After months of deliberations, the government on June 27 said it is going to go ahead with benchmarking the prices of biomass pellets used for co-firing in Thermal Power Plants (TPPs).
On March 24, Moneycontrol reported that the government is working on a proposal to benchmark biomass pellet prices. To decide on the criteria of price determination and to standardise the costs, the Ministry of Power (MoP) has appointed a committee under the Central Electricity Authority (CEA) which will prepare a report on the same. However, the ministry has made it clear that the benchmarked price, as decided by the committee, will come into effect from January 1, 2024.
Till the time the recommendations of the committee are implemented, MoP has asked the power utilities to go for short-term tenders for meeting the immediate requirement of biomass pellets for their TPPs.
Price benchmarking of biomass pellets is being taken up because at present there is wide variation in the prices quoted by pellet vendors which often results in failed contracts with gencos. As a result, neither vendors are able to sell their pellets, nor gencos are able to buy in large quantities, despite TPPs being mandated to co-fire biomass pellets up to 10 percent depending on the weight of the pellets.
"The decision comes in view of evolving market conditions for biomass pellets and requests received from stakeholders including thermal power plants, pellet manufactures, farmers, bankers etc. Co-firing of biomass in coal-based power plants is a key policy of the government towards energy security, reduced use of fossil fuels and at the same time to increase income of farmers. The revised policy shall help in achieving these goals faster," said RK Singh, Union minister for power.
Alok Kumar, secretary, MoP said the benchmarked price shall take into account the business viability, impact on electricity tariff, and efficient and faster pellet procurement by power utilities. Price benchmarking of pellets will enable the TPPs as well as pellet vendors to establish a sustainable supply mechanism for co-firing of pellets, he said.
"The decision would encourage farmers, entrepreneurs as well as thermal power utilities to strive to establish a sustainable biomass ecosystem, achieve the targets for co-firing, reduce stubble burning and help to ensure a cleaner and greener future for the citizens of India," Kumar said.
In another modification of the policy, the MoP has directed that torrefied biomass pellets shall only be procured by utilities for which it is technically unavoidable, and utilities which can use non-torrefied pellets should utilise the usual pellets only. This change in the policy has been done because production of torrefied biomass pellets is currently limited in the country compared to its demand.
In October 2021, the MoP mandated the use of biomass residue for co-firing in coal-based thermal power plants. The policy was introduced to address the twin challenges of curbing emissions from coal power plants and pollution from burning crop residue.
As per an MoP statement, around 1.80 lakh tons of biomass fuel has been co-fired in 47 thermal power plants in the country totalling a capacity of 64,350 MW. Out of this, at least 50,000 MT has been co-fired during the first two months of FY 23-24, which has surpassed the previous highest annual quantity. Yet, the overall pace of biomass pellet co-firing has been slow despite the mandates.
Further, about 114 million ton of biomass pellets are at various stages of tendering. Purchase orders have been placed for at least 69 lakh tons of biomass pellets by thermal power plants.
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