Removal of Barriers to Biomass Power Generation in India ... · Final Report Removal of Barriers to...

82
Final Report Removal of Barriers to Biomass Power Generation in India, Phase I (Project ID: 51271) Midterm Review Report By Marcial T. Ocampo International Consultant and Team Leader & S.C. Rajshekar National Consultant and Team Member Submitted to United Nations Development Programme, New Delhi July 8, 2011

Transcript of Removal of Barriers to Biomass Power Generation in India ... · Final Report Removal of Barriers to...

Final Report

Removal of Barriers to Biomass Power

Generation in India, Phase I

(Project ID: 51271)

Midterm Review Report

By

Marcial T. Ocampo International Consultant and Team Leader

&

S.C. Rajshekar National Consultant and Team Member

Submitted to

United Nations Development Programme, New Delhi

July 8, 2011

Final Report

2

Acronyms

AWP Annual Work Plan

APR Annual Project Review

BPP Biomass Power Plant

CDR Combined Delivery Report

CERC Central Electricity Regulatory Commission

Crore Ten (10) Million or One Hundred (100) Lakhs

DEA Department of Economic Affairs (Ministry of Finance, the UNDP political focal point)

ESCOM Energy Service Company (usually, the electricity distribution company at the state level)

FIs Financial Institutions

GDP Gross Domestic Product

GEF Global Environment Facility

GoI Government of India

IREDA Indian Renewable Energy Development Agency Ltd.

KfW German Investment Bank to promote German and European Companies

Lakh One Hundred Thousand (100,000)

LED Light Emitting Diode

MIP Model Investment Project

MITCON MITCON Consultancy Services Ltd.

MNES Ministry of Non-Conventional Energy Sources (old name of MNRE)

MNRE Ministry of New and Renewable Energy

MoEF Ministry of Environment & Forests

MOP Ministry of Power

MoU Memorandum of Understanding

MTR Mid-Term Review

MW Mega Watt

M&E Monitoring & Evaluation

NPC National Project Coordinator

NPD National Project Director

PEC Project Executive Committee

PIF Project Identification Form

PIR Project Implementation Review

PLF Plant Load Factor (capacity factor)

PMC Project Management Cell

PPM Project Planning Matrix

ProDoc Project Document

PSC Project Steering Committee

QPR Quarterly Progress Reports

Rs Indian Rupee (1 US$ = 48.00 Rs)

SEB State Electricity Board

SERC State Electricity Regulatory Commission

Final Report

3

SHG Self-help Group

SNAs State Nodal Agencies

TA Technical Assistance

Tonnes Metric Tons (1,000 kilograms or kg)

TPRs Annual Tripartite Review meetings

UNDP United Nations Development Programme

VFC Village Forest Committee

Final Report

4

Table of Contents

1.0 Introduction ............................................................................................................. 12

1.1 Brief description of the project ............................................................................ 12

1.2 Purpose of the Evaluation .................................................................................. 12

1.3 Key Issues Addressed ........................................................................................ 13

1.4 Methodology of the Mid-Term Review (MTR) .................................................... 13

1.5 Limitation of the MTR ......................................................................................... 14

2.0 Project & Its Development Context ........................................................................ 15

2.1 Project Start & Key Dates ................................................................................... 15

2.2 Problems that the Project Seeks to Address ..................................................... 16

2.3 Immediate and Development Objectives of the Project ..................................... 16

2.4 Main Stakeholders .............................................................................................. 17

2.5 Results Expected ................................................................................................ 17

3.0 Findings and Conclusions ...................................................................................... 19

3.1 Assessment of progress towards Development Objective ................................ 19

3.2 Assessment of Outcomes .................................................................................. 21

3.2.1 Outcome 1................................................................................................... 21

3.2.2 Outcome 2................................................................................................... 23

3.2.3 Outcome 3................................................................................................... 24

3.2.4 Outcome 4................................................................................................... 25

3.2.5 Outcome 5................................................................................................... 26

3.3 Project Formulation ............................................................................................ 29

3.3.1 Conceptualization / Design ......................................................................... 29

3.3.2 Country-ownership / Driveness .................................................................. 29

3.3.3 Stakeholder Participation ............................................................................ 29

3.3.4 Replication Approach .................................................................................. 30

Final Report

5

3.3.5 Other Aspects ............................................................................................. 30

3.4 Project Implementation ....................................................................................... 30

3.4.1 Implementation Approach ........................................................................... 30

3.4.2 Monitoring & Evaluation .............................................................................. 31

3.4.3 Stakeholder Participation ............................................................................ 31

3.4.4 Financial Planning ....................................................................................... 31

3.4.5 Sustainability ............................................................................................... 32

3.4.6 Execution and Implementation Modalities .................................................. 32

3.5 Results ................................................................................................................ 33

3.5.1 Attainment of Outcomes / Achievement of objectives ................................ 33

3.5.2 Effectiveness of Project Implementation, ................................................... 33

3.5.3 GHG Emissions Reductions ....................................................................... 33

3.5.4 Sustainability ............................................................................................... 33

3.6 Other issues raised in the ToR ........................................................................... 34

3.6.1 Expected End of Project Scenario .............................................................. 34

3.6.2 Project Completion & Timeline ................................................................... 35

3.6.3 Constraints to Project Implementation for Envisaged Technology Models 35

3.6.4 Small-Scale Biomass Power Plants ........................................................... 38

3.7 Conclusions ........................................................................................................ 39

4.0 Recommendations ................................................................................................. 40

5.0 Lessons Learned .................................................................................................... 44

6.0 Annex A – List of Documents Reviewed ................................................................ 46

7.0 Annex B- List of Persons Interviewed .................................................................... 47

8.0 Annex C – List of Studies Completed and On-Going ............................................ 48

9.0 Annex D – Assessment of Progress ...................................................................... 50

10.0 Annex E - Project Planning Matrix ......................................................................... 57

Final Report

6

11.0 Annex F – Phase I Year-wise Progress ................................................................. 60

12.0 Annex G – Estimate of GHG Emission Reduction Potential at SPSSKL .............. 66

13.0 Annex H – Estimate of GHG Emission Reduction at Malwa Power Plant ............. 68

14.0 Annex I - Terms of Reference ................................................................................ 69

Final Report

7

List of Tables

Table 1-1: Chart for rating the project ............................................................................... 14

Table 2-1: Project chronology ............................................................................................ 15

Table 2-2: Results expected from the project.................................................................... 17

Table 3-1: Project budget vs. Project expenditure ............................................................ 20

Table 3-2: Financial delivery - Outcome 1 ......................................................................... 22

Table 3-3: Financial delivery - Outcome 2 ......................................................................... 24

Table 3-4: Financial delivery - Outcome 3 ......................................................................... 25

Table 3-5: Financial delivery - Outcome 4 ......................................................................... 26

Table 3-6: Status of MIPs .................................................................................................. 27

Table 3-7: Financial delivery - Outcome 5 ......................................................................... 28

Table 3-8:Budget Utilization of UNDP-GEF Funds ........................................................... 31

Table 3-9:Budget Utilization of Government of India (GoI) Funds .................................... 32

List of Figures

Figure 3-1 : Impact of withdrawal of KfW ............................................................................... 26

Figure 3-2: Need for trend data on biomass supply & price .............................................. 37

Figure 4-1: Tree-based farming for biomass fuel supply................................................... 42

Final Report

8

Executive Summary

Background

The project titled “Removal of Barriers to Biomass Power Generation in India, Phase I” is being implemented by the MNRE with co-funding support from UNDP-GEF. This project aims to accelerate the adoption of environmentally sustainable biomass power and cogeneration technologies in India.

It seeks to promote combustion, gasification and cogeneration technologies for electricity generation using different types of captive and distributed biomass resources. The project is designed to focus on biomass power projects to be undertaken in three sources: (1) cooperative sugar mills; (2) agro-processors and biomass producers; and (3) distributed and decentralized biomass resources.

The project utilizes technical assistance to remove the remaining technical, regulatory and institutional barriers to widespread use of biomass power. It also seeks to utilize investment risk mitigation support to promote repeated investments in biomass power generation projects.

The project has a total budget of US$10.89 million with GOI contributing US$5.42 million and the rest coming from UNDP-GEF. This 3-year project, which began operation in 2007-08, has been extended up to March, 2012 so as to enable it to complete the project activities.

A midterm evaluation was carried out by a team comprising Marcial T. Ocampo (International Consultant and Team Leader) and SC Rajshekar (National Consultant and team member) during April 4-8, 2011. The evaluation covered physical and financial aspects of the project. The MTR team reviewed project documents, outputs and had interviews with key project staff as well as other stakeholders.

Key findings

The project has been rated as Marginally Unsatisfactory to Marginally Satisfactory on various counts. The project is expected to achieve its major global environmental objectives (GHG emission reduction shown in Annex G and H) with major shortcomings. Further, the project is expected to achieve most of its major relevant objectives (technology benchmarking, enhanced capacity, development of support services, and creation of contingent funding) but with either significant shortcomings (limited model investment projects) or modest overall relevance, hence the overall project rating of “MU” to “MS”.

Overall, the project is yet to reach its objective of accelerating adoption of environmentally sustainable biomass power technologies. Moreover, the key issue of lack of reliable supply of biomass fuel and stable biomass prices is still plaguing the sector.

Financial delivery of the project is very low. Only 29.45% of the total budget of the project has been spent so far. The spending on the UNDP-GEF account is less than half as compared to the budget at mid-term. Only 2.03% of the GoI budget has been spent so far.

Final Report

9

However, it is only fair to mention that the project suffered due to late start of project activities (due to factors beyond the control of the Project Management Cell) and an unrealistic project timeframe for implementing a project such as this.

Conclusions

The MTR team finds that the project is relevant to the development of biomass power sector in the country and is appropriately designed. However, in terms of implementation, progress is slow and delayed. There is a significant risk of the project not completing the designed activities within the extended project deadline of March 2012.

A major cause for this is the unrealistic timeline of 3 years designed for a project with significant knowledge generation and field implementation activities. Further, late start of the project activities has also contributed to delay in implementation.

Usually, in projects involving government departments, there is a time lag of 8-10 months in beginning project activities from the date the project document is signed. This is so because, the concerned ministry has administrative procedures to follow in identifying and designating project staff even if it is from within its existing staff. Since, this time lag is not taken into account at the time of designing the project, most projects start with a “delay” which only gets magnified by the time it reaches a midterm stage.

The MTR team finds that the project has generated a wealth of knowledge and information on issues relevant to promotion of the biomass power sector. However, dissemination and use of the knowledge needs to be done better.

Recommendations

Project specific

Project Implementation & Monitoring

• There is an urgent need to reassess the work to be completed and draw up a realistic timeline. It would be meaningless to wind up the project by March 2012 since none of the MIPs would have been implemented, which means the project would not have gained any knowledge from supporting the MIPs.

• Based on an optimistic estimate of the time needed to complete the project activities and learn meaningful lessons, the project deadline may need to be extended at least up to March 2014. However, more conservatively, taking into account the complex issues involved in implementing small-scale power projects connected at 11 kV to the grid, we would estimate that the project would need at least till March 2016 to achieve meaningful results.

• Annual work plans, APR/PIR, financial reports etc., must be brought in alignment with the LFA for proper monitoring, documentation and reporting of project progress.

• The proposal of the NPD to use the good offices of MNRE to help identified MIPs receive their mandatory clearances is welcome and should be followed up by strictly monitored action.

• The PSC may meet more frequently to take stock of the progress (especially with reference to MIPs) and provide guidance and facilitate inter-ministerial and central-state government cooperation to speed up implementation of MIPs.

Final Report

10

Dissemination of Knowledge & Capacity Building

• The project needs to step up its activities in dissemination of knowledge and capacity building of stakeholders. As a first step, copies of the reports of the various studies carried out under this project should be made available on the MNRE and UNDP websites.

• Alternatively, a website may be set up for the project (which may later be used as the website for the proposed “Biomass Mission”), where these reports could be made available

• Copies of the reports may also be put up on the websites of SNAs, IREDA. They may also be made available to potential investors, technology suppliers, etc.

• As the PMC waits for the MIPs to be come on stream, they can organize a series of workshops to discuss the findings of these reports, identify areas for further research/action and prepare appropriate strategies.

• The 6 issues of Bio-Energy published by the MNRE are of good quality in terms of production and content. The MNRE may like to consider putting the magazines on the web itself or produce a web version and allow open access instead of the subscription basis now being implemented for the hard copy version.

Gearing up for implementation of MIPs

• The PMC needs to beef up its staffing to gear up for monitoring the implementation of MIPs. They need to find staff with technical and monitoring skills to monitor and report on progress from the field. Alternatively and/or additionally, they may engage the services of reputed organizations to carry out this task.

• Simultaneously, they need to start putting in place a mechanism to glean lessons from the implementation of the MIPs. Merely collecting physical and financial progress and reporting on them would provide no insights into the lessons that the MIPs would offer. For example, monitoring staff of MNRE may collect operational data. Regular, site visits and meetings may be conducted to not only oversee implementation and operations subsequently, but also to document progress and lessons learnt. Case studies may be commissioned to document and highlight achievements.

• The PMC also needs to be geared up to process information from the field and clear sanctions and release funds quickly to enable faster implementation of the projects. For example, it may include having staff to collect data required to “put up a file” for clearance from their finance, etc. The idea is lack of manpower and lack of ability to process requests for funds release should not become a reason for delay.

Biomass Tariff & Fossil Fuel Price

• Variable component for the tariff for biomass power is now linked to price of coal. However, increasingly, biomass power producers are competing with users who are switching from diesel to biomass. Thus, the price of coal is no more the only relevant factor for biomass pricing.

• Further, with just 3-4kg of biomass needed to replace a litre of diesel, the price that current users of diesel (who plan to switch to biomass fuel) can pay to

Final Report

11

procure biomass is very high as compared to the price that biomass power producers can pay under the current tariff regimes.

• The project may work out a suitable modification to the Fuel Price Indexation Mechanism formula that is being used by the CERC to determine price of biomass in relation to that of coal to ensure that the comparison also includes the cost of diesel.

• The project should also evolve a mechanism to determine biomass price for an area through a third party assessment of biomass pricing in the area. It may develop a methodology to assess annually price of biomass in around existing biomass power plants. SNAs may be supported to hire reputed consultants to carry out the assessment based on this methodology and report the price of biomass. These reports may be periodically verified by organizations such as TUV, BVQi, etc. for its veracity. This data then can become a basis for determining the variable cost of power from biomass power plants. Over a period of time this data would be very valuable to build a model for predicting price of biomass as a fuel.

• A mechanism should be put in place to ensure that the Biomass atlas that is referred to by many investors, analysts and decision makers should be updated regularly with information on production, consumption and availability of surplus biomass. In addition, it should also provide information on existing biomass power plants and availability of water for setting up biomass power plants.

• MNRE should put in place a mechanism to educate SNAs on the need to provide enough hinterland to each biomass power plant while issuing licenses. Apart from providing guidance to SNA, MNRE should also create awareness among investors and FIs on the use of biomass atlas as a preliminary decision making tool in deciding if a particular site is worth buying a license for.

Final Report

12

1.0 Introduction 1.1 Brief description of the project

The UNDP-GEF supported project titled,” Removal of Barriers to Biomass Power Generation in India, Phase I” being implemented by the MNRE is about removal of barriers to the increased use of biomass energy sources for generating electricity for own consumption and export to the grid. This project aims to accelerate the adoption of environmentally sustainable biomass power and cogeneration technologies in India.

It seeks to promote combustion, gasification and cogeneration technologies for electricity generation using different types of captive and distributed biomass resources. The project is designed to focus on biomass power projects to be undertaken in three sources: (1) cooperative sugar mills; (2) agro-processors and biomass producers; and (3) distributed and decentralized biomass resources.

The project utilizes technical assistance to remove the remaining technical, regulatory and institutional barriers to widespread use of biomass power. It also seeks to utilize investment risk mitigation support to promote repeated investments in biomass power generation projects.

Broadly, the project activities are of 4 kinds:

• Knowledge generation (through commissioned studies) with respect to status of biomass power sector, its problems, potential solutions, etc.

• Designing, implementing and commissioning Model Investment Projects to demonstrate good practices and learn lessons from it

• Disseminating such knowledge gained and mainstreaming the good practices to accelerate development of biomass power sector

• Creating mechanisms to replicate the good practices in the biomass power sector.

1.2 Purpose of the Evaluation

This Mid-Term Review (MTR) Report is part of the monitoring and evaluation requirement in the implementation of the UNDP-GEF project “Removal of Barriers to Biomass Power Generation in India, Phase I”. This project which began actual operations in 2007-08 has now reached a mid-term stage in terms of physical and financial delivery and therefore, a mid-term evaluation is being conducted now. The Terms of Reference (ToR) may be referred to in Annex I.

The purpose of the mid-term evaluation is to assess the relevance, performance and success of the project. It also seeks to help the Project management take stock of progress and re-strategize to achieve the goals given the resources and time left in the project. It also seeks to identify/document lessons learned and provide recommendations that might improve design and implementation of UNDP-GEF projects.

Final Report

13

1.3 Key Issues Addressed

This MTR reviews the progress of the “Removal of Barriers to Biomass Power Generation in India, Phase I” as against its stated project activities, outputs and outcomes, and to evaluate their adequacy and relevance, thereby providing advice and opportunity for the project management team to complete any pending tasks and to address any essential issues before the finalization of the project at planned closing date (originally 21 September 2009 and extended to 31 March 2012).

This MTR report inter alia addresses the following key issues:

• What is the physical and financial progress of the project with reference to the objective, outcome and outputs planned?

• What is the expected end-of-project situation by March 2012, the extended deadline for completing the project?

• What is the realistic timeline required to complete the activities remaining in the project?

• What is the performance of the project with reference to design, implementation and management?

