated plantations on waste land or degraded

lands that are not normally used for agriculture. In

social forestry programmes sustainable yields of

ARTICLE IN PRESS

0

0.2

0.4

0.6

0.8

1

1.2

0 2 4 6 8 10

Time in hrs.

SolarradiationkW/m2

0

1

2

3

4

5

6

7

8

Month

AvgDailySolarRadiation(kW

h/m2/day)

12 14 16 18 20 22 24

1 2 3 4 5 6 7 8 9 10 11 12

(a)

(b)

Fig. 6. (a) Daily solar radiation (Mumbai, May); (b) Variation in

monthly solar radiation (Mumbai).

Table 3

Cost of generation from solar PV

Capital cost Rs./kW 200 000 250 000 300 000

LF 0:2 ALCC Rs. 23,930 29,803 35,676Rs./kW h 13.66 17.01 20.36

LF 0:25 ALCC Rs. 24,039 29,912 35,785

Rs./kW h 10.98 13.66 16.34

O&M Rs. 0.25/kWh, Life 20 years, discount rate = 10%.



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78 tons/hectare/year have been achieved (Ravindranath

and Hall, 1995). The waste land available in the country

has been estimated to be between 66130 million

hectares (Mukunda, 1999). Using an average productiv-

ity of 5 tons/hectare/year and 100 million hectares of

waste land the total biomass available annually is 500

million tons which can fuel power generation of60,000 MW at a plant load factor of 68.5% (6000 h/

year).

The options for conversion of biomass into electricity

are combustion, gasification, IGCC, pyrolysis (Ganesh

and Banerjee, 2001). The biomass can be converted into

producer gas by gasification (partial combustion).

Thermochemical gasification involves burning the bio-

mass with insufficient air so that complete combustion

does not occur and producer gas is formed. Producer

gas is a mixture of carbon monoxide and hydrogen.

Gasifiers are classified as updraft or downdraft depend-

ing on the direction of flow of the biomass and the

producer gas. In a downdraft gasifier the biomass and

the gases flow in the same direction (downwards).

In a typical downdraft gasifier the biomass is fed from

the top. It passes through the gasifier and undergoes the

following sequence of processesdrying, pyrolysis,

oxidation and reduction (Parikh, 1984). The gas formed

is passed through a cooling and cleaning sub-system that

usually consists of a cyclone for particulate removal and

a scrubber for cooling and cleaning the gas (removing

the tar). Some ash is formed from the oxidation

reactions. The ash moves through the reduction zone

and gets removed from the ash disposal system (grate

and ash collection system). The typical composition ofproducer gas is 2022% CO, 1518% H2, 24% CH4,

911% CO2 and 5053% N2 (by volume). This is a low

calorific value fuel with a calorific value of

10001200 kcal=Nm3.India has significant experience in atmospheric fixed

bed gasifiers. About 1700 gasifiers have been installed

with a total installed capacity of 34 MW. The average

gasifier size is 20 kW. Biomass gasifiers were initially

developed for diesel replacement in agricultural pump-

sets. Gasifier models were indigenously developed

around 1986. During the initial years of the National

Demonstration Programme (19861994) the emphasiswas on agricultural pumpsets of 5 and 10 hp rating. A

feature of this programme was heavy subsidies on

gasifiers, pump-sets and diesel engines. It is estimated

that the majority of installations (80%) during this

phase become inoperative within one to three years of

the system installation (ASCENT, 1998). Target bene-

ficiaries took little interest in the programme and

reverted back to full diesel operation, after the initial

few hundred hours of operation. Subsidies were misused

to obtain a diesel engine pump-set at a cheaper rate.

Despite this, there was important technology demon-

stration experience obtained in the installations that

continued to operate with gasifiers. Since 1994 subsidies

were reduced and were only available for the gasifier.

This initially resulted in a drop in the number of annual

installations, but the programme is now more market

oriented.

