Combined heat and power potential in Indian industries
Alok Goyal
Energy Technology News, Issue 2 and 3, January and April 2001

Introduction

The power sector in India has grown at a phenomenal rate during the last four decades to meet the rapidly growing demand for electricity as a commercial fuel. Electric utilities have in the past adopted the conventional approach of adding new generating capacities to meet the demand. However, financial constraints aggravated by sub-optimal operations of the existing facilities of power generation and supply have resulted in both energy and peak shortages since the mid-1970s. In this context, CHP (combined heat and power) is an important option to meet the demand for electricity and heat most cost-effectively. Electricity generated can be used to meet the internal electric requirements and thus reduce the demand for utility power; additionally, the surplus, if any, can be sold to the utilities. CHP thus provides an alternative to the conventional utility power and reduces the overall emissions from the power sector.

Despite CHP being currently practiced in the Indian industry, there are no efforts to optimize the steam and power requirements. As a consequence, the CHP systems installed meet steam requirements completely and generally a part of the total power requirements are met. Also, no efforts are made towards installing CHP systems that could generate surplus electricity. Many industries are compelled to continue with non-optimum systems for reasons such as company investment criteria, availability of equipment, incremental costs and reliability and above all, government regulations.

Benefits of the CHP system

The CHP system efficiently produces two forms of useful energy from the same fuel resource, using the exhaust energy from one production system as the input for the other. Ordinarily the primary energy form is thermal (steam) and the secondary form is either electrical or mechanical. The electrical or mechanical energy can be used internally to run plant equipment, and the surplus electricity, if available, can be sold to the utilities. Such a system can reduce energy input to 10%–30% of what is required by separate systems to produce the same output. Total system efficiency can approach 90%, a significant improvement over the 50%–90% efficiency of many industrial boilers and the 30%–35% efficiency of electrical conversion when separate production is used. As a result, this efficient production of two energy forms simultaneously can significantly reduce total operating costs in many instances, even after paying for the increased capital costs.

The benefits of CHP listed here are derived from an improved power cycle efficiency and an associated reduction in fuel consumption as compared with the conventional power plant using fuel solely for generating electric energy.

High efficiency by using the same fuel to provide heat and electricity and thereby

- reduce fuel consumption
- reduce fuel cost
- reduce electric utility bills
- provide economic competitive advantages through a maximized return on investment capital
- ensure efficient use of capital investment

Increase in the amount of useful energy produced through the recovery of otherwise wasted heat

Energy conservation

- improve energy efficiency by implementing an energy conservation plan
- convert any existing standby power generator set to a continuous profit producer
- recover heat energy from cooling and exhaust systems to add profits to the operation
- minimize utility electricity demand
- use available energy for internal process applications and displace other less-efficient sources.

Lower environmental impact because of efficient fuel use

- reduced air emissions (sulfur dioxide, nitrogen oxides, particulate)
- reduced thermal pollution

Reliable source of power and process steam or heat, which is particularly important in regions prone to frequent disruptions in electricity supply
On-site electricity generation can eliminate losses (8%–10%) in the transmission and distribution systems
Can begin operation in 2–3 years compared with 5–6 years for conventional power plants.

Status of CHP technology using biomass as fuel

At present, there are only four major companies that can manufacture multi-fuel boilers at a pressure of 43 ata (atmospheres) and only two of them are now upgrading their facilities to 63 ata. The 63-ata boilers are fluidized-bed boilers. Multi-fuel boilers will be required because bagasse will be available only for about 8 months in a year and the boiler may have to operate on coal or rice-husk for the remaining period to be cost-effective. Boilers operating at pressures greater than 100 ata are not available in India for 50- to 100-MW plants.

There are hardly any CHP packagers in India except for 3–4 major engineering companies. The types of contracts that are required for successful execution and running of the plant are totally new to almost any company in India. It is therefore essential to generate adequate awareness in the companies about the practical aspects of CHP. There is also a problem of non-availability of bagasse driers, which have a moisture content of 50%. All these factors can significantly affect power generation.

Potential for CHP in India

There have been very few definitive studies to estimate the potential for CHP in the Indian industry. TERI recently carried out a detailed survey of 300 industrial units covering 10 industrial sectors in the country and estimated the CHP potential based on the analysis of the data obtained from the questionnaires. The investment required for the steam and/or gas turbines for each of the sector was also studied under the study (Table 1). The CHP estimates are based on the internal heat-to-power ratios that would meet the plant’s energy requirements and on the existing production capacities of the various industrial categories. Of the total estimated potential of 7574 MW, nearly 68% is estimated to exist in the sugar industry alone. If the power maximization options are considered, the CHP potential is expected to increase significantly.

Recent initiatives to promote CHP

The Ministry of Non-Conventional Energy Sources (MNES), Government of India, vide their circular dated 5 January and 7 January 1993 announced financial incentives for (a) demonstrating CHP projects in sugar mills and (b) preparing a detailed project reports for bagasse-based CHP. A maximum of two demonstration

Table 1 Potential of CHP in the Indian industry

a Includes nylon and polyester filament yarns

projects will be sanctioned in each of the major sugar producing states, subject to surplus power generated from cogenerators being allowed to supply to the SEBs (state electricity boards) or to other bulk electricity consumer.