In addition, it also covers issues related to GHG mitigation and certain other specific issues covered in the Section III of the ToR.

1.4 Methodology of the Mid-Term Review (MTR)

A Midterm Review Team comprising Mr. Marcial T. Ocampo (International Consultant and Team Head) and Mr. S. C. Rajshekar (National Consultant and Team Member) was formed by the UNDP. They conducted the MTR from April 4 – 8, 2011. Largely the methodology consisted of:

• Review of key documents such as Project Document (ProDoc), Annual Work Plans, Project Implementation Review, financial reports and other reports which formed the output of this project (Annex A and Annex C)

• Interviews with key project personnel from UNDP and MNRE (Annex B)

• Field visits and interviews with biomass power producers (Annex B)

The MTR covered the project and its components as well as the co-financed components. It assessed the Phase I project implementation taking into account the status of the project activities and outputs and the resource disbursements made up to June 30, 20101. The latest Quarterly Progress Report cum PO’s Report as of 4th Quarter 2010 (Oct – Dec 2010) was also accessed by the MTR Team as a part of this review.

The MTR team followed the rating chart as per GEF guidelines in rating the progress and performance of this project. The details of the rating system are given in the table below:

1 This the date of the last Annual Project Report and Project Implementation Report made available to the MTR Team.

Final Report

14

Table 1-1: Chart for rating the project

Highly Satisfactory (HS)

Project is expected to achieve or exceed all its major global environmental objectives, and yield substantial global environmental benefits, without major shortcomings. The project can be presented as “good practice”.

Satisfactory (S)

Project is expected to achieve most of its major global environmental objectives, and yield satisfactory global environmental benefits, with only minor shortcomings.

Marginally Satisfactory (MS)

Project is expected to achieve most of its major relevant objectives but with either significant shortcomings or modest overall relevance. Project is expected not to achieve some of its major global environmental objectives or yield some of the expected global environment benefits.

Marginally Unsatisfactory (MU)

Project is expected to achieve its major global environmental objectives with major shortcomings or is expected to achieve only some of its major global environmental objectives.

Unsatisfactory (U)

Project is expected not to achieve most of its major global environment objectives or to yield any satisfactory global environmental benefits.

Highly Unsatisfactory (HU)

The project has failed to achieve, and is not expected to achieve, any of its major global environment objectives with no worthwhile benefits.

1.5 Limitation of the MTR

The efforts of the MTR team were seriously hampered by the lack of proper project documentation especially with reference to:

• Reporting of physical progress against appropriate activities, outputs and outcomes as detailed in the ProDoc.

• Inconsistency in use of terms such as outcome and output, which have been used interchangeably in the APR/PIR

• Use of outputs and outcomes in the APR/PIR that are not mentioned in the ProDoc at all

• Lack of activity-wise financial data

Thus, the MTR team took quite a while to understand the project and reconcile it to the LFA/Project Planning Matrix as mentioned in the ProDoc against which they were required to evaluate the progress. The MTR team has made every effort to understand the project and present a fair and a well considered assessment of the project. Any gross misrepresentation of the project is entirely on account of the problems with documentation and data mentioned above, control and access of which was beyond the scope and capacity of the MTR team.

Final Report

15

2.0 Project & Its Development Context 2.1 Project Start & Key Dates

The project document and milestones of the project are shown below.

Table 2-1: Project chronology

Project milestones Date

Pipeline entry or PIF approval 15-Oct-02

GEF CEO endorsement/approval date 13-Jan-05

Project Document Signature date 22-Sep-06

Date of First Disbursement 03-Jul-07

Original Planned Closing Date 21-Sep-09

Revised Planned Closing Date 31-Mar-12

The project identification form (PIF) was approved on 15 October 2002 and endorsed to the GEF CEO by 13 January 2005. By 22 September 2006, the Project Document (ProDoc) was signed and the project started with its first disbursement on 3 July 2007.

It can be observed that the project took 5 years from the time the PIF was approved to actually start implementation of the project (date of first disbursement). During this period, the world has seen a near global economic melt-down followed by global economic reforms. In India, this period has been marked by economic boom and major reforms in the power generation and distribution sector as well as petroleum and the renewable energy sectors.

In fact, just around the time (2008) this project started, the Central Electricity Regulatory Authority (CERC) started on a suo moto basis to determine the tariff for all renewable energy sources and provide guidelines to all SERCs (State Electricity Regulatory Authority) in the country. Many SERC (notably Punjab, Haryana, Rajasthan, Tamil Nadu and Maharashtra) revised tariff for purchase of power from biomass power plants significantly.

Simultaneously, fuelled by the phenomenal economic growth that India has seen in the last decade, the demand supply gap for electricity, especially in urban India has been growing. The result has been curtailed supply to rural areas in favor of supply to urban areas. Faced with growing electricity deficits, many ESCOMs (Energy Service Companies) are now more willing to buy power from any source, even renewable energy sources.

Thus, by the time this project got underway, a significant step had already been initiated by the CERC in revising tariffs and the power deficit had been increasing the demand for power supply from any source. These two events have, in fact, been driving the growth of the biomass power sector in the country since 2008. While some significant barriers such as policy and regulatory have been largely addressed, this project remained relevant since there are other barriers that need to be addressed. For example, technological issues related to cofiring of multiple biomass fuels in boilers, grid linking at 11kV for small-scale generators, issues related to gas cleaning train in biomass gasifiers, policy framework to enable small-scale generators to compete on a level playing ground with subsidized grid electricity, etc.

Final Report

16

2.2 Problems that the Project Seeks to Address

In general, the deployment of biomass power generation technologies has been slow when compared to the availability and collection of biomass. Implementing biomass projects face varying difficulties according to whether the biomass resource comes from a captive source (sugar central, rice mill, oil mill, etc.) as opposed to a distributed source (cotton stalks, mustard or rape seed stalks, etc.)

The common barriers identified during the project preparation phase were:

• Insufficient capacity of stakeholders and inadequate institutional and policy framework at the national, regional and local levels;

• Lack of institutional and regulatory framework in the distribution and sale of electricity from biomass power projects;

• Absence of commercial and service networks [e.g. biomass depots for collection, transportation and delivery of biomass fuels to power plants];

• Limited access to financing and lack of interest on the part of the State Electricity Boards (SEBs) in promoting biomass power generation [biomass power capacity too small a concern compared to coal]; and

• Absence of effective information dissemination related to the availability of biomass and suitable technologies for its utilization.

2.3 Immediate and Development Objectives of the Project

The global development objective of the project is to improve the electricity supply using renewable energy sources without increasing GHG emissions.

The immediate objective of the project is to accelerate the adoption of environmentally sustainable biomass power technologies by removing barriers identified, thereby laying the foundation for the large-scale commercialization of biomass power through increased access to financing.

Thus, clearly, the emphasis is on removing barriers to the large-scale commercialization of biomass power. However, the process of doing so should not lead to increase in GHG emissions. Thus, the supply of biomass must be from renewable and sustainable sources.

Needless to say, electricity is an enabling factor, if not one of the key drivers of development of an area and a community. This project seeks to mainstream environmental benefits into development goals by improving the supply of sustainable energy.

It aims to address the key barriers through provision of Technical Assistance (TA) and implementation of model investment projects (MIPs) for accelerated adoption of environmentally sustainable biomass power technologies.

The TA is geared towards three components to remove technology barriers; information, policy and regulatory barriers; and institutional barriers to biomass power deployment. The MIP component is intended to provide support to mitigate risks and stimulate enough

Final Report

17

replications of biomass power projects so that their future implementation is simplified because of the experiences gained.

2.4 Main Stakeholders

The main stakeholders apart from the Ministry of New and Renewable Energy (MNRE), which is the implementation partner, are:

• Biomass power producers • Potential investors • Financial institutions including IREDA • Technical consulting and research institutions • State Nodal Agencies (SNAs) • Industry associations

The project commenced after the constitution of Project Steering Committee (PSC), appointment of the National Project Director (NPD) and establishment of Project Management Cell (PMC). The PMC is expected to ensure adequate project management structure and systems for facilitating implementation of MIPs and activities under TA component. The MNRE is responsible for the execution and implementation of the project through the PMC.

The PSC is chaired by the Secretary, MNRE, and has representatives from the Ministry of Power, Rural Development, State Nodal Agencies (SNAs), Department of Economic Affairs (DEA), Ministry of Environment & Forests (MoEF), and other line ministries. The NPD is the Member-Secretary of the PSC. The PSC is responsible to provide necessary guidance and oversight of the project implementation and may invite members and experts for specific meetings as needed. It is expected to meet once at least every six (6) months to review the progress of the project.

The Project Executive Committee (PEC) is expected to provide expert advisory inputs to the NPD and PMC. It acts as a platform for interaction with project developers, promoters and stakeholders. The NPD is the Chairman of the PEC, which also has representatives from UNDP, Industry Associations and Financial Institutions.

2.5 Results Expected

The project’s logical frame work (Log Frame) clearly indicates the expected results or target at the end of this three year project. The same is summarized here below:

Table 2-2: Results expected from the project

Strategy Details Target Level at end of project

Objective To accelerate the adoption of environmentally sustainable biomass power technologies for captive and distributed biomass materials in niche areas, through demonstration of project development models and establishment of sustainable business/support services network and undertaking enabling activities for removal of the key barriers.

By the end of Phase 1, 7 MIP’s contracted covering co generation (1 x 16.73 MW), gasification (5 x 1 MW) and combustion (1 x 5 MW) technologies in 3-5 different states in India.

Final Report

18

Outcome 1 Technology package benchmarking and validation for different biomass power technologies, including feasibility of energy plantation.

By the end of phase 1, the parameters and technical standards for the efficient biomass power technologies targeted by the project have been finalized.

Outcome 2 Enhanced capacities and confidence of project promoters, financial institutions, regulators, policy makers, SNAs, other stakeholders through effective information development & dissemination program, along with capacity building initiatives.

By the end of phase 1, pilot portfolio of project profiles developed, model formats/agreements established for the targeted biomass technologies (on fuel supply, energy purchase, project development and management) and promotional material and awareness raised significantly in pilot states.

Outcome 3 Development of business, commercial and support services networks in focused States.

By the end of phase 1, the appropriate biomass power business models have been widely disseminated and established in the initial pilot states.

Outcome 4 Creation of fund for contingent financing. By the end of phase 1, 7 MIP’s successfully facilitated by the contingent financing facilities made available through the selected financial institutions, together with the full design of a non financial institutions specific guarantee mechanism.

Outcome 5 Model Investment Projects (MIPs). By the end of phase 1, 7 model investment projects will have been successfully commissioned and have started initial implementation in 3-5 states demonstrating the 3 different biomass power technologies targeted.

In the end, it is hoped that with the removal of technical, institutional, regulatory, commercial, economic and financial barriers, or through the adoption of risk reduction mechanisms developed as a result of this project, there will be widespread use of biomass resources for sustainable power generation in India for both central on-grid and distributed off-grid power generation and distribution.

Of course, the end result is sustainable development of the country in order to narrow the income and poverty gap between the rich urban dwellers and the rural communities by equalizing opportunities.

Final Report

19

3.0 Findings and Conclusions

The MTR team rates2 the progress towards achievement of results for the Phase I project as between “Marginally Unsatisfactory (MU)” to “Marginally Satisfactory (MS)”.

The project is expected to achieve its major global environmental objectives (GHG emission reduction shown in Annex G and H) with major shortcomings. Further, the project is expected to achieve most of its major relevant objectives (technology benchmarking enhanced capacity, development of support services, and creation of contingent funding) but with either significant shortcomings (limited model investment projects) or modest overall relevance, hence the overall project rating of “MU” to “MS”.

Assessment of each objective and outcome is presented by stating the objective /outcome, target at end of project, physical and financial achievements as of date3, assessment of its contribution to the objective/outcome and finally a rating of the progress. The detailed assessment is presented in the sections that follow.

3.1 Assessment of progress towards Development Objective

Objective/Outcome Details Assessment of Achievements

Objective To accelerate the adoption of environmentally sustainable biomass power technologies for captive and distributed biomass materials in niche areas, through demonstration of project development models and establishment of sustainable business/support services network and undertaking enabling activities for removal of the key barriers.

• As of now, a set of studies (Annex D) that delineate issues concerning development of biomass power sector and suggest solutions are completed.

• Model projects are yet to be sanctioned, leave alone implemented and commissioned.

The objective may be broken into three parts as follows:

• To accelerate the adoption of environmentally sustainable biomass power technologies for captive and distributed biomass materials in niche areas

o As of now, there is no evidence that this is happening. The two power plants (Universal & Malwa Power) that we visited mentioned that they were under financial and biomass supply stress.

o The Managing Director of IREDA mentioned that they were not very keen on increasing their exposure to biomass projects, in view of the high risk on biomass availability and price.

2 For details of rating chart see Section 1.4

3 Progress is largely as of June 30, 2010 up to which date APR/PIRs exist. In some cases based on communication from the NPC, progress made at even later dates has been taken into account. This was done to ensure that the MTR captures the latest in terms of physical achievements.

Final Report

20

o However, independently of the project, mainly driven by revised tariffs being offered after the CERC order of 2009 and due to the increased demand for power due to high peaking and average deficits in most states of the country, there is a renewed interest in biomass power projects.

o Further, with some states now allowing Third Party Sale through Open Access, biomass power producers are able to realize a higher price and profitability. Hence the increased interest in biomass power in the country.

• Through demonstration of project development models and establishment of sustainable business/support services network

o Model projects are yet to be sanctioned

o Two fuel-linkage models have been implemented in Malwa Power and Pandurang SSK. However, there is no evidence that this is being taken up by all biomass power plants. Further, unless this is made a mandatory part of DPR, project appraisal by lending institutions and included as a part of project cost, such linkage may or may not occur.

o So far this has been the most important and visible contribution of this project towards promoting biomass power projects.

• Undertaking enabling activities for removal of the key barriers

o A number of studies have been conducted so far on various issues; however, their wide-spread dissemination is limited to a few workshops

o A major step however, is the proposed Biomass Mission from the MNRE (as mentioned by Mr.Shashi Shekhar, Joint Secretary, MNRE). However, the scope and the form of the mission are not known as of now.

Financially the progress of the project has been rather tardy and understandably so since a bulk of the MNRE funds and substantial portion of UNDP-GEF funds was for supporting MIPs, an activity that is yet to be completed. The table below shows the status of financial delivery as of December 31, 2010:

As of December 31, 2010, the total project expenditure has been a mere 16.25% of the total budget of US$10.89 million. The following table presents the budget vs. spending for the project as a whole (also see Tables 3.7 & 3.8):

Table 3-1: Project budget vs. Project expenditure

UNDP-GEF Budget 5,650,000

Expenditure 1,663,737

% to Total 29.45%

GoI Budget 5,240,000

Expenditure 106,413

% to Total 2.03%

Total (UNDP-GEF & GoI Budget 10,890,000

Expenditure 1,770,150

% to Total 16.25%

All figures in US$

The low delivery rate (large balance) for GoI funds is due to low packaging and approval of MIPs (only 2 out of the 7 planned MIPs).

Final Report

21

Assessment of Progress & Rating:

The project has generated a wealth of information and knowledge about biomass power technologies, biomass fuel supply, related policy and regulatory issues. On this count the project achievements are “Highly Satisfactory (HS)”. However, on organization, dissemination and use of this knowledge, the performance is “Marginally Unsatisfactory (MU)” or less than satisfactory. On the issue of demonstration of MIPs work is in progress but substantial work is yet to be done. Performance on this count is “Marginally Satisfactory (MS)”.

Overall, the project is yet to reach its objective of accelerating adoption of environmentally sustainable biomass power technologies. Moreover, the key issue of lack of reliable supply of biomass fuel and stable biomass prices is still plaguing the sector.

Despite the efforts of this project in supporting fuel-linkage projects, competition from organized and unorganized industries such as cement and brick industries has increased prices by as much as 200% in Punjab (Malwa Power). While collection through fuel-linkage has been made more systematic, trading of biomass is still not organized or regulated. Further, no work has been initiated on energy plantations.

Finally, we feel that stripping agricultural lands4 of every bit of biomass is not sustainable. Soils in India are already very deficient in organic carbon, a vital input to ensure uptake of other nutrient, especially nitrogen. Recycling crop residue is the key mechanism to restore organic carbon and thereby fertility. Thus, there is a need to reconsider sustainability of such fuel linkage strategies.

3.2 Assessment of Outcomes

The MTR team’s assessment of outcomes has been presented here. The detailed output and activity-wise assessment is presented in Annex D.

3.2.1 Outcome 1

Objective/Outcome Details Target by End of Project Assessment of Achievements

Outcome 1 Technology package benchmarking and validation for different biomass power technologies, including feasibility of energy plantation.

Parameters and technical standards for the efficient biomass power technologies targeted by the project have been finalized.

• A set of studies have been completed that raise and discuss specific issues related to use of biomass in boilers of different types (studies done by both DSCL and Deloitte). Also the study by E&Y on rice husk and Winrock on sugar cane based cogeneration. (Annex D)

• For biomass gasification

4 Both Universal Power and Malwa Power, which the MTR Team visited mentioned that they were now procuring all kinds of biomass including fallen leaves and cow dung. This is a dangerous and unsustainable trend.

Final Report

22

technology empanelment process has been revamped and notified. Independent Central and Regional Testing Centres have been proposed for verification and empanelment of suppliers and designs of their gasifiers.

• Standards materials and performance for various components and processes of gasification have been notified.

• All suppliers seeking to avail MNRE subsidy have to abide by these standards and testing procedures.

Outcome 1 has two parts:

• Technology for biomass power generation

o Description of work completed so far has been given in the above table.