Biomass gasifiers have been developed either for wood

or for rice-husk. Other fuels that have been used arecotton stalks, coconut shells, saw dust, palm shells, corn

cobs. Installations range from 3 to 500 kW capacity. The

biomass input required ranges from 5 to 500 kg/h for

electrical outputs ranging from 5 to 500 kW. The largest

installation size is 500 kW in Gujarat that is being

connected to the grid. A 500 kW 5100 kW rural

electrification system has been installed at Gosaba in

Sunderbans (West Bengal). A 100 kW rice husk based

gasifier has been installed in a rice mill in Andhra

Pradesh. Almost all gasifier systems installed are stand

alone. Most installations use diesel engines in the dual

fuel mode. There are a number of manufacturers

Ankur Scientific (Ascent, Baroda), Netpro, Cosmos

(Raipur), AEW and Tanaku. Decentralized Energy

Systems India (DESI Power, 2003) has set up six

projects as independent rural power producers (IRPP)

in various parts of the country. The first installation was

at Orchcha in Madhya Pradesh (100 kW rating2 units

of 50 kW each). DESI power estimates that a 100 kW

IRPP will directly employ 11 persons and another 56

downstream jobs in new small scale industries (because

of the availability of electricity). Instead of a diesel

engine being operated in the dual-fuel mode that has a

high operating cost and emissions because of the diesel

fuel, it is preferable to opt for a dedicated spark ignitionengine operated on producer gas. There are a few

installations in the countryIISc Bangalore has set up a

100 kW dedicated engine in a milk chilling plant in

Arnekal near Bangalore. Ankur has set up 100 kW gas

engines in an industry near Baroda.Table 4shows the

input data for the calculation.

Fig. 7shows the cost of generation from this option.

It is clear that this is preferable to diesel engines at load

factors of 20% or higher. In case biomass is available,

this can operate like a dispatchable power plant.

Biomass gasifier-engines appear to be a potentially

cost effective DG solution. This has a potential forwidespread diffusion since biomass can be obtained

from waste lands using dedicated plantations. It is

ARTICLE IN PRESS

Table 4

Input data for the biomass gasifier-engine

Gasifier Engine-generator

Capital cost (Rs./kW) 20 000 33 000

Life 10 years 20 years

Efficiency 70% 35%

Biomass NCV = 3400kcal/kg; Price Rs. 1/kg; Discount rate = 10%;

O&M cost = Rs. 0.5/kWh.



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necessary to have assured biomass supply as the viability

would depend locally on the biomass price. It is expected

that the optimal ratings would be between 50500 kW. It

is seen that the dedicated biomass fired engine has a cost

of generation comparable to the gas engine. The main

advantage for this option is that it would operate on

locally available resources, unlike the gas engine that

would require natural gas transport and supply to the

rural areas (this might increase the cost of energy from

the gas engine). The viability of the biomass option is

critically dependent on the availability and price ofbiomass. (The present value is Rs. 0.07/MJ or half the

price of natural gas on an equivalent energy basis.) The

main usage of biomass in the rural areas of India is for

cooking. This is often collected from local wood lots or

from areas near forests. There is no well developed

market for biomass in most rural areas. Hence a

dedicated biomass based power plant should ensure

that it has a dedicated plantation attached to it. In case

of isolated gasifierengine systems it is essential that

the system is coupled with an industrial load (cold

storage, rice mill, oil mill etc.) so that the demand load

factor can be improved and the revenue can be ensured.The operation of the gasifier requires operator training.

The institutional mechanism for cost recovery and plant

operation needs a number of policy experiments. Most

of the installations have been subsidized and operated

by the technology supplier. Independent assessment of

actual costs incurred and operating experiences need to

be documented and disseminated before launching a

large biomass gasifier engine programme. The present

manufacturer base and number of energy service

companies (ESCOs) is sub-critical for a large scale

programme. One possible solution is a setting up of a

public-sector (on joint sector) national company the

National Bio Power Corporation (modelled on the lines

of the National Thermal Power Corporation).

5.4. Bagasse cogeneration in sugar factories

All sugar factories use bagasse as a fuel in their boilers

to generate process steam and also to generate theelectricity and shaft work required by the plant.

Cogeneration is the simultaneous generation of power

(electricity or motive power/shaft work) and process

heat (steam). The process steam required in sugar

factories is at low pressuresmost of the steam is

required at 2 atm absolute (ata,) a small portion is

required at 6 ata. Traditionally sugar factories have been

designed to meet most of their power requirements

during the crushing season from the bagasse itself. All

sugar factories already have cogeneration of steam and

power. However the steam generation pressures are low

(usually 21 atm absolute (ata)). The mill turbines and

power turbines are old and inefficient.

If the steam generation pressures are increased by

using a high pressure boiler, the sugar factories can

export surplus power to the grid. A large number of

options are possible. The options proposed have been to

replace the milling turbines by efficient electric motors

and the power turbine by an efficient backpressure

turbine, increasing the generation pressure, using a

condensing extraction turbine. An improved configura-

tion that uses steam at 65 ata and passes through a

condensing extraction turbine provides surplus power

for export of 9.5 MW for a 2500 tons of cane crushed

per day (tcd) plant (Smouse et al., 1998). For a givenconfiguration, it is possible to select an optimal steam

generation pressure (Raghu Ram and Banerjee, 2003).

