Powering Rural India by Micro Electrification PRIME Powering Rural India by Micro Electrification...

Powering Rural India by Micro Electrification

PRIMEPRIMEPowering Rural India by Powering Rural India by Micro ElectrificationMicro Electrification

Presented by:Prasoon Agarwal ( [email protected])

Indian Institute of Management , Ahmedabad ( India)

Team PRIME - IIM Ahmedabad

Meet my Team

Koushik MBA 2 Year Experience in Finance

Maruthi MBA 2 Year Experience in Operations

Maurya MBA 2 Year Experience in Marketing

Dr. Chirag Experience in Community Health


Electricity Scenario in India

30% of this is in the villages

Revenue Opportunity (@ 8.25 cents/ KWh)

$ 1.82 Billion

2003-04 2004-05 2005-06 2006-07

(Proj)

100000

200000

300000

400000500000

60000011.2 % 11.7 %

12.3 % 13.9 %

Electricity Consumption vs. Shortage Total Shortage72925 GWh


What lack of Electricity means

No Water for Irrigation



No electricity for Households



Poor Health Facilities



Firewood as main fuelNo industriesEnvironmental Issues


Our Dream

Irrigation Concerns

Development Concerns

Health Concerns

Clean Energy Access

Biomass based Micro Electrification


What Power means for India


What is PRIME

Small power plants in Villages

Run on locally grown Bio Fuels

Community as a stakeholder

Each plant caters to 6-7 Villages


Implementation Plan

Identification of Land

Leasing and Develop the land

Regulatory Approvals & Compliance

Forming Village Cooperative

Cultivation of Crops

Power Plant and T&D Setup

Distribution and Collection


Implementation Plan


Leasing andDevelop the land

Regulatory Approvals & Compliance

Forming Village Cooperative

Cultivation of Crops

Power Plant and T&D Setup

Distribution and Collection

First Project: PRIME-1 Completed till this Stage


What's in for InvestorsK

ey P

aram

eter

s (p

er

Pla

nt

)

IRR

Cost per unit of electricity

Profit Margin

$ 0.34 Million for a capacity of 1MW

$ 0.165 Million per year

$ 0.8 Million ( over a 30 year horizon)

26% over the Net Cost of Generation (excluding CER)

PAT

Capex (Net of Grants & loan)

5.15 years

6.55 cents/KwH (Rs 2.62/KwH)

29%

Payback Period

NPV


Social Benefits ( SROI)Electricity for Irrigation60 Pumpsets of 7.5 HP rating, per village

Electricity for Household700 Incandescent lamps per village (24 Hours)

EmploymentWill lift 250-270 people per cluster above poverty line

Income for Farmers from WastelandIncome benefits for farmers cultivating Bio Fuels for this plan

Environment BenefitsCarbon Neutral Fuel Used ; CERs gained for every unit

Health/Education BenefitsWill raise the standard of living for the people from these communities


Risks

Feedstock PricesPrice impact on input cost

Technology ObsolescenceEmerging technology might make existing facilities inefficient

Government SupportPolicy reversal on subsidy on electricity

Leasing the land from Villagers

Rural CooperationDifferent villages might lead to different arrangements

BioFuels ( Leased Land Cultivation)What if Plant is not able to generate power

Provision for Upgradation in 3 Years

Community Involvement

“Panchayat” As a stakeholder

Other uses for Casuarina

Powering Rural India by Micro Electrification

We are not just Powering

but EmPowering India !!!


Q & ALoad in Villages

Village Cooperatives

Implementation Flow

Cost Breakup

Pricing

Income Statement

Government Cash Flow

NPV CalculationsPilot- PRIME 1

T & D Costs Labour/Admin Cost

Why BioFuels

Why Casuarina

Gasification Process

Vision

Management

Future Plans


Power Requirement in Village

Assumptions:1. A 10 Hp pump running for 6-8 hrs every alternate day would be sufficient for irrigation purposes. So, the

average number of hours that a pump works for a day works out to be 4.

2. The most commonly used pump set is of 5Hp. However one can find quite a few pump sets of 10 Hp and even a few of 15 Hp capacities in a typical village. So, taking an average of 7.5 Hp is a reasonably fair assumption.