• Energy plantations

o No specific work has been done so far. From the annual plans also, it is clear that no work has been proposed. However, we were told by the NPC that this would be part of the proposed “Biomass Mission”.

o Contract for updating biomass resource atlas has been given to CGPL, IISc. However, the activity is only aimed at updating production figures for crop residues based on published secondary data on area under various crops. No survey is being carried out to update consumption and price figures. The Biomass Atlas was last updated with consumption figures in 2004, since then the use of biomass has spread to many industrial sectors and both price and availability have consequently changed. The key driver for this change has been the relentless rise of crude oil prices internationally.

o Therefore, the usefulness of this atlas to prospective biomass power investors is limited.

Assessment of Progress & Rating

Most of the targets of Outcome 1 (parameters and technical standards finalized) have been achieved or substantially done. However, the focus is on combustion technologies only. Other conversion technologies have not been covered. No specific work has been carried out on the technical feasibility of small-scale (1-2MW) grid-connected (at 11 kV) biomass power projects. Issues related to island mode of operation in grid-connected areas has not been explored. No work has been initiated yet on energy plantations.

The following table shows the status of financial delivery with respect to Outcome 1:

Table 3-2: Financial delivery - Outcome 1

UNDP-GEF Budget 594,888

Expenditure 126,426

% to Total 21.25%

GoI Budget n.a.

Final Report

23

Expenditure n.a.

% to Total n.a.

Total (UNDP-GEF & GoI Budget

Expenditure

% to Total

All figures in US$

From the table it is clear that despite most of the activities under this Outcome being completed, the actual spending is very low.

As of the mid-term review, the assessment towards achieving Outcome 1 targets is “Satisfactory (S)”.

3.2.2 Outcome 2

Objective/Outcome Details Target by End of Project

Assessment of Achievements

Outcome 2 Enhanced capacities and confidence of project promoters, financial institutions, regulators, policy makers, SNAs, other stakeholders through effective information development & dissemination program, along with capacity building initiatives.

Pilot portfolio of project profiles developed, model formats/agreements established for the targeted biomass technologies (on fuel supply, energy purchase, project development and management) and promotional material and awareness raised significantly in pilot states

• A lot of information on a variety of topics and issues has been generated under this project.

• However, evidence on dissemination and use of the information is lacking.

Assessment of Progress & Rating

Outcome 2 has three parts:

• Development of information,

• Dissemination of information, and

• Capacity building of a set of stakeholders

As mentioned earlier a number of studies have been conducted as a part of this project. Many of the studies have provided valuable insights into the status and problems of the biomass power sector. However, efforts to widely disseminate the findings of the study have been very limited. 6 issues of Bio-energy, a magazine have been published since the start of the project.

For example, one of the key questions that potential investors ask is which district or taluka in a particular state has the highest potential for a biomass project. The studies carried out by Deloitte, DSCL and SPRERI provide some analysis of potential areas for siting biomass power projects in a particular state.

Final Report

24

Similarly, both the Deloitte and DSCL studies have shown what the competition can afford to pay to procure biomass as compared to biomass power plants. This information is important to potential investors, financial institutions as well the Electricity Regulatory Commissions that determine tariff.

Financial delivery against Outcome 2 is shown in the table below:

Table 3-3: Financial delivery - Outcome 2

Information

Capacity

Building

UNDP-GEF Budget 967,345 487,889

Expenditure 571,813 131,754

% to Total 59.11% 27.00%

GoI Budget n.a. n.a.

Expenditure n.a. n.a.

% to Total n.a. n.a.

Total (UNDP-GEF &

GoI Budget

Expenditure

% to Total All figures in US$

Financial progress against Outcome 2 is reported against two heads, Information Generation and Capacity Building. Overall, spending against Information Generation is 59.11% as against 27.00% for Capacity Building. Thus, the financial progress supports the assessment of this MTR team that physical performance in terms of Information Generation has been good but poor in terms of Capacity Building (or use of the information to spread knowledge and skills).

As of the mid-term review, the assessment towards achieving Outcome 2 (Information & Knowledge) targets is “Marginally Satisfactory (MS)” and in terms of Outcome 2 (Capacity Building) is “Marginally Unsatisfactory (MU)”.

3.2.3 Outcome 3

Objective/Outcome Details Target by End of Project

Assessment of Achievements

Outcome 3 Development of business, commercial and support services networks in focused States.

The appropriate biomass power business models have been widely disseminated and established in the initial pilot states.

• 2 fuel-linkage models have been demonstrated in Punjab and Maharashtra

• Study has been conducted to identify equipment needed to organize collection of biomass from distributed sources

• Model Farmers Cooperative is being set up in Punjab and Haryana to ensure better collection of biomass

Assessment of Progress & Rating

The activities under this Outcome are mainly related to organizing biomass supply. No activity has been initiated on improving support services for biomass gasifier plants,

Final Report

25

especially on building capacity to repair and maintain small gasifiers and engines in remote areas.

Financial performance for this Outcome is given in the table below:

Table 3-4: Financial delivery - Outcome 3

UNDP-GEF Budget 311,111

Expenditure 50,000

% to Total 16.07%

GoI Budget n.a.

Expenditure n.a.

% to Total n.a.

Total (UNDP-GEF & GoI Budget

Expenditure

% to Total

All figures in US$

In terms of budget delivery rate for Outcome 3, UNDP-GEF has disbursed US$ 50,000(CDR) or 16.07% of the total US$ 311,111 commitment of the UNDP-GEF.

As of the mid-term review, the assessment towards achieving Outcome 3 targets is “Marginally Satisfactory (MS)” to “Satisfactory (S)”.

3.2.4 Outcome 4

Objective/Outcome Details Target by End of Project

Assessment of Achievements

Outcome 4 Creation of fund for contingent financing.

7 MIP’s successfully facilitated by the contingent financing facilities made available through the selected financial institutions, together with the full design of a non financial institutions specific guarantee mechanism.

• Work is under progress. The initial plan was to anchor this activity with IREDA, with funding from KfW. However, after the withdrawal of KfW from this project, a study was carried out by E&Y to assess the interest and readiness of other financial institutions such as banks, etc.

• Based on the study, an EOI was called for and 18 institutions have responded.

Assessment of Progress & Rating

Financing for biomass combustion technology based projects has not been a key barrier as much as it has been for gasification based projects. Accordingly, MNRE has taken a decision to support 5-6 biomass gasification projects under this project apart from a few biomass combustion and cogeneration technologies.

The ProDoc describes the Contingent Fund as a fund to be created and used innovatively to support MIPs that aim at removal of specific barriers. Further, it also envisages that such funding support would result in reflows from the MIPs to the handling financial institutions and they would then offer them to other biomass power projects.

Final Report

26

The aim was to ensure that potential investors were supported at the same time the goal was to induce mainstream financial institutions to gain the experience of financing biomass power project. The contingent fund with associated reflows was a carrot to attract FIs into the biomass power sector financing.

Accordingly, a TA component was created within the Contingent fund to support development of MIPs, identification of FIs and most importantly structuring of contingent funding support to each MIPs on a case to case basis. In fact, the ProDoc mentions some models such as “subordinate debt”, “guarantees”, “venture/seed capital”, etc.

However, as per the E&Y report on contingent fund handling, the project has decided that the funding support would be in the form of a one-time grant to support a specific additionality that the MIP is proposing. Thus, no effort is being made to design and learn from implementation of specific financing models. Further, being one-time grants no reflows would be expected from the MIPs even after implementation, commissioning and operations. In fact, the relevance of the contingent fund as a tool to remove specific barriers and risks has been undermined by this approach.

Financial progress against this outcome is very poor as shown by the table below:

Table 3-5: Financial delivery - Outcome 4

UNDP-GEF Budget 2,287,888

Expenditure 790,712

% to Total 34.56%

GoI Budget n.a.

Expenditure n.a.

% to Total n.a.

Total (UNDP-GEF & GoI Budget

Expenditure

% to Total

All figures in US$

As of the mid-term review, the assessment towards achieving Outcome 4 targets is “Marginally Unsatisfactory (MU)”.

3.2.5 Outcome 5

Objective/Outcome Details Target by End of Project

Assessment of Achievements

Outcome 5 Model Investment Projects (MIPs).

7 model investment projects will have been successfully commissioned and have

• Currently, 87 application covering biomass combustion, gasification, innovative fuel-linkage mechanisms, etc., have been received based on an

Figure 3-1 : Impact of withdrawal of KfW

Withdrawal of KfW from this project has had no

impact on this project. The funding that was to be

made available to MIPs from the KfW fund is now

being provided by MNRE as a capital grant.

It is important to mention that though KfW withdrew

from this project, their funds have been made

available to biomass power projects through IREDA.

Thus, on the whole the biomass power sector has

received the support, while the UNDP-MNRE-GEF

project has not suffered.

Final Report

27

started initial implementation in 3-5 states demonstrating the 3 different biomass power technologies targeted.

invite for EOIs for MIPs.

• 8 proposals for fuel supply linkages and 12 proposal for establishment of 1-2 MW capacity cogeneration / decentralized power generation have been shortlisted for further development including preparation of DPR, financial tie - ups statutory approvals / clearances etc.

Assessment of Progress & Rating

Currently, MNRE is waiting for these projects to secure all clearances and come to the state of financial closure, so that the contingent fund support could be released and work on implementation of the MIPs be started. See Table 3.6 below. (Source: NPC, MNRE)

Table 3-6: Status of MIPs

Sl.

No.

Details of the Project Plant

Capacity

(MW)

Total

Project

Cost (Cr)

Remarks

Establishment of Fuel Supply Linkages [A]

1 Universal Biomass, Distt.

Muktsar, Punjab

14.5 4.03 Sanctioned, First Instalment

released

2 SLS Power 6 3.3 Sanctioned, First Instalment

released

3 Loknete Baburao Patil

Sahakari Sakhar Karkhana Ltd.

8 7.24 Likely to be sanctioned in Q 3

4 Kissanveer Satara 22 9.77 Cogen plant commissioning

awaited

5 Blue Gums, Nagpur _ _ DPR being revised

6 MPPL, Mandya _ _ Rejected

7 Transtech Green 12 9.00 Cogen plant commissioning

awaited

Total MW [A] 62.5

2 MW Grid Connected Combustion Based [B]

8 Dee Vee Power, Kushal Nagar 2 9.3 Term Loan and Pollution

Board Clearance awaited

9 Verde Renewables 2 16.74 Approval Documents awaited

10 Godavari Jaggery Udyog 2 9.96 Term Loan Sanction, Pollution

Board Clearance, PPA awaited

11 U A Power Projects Pvt. Ltd. 2 14.12 Likely to be sanctioned in Q 3

12 PR Ecoenergy 2 12.78 Term Loan and Pollution

Board Clearance awaited

13 Transtech Green, Boondi 2 13.38 Pollution Board Clearance,

PPA awaited

14 Kandra Energy 2 8.15 Approval Documents awaited

15 Evika System, Kolkata 2 9 .0 Approval Documents awaited

16 Ananya 2 12.70 Approval Documents awaited

17 Mahaa Energy India, 2 DPR being finalised

Final Report

28

Coimbatore

Total MW [B] 20

Biomass Gasification [C]

18 Ankur Scientific 1.2 6.5 Sanctioned, First Instalment

released

19 Ruchi Infrastructure 3 DPR being finalised

20 Sujana Energy Pvt. Ltd. 1 DPR being finalised

21 Fairmacs Group of Companies 1 DPR being finalised

22 MET Institute of Management

(Anna Purna Energy)

2 13 Likely to be sanctioned in Q 3

Total MW [C] 8.2

8-10 mw Combustion Based [D]

23 Satya Bio Power (INDIA) 10 46.62 Likely to be sanctioned in Q 3

24 Rukmini Estate & Investment 8 39.00 Approval Documents awaited

25 Orient Green Power Company 10 62.80 Approval Documents awaited

26 S. R. Renewable Energy

Limited

10 _ DPR being finalised

27 Harvest Energy 5 _ DPR being finalised

28 PARIJAT - NextGen Energy 7.5 _ DPR being finalised

Total MW [D] 50.5

Total MW [A+B+C+D] 141.2

Financial progress is shown in the table below:

Table 3-7: Financial delivery - Outcome 5

UNDP-GEF Budget 525,002

Expenditure -20,037

% to Total -3.82%

GoI Budget n.a.

Expenditure n.a.

% to Total n.a.

Total (UNDP-GEF & GoI Budget

Expenditure

% to Total

All figures in US$

Overall progress is LESS THAN SATISFACTORY. In fact, by the proposed end of the project in March 2012, it is highly unlikely that the MIPs would be commissioned and running. This means that one of the key strategies of this project which was to demonstrate model projects which show-cased removal of barriers would have no significant results to show.

As of the mid-term review, the assessment towards achieving Outcome 5 targets is “Marginally Unsatisfactory (MU)”.

Final Report

29

3.3 Project Formulation 3.3.1 Conceptualization / Design

The overall rating for conceptual design of this project is “Satisfactory (S)”. The project has three well-thought out components, namely: knowledge development, dissemination and demonstration of MIPs. Even within the components, the outcomes and outputs and activities are well-linked to achieve the project objectives.

However, many of the barriers identified during the project formulation stage are no more major barriers since a long time elapsed before this project was implemented. During this period, as mentioned earlier, the CERC on a suo moto basis decided to determine tariffs for biomass power projects. This tariff order became the basis for several SERCs revising tariffs for purchase of power from biomass power projects. Nevertheless, the project activities and outputs continue to remain relevant.

The project timeline provided for during the project design stage is a huge underestimation of the time needed to implement a project of this nature that has a significant component of field level implementation. Further, it has also not taken into account the time needed for a government department to set up its internal processes to actually begin work on an externally funded project. The net result has been that the project is lagging behind in terms of timelines and the designed timeframe may not be sufficient. In fact, it is very likely that the current extension up to March 2012 also may not be sufficient to complete the project activities in a meaningful manner.

3.3.2 Country-ownership / Driveness

The proposed project is consistent with national programs, policies and priorities, as well as with nationally and internationally agreed-upon programs for sustainable development. Every state government in India now has stipulated that a minimum quantum of power purchased by the ESCOMs should come from renewable energy sources.

The fact that the MNRE is proposing to start a “Biomass Mission”, based on the findings of the various studies conducted as a part of this project shows the importance of this project to the MNRE. Further, the MNRE has a 48% contribution to the budget for this project.

Based on the outcomes of the studies, the National Program on Biomass Gasification and the National Programme on Bagasse Cogeneration has been modified. A guideline for setting up Biomass Power Projects with reduced risk has been prepared is currently being reviewed by the various SNA.

Thus, clearly this project enjoys country ownership and is being driven by the needs of the biomass power sector as understood by the MNRE.

3.3.3 Stakeholder Participation

As per the ProDoc and other documents made available to the MTR team, several stakeholders were consulted during the formulation of this project. This included, MNRE, IISc, IIT-Mumbai, biomass power producers, etc. In fact, these consultations started as

Final Report

30

far back as 19995. However, the extent of their participation and their specific contributions are not known. Therefore, the MTR team would be constrained to rate the project as “Marginally Satisfactory (MS)” on this count.

3.3.4 Replication Approach

As per the ProDoc, the replication approach is that by providing TA and some investment funds for MIPs, the strongest FIs in the region will develop skills and relevant experience that would allow them to continue to fund biomass projects. After the end of the project, funding of biomass projects will be institutionalized and continued by the FIs in their existing or revised business development models.

Furthermore, as per the ProDoc, the Phase I project will establish the design of non-FI specific Guarantee Mechanism that will hopefully become operational under Phase II project. The lessons learned under Phase I regarding the success of the MIPs will help develop the most effective design of the Guarantee Mechanism.

However, with the decision to offer capital grants to MIPs under contingent funding under Phase I it is not clear how reflows would be ensured to the participating FIs. Therefore, it is not clear how FIs would be funded to build and operate contingent funds under Phase II.

Thus, the key to the replication strategy is successful implementation of MIPs, learning lessons from them during Phase I and incorporating them in designing Phase II. However, the option of learning on design and performance of financial models for MIPs has been lost since contingent finance is being delivered as a straightforward capital subsidy for the additionality6 the MIPs is proposing.

3.3.5 Other Aspects

As mentioned earlier, the project has been well designed. However, it would have been more useful to define in a clearer manner the activities to be taken up under capacity building and dissemination of information. It is the experience of this MTR team that these are areas where MNRE needs better support and guidance.

3.4 Project Implementation 3.4.1 Implementation Approach

Overall the implementation approach of the project management cell has been “Satisfactory (S)”. They have adapted well to changed priorities and modified their

5 SC Rajshekar one of the MTR team members remembers attending one such workshop in IISc.

6 As per the details provided to us, MNRE is proposing to provide capital grants to these MIPs

in addition to the existing subsidies, because these projects would have some other innovation which is not currently supported or adequately tested.

Final Report

31

plans accordingly. The PMC has been preparing Annual Plans and working according to them. The MNRE has placed personnel with adequate sectoral knowledge as well administrative capabilities to steer the project.

However, both MNRE and UNDP have not been following the LFA to monitor and report on project progress. As mentioned earlier, they have used outputs and outcomes interchangeably and sometimes reported against outputs not mentioned in the LFA at all.

3.4.2 Monitoring & Evaluation

The supervision and guidance provided by the PSC in implementation of the project is “Satisfactory (S)”. The oversight provided by UNDP is adequate. However, the PSC has not been meeting as frequently as it is expected to meet.

3.4.3 Stakeholder Participation

Overall, Stakeholder participation is “Marginally Satisfactory (MS)”. Knowledge dissemination efforts by the project have been rather modest. Findings of the various studies have not been discussed with a larger set of stakeholders to prioritize areas for further action/research.

For example, the set of model documents prepared by MITCON have not been circulated to key stakeholders such as ESCOMs (for PPAs), biomass power producers (Fuel supply contracts, PPAs, etc.) for their inputs before finalization. There is an urgent need for the project to create forums for enabling consultations with stakeholders to validate, fine tune and disseminate the outputs of the project.

