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Pitch

A sustainable biofuels based model creating possibilities for inclusive growth without compromising food security and economic equilibrium.


Description

Summary

Six of the E7 nations i.e. China, India, Indonesia, Mexico, Russia and Turkey depend heavily on Diesel Generators (DGs) for power generation. The proposal focuses on the six nations as thermal generating sources contribute only a small part to Brazil's electricity supply. 

The demand for oil to generate electricity in emerging economies is projected to remain a constant 3.5 mboe/d till 2035 and modern Biomass & Biodiesels are considered viable renewable alternatives. The latter(biodiesels) can replace HSD(High Speed Diesel) used in mobile, standby, emergency and starting DGs. Biomass along with compliant firing infrastructure can replace peak load, nursery and central DG stations. Specific biomass and biodiesel solutions for each of the six nations are suggested based on potential and economic viability.

The key stakeholders and actors are state and local governments, industries, universities & research institutes, NGOs, intergovernmental & development agencies.

The proposal will be implemented in five sectors i.e. industrial, agricultural, residential, power generation and defence. The location of the project is to be planned taking into consideration the logistic expenses of harvesting, transporting and storing feedstock which accounts for nearly 50% of generation costs. This is done after surveying the biomass density, energy crop patterns and the location of load centers.

Implementation will reduce 60 - 85% of life cycle Green House Gas (GHG) albeit, the cost of generation using biofuels is higher compared to that of diesel generation.

Yet, the prospect of achieving sustainable, inclusive economic growth & equilibrium and food security precedes cost of generation. This makes biofuels a viable and desirable alternative.


Category of the action

Reducing emissions from electric power sector.


What actions do you propose?

In six of the E7 nations i.e. China, India, Indonesia, Mexico, Russia and Turkey the dependence on Diesel Electric plants is high particularly in countries with low power supply fidelity. Notably India, which consumes over 530 Million gallons of diesel just to keep its rural and urban digital communication networks running.[1] The demand for oil in developing countries for electricity generation is estimated to remain a constant 3.5 mboe/d i.e. 186.515 mtoe per annum till 2035. [2] 

Figure 1

Table 2.19 from Reference [2]

Due to high dependency on DGs it is viable to replace diesel rather than the generators in the short term (Till 2020) with gradual planned transition to non-conventional methods of generation. Diesel can be replaced with a greener alternative i.e. Biodiesels. They can reduce dependence on oil by 73.6 mtoe by the year 2015 and supply is projected to grow annually by an average rate of 8.9% till 2020. [3] With the right pricing, it is possible to achieve return rates of up to 18% on investments in emerging economies. [4] The global biomass potential is projected to be over 35 EJ/y i.e. 836.52 mtoe. This potential can further be harnessed.[6]

In the electricity generation sector DGs are chiefly used as [5]:

  1. Peak Load Plants: In combination with thermal, hydro-plants to meet peak demand.
  2. Mobile plants: Mounted on trailers to be used for temporary or emergency purposes and supplying power to large civil engineering works.
  3. Standby plants: To cope up with demand when main unit fails.
  4. Emergency plants: To supply to key industrial plants or hospitals when power fails.
  5. Nursery stations: To supply power to small towns in the absence of main grids.
  6. Starting stations: To run auxiliaries for starting large steam powered plants.
  7. Central stations: Used as stand alone generator where capacity required is small.


Proposal: Use 

  1. Modern biomass plants as replacement to peak load, nursery and central DGs.
  2. Biodiesel in mobile, standby, emergency and starting stations.


Figure 2: Country specific biomass feedstock and potential

a)For China, Indonesia, Russia and Turkey it is assumed that 50% of biomass potential is utilized and the efficiency of energy conversion is 30%; b) Source for biodiesel potential in APEC nations - [13]

Figure 3: Detailed biomass list in India [20]

Actions by Government:

Manage supply chain sustainably

  1. Encourage mixed farming and ensure that feedstock cultivation does not affect supply trends of essential agricultural produce taking into consideration recommendations of FAO.
  2. Ensure sustainable land use to meet demand requirements.
  3. Create awareness of economic prospects of producing biomass and biodiesel while emphasizing on the need for sustainable cultivation without compromising food security.


