India's BHEL Secures $35.6 Million Captive Power Plant Contract

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Researched by Industrial Info Resources (Sugar Land, Texas)--India's state-owned Bharat Heavy Electricals Limited (BSE:500103) (BHEL) (New Delhi) has secured a contract worth $35.6 million from Chennai Petroleum Corporation Limited (CPCL) (Chennai, Tamil Nadu) to deliver and set up a captive power plant. The 20-megawatt (MW) cogeneration plant is based on a frame-5 gas turbine and will be located at CPCL's refinery in Manali, Himachal Pradesh. CPCL is developing the power plant to take care of the additional steam and power needs of the refinery to achieve compliance with Euro-IV emission regulations. BHEL has already installed and successfully commissioned three captive power plants at the Manali refinery.

As part of the agreement, BHEL will undertake design and development, engineering, production, delivery, construction, and commissioning of the gas-turbine generating system, as well as the 85-ton-per-hour heat-recovery steam generator and other allied equipment. The components and other balance-of-plant equipment will be manufactured and supplied by BHEL's production facilities in Trichy, Bhopal, Hyderabad, Jhansi, Ranipet and Bangalore. Erection, installation and commissioning will be carried out by BHEL's Power Sector (Southern Region), headquartered in Chennai.

In a related development, BHEL was also awarded the $21.9 million contract by Indian Oil Corporation Limited (BSE:530965) (IOCL) (New Delhi) for setting up a 20-MW captive power plant at its refinery in Barauni, Bihar. Equipment for the proposed 150-ton-per-hour steam turbine generating boiler, which can operate on either oil or gas, will be delivered from BHEL's facilities in Hyderabad, Trichy, Ranipet and Bhopal. Control systems and other devices will be sourced from BHEL's electronics division in Bangalore. The captive power plant is being set up by IOCL to meet the increasing power needs of the refinery complex and to provide seamless power supply to the refinery. This is a repeat order for BHEL, which has successfully completed captive power plant projects for IOCL in Haldia, Panipat, Digboi, Mathura and Barauni.

BHEL is fast emerging as a market leader in the captive power and cogeneration plant segment. The company has executed several steam- and gas-turbine-based power plants with capacities of 10 MW and up. BHEL has installed and commissioned more than 700 projects in this category for customers in the cement, refining, paper, chemicals, fertilizer, petrochemicals, metals and sugar industries.

Captive and cogeneration power plants are gaining popularity in India, especially among companies in energy-intensive industrial sectors. The heavy industry segment, which is the single largest energy consumer in the country, is now relying on electricity supply from captive power generation units in order to reduce dependence on the national grid supply. This is primarily because of the non-availability of an adequate and steady supply of power from the national energy grid. Poor transmission and distribution quality as well as high power tariffs are also reasons for a number of private players opting for captive power plants. Many private power producers are also exploring the possibility of selling surplus power to other industrial players or the state grids, while some are already doing so.

The growing popularity of captive and cogeneration plants is causing concern among state electricity boards and governments as the industrial load accounts for revenue from cross-subsidies. The tariff structure and billing and collection mechanism is also more profitable and efficient in this segment. On the other hand, captive power producers have to make huge capital investments and incur operating costs to run the power plants. The power producers have also been lobbying with the union government to extend subsidies to captive and merchant power plants as well. However, the Indian government recently announced that following discussions with various ministries, it was decided that the encouraging subsidies will not be made available to these independent initiatives. Earlier, the power ministry, in a draft submission, proposed to bring merchant and captive power plants under the incentive scheme if they fulfilled the threshold capacity clause of 1,000 MW of thermal power generation.

Presently, India's public power generation capacity is about 148,000 MW. Captive power plants bring in an additional 55,000 MW to the total power generating capacity, accounting for 37% of the country's total installed capacity. India is facing acute power shortages of 8-9%, with the deficit rising to 12-15% during periods of peak demand. Energy losses in transmission and distribution are forcing power utilities to produce 1.5 kilowatt-hours (kWh) for every kWh of power that is supplied and billed. This precarious energy situation has made it imperative for energy-dependent industries to seek alternate options to meet their power requirements.

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