3.4.4 Financial Planning

The following table highlights the budget utilization of the UNDP-GEF funds for the various outputs of the project based on UNDP budget and actual disbursement from CDR. The project has disbursed a total of US$1.664 million or 29.45% of its $5.650 million budget specified in the ProDoc. Unspent portion is US$3.986 or 70.55% of budget as of 31 Dec 2010.

Table 3-8:Budget Utilization of UNDP-GEF Funds

Description from AWP/PIR Budget Actual from CDR

UNDP - GEF Budget Allocation As per ProDoc pp. 57-58 As of 31 Dec 2010

US$ % of Total US$ % of Budget Increased Information & Knowledge (with GEF donation)

594,888 10.53% 126,426 21.25%

Increased Information & Knowledge 967,345 17.12% 571,813 59.11%

Capacity Building 487,889 8.64% 131,754 27.00%

Business and Commercial Networks 311,111 5.51% 50,000 16.07%

Financing and Contingent Mechanisms

2,287,888 40.49% 790,712 34.56%

MIPs 525,002 9.29% -20,037 -3.82%

Monitoring and Evaluation 475,877 8.42% 13,069 2.75%

TOTAL 5,650,000 100.00% 1,663,737 29.45%

balance 3,986,263 70.55%

Final Report

32

On the other hand, the budget utilization of contribution from GoI is a very small 2.03%. The budget allocation for the GoI contribution of US$5.240 million is based on the ProDoc while the actual expenditure in local currency was provided by the NPC and converted to US$ using the exchange rate of INR48 per US$.

Table 3-9:Budget Utilization of Government of India (GoI) Funds

Description from ProDoc Budget Actual from NPC

UNDP - GEF Budget Allocation As per ProDoc p. 51 As of 31 Dec 2010

US$ % of Total US$ % of Budget

Personnel cost 0 0.00% 0

Sub-contracts 630,000 12.02% 84,856 13.47%

Training/workshops 332,043 6.34% 0 0.00%

Equipment cost 0 0.00% 0

Mission cost 0 0.00% 0 Travel/local conveyance (incl. study tours, fellowships) 0.00% 0

Domestic 207,957 3.97% 7,530 3.62%

International 0 0.00% 0

Organization fees (MITCON) 0 0.00% 13,511

Contingent financing funds for MIPs 4,000,000 76.34% 0 0.00%

Other miscellaneous costs 0 0.00% 515

PA costs, including ProDoc 70,000 1.34% 0 0.00%

TOTAL 5,240,000 100.00% 106,413 2.03%

3.4.5 Sustainability

The potential for biomass power is enormous, the demand for electricity is growing by leaps and bounds and supply is barely able to catch-up. Given this situation, biomass power plants will continue to be set up. However, for the outputs of this project to create an impact, substantial efforts are needed to create awareness and mainstream innovation being developed under this project such as fuel-linkage models, etc.

The key to sustainability of project impact is mainstreaming. For example, when FIs start demanding a well-thought out fuel linkage plan or when SNA starts following strictly the norm of not more than 1 biomass power plant in a 50km radius one can conclude that the outputs of this project have been mainstreamed.

3.4.6 Execution and Implementation Modalities

The present PMC is adequate for carrying out the day-to-day work of the project. However, once the MIPs are ready for implementation, more staff would be needed to carry out field inspections. Similarly, office staff and qualified technical staff would be needed to assess progress and clear sanctions and release of funds in a timely manner. Therefore, there is a need to gear up to this situation.

Final Report

33

3.5 Results 3.5.1 Attainment of Outcomes / Achievement of objectives

On the overall, the design and work plan remain valid and is still consistent with the project strategy, objectives and outcomes. The project plan and implementing details and activities were modified in view of new and current developments without changing the original purposes and objectives of the project. Such changes are documented in the annual work plan (AWP) and progress implementation report (PIR) for the years 2008, 2009 and 2010 and likewise monitored in the quarterly progress reports (QPR) from 1Q 2008 till 4Q 2010.

The detailed assessment of progress towards achievement of outcomes and objectives has already been presented in the previous section. Hence, it is not being repeated here.

3.5.2 Effectiveness of Project Implementation,

The removal of barriers to biomass power generation project are not proceeding well even according to the modified plan as there are many delays and issues that need to be addressed. Assessment: “Marginally Unsatisfactory MU)”

Based on the original project closing date of 21 September 2009 which was later revised to 31 March 2012, the remaining activities and outputs are at risk of not being completed. The project should be subject of a highly improved performance level among all project participants, partners and sub-contractors.

Overall, in our opinion, the designed time period of 3 years is too short to execute a project which has a significant knowledge component as well field implementation component.

3.5.3 GHG Emissions Reductions

Currently, two projects, namely Shri Pandurang SSKL and Malwa Biomass Power Plant have been supported under this project to improve their fuel supply system. Thus, the power produced from the additional biomass being procured as a result of the improved fuel supply system and infrastructure can be attributed to the project. Therefore, any GHG emissions reductions resulting from such biomass power generated would be attributable to this project.

At current levels of generation, the two projects are generating GHG emissions reduction of 13,455 (Malwa Biomass Power Plant) &, 9,020 (SPSSKL) tCO2/year (See Annex G & H for details of calculations). Needless to say, the fuel supply systems at these plants are models for other biomass power plants to emulate. When this happens, GHG emissions reductions are attributable to this project.

3.5.4 Sustainability

As already mentioned, the impacts of this project would be sustainable provided, the lessons and knowledge gained from this project are widely disseminated. There is no doubt that biomass power plants would be set up. However, for these plants to be operated in an efficient manner, many of the interventions being tested under this project would be useful. The importance of learning that could be gleaned from implementation of the MIPs cannot be exaggerated. Therefore, there is a need to pursue the MIPs to their logical ends to make real and lasting gains from this project.

Final Report

34

In GEF terms, the direct outputs of this project would be the GHG emission reduction that has been discussed in the previous section. Further, indirect GHG emission reduction would occur when such model get replicated. Thus, benefits of the project would flow even after completion of the project.

However some negative effects of this project that the MTR team observed during their field visit relate to over-extraction of biomass from farmlands leading to depletion of organic carbon in the soils. This would in turn reduce the uptake of nutrients leading to diminishing productivity and returns to the farmer in the future.

Needless to mention, if the productivity of the soil is diminished, biomass fuel supply would also diminish. Thus, there is a need to maintain adequate7 biomass for manuring purpose. The MTR team was concerned at the manner in which even leaves and weeds (not to speak of paddy straw and wheat straw) from roadside are being collected by the biomass power plants being supported by the project for fuel-linkage development.

3.6 Other issues raised in the ToR

A set of issues were specifically mentioned in the ToR (see Annex I, Section III) for the MTR team to comment upon. Many of the issues have been covered in the preceding sections. Our observations and comments on the rest of the issues are presented here:

3.6.1 Expected End of Project Scenario

• At the end March 2012 (currently, this is the end date for the project), it is unlikely that any of the MIPs would be commissioned and operational. Further, it is highly unlikely that any meaningful lessons would have been learnt from the MIPs.

• Thus, at the end of the project, the key achievements of the project would be a set of reports that discuss and delineate problems plaguing the biomass power sector (specifically, combustion and cogeneration technology) and offer suggestions for tackling them. However, the key problem of unreliability of biomass fuel supply and price and its consequent impact on PLF and returns on investment would largely remain unaddressed.

• If efforts are made in a planned and focused manner, some of the key issues8 that the studies have thrown-up could be organized, collated and disseminated widely to increase awareness.

• Some of the issues could be prioritized for further research within and outside this project.

• GHG emissions reductions directly attributable to this project would be limited to improved generation on account of better fuel-linkages. However, only when these

7 In organic and natural systems of farming that is gaining popularity, as much residue as possible should be recycled into the soil to maintain a good layer of humus. An educated guess would be as much as 60-70% of the residue should be recycled.

8 These relate to technological issues, biomass supply chain issues, biomass costing issues and competition, analysis of regulatory frameworks, assessment of biomass concentrations in some states, etc

Final Report

35

systems of fuel collection, processing, etc. become the norm for the biomass power industry will substantial GHG emissions reduction benefits follow. However, as mentioned earlier, the twin problems of unreliable supply and ever-increasing prices of biomass fuel make the industry risky for potential investors.

3.6.2 Project Completion & Timeline

• The major work remaining to be done for completing the project is setting up of the MIPs, commissioning them, studying the operations, learning lessons, disseminating them and proposing suitable changes in policies, regulatory mechanisms, technology, financing, etc. to incorporate the lessons.

• From the time of financial closure, a biomass power project takes at least 18 months time to get commissioned. It takes another 4-6 months to stabilize its operations. Thus, it will be at least 24 months (2 years) for most of the MIPs to be commissioned. However, most of them are yet to receive mandatory clearances from various governmental bodies. The NPC estimated that all MIPs would come to financial closure by June, 2011.

• Thus, most MIPs would not be operational before May, 2012 - November, 2012. To learn any meaningful lessons, operations should be studied at least for a full agricultural year (Kharif, Rabi and summer crops). Taking another 6 months to consolidate and disseminate the learnings, the project will reach its projected end of project scenario only by November, 2013 - February, 2014.

• These are most optimistic estimates, since most projects have not even completed mandatory clearances. Usually, in a biomass power project implementation, this is one step that takes an indefinite period of time. Hence, these estimates are most optimistic.

• However, more conservatively, taking into account the complex issues involved in implementing small-scale power projects connected at 11kV to the grid, we would estimate that the project would need at least till March 2016 to achieve meaningful results.

• The NPD and the NPC mentioned that they would leverage the good office of the MNRE with various state agencies to speed up granting clearances to the projects. This is a welcome step and would certainly help speed up the implementation. However, the time required to commission a biomass power project (18 months) cannot be further compressed since delivery period for turbines itself is around 9 -12 months.

• As far as biomass gasifiers are concerned, the delivery period for producer gas engines is also about 6 - 9 months. Further, since most gasifier manufacturers are small-scale units, lack of working capital often delays delivery and execution of the work. Therefore, the time line of 18 months is still an optimistic estimate for even small-scale gasifiers.

• Also since many of them would be grid connected, technological issues related to connectivity at 11 kV and island mode of operations would need substantial cooperation from the local ESCOMs for their successful implementation and operations.

3.6.3 Constraints to Project Implementation for Envisaged Technology Models

Biomass pricing & tariff related issues

Final Report

36

• All 3 models suffer from high risk on account of uncertainty in biomass supply and pricing. Tariff for purchase of power from biomass power producers is based on a variable cost component9 that is linked to the cost of coal that the biomass is replacing. These are revised annually during the control period of 3 - 5 years.

• However, biomass prices10 are increasing frequently (mostly in response to increased local demand on account of users shifting from fossil fuels to biomass fuels) and the tariff is often not remunerative. During such periods, the tariff is revised on a case to case basis on appeal from the power plant management. Therefore, there is a need to start putting in place a mechanism to link the price of biomass for power to actual biomass market price and/or the equivalent fossil fuel, especially diesel.

• However, as elucidated in the reports of Deloitte and DSCL, the Maximum Opportunity Cost of biomass is much higher than even the present high prices. This means that competing users for biomass, especially those that are replacing diesel /LDO with biomass can afford to pay much more. For example, an industry replacing diesel with agro-residues can afford to pay Rs 9,360 / tonne of biomass before it becomes costlier than diesel. On the other hand, a user replacing coal with biomass can afford to pay only Rs 2,940 / tonne of biomass. Needless to mention, the biomass power producer cannot compete even with the coal-replacing applications, leave alone the diesel-replacing applications.

• The implication for biomass power producers is that unless tariffs are linked to fossil fuel prices and the fuel cost part of the tariff is hiked in consonance periodically, they are likely to suffer operational losses whenever price of biomass increases. This indicates to adopt a two-component tariff to recover the fixed capital cost and the variable costs such as biomass fuel price that is indexed to other fossil fuels.

• Thus, supply of biomass fuel, its market pricing, tariff for biomass power are key constraints that all 3 models would continue to face even after this project period.

Technological issues

• Technologically, issues for combustion and cogeneration models have been well-identified in this project and a set of measures have been presented. However, further consultations among equipment suppliers, designers, biomass power producers, etc., is needed to prioritize areas for further research/action. Key among these issues is designing suitable furnaces for firing multiple biomass fuels, such that downtime on account of frequent cleaning of boilers is avoided. Further, if boilers could be operated at higher pressures and temperatures, efficiency would improve, but significant technological challenges are involved in view of the varying characteristics of biomass fuel.

• However, for small-scale of operations, especially gasifiers, a range of problems associated with grid connectivity at 11 kV, local supply, metering, bill collection from local users, etc. are involved. Further, operational viability of these plants are doubtful

9 The CERC tariff order of 2009 vide regulation 45 has provided a formula to link the price of biomass to coal.

10 Mr. Jhangra, GM of the Malwa Power Plant reported that the price of unchipped cotton stalks (dry basis) has gone up from Rs 600-800 / tonne in 2005-06 to Rs 1,800-2,400 / tonne in 2010-11.

Final Report

37

and may need a higher biomass power tariff to reach profitability. Also with most of the gasifiers using woody fuels or high density briquettes, the cost of biomass is also likely to be higher than for other types of agri-residues. Therefore, availability and affordability of such fuels is likely to be a bottle-neck for implementing such projects.

Fuel-linkage model related

• Finally, as mentioned in the preceding paragraphs, most of the work on the fuel-linkage model deals with improving collection efficiency, organizing collection, storage, etc. However, the key question of pricing of biomass and availability of biomass at affordable prices is not addressed by the fuel-linkage models. This needs regulation of biomass trading and use. Currently, biomass is still treated as agri-waste to be put to some suitable economic use. Its value as a national asset with multiple and divergent uses has not been recognized.

• For example, agri-residue is used as fodder, manure, fuel and thatching material in most of the farmer households. Its function as fodder and manure is vital in maintaining farm productivity and profitability. Soils in India are generally low on organic carbon content, an ingredient which is very important to facilitate uptake of other nutrients such as nitrogen, etc. When biomass power project start using every bit of straw and leaves from the farmers field (under the erroneous understanding that agri-residue is wasted when left on the farm), then the productivity of the soil deteriorates and reduces availability of biomass fuel in addition to reduced yield and returns to farmers.

• Thus, there is a need for a more calibrated approach to using biomass as fuel for power generation. A step in this direction has been suggested by the DSCL study which says that the size of a power plant should not be more than 10% of the total biomass production in an area. The project may try to validate this finding over a larger sample base than the one covered by DSCL.

• Despite the availability of Biomass Atlas and other studies conducted by MNRE over a period of time, understanding of dynamics of biomass production, consumption and trade is limited. Therefore, there is a need to build better knowledge in this area through sustained efforts. The first step is to recognize the economic and ecological value of biomass and ensure that it is not over-exploited. This needs inter-

Figure 3-2: Need for trend data on biomass supply & price

Currently, there are no assessments of trends of biomass prices and factors that are affecting it. If biomass is considered as an important fuel, then one needs to be able to build models to predict its price and future uses and put an economic value on it.

The first step for this is to collect data and build a database. MNRE may like to support a long term study in this regard.

Everyone has been ignoring this aspect saying that the trade is unorgainsed therefore it cannot be done. A start in just collecting information would show that though the business is unorganized, there are informal and sometimes formal contracts in place for supply of biomass. Whole sets of commercial operations dependent on assured supply of biomass fuel are working year after year based on such arrangements.

Final Report

38

ministerial11 action, since biomass has more vital uses than as merely fuel in the country’s economy and ecology.

3.6.4 Small-Scale Biomass Power Plants

The PSC has endorsed the strategy of supporting setting up of 1-2 MW biomass power projects. The reasoning for identifying 1-2MW power projects as a niche area of focus is not clear in any of the documents provided to the MTR team or from the discussions that we had with the NPD and the NPC.

However, we gathered that these projects are expected, because of their size to not face difficulties in sourcing biomass (including transportation, storage and fuel security) and would be ideal for decentralized power production. Further, we were also told that these plants would be connected to the 11 kV distribution line and would help stabilize the power supply in local areas. Therefore, these kinds of generators would result in desirable societal impacts. However, they face technological, policy and regulatory barriers. Therefore, we have a few reservations in this regard:

• Connectivity to the grid for small power producers at 11 kV has technical issues in terms of making the actual connections as well as grid availability, especially in rural areas. Grid availability has direct consequences to financial viability of the power plant.

• Most ESCOMs prefer to reduce the power supplied to rural areas since power for irrigation is free or almost free and tariffs for domestic use are usually a fraction of the cost of delivering power to the rural households. Thus, every unit of power supplied results in losses to the ESCOMs. Further, with most state governments not paying subsidies in time to the ESCOM for power supplied for irrigation pump sets, cash flow is affected reducing profitability of the ESCOMs.

• ESCOMs are interested in signing PPAs with large power producers since their requirements are large. Further, large power producers based on fossil fuel offer power for sale at very competitive prices as compared to renewable energy in generally and biomass energy in particular. Even within biomass power, cost of power from small biomass power generators would be higher, thus, making them not attractive to ESCOMs.

• Lastly, the issue of improving supply of power in terms of quantity and quality in rural areas. With ESCOMs being reluctant to increase supply to rural areas due to poor profitability of operations, we are not sure that they would like small biomass producers to supply more to rural areas.

11 Given the multiple and often competing uses of biomass there is a need for a policy framework that goes beyond just the ambit of MNRE. For example, MoP is promoting and incentivizing the use of biomass to replace fossil fuel in steel, paper and cement plants. The Ministry of Agriculture is promoting increased use of crop residues for manuring under the organic system of cropping.

