REPORT

ON

PPP model
for development of thermal power plant
based on
IGCC TECHNOLOGY

SUBMITTED BY: -
Maninder Singh
Roll no. 12

INTRODUCTION
Electric power is the prime mover of economic development of a country. Thus to meet
its development needs, India has increased its installed generation capacity from a mere
1330 MW at the time of independence to 106,216 MW by March 2003. But these
achievements have not kept pace with the growth in demand. There are still peaking
shortages of 12.2% and energy deficit of 8.8%.
Considering this, the Government of India has very prudently set a target of 215,804 MW
power generation capacities by March 2012 (Refer Table 1.1). This will require a
capacity addition of 109,588 MW in next nine years. If achieved, this will definitely
bring in zero deficits in power by 2012 and the country will be able to provide power on
demand.

Table 1.1 India’s perspective plan for electric power

Thus the thermal (coal + NG/LNG/Diesel) power by the next nine years will be about
68% of total capacity. All these additions are going to increase the atmospheric pollution
due to fly ash, SOX, NOX and CO2. The technologies currently used for coal based
thermal power generation is conventional steam cycle with sub-critical steam parameters
and combined cycles for NG/LNG/Naphtha. A need is felt for introducing advanced
technologies such as super-critical, ultra supercritical steam system, PFBC based
combined cycles, and integrated gasification combined cycles (IGCC) for coal as fuel,
and combined cycle with advance class gas turbines for NG/LNG as fuel. However there
are apprehensions about higher cost, and lack of design and operating experience in the
country for these technologies. But we have to ‘move on’ in view of making our
environment sustainable, and at the same time producing power at affordable cost from
fossil fuels available within the country and thus maintaining energy security.
About IGCC Power Plants
Integrated gasification combined cycle (IGCC) power plants are believed to be the type
of power plants that will predominately be used to add to our electrical power supply,
replace our aging coal power plants and out increasingly expensive natural gas power
plants. The process offers options to eliminate greenhouse gases, produce hydrogen
and/or produce liquid fuels.
The process used by IGCC plants can be broken down into five broad steps:

1. The coal is gasified to produce a synthetic gas (syngas)

2. The pollutants are removed from the syngas, then electricity is generated using a
combined cycle, consisting of the following three steps:
3. A gas turbine-generator burns the syngas
4. Heat from the gasification and the exhaust heat from the gas turbine are used to
create steam
5. The steam is used to power a steam turbine-generator.

The potential for carbon dioxide sequestration makes IGCC technology even more
appealing and environmentally responsible. If desired hydrogen can be separated from
the syngas stream. A more complex, but even more economical option is to generate
Fischer-Tropsch liquid fuels from a portion of the syngas.
The following are the characteristics of an IGCC plant:

• SOx, NOx and particulate emissions are much lower in IGCC plants than from a
modern coal plant. Its VOC emissions and mercury emissions are comparable.
• IGCC plants emit approximately 20% less CO2 emissions than a modern coal
plant.
• IGCC plants use 20-40% less water than a modern coal plant.
• IGCC plants operate at higher efficiencies than conventional coal fired power
plants thus requiring less fuel and producing less emission. Current efficiency is
42% with efficiencies as high as 60% expected in the very near future using high
efficiency turbines and some other process improvements.
 • Costs for electricity, without CO2 capture, is about 20% higher than in a modern
coal plant. Electricity costs are 40% lower than from a natural gas IGCC plant
with natural gas at $6.50 per MMbtu.
• CO2 can be captured from an IGCC plant much more easily that from a
conventional coal plant at an additional cost increase of 25-30% for capture and
sequestration, without transportation charges.
• IGCC offers the possibility to capture the hydrogen that is part of the syngas
stream, in an economic manner.

PROCESS

A simplified flow diagram (courtesy Energy Northwest) for an IGCC process is shown
below:

Coal and/or petroleum coke is pulverized and fed into the gasifier along with oxygen that
is produced in an on site air separation unit. The combination of heat, pressure, and
steam breaks down the feedstock and creates chemical reactions that produce hydrogen
(H2) carbon monoxide (CO) and synthesis gas, or syngas. Feedstock minerals become an
inert, glassy slag product used in roadbeds, landfill cover, and other applications.
The syngas is cooled producing syngas and high-pressure steam. Sulfur and mercury are
removed from the syngas. Elemental sulfur is recovered as a marketable commodity.
CO2 is removed either as vent gas or captured for sequestration. If hydrogen is to be
recovered it is also separated and recovered at this point. The syngas then goes to the gas
turbine where it is burned to drive the turbine and generate power. The nitrogen, from the
air separation unit, is expanded through the turbine to increase power production and
reduce NOx emissions. The steam from gasification is combined with steam produced in
the gas turbine heat recovery unit and fed to the steam turbine-generator.

