02-03-2013, 11:15 AM
Promotion of Co-generation Power plants
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Introduction
Since the announcement of private power policy of the Government of India in 1991, a number of
proposals, including proposals from foreign promoters, have been received through Independent
Power Producer (IPP) route. However, as the gestation period for large power projects is long, it
would be possible to complete very few projects in the near future and, therefore, we would face huge
shortage of power. At the end of 1996-97, the energy shortage is visualized at 15% and peaking
shortage at 30%.
It is, therefore recognized that there is an urgent need to open an alternative route, other than
Private Generating Company, where the industries themselves will be interested to meet their own
power demand by pooling resources together. Captive Power Plants, because of the inherent benefits
offered by them, were considered as one such alternative route. Accordingly, State Governments
were requested to accord high priority to setting up of captive plants in their States and also
encourage absorption of the available surplus power, to be remunerative tariff. A detailed guide line
to this effect was issued through a letter to All Chief Secretaries of States from the office of the
Secretary (Power), Government of India (D.O. NO. 6/1/Tariff/Captive Power/95, 9th October, 1995).
Through a subsequent communication (DO No.A-31/94-IPC dated January 30, 1996) regarding
clearance process for captive power projects, it was clarified that the captive power plants of any
other persons [including juristic persons and excepting generating companies] are not subject to the
provisions of Section 29(2) of the Electricity (Supply) Act. Section 43(1) of the Act provides that the
Board may enter into arrangement with any person producing electricity within the State for the
purchase of the power on such terms as may be agreed, of any surplus electricity which that person
may be able to dispose of. However, as per Section 44(2A) the Board shall consult the authority in
cases where the capacity of new generating station, or as the case may be additional capacity
proposed to be created by the extension or replacement exceeds 25 MW. Hence, in terms of Section
44 of the Act, captive power/cogeneration plants require the approval of the State Electricity Board
only.
Objectives of the Policy
As electricity and heat are fundamental inputs to most of the industrial activities the present
policy strives to achieve the dual objectives of achieving higher efficiency in fuel use in the industry as
well as the availability of surplus electricity to the State grid, by combining power and heat generation
for industrial use.
Process for creation of Cogeneration Facility
With a view to promote setting up of cogeneration plants, it is proposed that the industry having
cogeneration potential would be allowed to develop a power generating facility without necessarily
going through the competitive bidding process, for projects of any size. In addition, in such cases the
projects for the purpose of CEA clearance would be treated in the same way as any proposal for
setting up of captive plant is required to be treated by the State Government under section 44 of the
Electricity (Supply) Act, 1948.
Refinery Bottoms as fuels
Refinery Bottoms or those by products of refining process would be permitted to be used as fuel for
cogeneration facilities to be set up by any petroleum refining unit which can not be easily marketed
due to transportation problems or due to low heat content. However, to qualify as a cogeneration
plant, the sum of useful power output and one half the useful thermal output be greater than 45% of
the facility s energy consumption. And in any calendar year, not less than 90% of the total heat input
for the facility should come from refinery residue or the refinery bottom.
Tariff fixation
While fixing tariff from a cogeneration plant, the basic consideration would be to share the
benefits of higher efficiency. In addition, the other advantage available to the industry is availability of
assured supply of power and possibly at a tariff lower than what the SEBs normally charge from their
industrial consumers due to cross subsidization. On the other hand SEBs also stand to benefit from
the fact that they qet surplus power at a rate lower than the marginal cost. However, in the bargain
SEBs would have to let go some of their good customers. The tariff should, therefore, reflect these
issues.
The tariff can be fixed by the SEB by making adjustments for the higher efficiency and applying
the same on the marginal cost of generation. Accordingly, the SEB can notify an acceptable tariff,
reflecting the modified marginal cost of generation and pay at that rate for the life of the plant barring
major fuel price escalations.
Independent use of power from CPP
If any industry or licensee wants to install captive power plant for its own use independently, there
shall not be any possible inter connection between its load fed by its generation and KSEB supply. The
industry or licensee shall purchase and install change over switch or circuit breaker with inter lock at
its cost, as per the scheme approved by the Chief Engineer (Generation) for which detailed scheme
shall be sent to the Chief Engineer (Generation).
Power supply during shut down/maintenance of CPP.
The KSEB will supply the power required for the construction of CPP at the rate applicable to other
consumers to whom KSEb sells power. The owner of the CPP has to remit the cost of construction of
the power line / installation of all equipments in advance. The power supply will be provided on out of
turn priority.
OBJECTIVE :
According to the 16th Electric Power Survey conducted by CEA, the country has energy shortage of
7.8% and peaking shortage of 13.0% for the current year. The capacity addition required by the end
of 11th Plan to meet these shortages is nearly 100,000 MW. In view of the massive investments
required for capacity addition it is necessary that the existing investments in the power sector are
fully utilized and captive power plants which are utilized only partially are encouraged to sell power to
the grid. The following general guidelines are recommended to the States to enable a more liberal
framework for setting up Captive Power Plants and utilizing their surplus output for benefit of the
consumer.
PRICING OF THE BALANCE POWER SOLD TO S E B
i) For the FIRM POWER, the pricing for the Captive Power Generation could be in single part i.e. rate
for units alone. The tariff for sale of power from thermal CPPs to SEB may be fixed after mutual
discussions between SEB & CPP and could be based on pooled variable charge of thermal power
stations operating in the SEB plus some percentage of the pooled variable charges as an incentive to
CPP generator. In case of hydro CPPs also, the tariff for sale of power to SEB may be fixed after
mutual discussions between SEB & CPP and could be based on pooled variable charge of thermal
power and incentives. To attract more power from CPPs into the Grid, tariff could also be based on the
highest variable cost in the system or the actual variable cost of CPP, whichever is lower, and some
percentage of the variable cost as an incentive.