Final Report

39

Therefore, in our opinion, this niche should be explored in a more carefully thought out manner and should not be taken up in this project given the limited time available and the complex issues that small biomass power plants have to face.

However, we would suggest that the MNRE (as Project Implementing Agency) and UNDP-GEF address the following key questions before coming to a conclusion:

• From the point of view of this project’s goal, is promoting small-scale biomass power projects that are connected to 11kV and lower the key strategy to accelerating the adoption of biomass power? and

• From a project management point of view are there sufficient resources, time and appetite in UNDP-GEF and MNRE to pursue this to its logical end?

3.7 Conclusions

The MTR team finds that the project is relevant to the development of biomass power sector in the country and is appropriately designed. However, in terms of implementation, progress is poor and delayed. There is a significant risk of the project not completing the designed activities within the extended project deadline of March 2012.

A major cause for this is the unrealistic timeline of 3 years designed for a project with significant knowledge generation and field implementation activities. Further, late start of the project activities has also contributed to delay in implementation.

Usually, in projects involving government departments, there is a time lag of 8-10 months in beginning project activities from the date the project document is signed. This is so because, the concerned ministry has administrative procedures to follow in identifying and designating project staff even if it is from within its existing staff. Since, this time lag is not taken into account at the time of designing the project, most projects start with a “delay” which only gets magnified by the time it reaches a midterm stage.

The MTR team finds that the project has generated a wealth of knowledge and information on issues relevant to promotion of the biomass power sector. However, dissemination and use of the knowledge needs to be done better.

Final Report

40

4.0 Recommendations

Two broad categories of recommendations are being made. The first set is project specific and needs to be actively considered by MNRE and UNDP-GEF for implementation under this project itself. The second set is related to promotion of biomass power and are desirable to be considered under this project subject to availability of resources and time. Where possible, we would urge MNRE/UNDP-GEF to at least prepare white papers/discussions notes and initiate wider consultation with respect to the second set of recommendations.

Project Specific

Project Implementation & Monitoring

• There is an urgent need to reassess the work to be completed and draw up a realistic timeline. It would be meaningless to wind up the project by March 2012 since none of the MIPs would have been implemented, which means the project would not have gained any knowledge from supporting the MIPs.

• Based on an optimistic estimate of the time needed to complete the project activities and learn meaningful lessons, the project deadline may need to be extended at least up to March 2014. However, more conservatively, taking into account the complex issues involved in implementing small-scale power projects connected at 11kV to the grid, we would estimate that the project would need at least till March 2016 to achieve meaningful results.

• Annual work plans, APR/PIR, financial reports etc., must be brought in alignment with the LFA for proper monitoring, documentation and reporting of project progress. There is no need to revise the LFA at this stage.

• However, we would strongly suggest that the PMC take stock of the activities, outputs and outcomes mentioned in Annex D of this document and as a first step update it. They could then indicate activities that may not necessary anymore/not planned to be done (with suitable explanations) and indicate it to the PSC and UNDP-GEF. This document could be then used as an LFA for further monitoring, reporting and final review.

• The proposal of the NPD to use the good offices of MNRE to help identified MIPs receive their mandatory clearances is welcome and should be followed up by strictly monitored action.

• The PSC may meet more frequently to take stock of the progress (especially with reference to MIPs) and provide guidance and facilitate inter-ministerial and central-state government cooperation to speed up implementation of MIPs.

Dissemination of Knowledge & Capacity Building

• The project needs to step up its activities in dissemination of knowledge and capacity building of stakeholders. As a first step, copies of the reports of the various studies carried out under this project should be made available on the MNRE & UNDP websites.

• Alternatively, a website may be set up for the project (which may later be used as the website for the proposed “Biomass Mission”), where these reports could be made available.

Final Report

41

• Copies of the reports may also be put up on the websites of SNAs, IREDA. They may also be made available to potential investors, technology suppliers, etc.

• As the PMC waits for the MIPs to be come on stream, they can organize a series of workshops to discuss the findings of these reports, identify areas for further research/action and prepare appropriate strategies.

• The 6 issues of Bio-Energy published by the MNRE are of good quality in terms of production and content. The MNRE may like to consider putting the magazines on the web itself or produce a web version and allow open access instead of the subscription basis now being implemented for the hard copy version.

Gearing up for implementation of MIPs

• The PMC needs to beef up its staffing to gear up for monitoring the implementation of MIPs. They need to find staff with technical and monitoring skills to monitor and report on progress from the field. Alternatively and/or additionally, they may engage the services of reputed organizations to carry out this task.

• Simultaneously, they need to start putting in place a mechanism to glean lessons from the implementation of the MIPs. Merely collecting physical and financial progress and reporting on them would provide no insights into the lessons that the MIPs would offer. For example, monitoring staff of MNRE may collect operational data. Regular, site visits and meetings may be conducted to not only oversee implementation and operations subsequently, but also to document progress and lessons learnt. Case studies may be commissioned to document and highlight achievements.

• The PMC also needs to be geared up to process information from the field and clear sanctions and release funds quickly to enable faster implementation of the projects. For example, it may include having staff to collect data required to “put up a file” for clearance from their finance, etc. The idea is lack of manpower and lack of ability to process requests for funds release should not become a reason for delay.

Non-project specific

The recommendations that are being made below are relevant to the promotion of biomass power and may be taken up in this project subject to availability of resources. However, there is a need to take cognizance of these issues in promoting biomass power and are therefore being mentioned here. Some of these could also be taken up as preparatory to the design of the proposed “Biomass Mission”.

Biomass Supply & Pricing

• Biomass supply and pricing continue to be key risk factors in setting up a biomass power plant. As mentioned earlier, biomass, especially agro-based is still considered as waste by planners, policy makers and investors, leading to erroneous conclusions about its availability and price. In fact, it is a moot point if any estimate has been made of the economic and ecological value of agri-residues in the country’s economy. Biomass trade, even as fuel is not included in GDP estimates.

Final Report

42

• There is a need to recognize agri-residue as a national asset and take into consideration its multiple economic and ecological uses. The need of the hour is to regulate trade of biomass to bring a semblance of control to biomass pricing.

• As a first step, licensing/registration of biomass trading/traders may be considered. This would bring about some consolidation of biomass trading as well help organize it better. Currently, with no idea of the number of biomass suppliers, traders and users, no assessment of extent of biomass business, pricing, actual demand and supply is possible. By reducing and regulating the number of traders, a semblance of order and organization can be brought about.

• There is an urgent need to consider the feasibility of biomass plantations being set up by biomass power producers in collaboration with Gram Panchayaths and farmers. The Biomass Energy for Rural India project (UNDP-GEF supported) has demonstrated the “tree-based farming” concept for generating biomass fuel on field bunds of farmers without affecting the main agricultural crop being grown by the farmer.

• The MNRE may also consider as a part of its large “Biomass Mission”, the concept of setting up “Biomass Parks” in rural areas of the country dedicated for supply of biomass fuel to designated biomass power projects. The state government in collaboration with the Gram Panchayath / NGO would help set up biomass plantations on farmer’s fields (tree based farming concept), waste lands (through SHGs), forest land (VFCs), etc. Once these “Biomass Parks” are set up, potential investors would be invited to bid for setting up and using the biomass resources. The respective owners of the biomass resources would receive payment for selling the biomass fuel to the biomass power producers.

• This would help reduce over-exploitation of agri-residues such as paddy straw and wheat straw that have alternate and more valuable use as cattle feed. Setting up such biomass parks would also reduce the uncertainty associated with availability and pricing of biomass for biomass power producers.

Biomass Tariff & Fossil Fuel Price

• Variable component for the tariff for biomass power is now linked to price of coal. However, increasingly, biomass power producers are competing with users who are switching from diesel to biomass. Thus, the price of coal is no more the only relevant factor for biomass pricing.

• Further, with just 3-4kg of biomass needed to replace a litre of diesel, the price that current users of diesel (who plan to switch to biomass fuel) can pay to procure biomass is very high as compared to the price that biomass power producers can pay under the current tariff regimes.

• The project may work out a suitable modification to the Fuel Price Indexation Mechanism formula that is being used by the CERC to determine price of biomass in relation to that of coal to ensure that the comparison also includes the cost of diesel.

Figure 4-1: Tree-based farming for biomass fuel supply

Trees are grown in trenches along field bunds and also on field bunds without affecting the main crop being grown (usually cereals /pulse s/oilseeds). Usually, 400-600 trees are planted in an acre in this system. BAIF an NGO has been promoting this type of agri-siliviculture as a drought proofing mechanism in dry lands of India.

BER I is an example for growing fuel. The main innovation in BERI is linking such initiatives to a buyer of fuel wood (BERI power plants).

Final Report

43

• The project should also evolve a mechanism to determine biomass price for an area through a third party assessment of biomass pricing in the area. It may develop a methodology to assess annually price of biomass in around existing biomass power plants. SNAs may be supported to hire reputed consultants to carry out the assessment based on this methodology and report the price of biomass. These reports may be periodically verified by organizations such as TUV, BVQi, etc. for its veracity. This data then can become a basis for determining the variable cost of power from biomass power plants. Over a period of time this data would be very valuable to build a model for predicting price of biomass as a fuel.

• A mechanism should be put in place to ensure that the Biomass Atlas12 that is referred to by many investors, analysts and decision makers should be updated regularly with information on production, consumption and availability of surplus biomass. In addition, it should also provide information on existing biomass power plants and availability of water for setting up biomass power plants.

• MNRE should put in place a mechanism to educate SNAs on the need to provide enough hinterland to each biomass power plant while issuing licenses. Apart from providing guidance to SNA, MNRE should also create awareness among investors and FIs on the use of biomass atlas as a preliminary decision making tool in deciding if a particular site is worth buying a license for.

12 I have checked the latest version of Biomass atlas Ver 2.0, it clearly mentions that the data pertains to 2002-04 and we are in 2011. It does not mention consumption separately. It only provides assessment of biomass surplus. I am not sure now, what updation of biomass atlas was done under this project.

Final Report

44

5.0 Lessons Learned

• Setting up fuel-linkage systems and infrastructure is the major lessons learnt from this project. The need for setting up biomass collection centres to mop-up as much crop residue as possible just after the harvest is a key strategy to ensuring fuel linkage to the biomass power plant. The project has not only helped set-up fuel-linkages for two power plants, but has also helped identify equipments needed to process various types of biomass before it can be used as a fuel. This is clearly a good practice that needs to be given wide publicity among potential investors and FIs wishing to funds biomass power projects.

• Identification of technological issues related to firing of multiple biomass fuels in boilers is an important knowledge that has been generated in this project. It needs to be discussed with equipment designers to prioritize issues and decide on areas for further work/research. If solutions are clear and tested, then the MNRE should bring out a short publication to create awareness among investors, equipment suppliers, FIs, etc.

• Three years is too short a period for implementing a project of this nature. This is clearly a deficiency during the design of the project. It also indicates that at the time of designing the project the timelines needed to implement a biomass power project were not kept in mind.

• The LFA has not been revised although many of the outputs and activities have been changed. This reflects poor project documentation and attention to management of the project. As mentioned earlier, it posed several challenges to the MTR team in understanding the project as was proposed and as is being implemented.

• The contingent financing as was proposed in the ProDoc was designed to be offered as a financing instrument and not merely as a capital grant. However, it is now being offered as a capital grant to MIPs. Thus, an opportunity to learn from designing and handling a contingent fund has been lost to the project. Further, no reflows are expected from the MIPs and thus, the possibility of a contingent funds management mechanism has been ruled out.

Final Report

45

Final Report

46

6.0 Annex A – List of Documents Reviewed

No. Title of Document Reviewed

1 Project Document (ProDoc)

2 Project Implementation Review Report (2008, 2009, 2010 APR/PIR as of 30 June of each year)

3 Minutes of Project Steering Committee (13 June 2008, 31 July 2009 and 14 December 2010)

4 Quarterly Progress Reports (1Q-4Q 2008, 1Q-4Q 2009, 1Q-4Q 2010)

5 Combined Delivery Report by activity and encumbrance (2006, 2007, 2008, 2009, 2010 CDR)

6 Annual Work Plans (2008, 2009, 2010)

7 Back-to-Office Reports of UNDP staff (Mission Report Summary 21 July 2009 and 2 December 2010)

8 Techno-Economic Feasibility Evaluation Fuel Linkage Demo Project at Shree Pandurang SSKL, Shreepur, Maharashtra (6 March 2009)

9 Clean Development Mechanism Simplified Project Design Document for Small-Scale Project Activities (SSC-CDM-PDD) Version 02, CDM Executive Board

10 CO2 Baseline Database for the Indian Power Sector User Guide Version 6.0 (March 2011)

11 Mapping of Biomass Resources for Power Generation by Combustion, Gasification & Propulsion Laboratory, Department of Aerospace Engineering, Indian Institute of Science, Bangalore

12 Office memorandum such as “Revised Procedure for Empanelment of Manufacturers, Benchmark Norms and Material Specifications and Performance Standards for Biomass Gasifiers – Reg”

13 Terminology in the GEF Guidelines to Terminal Evaluation and the Project Review Criteria – part II, Annex 1 of this TOR

14 Entire set of reports mentioned in Annex D

15 CO2 Baseline Database for the Indian Power Sector, Version 6.0, Central Electricity Authority

16 Suo Moto Renewable Energy Tariff Order 2010-11, Central Electricity Regulatory Commission

17 CERC RE Tariff Regulations, 2009

18 PDDs of SPSSKL and Malwa Biomass Power Plants

Final Report

47

7.0 Annex B- List of Persons Interviewed

Sl. No.

Name Designation Organisation

1 Mr. Anil Arora Programme Officer, Energy & Environmental Unit [email protected]

UNDP

2 Dr. S. N. Srinivas, Programme Officer (Energy & Climate Change), Energy & Environmental Unit [email protected]

UNDP

3 Mr. Srinivasan Iyer Assistant Country Director & Head (Energy & Environment)

UNDP

4 Mr. V. K. Jain Director, Ministry of New and Renewable Energy National Project Coordinator (NPC) of Project [email protected]

MNRE

5 Mr. Sukumaran Former NPD of the Project MNRE

6 Mr. D. Majumdar Chairman-cum-Managing Director, Indian Renewable Energy Development Agency, New Delhi [email protected]

IREDA

7 Mr. B.V. Rao General Manager (PTS), IREDA, New Delhi [email protected]

IREDA

8 Mr. Nirmolak Singh

Chief Executive Officer Universal Bio-Mass Energy Pvt. Ltd. [email protected]

Biomass Power Producer

9 Mr. Pavanpreet Singh Dhillon,

Managing Director Universal Bio-Mass Energy Pvt. Ltd.

Biomass Power Producer

10 Mr. B. S. Jangra Head, Biomass Division Malwa Power (P) Limited [email protected]

Biomass Power Producer

11 Mr. Shashi Shekhar

Joint Secretary, Government of India Ministry of New and Renewable Energy

MNRE

Final Report

48

8.0 Annex C – List of Studies Completed and On-Going

Sl. No.

Title of Study and Report Study carried out by

1 Report on Review of Performance of The Grid Connected Biomass Based Power Plants Installed in South India, 2009

Deloitte Touche Tohmatsu India Private Limited

2 Final Report on Review of Performance of the Grid Connected Biomass Based Power Plants of India (North India), August 2009

DSCL Energy Services Company Ltd., New Delhi

3 Rice Husk for Power Generation, Draft Report Version 2, September, 2009

Ernst&Young, New Delhi

4 Study on Techno-economic Feasibility of Biomass Briquetting of Agro residues India, November 2009

Winrock International India, New Delhi

5 Study of Bagasse Cogeneration in Sugar Mills in India, March 2010

Winrock International India, New Delhi

6 Concept Note on Management of Surplus Crop and Agro-Processing Residues to Harness their Potential for Power Generation, December 2009

Prof. BS Pathak, Sardar Patel Renewbale Energy Research Institute Vallabh Vidyanagar, Gujarat

7 Updating of Biomass Resource Atlas Combustion, Gasification & Propulsion Laboratory (CGPL), Indian Institute of Sciences, Bengaluru

8 Technology Status Review Report- Feedstock Processing Equipment & Multi-fuel Fired Boilers, August 2009

MITCON Consultancy Services Ltd.,

9 A Report on Review of Policy & Regulatory Framework, August 2009

MITCON Consultancy Services Ltd, Pune

10 A Generic Report on Removal of Barriers In Biomass Power Plants in India,

Pranam Consultants, Pune

11 Development of Generic Guidelines/Norms

M/S Pranam Consultants, Pune

12 Identification / Evaluation of Institutional Framework and Capacity Building / Entrepreneurship Development Models / Action Plans

M/S Mitcon Consultancy Services Pvt . Ltd. Pune

13 Techno-Economic Feasibility Report (TEFR) on Fuel Linkage Demonstration Project at Shree Pandurang Sahakari Sakhar Karkhana Ltd., (SPSSKL), February 2009

MITCON Consultancy Services Ltd., Pune

14 A Report on Development of Guidelines / Norms for Defining Catchment / Command Areas, Identification & Mapping of Sites for Establishment of Biomass Depots, June 2009

MITCON Consultancy Services Ltd., Pune

15 Report on Financial Models, Bagasse Cogeneration Power Plants, October 2009

MITCON Consultancy Services Ltd., Pune

Final Report

49

Sl. No.