GASIFICATION

Gasification technology can be divided into three types:

1) Moving Bed Gasifiers (dry ash)
2) Fluidized Bed Gasifiers, and
3) Entrained Bed Gasifiers
In a presentation by EPRI, single stage entrained gasifiers (Shell/Prenflo, E-gas, GE
(formerly Texaco), KBR, Mitsubishi, Noell/GSP, Eagle, Boeing Rocketdyne, etc) were
found to have the best features.

• At high operating pressures and in the quench mode they are best for high CO2
capture.
• They are the least expensive way of putting in the moisture needed for the Shift
reaction.
• They produce the least CH4 and are best for producing syngas for Fischer-
Tropsch synthesis.
• They use dry coal feed
• Cooled refractory liner extends refractory life.
• Eliminates high maintenance carbon scrubber.
• Continuous slag removal.

Typically the IGCC efficiency is the product of efficiency of the gasifier (achievable
80%) and the combined cycle efficiency (58% with contemporary gas turbines), giving a
value of 46.4% compared to 40% achievable through USC steam cycle. This will
proportionately reduce the CO2 emission. The SOX emission can be brought down to 40
to 115 mg /Nm3 as the sulphur is removed in the gasification process itself. The NOX
emission has also been reported to levels below 125 mg/Nm3.
The main barriers to widespread adoption of IGCC technologies are (a) high capital cost
compared to PC Plant, and (b) demonstration of high availability, at least equal to
existing PC Plants. However, the costs are coming down. A recent joint study by Texaco,
General Electric, and Praxair has shown that for a 550 MW power block, with the
introduction of 9H gas turbine technology with firing temperature in the range of 1400 to
14500C, the efficiency, capital cost, and cost of generation has significantly improved
(refer figure) from year 1994 levels to year 2000 levels.
Challenges and Constraints in the Coal-Power Sector

The challenges and constraints for technology development and deployment in the coal
power sector and their implications for future technologies.
ASH DISPOSAL SYSTEM

1) Wet disposal system - In most of the thermal power plants, the system of disposal of
ash is done in wet disposal form and then it is carried out in the form of ash slurry
through pipes to dispose off in Ash Ponds.

2) Dry system - Another form of disposal of ash is done through dry system in which ash
is collected directly through electrostatic precipitous to the Silos in solid form and then
gets dispatched to the vicinity area bricklins or cement manufacturing units. TPPs use to
generate ash in this form in small quantity and that too when it is there in demand. If for
some TPPs this form is not in demand then they use to make all the ash in bottom ash or
wet form and use to dispose it in the ash ponds.

3) High concentration slurry disposal (HCSD) system - This is the latest form of ash
disposal system in which ash is collected in bottom ash form only but while disposing it
off through ash slurry it requires a huge quantity of water usually in the ratio of 1:20,
which can be reduce to say around 1:8 using HCSD system. This is possible because it
uses induced draught fan and a mechanism, which helps in suction of ash slurry and
hence reducing the content of water drastically.

Water Requirement for Ash Disposal

PPP modeling

Public Private Partnership (PPP) Project means a project based on a contract or

concession agreement, between a Government or statutory entity on the one side and a
private sector company on the other side, for delivering an infrastructure service on
payment of user charges.

Since Viability Gap Funding (or Grant means a grant one-time or deferred, provided
under this Scheme with the objective of making a project commercially viable) alone
cannot make the IGCC power plant viable as these plants involve a huge investment, so
the PPP model proposed by me would be DBFO (design build finance operate). VGF will
only provide with 40% of the total project cost.

Private sector

The initial response of the domestic and foreign investors to the policy of private
participation in power sector has been extremely encouraging. However, many projects
have encountered unforeseen delays. There have been delays relating to finalization of
power purchase agreements, guarantees and counter guarantees, environmental
clearances, matching transmission networks and legally enforceable contracts for fuel
supplies. The shortfall in the private sector was due to the emergence of a number of
constraints, which were not anticipated at the time the policy was formulated. The most
important is that lenders are not willing to finance large independent power projects,
selling power to a monopoly buyer such as SEB, which is not financially sound because
of the payment risk involved if SEBs do not pay for electricity generated by the IPP.
Uncertainties about fuel supply arrangements and the difficulty in negotiating
arrangements with public sector fuel suppliers, which concern penalties for non-
performance, is another area of potential difficulty. It is important to resolve these
difficulties and evolve a framework of policy, which can ensure a reasonable distribution
of risks, which make power sector projects financially attractive.
i) Speedy environmental clearance
The Ministry of Environment and Forests has agreed to delegate the powers to
States for environmental clearance of:
a) All co-generation plants and captive plants up to 250 MW;
b) Coal based plants up to 500 MW using fluidized technology subject to sensitive areas
restrictions;
c) Power stations up to 250 MW on conventional technology.
d) Gas/Naphtha based stations up to 500 MW.

