Power-hungry businesses like cement and others have been operating CPPs for long. Besides saving on energy costs, these CPPs ensure that production continues uninterrupted with reliable and stable supply of electricity. ICR reports on the need of CPPs in cement cos.
Cement industry is a power intensive industry, consuming about 30 per cent of the total power generated in the country, contends Meemanshi Rangacharya, Group Head, Power Management Department in TECHPORT-Thane, a manufacturing support service division for LafargeHolcim. Clinker production is a continuous process that requires seamless power supply. Smooth and efficient operation of clinkerisation largely depends on power position in the plants. After liberisation of economy, it has been observed that cement capacities were added significantly, but then the power situation in the states remained a bottleneck. In 2003, a great relief came to the industry by way of the Electricity Act and further National Electricity Policy 2005. Overall these policies and various state policies encouraged the development of captive power plants in India, and cement industry was no exception.
The Captive Power Plants, CPPs as commonly known, have their own advantages, the most important being its proximity to the user. Besides, the transmission losses are the least in CPPs. The quality of power generated is superior to that of the state grid power, considering the fluctuations in supply, power outages from state grid, etc. Let us take the case of Shree Cement, which is a classic example. The company kicked off with a captive generation of 0.2 MW capacity, which has now reached 600 plus MW capacity now.
In short, the need to have a CPP for cement manufacturing unit is beyond any doubt. This thought was prevalent until some time back when the power scenario in a few states like Chhattisgarh, Madhya Pradesh, Gujarat, Rajasthan started turning power surplus which is diagonally opposite to what was 10 years before. The new cement projects or any capacity additions started rethinking, whether to have CPP or not. Many new cement units either have decided not to go for it and a few decided to closely look at the capacities, if it can be reduced? In short this is a new dimension of CPPs.
Today, the Government, following the order given by the apex court has gone ahead for the auction of coal mines, and various cement majors have lined up for their own coal block. Soon after the second phase of allocation of coal blocks-somewhere from next June 2016-linkage coal which is now available to CPPs will not be available any more. This will increase the cost of power generated through CPPs. It is very clear that the entire cement industry has not been doing well in the last 3-4 years, and this decision might make it even worse.
Non-availability of linkage coal to the power plants run by the cement companies will only add to their worries. The direct impact will be on the cost of power, which will go up by nearly 25 per cent as indicated by Satyanarayan Digamathi, Deputy General Manager of ACC?s; Wadi Cement Works. The cost input on account of fuel for a given CPP is around 65-70 per cent as indicated by Rangacharya. Therefore, every CPP unit will look for cheaper fuels like pet coke or agri waste. Only one lighter side is for the plants which are close to coastal line, since they can have the option of imported coal. The other option as Rangacharya puts is coal washery rejects. He feels after deregulation of coal, the washery business will also increases, in order to get and sell better quality of coal. CPPs can make use of washery rejects to bring down the cost, only it will require some trials.
One more option is the use of imported coal. The landed cost of Indonesian Coal at Indian ports is quoted at 38 $ per ton, 15 to 18 percent cheaper than last year. As the price is reasonable and quality is better than local coal, CPPs will be more than willing to use imported coal if economics permit. However as one moves to the interiors of the country, the logistic cost increases, so one has to take a judicious decision where to use imported coal. As we all have witnessed drop in crude oil prices in the last one year, the coal too has followed the same.
Another major problem, which is confronted by the CPPs, is tighter pollution control norms. We know that power generation being highest polluting sector, CPPs have to shoulder greater responsibility to bring down the pollution levels. This will call for improvement in the present level of technology and replacement of some of the old boilers, which will financially load the industry. As suggested by Rangacharya, we will have to think of latest technology for boilers of CPPs. The cement plants will have to provide for additional capital budgets for improvements in CPPs as planned by Digamathi for his plant. There are few cement plants which are using around 80 per cent of captive power and balance from state grid will now have to depend more on state power.
Use of pet coke in place of coal has limitations, particularly to use as a fuel in CPPs because beyond certain percentage as indicated by Digamathi, the SOx and NOx percentage in the emitting gas increase is worrysome. Vivek Taneja, Head – Business Development of Thermax, Power Division (a global solution provider in energy & environment) has offered suitable products where pet coke can be used as fuel, has given more input on the subject. Therefore use of pet coke in power generation will have limitations in the existing scenario. The other option is making use of agri waste but the availability is seasonal.
Rajiv Agrawal, Secretary, Indian Captive Power Producers Association, opines that the Government should give importance to CPPs, if they want industries to really grow and want more investments as they are asking through ?Make In India? campaign. The Government should not forget that that it is not the power, but the productive power that is required by India.
It is is a common observation that the Government does not differentiate between Integrated Power Plants (IPPs) and CPPs. This is being raised by Agarwal and his association. Considering the kind of operations, the end use and economics, it is necessary; not to equate CPPs and IPPs at par. We need to treat CPPs separately than IPPs. IPPs have been created to do business in power and for CPPs it is a support service to the main business because Government can not assure smooth supply of power to the industry as in the developed countries. Today IPPs get best of the technology available in the world and are much ahead on the efficiency parameter than CPPs. They get the best of the coal available and at a cheaper rate. Availability of any kind of fuel is much easier to IPPs than that of CPPs. They typically have capacities in the range of 500 MW plus. Therefore the cost economics is better than that of CPPs.
If we look at the capacities of CPPs, typically it ranges from 0.2 MW to 300 MW. Incidentally National Aluminimum Company Ltd has a captive generation of 960 MW and the other to quote is Shree Cement, having captive generation of 612 MW. The association is right in raising its voice because CPPs deserve different treatment than IPPs. There is no doubt that considering the various aspects mentioned above, the CPPs are going to have tough time ahead.