Title of Study and Report Study carried out by

16 Development of “Good Practice Documents” / “Generic Documents” for Biomass Power Plants of 5-10 MW Size and Bagasse Cogeneration

MITCON Consultancy Services Ltd., Pune

17 Identification of Financial Institutions for Operation of Fund for Contingent Financing and Development of Financial Models for MIPs, January 2011

Ernst&Young, New Delhi

18 Revised Procedure for Empanelment of Manufacturers, Benchmark Norms for Material Specifications and Performance Standards for Biomass Gasifiers, 2010

MNRE, New Delhi

19 Techno-Economic Feasibility Study on Utilization of Engine Exhaust for Heating and/or Cooling (on-going)

IISc, Bengaluru

20 Road Map to Biomass Energy (on-going which will have two deliverables: Road Map for Biomass Energy and Detailed Strategy & Action Plan for achieving 20,000 MW of power and Thermal Energy requirements of industry and households by 2022)

M/S Dalkia Energy Services Ltd. New Delhi

Final Report

50

9.0 Annex D – Assessment of Progress

This is as of December 31, 2010.

Strategy Objective, Outcome, Output, Activity & Sub-Activities

Observations & remarks of the MTR Team

Goal To remove barriers to the increased use of power energy sources for generating electricity for its own consumption and export to grid

Objective To accelerate the adoption of environmentally sustainable biomass power technologies for captive and distributed biomass materials in niche areas, through demonstration of project development models and establishment of sustainable business/support services network and undertaking enabling activities for removal of the key barriers.

As of now, a set of studies that delineate the issues and suggest solutions are completed. Model Investment Projects (MIPs) are yet to be finalized, let alone implemented and commissioned.

1) Adoption of environmentally sustainable biomass power generation technologies for captive and distributed biomass materials in niche areas

• As of now there is no evidence that this is happening. The two power plants that we visited mentioned that they were under financial and biomass supply stress. • The MD of IREDA mentioned that they were not very keen on increasing their exposure to biomass projects, in view of the high risk on biomass availability and price.

2) Demonstration of project development models and establishment of sustainable business/support services network

• Model projects are yet to be finalized • Two fuel-linkage models have been implemented in Malwa Power and Pandurang SSK. However, there is no evidence that this is being taken up by all biomass power plants. Further, unless this is made as a mandatory part of DPR, project appraisal by lending institutions and included as a part of project cost, such linkage may or may not occur. • So far this has been the most important and visible contribution of this project towards promoting biomass power projects.

3) Undertaking enabling activities for removal of the key barriers

• A number of studies have been conducted so far on various issues, however, their wide spread dissemination is limited to a few workshops. • A major step however, is the

Final Report

51

Strategy Objective, Outcome, Output, Activity & Sub-Activities

Observations & remarks of the MTR Team

proposed Biomass Mission from the MNRE (as mentioned by Mr.Shashi Shekhar, Joint Secretary, MNRE). However, the scope and the form of the mission are not known as of now.

Outcome 1 1. Technology package benchmarking and validation for different biomass power technologies, including feasibility of energy plantation.

• A set of studies have been completed that raise and discuss specific issues related to use of biomass in boilers of different types (studies done by both DSCL and Deloitte). Also the study by E&Y on rice husk and MITCON on sugar cane based cogen. • For biomass gasification technology empanelment process has been revamped and published. Independent Central and Regional Testing Centers have been proposed for verification and empanelment of suppliers and their designs of their gasifiers. • Standards materials and performance for various components and processes of gasification have been notified. • All suppliers seeking to avail MNRE subsidy have to abide by these standards and testing procedures.

1) Technology for biomass power generation

• Description of work completed so far as given the above table relate to this component only.

2) Energy Plantations • No specific work has been done on this component so far. From the annual plans also no work has been proposed. However, we were told by Mr. VK Jain that this would be part of the proposed “Biomass Mission”. • Contract for updating of biomass resource atlas has been given to CGPL, IISc. However, the activity is only aimed at updating production figures based on published secondary data on area under various crops. No survey is being carried out to update consumption and price figures. The Biomass Atlas was last updated with consumption figures in 2004, since then the use of

Final Report

52

Strategy Objective, Outcome, Output, Activity & Sub-Activities

Observations & remarks of the MTR Team

biomass has spread to many industrial sectors and both price and availability have consequently changes. The key driver for this change has been the relentless rise of crude oil prices internationally. • Therefore, the usefulness of this atlas to prospective biomass power investors is limited.

Output 1.1 1.1 Technology Improvement and Upgrade Needs Identified, Including Objective Assessment of Capabilities of Indian Technology and Equipment Suppliers

• Technological issues have been identified only for biomass combustion • Procedures and institutional mechanism for testing and validating claims of gasifier manufacturers has been put in place.

1.1.1 Carry out a review of the State of the Art technologies, national and international, for potential biomass power application (including combustion, gasification/pyrolysis, advanced biomass gasification, fuel cells and micro turbines) and develop sustained plan for adoption of biomass power technologies

• Scope of the studies carried out so far is not as comprehensive as the stated activity. • Development of sustained plan for adoption of biomass power technologies is being proposed under the “Biomass Mission”.

1.1.2 Develop strategic plan for sustained adoption of biomass power technologies through a consultative process involving all key stakeholders

• A few workshops have been conducted; however, there is no evidence of a consultative process for development of a plan. • Mr. VK Jain mentioned to us that since the MNRE has been supporting development of the biomass power sector for the last 2 decades they are well aware of the issues.

Output 1.2 1.2 Technology Performance and Evaluation Benchmarks for Model Investment Projects (MIPs) Available

• Currently, the selection procedure for MIPs does not mention such parameters. • The main feature that is being considered is the proposed project innovation, such as use of Cooperatives for fuel collection, use of waste heat for cooling purposes, etc.

1.2.1 Develop benchmarks for MIP and their evaluation through a technical team

As per NPC benchmarks have been developed for selection of MIPs. Our own understanding was benchmarks were needed for measuring performance of MIPs once they are operational.

Final Report

53

Strategy Objective, Outcome, Output, Activity & Sub-Activities

Observations & remarks of the MTR Team

Output 1.3 1.3 Long-term Perspective Plan for Utilization of Wasteland and Biomass Resources for Power Generation

• Not done, no proposal on this activity in any of the annual plans. • As per MNRE this is to be done under “Biomass Mission”.

1.3.1 Study of techno-commercial viability of wasteland for biomass production for power generation

Dropped from project activities as per NPC

Outcome 2 2. Enhanced capacities and confidence of project promoters, financial institutions, regulators, policy makers, SNAs, other stakeholders through effective information development & dissemination program, along with capacity building initiatives.

• A lot of information on a variety of topics and issues has been generated under this project. • However, evidence on dissemination and use of the information is lacking.

1) Development of information

2) Dissemination of information Not required as per NPC

3) Capacity building of a set of stakeholders

Output 2.1 2.1 Increased Information Available with Project Promoters and all Stakeholders in the Focused States and their Enhanced Knowledge Base

2.1.1 Create online databases for biomass projects promotion and development in focus states

• Biomass atlas provides some online information, but as mentioned above, since the Atlas does not update consumption information, the surplus projected in the Atlas may not reflect the true picture. • Apart from this no other online database has been created under this project.

2.1.1.a Establish database on potential biomass depots

MITCON study provides some information, but is too general to be of use to a biomass power promoter.

2.1.1.b Develop project profiles DPRs are the project profiles as per NPC

2.1.1.c Develop profiles of service providers

Detailed information on suppliers of various equipments is provided in the set of studies completed so far. However, there is not effort to consolidate, organize and make the information available to potential users in an online form.

2.1.1.d Develop investment factors Not required as per NPC

2.1.1.e Develop institutional profiles Not required as per NPC

Final Report

54

Strategy Objective, Outcome, Output, Activity & Sub-Activities

Observations & remarks of the MTR Team

2.1.2 Preparation of Good Practice Documents on various aspects of biomass power plants

• Most of it is done, but they need to be legally vetted and also reviewed for practicability and acceptability by various stakeholders. • For example, PPA needs to be approved by the State Energy Regulatory Commission as well as the purchasing ESCOM. • Lastly, many of these documents existed even before this project.

2.1.2.a Prepare Model Feasibility Reports/Detailed Project Reports

Prepared & distributed to MIP promoters as per NPC

2.1.2.b Develop Model Fuel Supply Agreements

Done.

2.1.2.c Develop Model Energy Purchase/Wheeling/Banking Agreement

Done.

2.1.2.d Develop Model Project Development Agreements

Done.

2.1.2.e Develop Project Management and Information Systems

Yet to be done.

Output 2.2 2.2 Improved Capacity of Key Stakeholders and Project Promoters in the Targeted States

• Dissemination and capacity building have not been done in a planned and focused manner. • No evidence to say that awareness has been significantly increased in target states.

2.2.1 Communication & Advocacy BioEnergy India is being uploaded on the website, ongoing activity

2.2.2 Improve access to information through website

Done, ongoing activity

2.2.3 Develop & test Capacity Building Modules in Focus states

As per NPC to be done once MIPs are set up

2.2.4 Conduct Information & Knowledge Sharing programmes through organized study tours/missions involving focused states

Done, but not in a focused manner to ensure a clearly designed goal.

2.2.5 Support for Fellowships/Participation in National/International events

As per NPC, a delegation of 3 members was deputed to Germany for 17th International

Outcome 3 3. Development of business, commercial and support services networks in focused States.

• 2 fuel-linkage models have been demonstrated in Punjab and Maharashtra. • Study has been conducted to identify equipment needed to organize collection of biomass from distributed sources. • Model Farmers Cooperative is being set up in Punjab and Haryana to ensure better collection of biomass.

Final Report

55

Strategy Objective, Outcome, Output, Activity & Sub-Activities

Observations & remarks of the MTR Team

Output 3.1 3.1 Biomass Activities Mainstreamed into the Existing Institutional Framework - NGOs, Women/SHGs, Micro-lending Institutions and Intermediaries in the Focused States

Yet to be done. The activities under this outcome are mainly related to organizing biomass supply. No activity has been initiated on improving support services for biomass gasifier plants, especially on building capacity to repair and maintain small gasifiers and engines in remote areas.

3.1.1 Study of required institutional mechanisms for biomass power project development

Not Required as per NPC

3.1.2 Evaluate existing commercial and institutional framework in focus states for their suitability to promote biomass projects

Not Required Geographical Coverage

had been enlarged- All States & UTs

3.1.3 Provide orientation to select institutions on the institutional requirements to participate in biomass power sector development

Not Required as per NPC

Output 3.2 3.2 Preparation of Master Plan for Creation of Dynamic and Sustainable Institutional Framework

Yet to be done.

3.2.1 Develop master plan for development of institutional mechanisms in the focused states

As per NPC in progress. But we have not information on the status or who has been assigned the task.

Outcome 4 4. Creation of fund for contingent financing

Work is under progress. The initial plan was to anchor this activity with IREDA, with funding from KfW. However, after the withdrawal of KfW from this project, a study was carried out by E&Y to assess the interest and readiness of other financial institutions such as banks, etc. Based on the study, and EOI was called for and 18 institutions have responded.

Output 4.1 4.1 Innovative Financing Schemes Designed and Feasibility of Viable Institutional Models Established

Currently, E&Y is working on structuring the Contingent funding. However, financing for biomass combustion-based technology projects has not been a key barrier as it has been for gasification-based projects. Further, with MNRE offering capital subsidies under this project, the need for offering and managing contingent funding is only related to additionality being proposed under

Final Report

56

Strategy Objective, Outcome, Output, Activity & Sub-Activities

Observations & remarks of the MTR Team

the MIPs.

4.1.1 Select Financial Institutions for creation of Contingent Fund for financing biomass power plants in target sectors

4.1.2 Design financial structuring models for MIPs utilizing Contingent Funds

As per NPC this has been done. However, we have not been provided information on this. What is available is how funds would flow under Contingent Funds to each MIP.

4.1.3 Design a non-FI specific Guarantee Mechanism

Not being done. As per NPC it is to

be taken up if required during

implementation of MIPs.

Outcome 5 5. Model Investment Projects (MIPs) • Currently, 87 application covering biomass combustion, gasification, innovative fuel-linkage mechanisms, etc., have been received based on an invite for EOIs for MIPs. • 8 proposals for fuel supply linkages and 12 proposal for establishment of 1-2 MW capacity cogeneration / decentralise power generation have been short listed for further development including preparation of DPR, financial tie - ups statutory approvals / clearances etc.

Output 5.1 5.1 Commissioning and Stabilization of MIPs

Not done. Work is in progress.

5.1.1 Generate project pipeline for selection of MIPs

Done.

5.1.2 Effect financial closure and commission MIPs

Not done.

Output 5.2 5.2 Documentation on Lessons Learned and Evolution of Replication Strategy Plan

Not done.

5.2.1 Monitor and document performance of MIPs for recommending replication strategies

Not done.

Project Management Ongoing activity

Monitoring & Evaluation Ongoing activity

Final Report

57

10.0 Annex E - Project Planning Matrix

Removal of Barriers to Biomass Power Generation in India, Phase I

Project Planning Matrix (PPM) or Log Frame

Strategy Indicators Baseline Target Sources of Verification Assumptions

Development Objective: To accelerate the adoption of environmentally sustainable biomass power technologies for captive and distributed biomass materials in niche areas, through demonstration of project development models and establishment of sustainable business/support services network and undertaking enabling activities for removal of the key barriers.

Rate of commercial adoption of sustainable biomass power technologies in key states in India

No Model Investment Projects exist.

By the end of Phase 1, 7 MIP’s contracted covering co generation, gasification and combustion technologies in 3-5 different states in India.

Project documentation on agreements signed for MIPs in Phase I, and data from Ministry of Power and the MNES (MNRE)

Conducive policy & regulatory framework for bio-mass power projects gets sustained over the project and follow up period

Final Report

58

Outcome 1: Technology package benchmarking and validation for different biomass power technologies, including feasibility of energy plantation.

Status of manufacturing capacities and standards for different biomass power technologies.

Poor reliability and inadequate information of biomass power technologies, both captive and distributed and on projects available to the major stakeholders.

By the end of phase 1, the parameters and technical standards for the efficient biomass power technologies targeted by the project have been finalized.

Project documentation and information from the dedicated ministries and institutions

Available information on existing capacities and comparable data / information to establish standards and benchmarks

Outcome 2: Enhanced capacities and confidence of project promoters, financial institutions, regulators, policy makers, SNAs, other stakeholders through effective information development & dissemination program, along with capacity building initiatives.

Enhanced capacities of key stakeholders involved in the facilitation and implementation of selected biomass power technologies

Wide variation in policy and regulatory environment and inadequate information on various aspects of BPP and bagasse cogeneration in sugar industries, to project developers and other key stakeholders.

By the end of phase 1, pilot portfolio of project profiles developed, model formats/agreements established for the targeted biomass technologies (on fuel supply, energy purchase, project development and management) and promotional material and awareness raised significantly in pilot states.

Documentation from practice documents, established data bases and their usage, together with workshops and training tours

Biomass power remains as a major focus for renewable energy power development in the target states and at the national level

Outcome 3: Development of business, commercial and support services networks in focused States.

Definition and implementation of biomass power business dissemination models in the project pilot states.

Inadequate Institutional Framework at National, Regional and Local Levels for large scale multiplication of biomass power technology and projects.

By the end of phase 1, the appropriate biomass power business models have been widely disseminated and established in the initial pilot states.

Dissemination program and user feedback from workshops and seminars held on biomass power business, together with Master Plans for dissemination and follow up

Biomass remains a focus within the promotion of RET on the state and national level, and commercial interest increases together with improved support and services network build up

Final Report

59

Outcome 4: Creation of fund for contingent financing.

Contingent financing fund with initial deal flows in operation through designated financial institutions

Inadequate skills, experience and commitment to provide finance to biomass power projects.

By the end of phase 1, 7 MIP’s successfully facilitated by the contingent financing facilities made available through the selected financial institutions, together with the full design of a non financial institutions specific guarantee mechanism.

Documentation from contingent fund operator and from selected financial institutions on biomass power deals. National level data from MNES (MNRE) and MOP, both at state and national level on biomass power investments and generation permits

Minimum level of interest and commitment from potential financial institutions

Outcome 5: Model Investment Projects (MIPs)

Model investment projects (MIP) commissioned and implementation started.

Models for implementing BPP do not exist either for captive or distributed biomass resources.

By the end of phase 1, 7 model investment projects will have been successfully commissioned and have started initial implementation in 3-5 states demonstrating the 3 different biomass power technologies targeted.

Project documentation and information from dedicated financial institutions, on the MIPs

Continued political interest and commitment on the state and national level

Final Report

60

11.0 Annex F – Phase I Year-wise Progress

Removal of Barriers to Biomass Power Generation in India, Phase I

Progress towards achieving Development Objectives

Strategy Level at 30 June 2007 Level at 30 June 2008 Level at 30 June 2009 Level at 30 June 2010

Development Objective: To accelerate the adoption of environmentally sustainable biomass power technologies for captive and distributed biomass materials in niche areas, through demonstration of project development models and establishment of sustainable business/support services network and undertaking enabling activities for removal of the key barriers.

Barriers to Biomass Power initially identified via discussions with State Nodal Agencies (SNAs) and experts.

Detailed studies being conducted to ascertain State-wise barriers to biomass power. Project Management Cell fully functional. Studies being reviewed for taking up appropriate MIPs.

i) Studies related to identification of barriers, resource assessment, evaluation of performance of the existing biomass power plants and reviews of policy & regulatory frame work have been completed. ii) Financial support provided to two Demonstration Projects for establishing Biomass Fuel Supply Linkages in the State of Maharashtra (Shree SSK Pandurang Pvt. Ltd., Solapur) and Punjab (M/s Malwa Power Ltd., Muktsar). iii) Proposals received against EOIs for establishment of Model Investment Projects (MIPs) are currently under evaluation by an Evaluation Committee.

Final Report

61

Outcome 1: Technology package benchmarking and validation for different biomass power technologies, including feasibility of energy plantation.

Adopt already developed software tools to process and produce the digital maps by distributing the statistical and survey information using Artificial Intelligence techniques.

