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A note on Biomass Energy: Barriers and Pitfalls

 Energy is the key factor on which the economy of the nation is dependent. In a country like India which is a developing country the major dependence of the economy is on industrialization which is in turn dependent on availability of quality power. Indian Power sector has been growing at a good pace but still there has been a significant gap between the demand and supply of electricity. The period post Electricity Act 2003 has witnessed a lot of policy measures from government aimed at providing electricity to all and rationalization of pricing and improvement of efficiency and quality through invoking competition in the sector. Some of the recent highlights of the sector are as follows:



Total Installed Capacity (As on 30.04.2012) :  2,01,637 MW

Per Capita Consumption                                 : 783Kwh (Global Average2300 Kwh)


Coal has been the dominant source of supply in India contributing around 65% of the total share in the total installed capacity. The disadvantage of too much dependence on a single source has recently highlighted the loop holes of the energy security. Changes in the global pricing regulations of coal and availability of domestic coal have nearly brought the sector to a halt. But the question is that whether we have any alternate source to compensate coal. The answer in the Indian context is still no. No doubt solar and wind energy are clean technologies but they are totally dependent on natural phenomenon and have inbuilt disadvantages such as inefficiency in inter state transfer and forecasting.




Biomass has also bee identified as a renewable source of energy by MNRE and several policies have been laid down by government such as CFA and feed in tariff but there has still not been substantial improvement in the sector with huge potential for improvement. The main reason has been the financial viability of the projects being set up under various regulatory schemes of the biomass sectors.


Some of the suggestions to improve the viability are as follows;


v  The ERCs' and IREDA guided by Section 86(e) of Electricity Act 2003 and Tariff Policy have been laying down policies to promote the renewable energy sector, but the main emphasis has been on Solar and wind technologies. Although biomass has also been backed up with feed in tariff through higher return on equity as compared to conventional tariff but at the same time the issues to be addressed are the initial capital cost of the project and as well as the cost of the fuel used. The fuel price has been fixed by ERCs' on state level but what actually is happening that suppose state A is having a price of fuel lesser than state B thus in order to bring the financial viability to the project the State B imports fuel from state A thus giving rise to increase in demand of fuel in State A accompanied with increase in price of fuel in State A also. The possible mechanism that can address this issue would be an Administered Price Mechanism for the biomass fuel wherein government intervention would be required to fix price of the fuel.


v  The wind and solar energy project enjoy a must run status irrespective of the capacity which means that they will not be subjected to Merit Order Dispatch but Biomass plant with capacity above 10 MW are subjected to Merit Order dispatch and in case of the grid disturbance due to their higher tariff these project would be asked to back down leading to loss in generation and revenue for the developer. In the either case if the developer goes for a plant less than 10 MW he will not be able to get the advantage of the Economies of Scale. The biomass project have been approved by MNRE as clean technology therefore they must also be given the status of must run status.


v  The Biomass projects also form part of the renewable resources which can be utilized for RPO compliance by distribution utility. Technologies like solar and wind are being given a Generation Based Incentives for generation which has shifted the focus from capacity addition to generation which has significantly contributed to reduction in CO2 emissions in the country. Similar incentives should also be there for biomass plant.



 (AS ON 31.03.2011)


Tariff fixed by Commissions


RP0 %  


Andhra Pradesh


@Rs.4.28/kWh,(201011)  (BM)

   Rs.3.48/kWh                  (Cogen)


Min. 3.75%


@Rs.3.93/Unit (2010-11)   (BM)



@ Rs.4.40/unit (with accelerated depre.)  (BM)

@ Rs.4.55/unit (with accelerated depre.)    for 1st 10 yrs(Cogen)



@ Rs.4.00/unit                   (BM) 

@ Rs.3.74/unit                  (Cogen)   

3%escalation (base year 2007-08)



@Rs.3.66 per unit (PPA signing date)  

  Rs.4.13 (10th year)          (BM)

@ Rs.3.59/unit,  (PPA signing date)    Rs.4.14/unit (10th  Year) (Cogen)



@ Rs.2.80/unit                   (BM) escalated at  5% for five years (2000-01)



@ Rs. 4.98         (2010-11)  (BM)

@Rs.4.79/unit (Comm  yr.) (Cogen)


Madhya Pradesh

@ Rs.3.33 to 5.14 /unit paise for 20 yrs. With esc of 3- 8paise



@Rs.5.05 /unit, (2010-11)   (BM) @Rs.4.57/unit   (2010-11)   (Cogen)escalated at 5% -cogen, & 5%-BM

Min. 3%


@ Rs.4.72 / unit-water cooled (2010-11)- & Rs.5.17-air cooled(2010-11)-(BM)


Tamil Nadu

@ Rs.4.50-4.74/unit(2010-11) –  (BM)@ Rs.4.37-4.49/unit (2010-11)- (Cogen)(Escalation 2%)

Min. 13%


@ Rs.3.06/unit. (2010-11) - BM@Rs.3.12/unit (2010-11)- (Cogen) (new projects)



@ Rs.4.29 / unit, for existing and 4.38 for new with  escalated at  4 paise/year, base year (2006)


West Bengal

Rs. 4.36/unit fixed for 10 years-BIOMASS



Rs. 4.17/unit (2010-11)–BIOMASSRs.4.25/unit (2010-11) – existing  (Cogen)Rs.4.46/unit (2010-11) – new (Cogen)








CFA for Biomass Power Project and Bagasse Cogeneration Projects by Private/Joint/Coop./Public Sector Sugar Mills


Special Category States(NE Region, Sikkim, J&K, HP & Uttaranchal)

Other States

Project Type

Capital Subsidy

Capital Subsidy

Biomass Power projects

Rs.25 lakh X(C MW)^0.646

Rs.20 lakh X (C MW)^0.646

Bagasse Co-generation by Private sugar mills

Rs.18 lakh X(C MW)^0.646

Rs.15 lakh X (C MW)^0.646

Bagasse Co-generation projects by cooperative/ public sector sugar mills 40 bar & above
60 bar & above
80 bar & above


Rs.40 lakh    *
Rs.50 lakh    *
Rs.60 lakh    *
Per MW of surplus power@
(maximum support Rs. 8.0 crore per project)


Rs.40 lakh         *
Rs.50 lakh         *
Rs.60 lakh         *
Per MW of surplus power@
 (maximum support Rs. 8.0 crore per project)

  *For new sugar mills, which are yet to start production and existing sugar mills employing backpressure route/seasonal/incidental cogeneration, which exports surplus power to the grid, subsidies shall be one-half of the level mentioned above. 

Syed Saif Abbas Naqvi
Energy Security Division- Mission Bhartiyam


  1. This blog focused on Energy Market in India which is large trading industry.Due to requirement of energy increasing day by day,burden of energy prices are offset..very nice information provided in this blog, specially two sources of energy..


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