- Khushboo Lakhotia, Associate Director, Corporate Ratings, India Ratings and Research
Though there is a decline in overall power capacity addition, there witnessed an increase in captive segment. Your comment.
There are two types of captive power plant in the cement segment - thermal power plant and waste heat recovery plant (WHRS). Opting for WHRS helps the cement plant to bring down on the power cost. As far as any significant plant above 1 million tonne (MT) or 1.5 MT is concerned, power captive is the backbone. Most of the cement plants depend on captive capacity to make their energy requirement. This is the main reason why we see more investment in captive heat recovery power.
In the normal scenario, about 50 to 60 per cent of the generated heat is utilised and rest 40 per cent is being wasted. As part of the sustainability programme, majority of the companies are realigning themselves in capturing this 40 per cent and converting it into electricity. WHRS is one of the best routes wherein the cost of production of electricity is less than Re 1, say between Rs 0.5 to 0.7 per unit.
In comparison to the captive thermal plant, the cost of generated units is higher (Rs 3 to Rs 4 per unit).
To cite an example, one of the leading cement companies in India have recently put up a new 22.5 MW WHRS plant at their site in Madhya Pradesh with an investment of Rs 180 to Rs 200 crore.
The payback period of this plant is calculated to be between 3 to 3.5 years. With an EBITDA advantage of Rs 60-70 crore per year that translates to EBITDA advantage of Rs 100 per person per year. The low payback period is one of the key components that encourage the companies to opt for WHRS.
Putting up WHRS power plants also help companies in mitigating CO2 compliances. A 1-MT capacity cement plant produces heat, which can be converted and generate 3.75 to 4 MW of power, is 35,000 tonnes of carbon dioxide equivalent. This helps in reducing CO2 emissions.
Is there a shift from thermal to more sustainable heat recovery system?
Yes, absolutely. That is primarily because it brings down the cost of production of electricity.
Cement plants actively looking at solar energy. Cement plant location faces the challenge of dust. Solar is infirm power. How feasible is solar energy for cement plants?
Cement plants have tentatively increased dependency on solar and wind power. Some of the companies like UltraTech have currently set a target of about 10 per cent of the total consumption globally from renewable energy by FY21. The company has 60 MW of solar capacity, which is under a group captive scheme. This capacity will go up from 60 to 500 MW in FY21.
Most of the companies are increasing their renewable portfolio by setting up say 16 to 20 MW renewable plants. This is because all these companies have a long term target of bringing down per tonne CO2 emission. Sustainability is not a one-time initiative, but a continuous process in which we would see the percentage of renewable energy increasing. As for cement plants, WHRS would remain an essential option.
- LIZA V