3. The consumption of electricity for domestic purposes is small compared to the power consumption for irrigation. So, the total consumption of electricity is kept at 1.5 times that required for irrigation.

4. The final calculation of the Capacity takes into account a cushion of 4% downtime and a transmission efficiency of 90%.

Total number of Pumpsets in the district 56155

Total number of villages 949

Average number of Pumpsets in a village 60 (appx)

Number of hours of running everyday 1 4

Rating of a Pump 2 7.5Hp

Units required for a pump in a day (KWh) 22.5

Units required for the irrigation of the entire village 1350

Total number of Units required 3 2025

Number of hours the powerplant will run in a day 16

Hence, the Required Daily Capacity of Plant 4 164.983

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Break-up of Costs

Farm Costs (Rs/KWh)

Raw Material Cost 1.25

Lease Rental for Plantation Land 0.27

Total Costs 1.52

Plant Costs (Rs/KWh)

Operation and Maintenance Cost 0.07

Labour Costs 0.20

Depreciation of Assets 0.20

Total Costs 0.47

Other Costs (Rs/KWh)

Interest Costs 0.36

Collection & Transaction Costs 0.13

Total Costs 0.49

T & D Costs (Rs/KWh)


Depreciation of Assets 0.09

Total Costs 0.14

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Labor and Admin Costs

Total number of units delivered = 560000 So, labor cost /KWh = 0.20 Rs

Direct labor No. of Workers Daily Wage Rate Expense /Year

Feed Handling 3 150 157500

Operators 3 150 157500

Ash Handling 2 150 105000

Labour Bill for a shift (2 shifts/day) 420000

Total Labour Bill for the year 840000

Office Administration No. of Workers Expense/Year

Plant Supervisor 2 168000

Plant Manager 1 120000

Total Admin Costs 288000

Total Manpower Cost for running the plant 1128000

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Pricing

Total Costs Rs/KWh

Total variable Cost per KWh 1.38

Total fixed costs per KWh 0.59

Depreciation of assets 0.29

Interest Cost 0.36

Total Cost of Producing 1 KWh of energy 2.62

Mark-up 0.68

Final Price 3.3


Cost Structure

Factory

Farms

Transmission

ConsumersSelling PriceRs. 3.3/KWh

Rs. 1.52/KWh

Rs. 0.49/KWh

Total CostRs. 2.62/KWh

MarkupRs 0.68/KWh

+ CER Rs

0.60/KWh

Others

Rs. 0.14/KWh

Rs. 0.47/KWh

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Income Statement

Back

Income

Rs per unit

Tariff 3.3

Carbon Credits 0.6

Total Income 3.9

Costs

Variable Costs

Raw Material Cost 1.25

Collection Costs (3%) 0.1

Transaction costs for CC 0.03

Total variable Cost per KwH 1.38

Fixed Costs


Labour for Plant running 0.2

Depreciation of assets 0.29

Lease rental for Plantation land 0.27

Fixed T&D 0.05

Total fixed costs per KwH 0.88

Costs per Kwh Supplied 2.26

PBIT 1.64

PBDIT(Adding back depreciation) 1.93

Less: Interest

Long term Loan 0.36

PBT 1.28

PAT(in millions for whole plant) 6.59272


Cash Flow Statement

Back

Year 0 1 to 5 5 to 10 11 12 to 15 16 to 30

Outflows(in Rs Million)(per plant)

Land Cost Factory and Storage 0.20

Land Lease 1.68 1.68 1.68 1.68 1.68 1.68

Land initial development cost (accumulative) 1.50

P & M 30.00

Technology 1.00

Contingencies 1.00

T&D Network Setup 15.00

O&M Cost 0.40 0.40 0.40 0.40 0.40

Overhauling Costs 6.00

Collection Costs 0.56 0.56 0.56 0.56 0.56

Interest Costs 2.01 2.01 2.01 2.01 2.01

Labor (Plant) 1.12 1.12 1.12 1.12 1.12

Expense on raw material* 7.00 7.00 7.00 7.00 7.00

Fixed T&D Cost 0.30 0.30 0.30 0.30 0.30

Transaction Costs for carbon credits 0.17 0.17 0.17 0.17 0.17

Total Outflows 50.38 13.24 13.24 19.24 13.24 13.24

Inflows

Grant 16.00

Tariff Revenue 18.48 18.48 18.48 18.48 18.48

Carbon Credit Sale 3.38 3.38 3.38 3.38 3.38

Total Inflows 16.00 21.86 21.86 21.86 21.86 21.86

Net cash Flows -34.38 8.62 8.62 2.62 8.62 8.62


T&D Setup Costs: Each village has approx. 160-180 households

A 25 kVA transformer can cater to 60-70 households (at normal load)

