Ministry of Power Introduces Benchmark Prices for Biomass Pellets to Enhance Co-Firing

In a notable policy update, the Ministry of Power has taken a proactive step by introducing benchmark prices for biomass pellets used in co-firing applications at thermal power plants. This policy adjustment comes in response to the evolving dynamics within the biomass pellet market and a myriad of requests from stakeholders, encompassing thermal power plants, pellet manufacturers, farmers, bankers, and various other interested parties.

Background and Policy Rationale

The newly established benchmark pricing mechanism is designed to factor in several critical considerations, including economic viability, its implications on electricity tariffs, and the efficient procurement of pellets by power utilities. The principal objective behind instituting these benchmark prices is to foster a sustainable supply chain for co-firing, with active participation from both thermal power plants and pellet suppliers. These final benchmark prices will be determined by a committee operating under the Central Electricity Authority (CEA) and are slated to take effect from January 1, 2024.

Until these recommendations are fully integrated, power utilities will retain the flexibility to utilize short-term tenders as a means to fulfil their immediate demands for biomass pellets in their respective thermal power plants.

Implementation Strategy and Government Vision

Union Power Minister R.K. Singh has highlighted the government’s perspective on the importance of co-firing biomass in coal-based power plants as a pivotal policy measure. This measure is aimed at bolstering energy security, diminishing reliance on fossil fuels, and simultaneously enhancing the income of farmers. The revised policy is anticipated to expedite the realization of these multifaceted objectives.

Recognizing the constrained availability of torrefied biomass pellets within the country, the revised policy mandates power utilities to procure torrefied pellets solely in exceptional scenarios when there is a technical imperative. Power utilities equipped to employ non-torrefied pellets are encouraged to exclusively opt for them. Torrefied pellets, commonly referred to as black pellets, are a densified biofuel derived from the thermal treatment of solid biomass, often with additives.

Progress and Future Outlook

Under the existing biomass policy, which mandates the co-firing of biomass with coal in thermal power plants, approximately 180,000 metric tons of biomass fuel have already been successfully co-fired across 47 thermal power plants nationwide. These plants collectively possess a capacity of 64,350 megawatts. Notably, within the first two months of the fiscal year 2024, more than 50,000 metric tons have already been co-fired, surpassing the previous annual quantity record.

Moreover, a substantial quantity of approximately 114 million metric tons of biomass pellets is presently advancing through various stages of the tendering process, with thermal power plants having already issued purchase orders for roughly 6.9 million metric tons of biomass pellets.

The implementation of favourable policies and the Ministry of Power’s steadfast commitment to the Sustainable Agrarian Mission for the utilization of Agro-Residues in THermal Power Plants (SAMARTH) mission bodes well for the foreseeable growth of biomass co-firing in thermal power plants throughout the nation. The SAMARTH program is tailored to address the challenges posed by crop residue burning on Indian farms and mitigate substantial carbon emissions stemming from coal-fired power plants by advocating for biomass co-firing.

Lastly, in November of the preceding year, the Ministry of New and Renewable Energy launched the National Bioenergy Program, slated for operation from FY 2021-22 to FY 2025-26. This program, planned to be executed in two phases, has received budgetary allocation totalling 28.58 billion rupees, approximately equivalent to $104.66 million, for Phase-1.

To cap it off, a noteworthy achievement reported in July of the prior year highlighted that biomass co-firing in 35 thermal power plants across India had effectively reduced CO2 emissions by a commendable 100,000 tons. In these 35 thermal power plants, boasting a combined capacity of 55,335 megawatts, approximately 80,525 metric tons of biomass had been co-fired up until July 24, 2022.