Studies were being formulated

The following studies are being conducted by MITCON: • Review of Technologies• Performance Evaluation of Biomass Power Plants. Additionally, a round table conference of machinery (boiler & turbine) suppliers was conducted to identify technological barriers. A study awarded to CGPL will review the Biomass Atlas and include biomass from wasteland in the database. The database will be made in a user-friendly manner and this comprehensive Atlas will be placed on MNRE website.

Some of the important studies completed are: i) Review of performance of the grid connected biomass power plants installed in India; ii) Utilization of rice husk for providing electricity in rural areas; iii) Feasibility of briquetting of agro-residues; iv) Bagasse cogeneration in smaller sugar mills; v) Management of field distributed crop residues; vi) Updating of Biomass Resource Atlas;vii) Review Report on the State of - the - Art Technologies commercially available worldwide on fuel stock processing and combustion of Biomass in multi fuel boilers;

Final Report

62

Outcome 2: Enhanced capacities and confidence of project promoters, financial institutions, regulators, policy makers, SNAs, other stakeholders through effective information development & dissemination program, along with capacity building initiatives.

Work not initiated • MITCON is conducting a study on Policy and Regulatory Framework currently in place in Developed and Developing Countries vis-à-vis in India. • Additional studies initiated covering Major Barriers for sustained operation of BPP • Report on Guidelines / Norms for –catchment area, Identification of Sites for establishment of biomass depots, and mapping of potential sites for biomass depots is expected in Jul 09. • Preparation of Feasibility Report is underway for setting up large capacity (up to 25 MW) biomass based power plants. • A meeting and dissemination programmes planned for 4th quarter of 2009.

Some of the important studies completed are: i) Review of Policy Framework; ii) Major Barriers for sustained operation of Power Plants; and iii) Development of Generic Guidelines / Norms.

Final Report

63

Outcome 3: Development of business, commercial and support services networks in focused States.

Work not initiated. Evaluation of institutional framework by involving NGOs is planned for IV quarter of 2009.

Study completed for developing, comprehensive Mechanism/ Models as well as deployment of appropriate agricultural machinery for management of field distributed as well as captive biomass / crop residues for sustained operation of the plants. Based on the outcome of this study, EOI for establishment of Fuel Supply Linkages in the existing Power Plants to demonstrate improvement in sustainability and economic viability was formulated. Assessment is also being done to involve NGOs for the fuel-linkage activity.

Outcome 4: Creation of fund for contingent financing.

Work not initiated A meeting with nationalized as well as private banks, and other financial institutions arranged to assess their interest in and commitment to biomass power projects and for contingent financing fund.

Received 18 Expression of Interest from National level Financial Institutions for operation of contingent fund for MIPs. Received 87 proposals for 3 categories of MIPs. Study awarded for development of restructured financial models and short listing of financial institutions for operation of contingent funds.

Final Report

64

Outcome 5: Model Investment Projects (MIPs)

Work not initiated ToR developed for inviting expression of interest to develop MIPs.

The studies brought out the scope for enlarging the nature and geographical area for taking up model investment projects in order to demonstrate the best practices for setting up sustainable biomass based project. Need for demonstrating viability of smaller capacity project up to 2 MW in view of a reduced risk in terms of biomass fuel linkage and capacity to reduce transmission losses also was brought out in the studies. Therefore PSC approved revised pattern and capacity for MIPs. Based on the outcome of various studies, EOIs were formulated for setting up MIPs focusing on removal of barriers related to Technology, Size and Sustainability and were issued for inviting proposals for the following: i) Establishment of Model Investment Projects (MIPs) based on Biomass Combustion and Biomass Gasification Technologies for grid connected projects. ii) Establishment of Fuel Supply Linkages in existing Biomass / Bagasse Cogeneration Power

Final Report

65

Plants iii) Establishment of 1-2 MW Biomass Projects for Cogeneration in Small and Medium Enterprises (SME) viz., Oil Extractions Plants, Khandsari Udyog etc. and for Decentralized Distributed Power. Total 87 applications have been received which are currently under evaluation.

Final Report

66

12.0 Annex G – Estimate of GHG Emission Reduction

Potential at SPSSKL

GHG Emission Reduction - Shree Pandurang SSKL (SPSSKL)

Shree Pandurang SSKL, Shreepur, Maharashtra

Design Value 2005-06 2006-07 2007-08

Operating Cycle, days:

On Season 160 257 231 292 Off Season (on saved & procured bagasse) 170 73 80 74

Total days operation 330 330 311 366

Generation, million kWh

Rated Capacity, MW 9.0 9.0 9.0

Operating Days 330 311 366

Gross Generation (GWh) 10.36 55.44 57.93

Export Sales (GWh) 9.09 44.96 48.84

Own Use (by difference) (GWh) 1.27 10.48 9.09

% Own Use 12.26% 18.90% 15.69%

Plant Capacity Factor, % of rated 14.53% 82.53% 73.28%

GHG Emission Calculation: (9.0 MW Cogen Plant) 2005-06 2006-07 2007-08

Net export to grid, kWh 90,90,000 4,49,60,000 4,88,40,000

GHG Emission Factor for Grid Electricity - Combined Margin of NEWNE13 (kg CO2/kWh) 0.900

Total GHG Emission Reduction by SPSSKL: GHG Emission Reduction vs. Indian Grid Combined Margin of NEWNE kg CO2/year 81,81,000 4,04,64,000 4,39,56,000

tCO2/year 8,181 40,464 43,956

Additional GHG Emission Reduction Attributable to Fuel Linkage Project

It is limited to the extent of cane trash use which is the innovation facilitated by this GEF-project. SPSSKL estimates that about 10% of total biomass fuel consumed by them is cane trash. The GCV of cane trash as per SPSSKL is 3,800-4,000 kcal/kg as compared to 2,200-2,300 kcal/kg for bagasse. Therefore, cane trash in bagasse energy equivalent terms in this case would be 1.73 times.

13 As per “CO2 Baseline Database for the India Power Sector”, Version 6.0, March, 2011, Central Electricity Authority, Ministry of Power, GoI.

Final Report

67

This means every tonne of cane trash is equal to 1.73 tonnes of bagasse. Thus, if cane trash has been used up to 10% by weight, then it would have replaced 17.3% of bagasse as fuel. Therefore, the additional GHG emissions reduction on account of use of cane trash as fuel is 17.3% of total generation of Pandurang SSKL.

This works out to 17.3% of 43,956 tCO2/year which is 7,604.3338 tCO2/year.

Final Report

68

13.0 Annex H – Estimate of GHG Emission Reduction at

Malwa Power Plant

GHG Emission Reduction - Malwa Power (P) Limited (MPPL)

Malwa Biomass Power Plant (MPPL) Design Value 2005-06 2006-07 2007-08

Rated Capacity, MW 7.5

Generation, million kWh:

Rated Capacity, MW 7.5

Operating Days (calculated from PLF) 307 321 336

Gross Generation (GWh) 65.00

Export (GWh) 58.00

Own Use (GWh) 7.00

% Own Use 10.77%

Plant Capacity Factor, % of rated Malwa 84.00% 88.00% 92.00%

GHG Emission Calculation: (7.5 MW) 2005-06 2006-07 2007-08

Export to grid, kWh 4,87,20,000 5,10,40,000 5,33,60,000

GHG Emission Factor of India14 (kg CO2/kWh): 0.900 GHG Emission Reduction vs. Indian Grid Combined Margin of NEWNE: kg CO2/year 4,38,48,000 4,59,36,000 4,80,24,000

tCO2/year 43,848 45,936 48,024

Additional GHG Emission Reduction Attributable to Fuel Linkage Project

About 25% of the total fuel used by Malwa Power Plant is conservatively estimated to have been enabled due to the Fuel Linkage Project support by this GEF project. Hence 25% of total GHG emissions reductions may be attributable to this project, which is 12,006 tCO2/year.

14 As per “CO2 Baseline Database for the India Power Sector”, Version 6.0, March, 2011, Central Electricity Authority, Ministry of Power, GoI.

Final Report

69

14.0 Annex I - Terms of Reference

(Reference NO. UNDP/SSA/2011/02): MID-TERMINAL EVALUATION REMOVAL OF BARRIERS TO BIOMASS POWER GENERATION IN INDIA, PHASE I

I. INTRODUCTION:

a) Overview:

In the year 2004 when this project was initiated, more than 70% of the installed capacity was based on fossil fuels, mainly coal. It was estimated that the available biomass for potential power generation in India was estimated at 540 million tonnes per year. The total biomass power potential estimated in the year 2004 is at 18,000-23,000 MW, of which approximately 6,000 to 7,000 MW of power could be contributed by the industrial sectors like sugar, rice mills, and oil mills. The balance would be derived from distributed biomass resources. In addition to these existing resources, about 70 million hectares of wasteland can be made available for raising energy plantations. The Ministry of New and Renewable Energy (MNRE) recognizes this potential. MNRE, State governments, Central and State Regulatory Commissions have developed a number of policy instruments and financial incentives to support bioenergy development. Despite this, empirical evidence shows that the rate of spread of bio-energy technologies is rather low. This is because of the existence of institutional, technical, informational, market and financial barriers.

Problems/barriers targeted under the project: In general, the deployment of biomass power generation technologies has been slow when compared to the availability of biomass. The difficulties faced in the implementation of biomass power projects may differ slightly depending upon whether the projects are drawing their biomass resources from a captive source (sugar, rice mills, etc.) as opposed to a distributed source (cotton stalks, mustard or rape seed stalks etc.).

The common barriers constitute: (i) insufficient capacity of the stakeholders and inadequate institutional and policy framework at the national, regional and local levels; (ii) lack of institutional and regulatory framework in dealing biomass power projects such as distribution and sale of electricity, (iii) absence of commercial and service networks (e.g. biomass depots for collection, transportation and delivery of biomass fuels) at the national, regional and local levels; (iv) limited access to financing and lack of interest on part of the State Electricity Boards (SEBs) in promoting biomass power generation, and (v) absence of effective information dissemination related to the availability of biomass and suitable technologies.

b) UNDP/GEF Monitoring and Evaluation (M&E) policy:

The M & E policy at the project level in UNDP/GEF has four objectives: (i) to monitor and evaluate results and impacts; (ii) to provide a basis for decision making on necessary amendments and improvements; (iii) to promote accountability for resource use; and (iv) to document, provide feedback on, and disseminate lessons learned. A mix of tools is used to ensure effective project M&E. These might be applied continuously throughout the lifetime of the project, e.g., periodic monitoring of indicators, or as specific time-bound exercises such as mid-term reviews, audit reports and final evaluations.

c) Project Objectives:

The objective of this two-phase project is to remove barriers to the increased use of biomass energy sources for generating electricity for own consumption and export to the grid. This project aims to accelerate the adoption of environmentally sustainable biomass power and cogeneration

Final Report

70

technologies in India. It will promote combustion, gasification and cogeneration technologies for electricity generation using different types of captive and distributed biomass resources. The project will focus on biomass power projects to be undertaken in three different specific contexts: cooperative sugar mills; agro-processors and biomass producers; and distributed or decentralized biomass. The project strategy is to focus attention on a limited set of States that have plentiful biomass supplies and favourable policy and regulatory environments. It will utilize technical assistance focused on removing the remaining technical, regulatory and institutional barriers to widespread use of biomass power. It will then utilize investment risk mitigation support to promote repeated investments in biomass power generation projects. Phase I of the project will provide technical assistance and investment support in a limited number of states. Phase II will focus on providing support for risk mitigation to stimulate further replication investments across the targeted sectors and will allow for participation in a wider selection of states, once their policy and regulatory environment become more favourable to biomass power. This project relates to activities and financing approved for Phase I of the project only.

II. OBJECTIVES OF THE EVALUATION:

The GEF expects to ensure that its projects are monitored and evaluated regularly. By this exercise, GEF aims to promote accountability for achievement of GEF objectives through the assessment of results, effectiveness, processes, and performance of the partners involved in GEF activities. The results need to be monitored and evaluated for their contribution to global environmental benefits.

The project in the title is a full-size project, of a total duration of three years, and is operational from September 2006 and is still ongoing. This project has barely reached a mid-way point in terms of physical and financial delivery. In accordance with UNDP/GEF M&E policies and procedures, all regular projects supported by the GEF should undergo a mid-term and final evaluation. The mid-term evaluations are intended to assess the relevance, performance and success of the project. It looks at early signs of potential impact and sustainability of results, including the contribution to capacity development and the achievement of global environmental goals. It will also identify/document lessons learned and provide recommendations that might improve design and implementation of UNDP/GEF projects.

III. SCOPE OF THE EVALUATION – SPECIFIC ISSUES TO BE ADDRESSED:

In addition to elaborating on the Midterm Evaluation Report Outline listed in Item IV, the evaluation team should also comment upon the following specific issues:

• Report on the progress against Objective, each Outcome, Output, Activity (including sub-activities) and impact indicators listed in the project document. How far the project has reached on the overall objective and outcome; the timelines and how these will be completed within the extended project duration, i.e. till 31 March 2012.

• A commentary may also be made on the “Expected Situation at the end of the Project” as envisioned at the mid-term evaluation stage and recommendations, if any required, for accelerating the pace of work. Comment on how the GEF’s overall objective of Greenhouse Gases Emission reduction will be met with – (1) during the life of the project; and (2) for the replication potential;

• Analyze impact of withdrawal of funding support by KfW (funding partner), whether the project is still sustainable without this support and what should be done to fill the gap if any;

• Comment on the present constraints to project implementation, if any, for all the three envisaged models, i.e. combustion, gasification and cogeneration models and possible corrective actions. Please analyze the fuel linkage models to demonstrate sustained

Final Report

71

operation of the biomass power plant and improvement in plant load factor. Also analyze its contribution and shortfall to the listed outcomes expected in the project document;

• The PMC has identified niche area for projects of 1-2 MW power capacity and extended the geographical focus to all the states across India. This was also endorsed by the PSC. Whether this is in consonance with the original proposal? If not, analyze the implications that may happen due to this change than what was proposed in project document. One of the proposal (commissioned by KfW) during the project was to set up few large size MIPs and few small size MIPs. Please analyze the niche area identified through KfW commissioned assignment;

• Analyze the technical assistance listed in the project document v/s. what is adopted as a part of the project strategy and its best use under the current circumstances. Please also analyze the provision of Contingent Financing proposed in the project, its relevance and the scope of application in the project activities. How will it impact on the replication strategy of the project;

• Comment on risks and assessment of barriers specific to MIPs, including financing barriers and their adoption in the project activities. How could these be better addressed;

• Policy impact of the project, if made, including change in decision making, the guidelines at the MNRE level, if any happened/envisaged.

• Appropriateness of the institutional arrangement and whether there was adequate commitment to the project. Will the project be sustainable after planned date of operational closure? If not, what are the suggestions to make it sustainable?

• The effectiveness of current monitoring and overseeing systems such as Project Steering Committee and suggestion on improvements, if any.

• Utilization of resources (including human and financial) towards producing the outputs and adjustments made to the project strategies and scope.

• Details of co-funding provided (GoI subsidies, MNRE cash/in-kind co-funded activities, and that of others, if any) and its impact on the activities may also be provided. A “Financial Planning Co-financing” format is enclosed in Annex 1 for reporting;

• Comments on Information dissemination activities undertaken for the development and benefit of the sector and the role played by the stakeholders in the project. Analyze the importance of establishing a website dedicated for the project.

• Comments on the awareness programmes, trainings undertaken and the quality of awareness material, like quarterly newsletters, project website and the brochure/ manuals other documents, if generated any.

Annex 1 contains guidance on the GEF Project review criteria and explanation of terminology provided in the GEF Guidelines to Evaluations.

Cross Cutting Issues:

Considering that UNDP is concerned about poverty reduction, local governance and promotion of gender equity, the team may look at these cross-cutting issues and comment if the project had any linkages and any achievement on these objective has been through.

At its discretion, the team is free to include any other additional comments that are felt worth reporting.

IV. PRODUCTS EXPECTED FROM THE EVALUATION:

The total duration of the review and the finalization of report are 30 days, including a four to six days visit to the field. At the end of 15 days, the team leader will submit and present, for comments, his/her draft report to a meeting consisted of UNDP, MNRE, Implementing/Partnering

Final Report

72

Agencies, Ministry of Environment & Forests and other members of the Project Steering Committee. The draft report and the final report will also be shared with UNDP’s Regional Coordinating Unit, GEF M&E office, in addition to UNDP for comments. After incorporating the comments, the team leader will submit the final report to UNDP, New Delhi (including an electronic copy). The length of the report should not exceed 50 pages, in total. While the contract for emolument purposes will be for 30 days, incorporating the comments, reviewing the draft report/its finalization and formal submission, in no case, should exceed a total period of 45 days.

If there are discrepancies between the impressions and findings of the evaluation team and the aforesaid parties, these should be explained in a separate sheet to be attached to the final report.

The Evaluation Report Outline should be structured along the following lines:

1. Executive Summary 2. Introduction 3. The project and its development context 4. Findings and Conclusions

4.1 Project formulation 4.2 Implementation 4.3 Results

5. Recommendations 6. Lessons learned 7. Annexes

V. METHODOLOGY OR EVALUATION APPROACH:

The evaluation approach will combine methods such as documentation review (desk study); interviews; and field visits. All relevant project documentation will be made available by the project management team, facilitated by UNDP. After studying the documentation the team will conduct interviews with all relevant partners including the beneficiaries. Validation of preliminary findings/reports with stakeholders will happen through circulation of initial reports for comments or other types of feedback mechanisms.

The consultants should provide details in respect of:

• Documents reviewed; • Interviews; • Field visits; • Questionnaires, if any; • Participatory techniques and other approaches for gathering and analysis of data; and • Participation of stakeholders and/or partners.