Thus a typical 6-7 village cluster would require 18 such transformers

Each transformer costs around Rs.8 lakhs

Thus total costs around Rs.1.5 crores

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NPV Calculation

Back

Rs Millions Year 0 Year 1 – 5 Year 5 – 10 Year 11 Year 12 – 15 Year 16 - 30 PBIDT(1-T) 9.90 9.90 7.56 7.56 7.56Plus

Dep. Tax Shield 0.137 0.137 0.722 0.722 0.722Government grant 16Less Capital Expenditure 50.38 6

Change in Working Capital Free Cash Flow -34.38 10.03379 10.03379 2.28620 8.28620 8.28620NPV @ WACC Rs 32 million ( $ 0.8 Million per plant)


Gram Urjaa Samiti

Would comprise of heads of Gram Panchayats, officials from administrative bodies and representative from local NGO’s

Functions:

• Ensure that there is steady flow of the biomass from fields

• Steady collection of revenues, without any default

• Prevention of electricity developments

• Mode of communication between PRIME and the villagers


The Cooperative Model

PRIME

POWER PLANT

GOVERNMENT

GRAM URJA SAMITI

Grants and Exemptions

Subsidies/Financing

Continuous Power

Assured Payments Back


Government /Policies

Regulations (Electricity Act Provisions)

FREE LICENSE: Will come under Universal Service Obligation

Person exempted under eighth provision to Section 14 from licensing would be free from the licensing obligations and purview of the Appropriate Commissions in matters pertaining to determination of tariffs and universal supply obligations applicable to licensees.

TARIFF SETTING: Based on Mutual Agreement The retail tariffs for electricity supply by persons exempt under eighth

provison to Section 14 would be set, based on mutual agreement between such person and the consumers.


Government /Policies

Remote Village Electrification Program

Central Financial Assistance (CFA) upto 90% of the cost of the projects is provided as grant for electrification of remote unelectrified census villages and remote hamlets of electrified census villages under this Programme, with specific benchmarks as applicable in respect of the technologies adopted for electrification.

The balance 10% cost of projects could be financed through sources such as Pradhan Mantri Gramodaya Yojana (PMGY), Minimum Needs Programme (MNP), Rural Infrastructure Development Fund (RIDF), Ministry of Tribal Affairs (MoTA), Member of Parliament Local Area Development Fund (MPLAD) / Member of Legislative Assembly Local Area Development Fund (MLALAD) and the corporate sector. The implementing agencies are free to raise funds from these and other sources, such as Rural Electrification Corporation (REC), Power Finance Corporation (PFC), etc., including users, to meet their share of the cost of project.

Rajiv Gandhi Gramin Vidyutikaran Yojna RGGVY provides for 90% capital subsidy for creating/ augmenting a basic rural

electrification backbone and village electrification infrastructure

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Pilot- PRIME 1

0%

5%

10%

15%

20%

25%

AndhraPradesh

Gujarat MadhyaPradesh

Bihar Maharashtra

0%

5%

10%

15%

20%

AndhraPradesh


Bihar Maharashtra

Selection Criteria

Electricity Deficit- higher the deficit, more apt is the location

Proportion of VillagesUn-Electrified- higher the proportion, better is the location

Amount of Wastelands- higher the better

Considering the three criteria, Madhya Pradesh best fits the bill initial plants

0%

20%

40%

60%

80%

100%

AndhraPradesh


Bihar Maharashtra


Pilot – PRIME 1

Where?

How?

Why?