Creation of procurement network/system

  1. Facilitate and incentivize creation of procurement network/system for biomass, biodiesel feedstock and useful by-products of production process.


Instil investor confidence & incentivize investment

  1. Amend existing schemes and programs to reduce trade barriers to Foreign Direct investment.
  2. Implement feed in tariffs to encourage investment.


Encourage industries, universities and research institutes

  1. Set GHG emission ceiling and gradually reduce the same.
  2. Mandate use of biodiesel blends for DGs and progressively increase biodiesel percentage and finally mandate use of B100.
  3. Price biomass and biodiesel (in regulated markets) to allow a profitable and competitive rate of return.
  4. Progressively withdraw subsidies from oils used for power generation.
  5. Encourage sale of useful by-products of production process.
  6. Incentivize R&D through PPP models and synergistic partnership with universities and research institutes.
  7. Plan to implement system of personal carbon trading and link to personal identification numbers in the state.


Actions by Industries:
Procure, Produce & Price sustainably

  1. Establish procurement network/system for biomass and biodiesel feedstock from established supply chains.
  2. Leverage policies, incentives, science and engineering to set-up effective, efficient and economical biodiesel production plants.


Undertake Research Development & Deployment (RD&D) initiatives

  1. Undertake RD&D with the government (Public Private Partnership- PPP models), universities and research institutes to accelerate development of more efficient methods of energy extraction and conversion.
  2. Fund research directed towards identifying effective, efficient and economic methods of generating second generation biodiesels.


Contribute back Responsibly

  1. Undertake CSR initiatives to educate locals, create fair and inclusive economic opportunity and diversify their economies.


Action by University and Research institutes:
Set a direction

  1. Utilize funding, policy incentives and support from government and industries to pioneer research on making systems more efficient, reliable, scalable and universally implementable.
  2. Identify alternative sources, evolve technology and policy road maps.


Actions by NGOs:
Protect, preserve and assist

  1. Ensure the supply chain and procurement network is inclusive, fair and in the best interest of locals and the environment.
  2. Assist industries in successfully executing their CSR initiatives.

 

Actions by Intergovernmental and development agencies:
Finance

  1. Finance related project through credit to meet investment demands of $ 84 billion by 2020 and $ 133 billion from 2021-2030 [7] 


Risks to mitigate:

Counterparty credit risk: 
Counterparty credit risk is high when the counterparty is the government in which case mitigation is particularly a challenge. Delayed payment for high volume transactions adds significantly to risk both in cultivation and production of biofuel feedstock and biofuels particularly in E7 nations.

Technology risk: 
Given that biomass and biodiesel technology is flexible and can accommodate a variety of feedstock, technology risk is primarily attributed to technology saturation.

Operational risk: 
Feedstock price volatility and supply chain disruptions contributes significantly to operational risk particularly in regulated markets where biofuel units are sold at fixed price and price revision does not keep pace with market volatility.

Credit, finance risk and market risks:
Investments are vulnerable to equity and Forex volatility, especially in case of small-medium size investments. Biodiesel feedstock imports expose such investment to risk when transactions are in a stronger currency which is predominantly the case in E7 nations. Further, Forex volatility makes credit from IMF and World Bank more expensive adding to costs.  Also, the lack of long-term market commitments to biodiesels increases risk on investment.

Long-term market risk:
The long-term (Post 2020) food and land demand trends may cause this model to reach its saturation if not implemented then in conjunction with other non-conventional methods of electricity generation using:

  1. CSP (Concentrated Solar Power) 
  2. PV (Photo-voltaic) cells
  3. Nuclear Fusion (Ref: ITER)
  4. Wind, geothermal, tidal energy
  5. Fuel cells


Who will take these actions?

