Tamil Nadu Attracts $174 Million Investment in Biomass Power Sector

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Researched by Industrial Info Resources (Sugar Land, Texas)--The southern Indian state of Tamil Nadu recently announced $160 million in incentives for renewable and alternate energy projects. This move by the state government has led to several companies expressing interest in setting up biomass-based power projects. According to reports, new biomass power plants are likely to be set up in the state, with an estimated total investment of $174 million.

Tamil Nadu, which had not witnessed any new projects in this sector in the last 18 months, has benefited tremendously from the new power procurement tariff. In May 2009, the Tamil Nadu Energy Regulatory Commission (TNERC) (Chennai, Tamil Nadu) scaled up the bio-power procurement tariff from $0.07 per kilowatt-hour (kWh) to $0.097 per kWh. The regulatory commission also has approved the proposal that seeks to allow biomass power producers to sell electricity to third-party buyers. Power producers have welcomed this decision and the government's move to grant incentives to this sector, as they are paying more than $53 per ton of feedstock for the power plants.

Sources indicate that Tamil Nadu has biomass power potential of about 500 megawatts (MW). The state has 12 operating biomass projects, with a total installed power generating capacity of 110 MW. The projects are located in the districts of Dindugul, Tirvannamalai, Thanjavur, Pudukottai, Madurai, Theni and Virundhunagar. One project each in the districts of Krishnagiri and Tiruvannamalai, with a total capacity of 17.5 MW, is nearing completion. There are four proposed biomass power projects under the public-private partnership scheme, which is expected to add 40 MW, while there are nine power plant proposals with a combined capacity of 99 MW, which have received approval from the Tamil Nadu Energy Development Agency (TEDA) (Chennai). The mandatory clearances from Tamil Nadu Electricity Board (TNEB) (Chennai) are awaited. The cost of setting up a 1-MW biomass power plant is estimated to be about $1.08 million.

Tamil Nadu is emerging as a role model for captive use of bio-power. Until recently, the state had been focusing on developing wind power as an alternate source for power generation. Farmers and producers of pulses, tea and other agricultural crops have been utilizing bio-power as the primary source for their irrigation needs. Experts have observed that about 2,000 marginalized farming families can be supported by a 10-MW biomass plant. The project will assist farming communities to cultivate feedstock, like Juliaflora, in wastelands and provide employment opportunities in chopping, cutting and collection of feed.

Plants produce biomass during the process of photosynthesis. Biomass contains organic substances that can be used to produce heat and energy. A biomass power generating facility can operate on a variety of feedstock, including cane thrash, coconut shells, wood and agricultural residue. According to a recent study conducted by the Ministry of New and Renewable Energy (MNRE) (New Delhi) in association with Anna University (Chennai, Tamil Nadu), biomass power generating capacity in Tamil Nadu is expected to reach 487 MW in the next few years. This has been attributed to the growing popularity of biomass as an eco-friendly, alternate choice of power generation.

In a related development, Clenergen India (Chennai, Tamil Nadu), a fully owned subsidiary of Clenergen Corporation (OTC:CRGE) (Coral Springs, Florida), has announced that it will set up one biomass power plant each in the states of Karnataka and Tamil Nadu. The company is targeting 500 MW of power from agricultural waste and cultivated feedstock during the next five years. Cleargen India also has acquired 4,000 acres and 16,000 acres of land in Tamil Nadu and Karnataka, respectively, with 49-year leases, to begin cultivation. The company is exploring the possibility of creating a cooperative model with farmers that will help in aggregating small land holdings. Project officials have indicated that if the scheme is implemented, it can provide a farmer an annual revenue of about $1,087 per acre.

Presently, India's total biomass generating capacity is about 683 MW. Capacity utilization of these plants has been steadily declining over the last two years due to the increasing cost of raw material. In 2007-08, capacity utilization was between 5% and 70%, while in 2008-09, the ratio was between 3% and 48%. Incentive schemes and financial support from state and federal governments are expected to make this sector more economically and commercially viable for power producers.

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