VI. EVALUATION TEAM:

The evaluation team will comprise of an international and a local consultant. The international consultant will be the team leader and coordinate the consultancy to ensure quality of the report and timely submission. The local consultant will provide supportive roles both in terms of professional back up, translation etc. The team should have:

International consultant:

Final Report

73

Professional background in development field, renewable energy technologies (preferably biomass power) or climate change. A minimum of 10 years of working experience is required;

Highly knowledgeable of participatory monitoring and evaluation processes, and experience in evaluation of technical assistance projects with major donor agencies;

Familiar with renewable energy policies/conditions in India and abroad through management and/or implementation or through consultancies in evaluation of donor funded projects. Understanding of CO2 emission reduction calculations, that contribute to global benefits;

Familiar with GEF rules, regulations and project evaluations;

Demonstrated ability to assess complex situations, succinctly, distil critical issues, and draw forward-looking conclusions and recommendations;

Ability and experience to lead multi disciplinary and national teams, and deliver quality reports within the given time.

Writing and communication will be in English, and he/she must have excellent communication skills in English. The consultant must bring his/her own computer/ laptop and related equipment.

Local consultant:

Professional background in development field, renewable energy technologies, including biomass gasifiers, combustion and cogeneration technologies, or climate change mitigation expertise with a minimum of 8 years of relevant experience;

Demonstrated skills and knowledge in participatory monitoring and evaluation processes;

Extensive experience in monitoring and evaluation of development projects, supported by major donor agencies;

Knowledgeable of renewable energy policies/conditions in India and abroad through management and/or implementation or through consultancies in evaluation of donor funded projects.

Proficient in writing and communicating in English. The consultant to bring his/her own computer/laptop and related equipment.

VII. IMPLEMENTATION ARRANGEMENTS:

Management arrangements:

Throughout the period of the evaluation, the evaluation team will liaise closely with the UNDP Country Director, the concerned agencies of the Government, any members of the international team of experts under the project and the counterpart staff assigned to the project. The team can raise or discuss any issue or topic it deems necessary to fulfill its task, the team, however, is not authorized to make any commitments to any part on behalf of UNDP/GEF or the Government.

Time-frame:

Final Report

74

The team may include four to six days of site visits (may be to fuel-linkage model sites), the details of which can be worked out with the mission in due course. This visit will also include meetings with the officials of the Implementing Agency, State Nodal Agencies and any other stakeholder related to the project, including power plant owners, energy supply agencies and financial institutions.

After the initial briefing by UNDP Country Director, the evaluation team will meet with the National Project Director, the officials of IREDA, Ministry of Environment & Forests (including the GEF Focal Point) and other officials of MNRE as required.

Logistical Support:

All travel will be provided by Economy Class (if traveled by air) and by Executive/Ist Class wherever the travel by train is involved. The consultants should arrange their own travel and logistics. In case of any difficulty, the MNRE/UNDP could also facilitate hotel bookings of the team. While the consultants could pay for their ticketing and claim, UNDP could also facilitate their travel bookings. However, the schedule of travel needs to be provided well in advance.

The DSA, as applicable depending upon the place of visit, will be paid as per UNDP rates for international consultants.

The DSA, as applicable depending upon the place of visit, will be paid as per UNDP rates for national consultants.

VIII. LIST OF ANNEXES

Annex 1: Guidance on the GEF Project review criteria and explanation of terminology provided in the GEF Guidelines to Evaluations

Annex2: List of Documents to be reviewed by the evaluators

Final Report

75

Annex 1

GUIDANCE ON GEF PROJECT REVIEW CRITERIA AND EXPLANATION OF TERMINOLOGY

This Annex providing more detailed guidance on the GEF Project review criteria and explanation of terminology provided in the GEF Guidelines to Evaluations is an integral part of the attached TOR.

I Project Review Criteria

Please note that some of the categories in the findings and conclusions need to be rated in conformity with the GEF guidelines for final evaluations.

1. Executive summary

• Brief description of project • Context and purpose of the evaluation • Main conclusions, recommendations and lessons learned

2. Introduction

• Purpose of the evaluation • Key issues addressed • Methodology of the evaluation • Structure of the evaluation

3. The project(s) and its development context

• Project start and its duration • Problems that the project seek to address • Immediate and development objectives of the project • Main stakeholders • Results expected

4. Findings and Conclusions

In addition to a descriptive assessment, all criteria marked with (R) should be rated using the following divisions: Highly Satisfactory, Satisfactory, Marginally Satisfactory, Unsatisfactory

4.1. Project Formulation

§ Conceptualization/Design (R). This should assess the approach used in design and an appreciation of the appropriateness of problem conceptualization and whether the selected intervention strategy addressed the root causes and principal threats in the project area. It should also include an assessment of the logical framework and whether the different project components and activities proposed to achieve the objective were appropriate, viable and responded to contextual institutional, legal and regulatory settings of the project. It should also assess the indicators defined for guiding implementation and measurement of achievement and whether lessons from other relevant projects (e.g., same focal area) were incorporated into project design.

Final Report

76

§ Country-ownership/Driveness. Assess the extent to which the project idea/conceptualization had its origin within national, sectoral and development plans and focuses on national environment and development interests.

§ Stakeholder participation (R). Assess information dissemination, consultation, and “stakeholder” participation in design stages.

§ Replication approach. Determine the ways in which lessons and experiences coming out of the project were/are to be replicated or scaled up in the design and implementation of other projects (this also related to actual practices undertaken during implementation).

§ Other aspects. To assess in the review of Project formulation approaches would be UNDP comparative advantage as IA for this project; the consideration of linkages between projects and other interventions within the sector and the definition of clear and appropriate management arrangements at the design stage.

4.2. Project Implementation

§ Implementation Approach (R). This should include assessments of the following aspects:

(i) The use of the logical framework as a management tool during implementation and any changes made to this as a response to changing conditions and/or feedback from M and E activities if required.

(ii) Other elements that indicate adaptive management such as comprehensive and realistic work plans routinely developed that reflect adaptive management and/or; changes in management arrangements to enhance implementation.

(iii) The project's use/establishment of electronic information technologies to support implementation, participation and monitoring, as well as other project activities.

(iv) The general operational relationships between the institutions involved and others and how these relationships have contributed to effective implementation and achievement of project objectives.

(v) Technical capacities associated with the project and their role in project development, management and achievements.

§ Monitoring and evaluation (R). Including an assessment as to whether there has been adequate periodic oversight of activities during implementation to establish the extent to which inputs, work schedules, other required actions and outputs are proceeding according to plan; whether formal evaluations have been held and whether action has been taken on the results of this monitoring oversight and evaluation reports.

§ Stakeholder participation (R). This should include assessments of the mechanisms for information dissemination in project implementation and the extent of stakeholder participation in management, emphasizing the following:

(i) The production and dissemination of information generated by the project.

(ii) Local resource users and NGOs participation in project implementation and decision making and an analysis of the strengths and weaknesses of the approach adopted by the project in this arena.

Final Report

77

(iii) The establishment of partnerships and collaborative relationships developed by the project with local, national and international entities and the effects they have had on project implementation.

(iv) Involvement of governmental institutions in project implementation, the extent of governmental support of the project.

§ Financial Planning: Including an assessment of:

(i) The actual project cost by objectives, outputs, activities

(ii) The cost-effectiveness of achievements

(iii) Financial management (including disbursement issues)

(iv) Co-financing [1]

§ Sustainability. Extent to which the benefits of the project will continue, within or outside the project domain, after it has come to an end. Relevant factors include for example: development of a sustainability strategy, establishment of financial, environmental and economic instruments and mechanisms, mainstreaming project objectives into the economy or community production activities.

§ Execution and implementation modalities. This should consider the effectiveness of the UNDP counterpart and Project Co-ordination Unit participation in selection, recruitment, assignment of experts, consultants and national counterpart staff members and in the definition of tasks and responsibilities; quantity, quality and timeliness of inputs for the project with respect to execution responsibilities, enactment of necessary legislation and budgetary provisions and extent to which these may have affected implementation and sustainability of the Project; quality and timeliness of inputs by parties responsible for providing inputs to the project, and the extent to which this may have affected the smooth implementation of the project.

4.3. Results

§ Attainment of Outcomes/ Achievement of objectives (R): Including a description and rating of the extent to which the project's objectives (environmental and developmental) were achieved using Highly Satisfactory, Satisfactory, Marginally Satisfactory, and Unsatisfactory ratings. If the project did not establish a baseline (initial conditions), the evaluators should seek to determine it through the use of special methodologies so that achievements, results and impacts can be properly established.

§ This section should also include reviews of the following:

§ Sustainability: Including an appreciation of the extent to which benefits continue, within or outside the project domain after GEF assistance/external assistance in this phase has come to an end.

Contribution to upgrading skills of the national staff.

The positive and negative results, and foreseen and unforeseen, changes to and effects produced by a development intervention. In GEF terms, results include direct project outputs, short-to-medium term outcomes, and longer-term impact, including global environmental benefits, replication effects and other, local effects.

Final Report

78

5. Recommendations

• Corrective actions for the design, implementation, monitoring and evaluation of the • project • Actions to follow up or reinforce initial benefits from the project • Proposals for future directions underlining main objectives

6. Lessons learned

This should highlight the best and worst practices in addressing issues relating to relevance, performance and success.

7. Evaluation report Annexes

§ Evaluation TORs § Itinerary § List of persons interviewed § Summary of field visits § List of documents reviewed § Questionnaire used and summary of results § Comments by stakeholders (only in case of discrepancies with evaluation findings and conclusions)

II Explanation of Terminology Provided in the GEF Guidelines to Evaluations

Implementation Approach includes an analysis of the project’s logical framework, adaptation to changing conditions (adaptive management), partnerships in implementation arrangements, changes in project design, and overall project management.

Some elements of an effective implementation approach may include:

• The logical framework used during implementation as a management and M&E tool • Effective partnerships arrangements established for implementation of the project with

relevant stakeholders involved in the country/region • Lessons from other relevant projects (e.g., same focal area) incorporated into project

implementation • Feedback from M&E activities used for adaptive management

Country Ownership/Driveness is the relevance of the project to national development and environmental agendas, recipient country commitment, and regional and international agreements where applicable. Project Concept has its origin within the national sectoral and development plans

Some elements of effective country ownership/driveness may include:

• Project Concept has its origin within the national sectoral and development plans • Outcomes (or potential outcomes) from the project have been incorporated into the

national sectoral and development plans • Relevant country representatives (e.g., governmental official, civil society, etc.) are

actively involved in project identification, planning and/or implementation • The recipient government has maintained financial commitment to the project • The government has approved policies and/or modified regulatory frameworks in line with

the project’s objectives

Final Report

79

For projects whose main focus and actors are in the private-sector rather than public-sector (e.g., IFC projects), elements of effective country ownership/driveness that demonstrate the interest and commitment of the local private sector to the project may include:

The number of companies that participated in the project by: receiving technical assistance, applying for financing, attending dissemination events, adopting environmental standards promoted by the project, etc.

Amount contributed by participating companies to achieve the environmental benefits promoted by the project, including: equity invested, guarantees provided, co-funding of project activities, in-kind contributions, etc.

Project’s collaboration with industry associations

Stakeholder Participation/Public Involvement consists of three related and often overlapping processes: information dissemination, consultation, and “stakeholder” participation. Stakeholders are the individuals, groups, institutions, or other bodies that have an interest or stake in the outcome of the GEF-financed project. The term also applies to those potentially adversely affected by a project.

Examples of effective public involvement include:

• Information dissemination • Implementation of appropriate outreach/public awareness campaigns • Consultation and stakeholder participation • Consulting and making use of the skills, experiences and knowledge of NGOs,

community and local groups, the private and public sectors, and academic institutions in the design, implementation, and evaluation of project activities

Stakeholder participation

Project institutional networks well placed within the overall national or community organizational structures, for example, by building on the local decision making structures, incorporating local knowledge, and devolving project management responsibilities to the local organizations or communities as the project approaches closure

Building partnerships among different project stakeholders

Fulfillment of commitments to local stakeholders and stakeholders considered to be adequately involved.

Sustainability measures the extent to which benefits continue, within or outside the project domain, from a particular project or program after GEF assistance/external assistance has come to an end. Relevant factors to improve the sustainability of project outcomes include:

• Development and implementation of a sustainability strategy • Establishment of the financial and economic instruments and mechanisms to ensure the

ongoing flow of benefits once the GEF assistance ends (from the public and private sectors, income generating activities, and market transformations to promote the project’s objectives)

• Development of suitable organizational arrangements by public and/or private sector • Development of policy and regulatory frameworks that further the project objectives • Incorporation of environmental and ecological factors affecting future flow of benefits

Final Report

80

• Development of appropriate institutional capacity (systems, structures, staff, expertise, etc.)

• Identification and involvement of champions (i.e. individuals in government and civil society who can promote sustainability of project outcomes)

• Achieving social sustainability, for example, by mainstreaming project activities into the economy or community production activities

• Achieving stakeholders consensus regarding courses of action on project activities

Replication approach, in the context of GEF projects, is defined as lessons and experiences coming out of the project that are replicated or scaled up in the design and implementation of other projects. Replication can have two aspects, replication proper (lessons and experiences are replicated in different geographic area) or scaling up (lessons and experiences are replicated within the same geographic area but funded by other sources). Examples of replication approaches include:

• Knowledge transfer (i.e., dissemination of lessons through project result documents, training workshops, information exchange, a national and regional forum, etc)

• Expansion of demonstration projects • Capacity building and training of individuals, and institutions to expand the project’s

achievements in the country or other regions • Use of project-trained individuals, institutions or companies to replicate the project’s

outcomes in other regions

Financial Planning includes actual project cost by activity, financial management (including disbursement issues), and co-financing. Effective financial plans include:

• Identification of potential sources of co-financing as well as leveraged and associated financing[2].

• Strong financial controls, including reporting, and planning that allow the project management to make informed decisions regarding the budget at any time, allows for a proper and timely flow of funds, and for the payment of satisfactory project deliverables

• Due diligence in the management of funds and financial audits

Co financing includes: Grants, Loans/Concessional (compared to market rate), Credits, Equity investments, In-kind support, Other contributions mobilized for the project from other multilateral agencies, bilateral development cooperation agencies, NGOs, the private sector and beneficiaries. Please refer to GEF Council documents on co-financing for definitions, such as GEF/C.20/6.

Leveraged resources are additional resources—beyond those committed to the project itself at the time of approval—that are mobilized later as a direct result of the project. Leveraged resources can be financial or in-kind and they may be from other donors, NGO’s, foundations, governments, communities or the private sector. Please briefly describe the resources the project has leveraged since inception and indicate how these resources are contributing to the project’s ultimate objective.

Cost-effectiveness assesses the achievement of the environmental and developmental objectives as well as the project’s outputs in relation to the inputs, costs, and implementing time. It also examines the project’s compliance with the application of the incremental cost concept. Cost-effective factors include:

• Compliance with the incremental cost criteria (e.g. GEF funds are used to finance a component of a project that would not have taken place without GEF funding) and securing co-funding and associated funding

Final Report

81

• The project completed the planned activities and met or exceeded the expected outcomes in terms of achievement of Global Environmental and Development Objectives according to schedule, and as cost-effective as initially planned

• The project used either a benchmark approach or a comparison approach (did not exceed the costs levels of similar projects in similar contexts)

Monitoring & Evaluation. Monitoring is the periodic oversight of a process, or the implementation of an activity, which seeks to establish the extent to which inputs, work schedules, other required actions and outputs are proceeding according to plan, so that timely action can be taken to correct the deficiencies detected. Evaluation is a process by which program inputs, activities and results are analyzed and judged explicitly against benchmarks or baseline conditions using performance indicators. This will allow project managers and planners to make decisions based on the evidence of information on the project implementation stage, performance indicators, level of funding still available, etc, building on the project’s logical framework.

Monitoring and Evaluation includes activities to measure the project’s achievements such as identification of performance indicators, measurement procedures, and determination of baseline conditions. Projects are required to implement plans for monitoring and evaluation with adequate funding and appropriate staff and include activities such as description of data sources and methods for data collection, collection of baseline data, and stakeholder participation. Given the long-term nature of many GEF projects, projects are also encouraged to include long-term monitoring plans that are sustainable after project completion.

Financial Planning Co-financing

Co financing (Type/Source)

IA own Financing (million USD)

Government

(million USD)

Other*

(million USD)

Total (million USD)

Total

Disbursement (million USD)

Planned

Actual

Planned

Actual

Planned

Actual

Planned

Actual

Planned

Actual

Grants Loans/Concessional (compared to market rate)

Credits Equity investments

In-kind support Other (*) Totals

* Other is referred to contributions mobilized for the project from other multilateral agencies, bilateral development cooperation agencies, NGOs, the private sector and beneficiaries.

Leveraged Resources -

Leveraged resources are additional resources—beyond those committed to the project itself at the time of approval—that are mobilized later as a direct result of the project. Leveraged resources can be financial or in-kind and they may be from other donors, NGO’s, foundations, governments, communities or the private sector. Please briefly describe the resources the project has leveraged since inception and indicate how these resources are contributing to the project’s ultimate objective.

Final Report

82

Annex 2

LIST OF DOCUMENTS TO BE REVIEWED BY THE EVALUATORS

INTERNAL:

• Project Document; • Project Implementation Review Report for the previous years; • Minutes of Project Steering Committee/Executive Steering Committee meetings; • Quarterly Reports; • Annual Work Plan for the year 2010 and for earlier years, if required; • Back-to-Office Reports of UNDP staff; • Terminology in the GEF Guidelines to Terminal Evaluation and the Project Review

Criteria – part II, Annex 1 of this TOR. • Any other documents the evaluators feel necessary for conducting the evaluation.

EXTERNAL:

• Familiarization with policy guidelines, subsidies and developments relating to Biomass Power sector in India and abroad;

• GEF/World Bank guidelines on GHG emission reduction calculations; • Any other documents essential for the successful conduct of the above evaluation.