Government actors:

  1. Municipal and local government bodies in capacity to create supply chain and procurement network/system for biomass and biodiesel feedstock.
  2. State and local governments in capacity to reduce trade barriers, launch programs & schemes to incentivize investment in biofuel production and encourage FDI.
  3. Ministries in capacity to withdraw subsidies on oils used for power generation.
  4. Ministries and departments in capacity to enforce environmental law.
  5. Departments concerned with environment, pollution control boards and equivalent bodies in capacity to implement carbon emission trading along with carbon tax, carbon credit.
  6. Concerned ministries/departments in capacity to decide tariffs(in regulated markets).
  7. Ministries, agencies and departments in capacity, to implement personal carbon trading and link it to personal identification number.
  8. Departments, agencies and research laboratories to undertake RD&D.


Industrial actors and investors:

  1. Agro based industries, commercial plantations.
  2. Business conglomerates with in-house research capabilities to undertake inter-disciplinary research.
  3. Public companies and medium sized businesses capable of mitigating market volatility.
  4. Private funded research laboratories.
  5. Industries with capacity to work in PPP models.
  6. Financing institutions.


Universities and research institutes:

  1. Research institutes with capacity to identify effective and economic methods of producing secondary biodiesels.
  2. University with capacity to undertake research to make biomass and biodiesel related projects scalable and universally implementable taking into considering PESTLE (Political, Environmental, Technical, Legal and Environmental) influence.

 

NGOs:

  1. Women and child welfare organizations.
  2. Environmental conservationists.


Intergovernmental and development agencies:

IMF and World Bank which are in capacity to finance projects through credit.


Where will these actions be taken?

These actions will be taken in five sectors primarily:

  1. Industrial sector - Where facilities primarily use standby, emergency, peak load and mobile DGs.
  2. Agricultural sector - Where cultivators and food processors use mobile DGs.
  3. Power Sector - Using peak load, nursery, standby, central and starting stations.
  4. Defence sector - mobile DGs.
  5. Residential areas - Using emergency, standby, peak load, mobile and nursery DGs.
     

The project location is to be with due consideration given to logistics of harvesting, transportation and storage of the large volumes of bulky biomass. The cost of harvesting, transporting and storing constitute about 50% or higher of delivered cost of power in case of forest residue. [24] They contribute significantly to the cost of generation from other biomass sources as well.

Logistical expenses arise primarily due to:

  1. Labor and transport costs
  2. Cost of operation, credit, finance and market risk.
     

The expenses can be minimized by selecting a suitable location which reduces the two contributing costs cited above. This is done after surveying biomass density and energy crop-patterns(supply) and load centres(demand).

Supply:

Figure 4: Biomass carbon density map of the world [23]

 

An interactive map by National Geographic offers a very detailed view on the world electricity matrix by fuel. The map also gives projections for 2035.

Demand:

Figure 5: Global load centers [25]

Further, currency exchange rates must be considered when trading biomass and biodiesel feedstock internationally. A weakening currency will add to cost of generation and may even contribute to inflation.

The performance of currencies of the six of E7 nations are as follows: [30]

  1. Dollar to Yaun:
  2. Dollar to INR:
  3. Dollar to Indonesian Rupiah:
  4. Dollar to Mexican Peso:
  5. Dollar to Russian Ruble:
  6. Dollar to Turkish Lira:


How much will emissions be reduced or sequestered vs. business as usual levels?

Biomass reduces net life cycle GHG emissions by 85 -100 % and first generation Biodiesels by 60% and second generation biodiesels by as much as 120% (Negative carbon emission) vs. business as usual levels.[7] [8]

Reference [8]

Reference [7]


What are other key benefits?

  1. It is a sustainable model with a high potential to bring about inclusive growth.
  2. Works towards retaining economic equilibrium by not compromising on food security.
  3. Emphasizes sustainable use of land resources.
  4. Compared to other renewables, this model is one of the best to address energy crisis by generating power with competitive pricing.

 


What are the proposal’s costs?

Capital costs for Biomass: [7] {Capacity(MW) : (USD/kW)}

  1. <10 MW:6000-9800    
  2. 10 - 50 MW: 3900- 5800
  3. >50 MW:2400- 4200
  4. Co-firing: 300-700 (For additional systems only)

 

Cost of generation: [21]

 

Capital costs for Biodiesel production plant: [7][9][10]
For continuous production: $ 2.25 - $.75 per gallon when annual production rates are of the tune 5 - 30 Million gallons.

If priced well, rate of return in countries comparable to India will be 18%.