MNES estimates indicate a potential of 3500 MW net

(additional) exportable capacity from the Indian sugar

factories. Thirty four bagassebased cogeneration

projects aggregating 210 MW have been commissioned

till March 2001. The average export capacity of these

plants is 6 MW per plant. The projects implemented

have been with steam conditions of 60 ata (some are

lower). New cogeneration projects designed with steam

conditions of 87 ata and 515 C are being implemented

(Annual reportMNES, 2002. Bagasse based cogenera-tion has the problem that the mill operates only during

the crushing season, 79 months a year.) Bagasse can be

supplemented using other biomass fuels such as cane

trash and rice hulls so that there is power export

throughout the year.

There are about 430 sugar mills in India. In terms of

equivalent 2500 tpd mills, about 360 were in operation

during 19961997 (Smouse et al., 1998). Based on the

option discussed earlier, this would result in an

exportable power output of about 3500 MW. Sugarcane

production has been increasing at 35% per year. Hence

the cogeneration potential can be expected to increase at

ARTICLE IN PRESS

0

2

4

6

8

10

12

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1

Load Factor

CostofGeneration

Rs/kWh

Gas Engine

Bioengine

Diesel

Fig. 7. Cost of generation from bio-engine.



9/11

this rate. The capital cost of the plant is around $450/

kW of output or $650/kW of exportable surplus. This

works out to around Rs. 30,000 per kW of surplus

power which is cheaper than setting up a new fossil fuel

power plant.

MNES provides an interest subsidy on term loans for

cogeneration in sugar. The interest rate reduction is 3%for 80 ata and above, 2% for 6080 ata and 1% for

4060 ata. Most state governments have announced

policies that fix buy back rates, permit wheeling and

banking Tata Energy Data Directory (1999). To

encourage co-generation in co-operative and public

sector mills a joint venture/ Independent Power Produ-

cer model has been proposed by MNES in the major

sugar producing states. Capital subsidies are available

for the first projects of these types in each state.

Many of the sugar factories are in the co-operative

sector. They are traditional industries with limited

technical capability. Often the sugar factory does not

have the confidence to operate high pressure steam

based power plants. The capital investments are

significant, about Rs. 300 million for a 2500 tcd plant,

and the sugar factories are hesitant to make these

investments. At present boilers and turbines are avail-

able in India from suppliers like BHEL, Thermax,

ISGEC, Triveni. Grid interconnection and recovery of

dues from the State Electricity Board is perceived as a

problem. Some states have announced a special tariff for

Biomass Cogeneration (e.g the Maharashtra Electricity

Regulatory Commissions recent tariff order). This tariff

makes it viable for the sugar factory, even if it operates

during the crushing season only. The bagasse basedcogeneration option is only viable for large plants

2500 tcd or higher. Hence this option is suitable for

510 MW or more. This is the cheapest of the options

considered, since only the incremental cost is charged to

power generation.

The efforts to promote bagasse based cogeneration

seem to be providing the desired results. Access to soft

loans for the capital investment and the development of

a number of energy service companies (ESCOs) that

could prepare detailed project reports and build, own

and operate the plants may accelerate the installation of

Bagasse based cogeneration (Table 5).

6. Conclusions

The summary of the different options evaluated is

presented inTable 6. The cost of generation of different

DG options depends on the load factor. For some of the

renewable options the system load factor is constrained

by the supply availability.Among the non-renewable DG options considered,

diesel engines are prevalent in India. This is because of

the scarcity of capital and low load factors (use as

backup power). In view of the government liquid

fuel policy gas engines are likely to be the preferred

option for DG. Gas engines are cost competitive in

view of the relatively low natural gas price. These are

likely to be the preferred option for DG in areas

where natural gas is available. The existing engine

manufacturers need to promote their gas engines in

India. For PEM fuel cells and micro-turbines based

on natural gas, there is a need to have a few

demonstration projects and obtain experience with these

technologies. Technology development and cost reduc-

tions could make either of these technologies

cost-competitive.

Among the renewable technologies considered wind

energy is growing significantly because of the supportive

policy environment. For sites where the capacity factor

is 30% or more, wind is competitive at present prices.