Demonstration CHP project

Demonstration projects for bagasse-based CHP will be provided with one-time non-recurring capital subsidy of 30% (maximum amount of Rs 70 lakh per MW exported from the plant) of total equipment cost, provided the project employs a minimum steam generation pressure of 60 kg/cm2 and a temperature of 450 °C. It is imperative that the project generates surplus power of at least 5 MW for sale to the SEBs or to another bulk electricity consumer for 24 hours per day for at least 160 days a year. Profitable sugar mills opting for demonstration projects should have achieved a capacity utilization of at least 80% in the last five years or during their operational period in the case of new plants. The proposal for demonstration projects should also be supported by letter of approval from the SEB stating that it will be willing to wheel, bank, or buy back electricity offered for sale or permit third-party sale at remunerative prices. Independent power producers will also be eligible for the demonstration projects.

For CHP plants opting to operate in the dual fuel mode, subsidy will be given only on the bagasse-fired capacity on the basis of maximum notional power generation of 3 MW per thousand tonnes of cane crushed per day or as indicated in the DPR (detailed project report), whichever is lower.

Detailed project report

Detailed project reports for bagasse-based CHP will be provided with a one-time grant-in-aid for up to 50% of the actual cost of the DPR or of projects employing 60-bar and 40-bar pressure configurations, generating a minimum surplus power of 5 MW and 4 MW respectively. A maximum assistance of Rs 4 lakh and Rs 3 lakh respectively will admissible under the programme.

Introduction of the two-part tariff system

The Ministry of Energy, under their policy decision to encourage private-sector participation in power generation, has introduced a two-part tariff system, which guarantees returns to private investors. The first part of the tariff ensures recovery of fixed costs (including returns) based on performance at normative parameters; the second part ensures meeting of variable expenses, based on units of electricity actually supplied. Incentives will be provided for achieving efficiency levels that are higher than the normative parameters. Once the rate for sale of power is fixed, no limits will be put on actual profits earned by a generating company. The system also provides for the signing of a contractual agreement, laying down rates for the bulk sale of power by a generating company to an SEB for a specified period.

Increased role of the private sector

To augment resources for the capacity development in the Indian power sector, the government has formulated a scheme to encourage greater participation by private enterprises in electricity generation, supply, and distribution. The government has established an IPC (Investment Promotion Cell) in the Ministry of Power to coordinate and assist the private sector in the formulation and approval of projects. The new policy widens the scope of private investment in the sector by making modifications in the financial, administrative, and legal environment, some of the which are as follows.

The private sector can set up coal/lignite or gas-based thermal, hydroelectric, wind, and solar energy projects of any size.
The private sector can set up units either as ‘licensees’ distributing power in a licensed area from own generation or purchased power or as ‘generating companies’ generating power for supply to the grid.
Licensees holding a license issued by the state government to supply and distribute energy in a specified area will function under a liberalized economic and legal environment.Captive power plants set up to serve industrial or other units by the private sector will be permitted to sell or distribute surplus power to the SEBs.

Conclusion

Industrial CHP has been of considerable interest and inquiry in India for over a decade. The main arguments for CHP in India have centred on two compelling needs: (1) augmenting supply of power inexpensively in a regime of endemic power shortages, and (2) promoting energy conversion efficiency and thereby conserving scarce fossil fuels. In other words, the debate, until now, has centered on the use of CHP to ensure a reliable and continuous delivery of cost-effective power and to reduce dependence on fossil fuels.

CHP in the sugar industry brings additional benefits. The carbon released to the atmosphere as CO2 by CHP is no greater than what would have been produced by alternative methods of bagasse disposal (i.e. burning the bagasse inefficiently in the boilers or letting the bagasse decompose). Also, to the extent that CHP represents a good investment opportunity for sugar mills throughout India, it increases their financial health and the health of the agricultural sector as a whole.

To date, CHP in India has been restricted to the production of electrical energy for self-use or ‘captive power’ and has been viewed as a way to meet simultaneous on-site heat and power demands independently of the grid. Industries such as sugar, pulp and paper, and textiles have been ‘cogenerating’ electricity and steam for many years. The location of these industries in regions removed from the grid (e.g. sugar mills and paper plants), the availability of by-product fuels (e.g. bagasse and black liquor), and the steam requirements of the industrial process all combined to favour CHP. Beginning from the mid-1970s, the number of industries favouring CHP has grown to include chemical producers, oil refiners, and fertilizer manufacturers. These industries possess large and simultaneous steam and power demands and have installed CHP units to insulate themselves from the undependable utility supplies and to reduce plant costs.

Despite an increased use of industrial CHP for captive power, there has not been equal action in areas such as policy and regulation to promote the use of these systems for commercial sale of electricity. Without any way to sell their electricity for a reasonable return, sugar companies and other potential cogenerators saw little reason to discard their present systems in favour of more efficient ones that produce power for export.