Time line

Timeline for Biodiesel production plant[9]
Months:Process
0-6:Process Engineering, Environmental Permits, Financial Structuring
6-9:Construction
9-12:Begin Start Up
12-15: Achieve Design Capacity

For Biomass:
0-1 Yrs: Setting up procurement chain, plantation, environment permits, Financial structuring
1- 1 Yr 5 months: Construction, depending on plant capacity.
1 Yr 5 months - 2 Yr: Begin start-up and achieve production capacity.


Related proposals


References

  1. The Diesel Generator: India’s Trusty Power Source. http://india.blogs.nytimes.com/2012/07/31/the-diesel-generator-indias-trusty-power-source/
     
  2. OPEC World Oil Outlook 2012.
    http://www.opec.org/opec_web/static_files_project/media/downloads/publications/WOO2012.pdf
     
  3. Assessment of BiofuelsPotential and Limitations
    http://www.ief.org/_resources/files/content/news/presentations/ief-report-biofuels-potentials-and-limitations-february-2010.pdf
     
  4. Financial and Economic Assessment ofBiodiesel Production and Use in India (Nov 2011)
     
  5. Power Plant Engineering, P.K Nag, McGrawHill Publication, (Third Edition)
     
  6. Exploration of the ranges of the global potentialof biomass for energyMonique Hoogwijka;d;∗, Andr'e Faaija, Richard van den Broeka;1, G-oran Berndesb,Dolf Gielenc;2, Wim Turkenburga
    http://landuse.geog.mcgill.ca/pub/ESYS500papers/Hoogwijk_2003.pdf
     
  7. Technology Roadmap Bioenergy for Heat and Power, IEA
     
  8. Renewable energy policy consideration for deploying Renewables, IEA
     
  9. Establishing Biodiesel Production Facilities in Arkansas… a Pre-feasibility AssessmentSubmitted toUSDA/Rural Business – Cooperative Service
     
  10. http://www.biodieseltechnologiesindia.com/recent.html
     
  11. http://www.princeton.edu/pei/energy/publications/texts/Li_01_ESD_China_biomass_energy.pdf
     
  12. http://xml.cie.unam.mx/xml/se/pe/Bioenergia/Bibliografia/A-prospective-study.pdf; Pg 12
     
  13. http://www.nrel.gov/docs/fy09osti/43710.pdf;
     
  14. http://www.mnre.gov.in/schemes/grid-connected/biomass-powercogen/
     
  15. http://www.sener.gob.mx/res/0/Biomass-v01.pdf
     
  16. www.ieabioenergy.com/DownLoad.aspx?DocId=5357
     
  17. Biomass Energy Potentials And Utilization In Indonesia, Kamaruddin Abdullah

  18. http://www.geni.org/globalenergy/research/renewable-energy-potential-of-turkey/100-re-for-turkey-2020.pdf

  19. http://www.teias.gov.tr/eng/ApkProjection/CAPACITY%20PROJECTION%202009-2018.pdf

  20. http://www.eai.in/ref/ae/bio/powr/biomass_power.html

  21. http://www.idahoforests.org/img/pdf/PotentialContribution.pdf

  22. http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Biofuels%20Annual_New%20Delhi_India_6-20-2012.pdf

  23. http://cdiac.ornl.gov/epubs/ndp/global_carbon/FINAL_DATASETS.jpg

  24. http://www.iea.org/publications/freepublications/publication/biomass.pdf

  25. http://www.nasa.gov/sites/default/files/images/712130main_8246931247_e60f3c09fb_o.jpg

  26. http://www.fao.org/fileadmin/user_upload/hlpe/hlpe_documents/HLPE_Reports/HLPE-Report-5_Biofuels_and_food_security.pdf

  27. http://www.oecd.org/site/oecd-faoagriculturaloutlook/48178823.pdf

  28. http://www.marine.ie/NR/rdonlyres/10DEB9A8-DB0B-4C48-AB51-CE260FEC9D41/0/FP7_MABFUEL.pdf

  29. http://opim.wharton.upenn.edu/risk/library/2007_PRK-UGO_BiodieselTurkey.pdf

  30. Google Currency converter