Even though the comparison shows a price of Rs. 5.84/

kW h, the accelerated depreciation and tax benefits

provided make it a viable investment even at a selling

price of Rs. 3/kW h.

Biomass gasifiers operating dedicated gas engines is aDG option that is almost cost effective and seems suited

for rural areas. At present engine availability is a

constraint. Engine manufacturers are not keen to

develop producer gas engines as they are unsure of the

volumes. Biomass availability, system standardization

and institutional issues need to be addressed before this

option can achieve widespread diffusion. A national

level Bio-power corporation to provide technology

solutions and operation and maintenance support may

help this option reach its potential. Bagasse based

cogeneration is cost-effective at present prices and is

likely to provide about 3000 MW of surplus power tothe grid.

Solar PV does not seem to be a viable option for grid

connected systems, at present prices. However, the

technology is mature and requires low maintenance.

This is the preferred option for small remote systems.

For isolated systems hybrid systems of PV-Wind diesel

are likely to be cost-effective (IIT Bombay, 2002).

Accordingly to estimates of the Ministry of Power

(MOP, 2003a, b) there are about 18,000 villages that are

remote and difficult to connect to the grid. These

villages can be electrified by DG systems. This would

result in a potential of about 500 MW of small isolated

ARTICLE IN PRESS

Table 5

Data and calculations for Bagasse cogeneration

Incremental capital cost (Rs./kW) 30 0 00

Life 20 years

Boiler efficiency 70%

Load factor 0.4 0.5 0.6

Rs./kW h 2.60 2.40 2.27

Bagasse NCV = 3400 kcal/kg (dry basis); Price Rs. 1.50/kg; Discount

rate = 10%; O&M cost = Rs. 0.5/kWh; 2500 tcd plant 9.5 MW

export; 0.93 kg extra/kWh.



10/11

systems. The difficulty for these systems is the need to

match the supply with the load profile. For this

constraint hybrids of two renewables or renewable-fossil

can be shown to perform better than power plants

based on a single technology. The isolated systems are

likely to be costlier than the grid connected systems. In

isolated systems, the DG system viability increasesby the inclusion of an industry load (cold storage,

rice mill...).

Different institutional models adopted for DG in

India have been reviewed in the Gokak Committee

report (Gokak, 2003). The Sunderbans model

involves a village committee that manages the project

and collects bills from members, the local enterprise

that operates and maintains the plant and the nodal

agency (West Bengal Renewable Energy Development

Agency). The Uttam Urja project in Rajasthan

is an example of private Energy Supply Companies

operating a DG project in collaboration with TERIand manufacturers. A large number of DG projects

have to be initiated through different institutional

mechanisms and the results tracked. The national

strategy should involve demonstrations and pilot

projects with some of the new technologies (PEM

fuel cells, micro turbines), dissemination of successful

implementation mechanisms, tracking of actual

costs of generation from different DG options and

promotion of the cost-effective options. This

strategy could result in increasing the share of DG to

10% of the total electricity by 2012, as envisaged by

the Government.

Acknowledgements

The author is grateful for financial support from the

Carnegie Mellon Electricity Industry Center for the

duration of this work.

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Table 6

Summary of DG options

Type Technology

status

Capacity factor Cost of generated

electricityd 0:1Comments

Diesel NR C, I N LF 0:5 Rs: 5:10=kW h

LF 0:8 Rs: 4:85=kWh

Existing base of more than 10,000 MW

as backup.

Gas engine NR C N LF 0:5 Rs: 2:62=kW h

LF 0:8 Rs: 2:29=kW h

Relative price of Natural gas low

Micro turbine fuelled

by natural gas

NR D N LF 0:5 Rs: 3:24=kW h

LF 0:8 Rs: 2:82=kW h

Technology not proven in India

Fuel cell fuelled by

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LF 0:8 Rs: 4:68=kW h

Technology demonstration required

Wind turbines R C, I 13% Avg Max

3038%

LF 0:2 Rs: 8:71=kW h

LF 0:3 Rs: 5:84=kW h

2000 MW already installed

PV R C, I Max 25% LF 0.25 Rs.17/kW h Niche applications Grid connected

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BiomassGasifier R C N LF 0:5 Rs: 3:16=kW hGasEngine Gasifier-I LF 0:8 Rs: 2:59=kW hBiomass Cogen R C, I 50% Higher if aux

fuel is used

LF 0:5 2:40=kW h

LF 0:6 2:27=kW h

About 300 MW installed export

capacity in 2002

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