From Casuarina equisetifolia using Gasification Technology

Khandwa District

Biomass Plant


Location: Khandwa

Raisen 1349 94.4 80 5.60

Vidisha 1471 96.65 51 3.35

Sehore 1008 99.7 3 0.30

Hosangabad 873 94.58 50 5.42

Harda 444 89.34 53 10.66

Betol 1314 98.95 14 1.05Sub Total 6459 251 3.74

Morena 753 99.08 7 0.92

Shoepupr 476 89.31 57 10.69

Shivpuri 1298 97.89 28 2.11

Guna 2028 98.49 31 1.51Sub Total 4555 123 2.63

Khandwa 826 87.04 123 12.96

J abalpur 1335 97.23 38 2.77

katni 839 94.91 45 5.09

Mandla 946 95.08 49 4.92

Dindori 1035 93.16 76 6.84

Seoni 1539 97.1 46 2.90Sub Total 5694 254 4.27

Sagar 1776 95.07 92 4.93

Chhatarpur 1062 98.7 14 1.30

Damoh 1108 91.95 97 8.05

Panna 921 98.08 18 1.92Sub Total 4867 221 4.34

Rewa 2148 91.33 204 8.67

Satna 1655 92.77 129 7.23

Sidhi 1803 98.96 19 1.04

Shahdol 1298 93.52 90 6.48

Umariya @ 554 94.06 35 5.94Sub Total 7458 477 6.01G.Total 33900 97.3 1547 3.70

Rewa Region

Percent villages

unelectrified

I ndore Region

J abalpur Region

Sagar Region

Bhopal Region

Gwalior Region

District

Number of

villages

Percent villages

electrified

Number of villages

unelectrifi

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Process FlowCasaurina stems

Collection &Preparation

Cutting

Drying

Introductioninto Gasifier

Pyrolysis

C + ½ O2 = CO

Combustion

C + H2O = CO + H2CO + H2O = CO2 + H2

Electricity

Char Heat

Pressure

GasificationCooling &Cleaning

ProducerGas

InternalCombustion

Engine

Air

Heat

Steam

Water

CO + H2 + CH4

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Why BioFuels

High calorific value: 3000-4000 kCal

Minimal amount of carbon emission

Widely available throughout country

Various sources: Casaurina, Eucalyptus, Prosopis

B

I

O

M

A

S

S

Local availability of raw materials

Grows on waste/unused land

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Why CasuarinaRaw Material Tons / MW

Cost of Raw Material / Ton

Land reqd(hectares)

10000

10000

10000

Rs 700

Rs 700

Rs 700 1000

250

400

Lease CostRs/ KWh

4 X

X

1.6X

CASUARINA

PROSOPIS

SUBABUL

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Implementation flow


Wasteland details

Leasing & LandDevelopment

Gram UrjaSamiti

Un-electrified villages cluster

RegulatoryCompliance

State Electricity Regulatory

Commission

Min. of Rural Development

State Wasteland Development Dept

Ensuring regular

supply of Crops

Gram Panchayat, Admin Bodies

and NGOs

Min. of Non Conventional

Energy Resources

Provision of latest techniques

Cultivation ofCrops

Manpower TrainingCentral Location

Latest IISc technology

Power Plantand T&D setup

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Vision

“To integrate the vast rural populace into the mainstream by electrification, augmentation of their annual incomes and enhancement of

employment opportunities; leading to the holistic development of rural India”

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Director

Geo Technology

Management

Director

Technology

Director

Operations

Director

Liasoning

Director

Finance

Director

Public Relations

Director

East Zone

Director

Central Zone

Chairman

Dr. R L Sawhney Mr. M Gowda Dr. C M Adatia Mr. M Pattanayak

Mr. K Bhattacharyya Mr. R Balaji

Mr. S P Singh

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Jamui

Banka

Shoepur

Harda

1

2 3

4

Geographical Expansion

Target Market

1

Local Expansion

Harda

Shoepur

Banka

Jamui

More plants in Khandwa region

Maximising output of each plant

2

3

4

Future Expansion

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ImpactEMPLOYMENT

Direct employment at the factory and T&D centers

Driving out hidden employment by Casuarina farming . on wastelands and auxiliary jobs

Development of rural based small scale industries

COMMUNITY

Regular supply of electricity would lead to :

Improved quality of life

Provision of adequate health care facilities & clean . drinking water and improved education facilities

Improved connectivity with mainstream and increased . . access to information

ENVIRONMENT

Carbon Neutral source of energy, leading to reduction . . in pollution and conservation of fossil fuels

Powering Rural India by Micro Electrification PRIME Powering Rural India by Micro Electrification...

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