ii) Viability of SEBs

The financial health of the state electricity boards (SEBs) will be improved through
rationalization of tariff, restructuring and reforms to make them economically viable and
their projects bankable to generate energy on economic rate, to provide quality services to
the consumers and to ensure a fair return to the investors. This can be best achieved by
unbundling single entity (SEBs) and corporatising the same for the above activities. In
this context, some of the States have taken initiative by unbundling their respective SEBs
into separate companies for Generation & Transmission & Distribution.

iii) Regulatory bodies

The Government of India has promulgated Electricity Regulatory Commission Act, 1998
for setting up of Independent regulatory bodies both at the Central level and at the State
level viz. The Central Electricity Regulatory Commission (CERC) and the State
Electricity Regulatory Commissions (SERCs) at the Central and the State Levels
respectively. These regulatory bodies would primarily look into all aspects of tariff
fixation and matters incidental thereto.
Steps in bidding process

1) Request for qualification (RFQ) –

It includes the financial and technical capacity required by a private company for the
award of the project. The interested companies give a notification to the authority
showing their interest in the project. And the authority selects the potential
companies.

2) Request for proposal (RFP) –

This is legal document which is circulated to the selected potential companies, in which
the technical and financial capacity required by a company is written and the evaluation
procedure for the award of the project. It includes the details of the project and procedure
for applying for the project.

The regularity authority receives the technical and financial capacities of the companies
within 14 days of publish of the RFP. Then these companies are invited for the pre bid
meeting.

3) Pre bid meeting –

This is a formal meeting held by the regulating authority in which the companies can ask
any query about the project and can also suggest any change to be implemented in
the project.

4) Bidding –
Finally the bidding is done. Companies bid for the financial help given by the
government (VGF, ADB, WB etc).
The company, which bids minimum and has the technical and financial capacity as per
RFP is awarded the project. And the second minimum company is kept as a reserve.
Stages in PPP

1) Design – since the IGCC technology is new in India, therefore private company has to
study the already build power plants in other countries and design the same. And get it
passed from the corresponding authority. If the authority passed the blue print then the
project is taken to the next step.

2) Build – power plant is build according to the passed blue print and in accordance with
the policies, norms and regulations of the government.

3) Finance – since a huge investment is required in the IGCC power plant therefore the
private company has to take into consideration the finance part of the power plant.

4) Operate – operating the plant means to generate electricity and distribute to the public
on the rate specific to them in the contract or sell it to the government electricity boards
and they distribute to the public. The private company handles all the maintenance and
operation cost.

NPV & Payback period of the project:

NPV is the difference between an investment's market value and its cost. Essentially,
NPV measures how much value is created or added by undertaking an investment. Only
investments with a positive NPV should be further considered for investing.

What NPV Means

NPV is an indicator of how much value an investment or project adds to the firm. With a
particular project, if Rt is a positive value, the project is in the status of discounted cash
inflow in the time of t. If Rt is a negative value, the project is in the status of discounted
cash outflow in the time of t. Appropriately risked projects with a positive NPV could be
accepted. This does not necessarily mean that they should be undertaken since NPV at
the cost of capital may not account for opportunity cost, i.e. comparison with other
available investments. In financial theory, if there is a choice between two mutually
exclusive alternatives, the one yielding the higher no-no should be selected.

If... It means... Then...

The investment
NPV
would add value to The project may be accepted
>0
the firm

The investment
NPV
would subtract value The project should be rejected
<0
from the firm

We should be indifferent in the decision whether to accept or

The investment
reject the project. This project adds no monetary value.
NPV would neither gain
Decision should be based on other criteria, e.g. strategic
= 0 nor lose value for the
positioning or other factors not explicitly included in the
firm
calculation.

Example

A corporation must decide whether to introduce a new product line. The new product will
have startup costs, operational costs, and incoming cash flows over six years. This project
will have an immediate (t=0) cash outflow of $100,000 (which might include machinery,
and employee training costs). Other cash outflows for years 1–6 are expected to be
$5,000 per year. Cash inflows are expected to be $30,000 each for years 1–6. All cash
flows are after-tax, and there are no cash flows expected after year 6. The required rate of
return is 10%. The present value (PV) can be calculated for each year:
 Year Cash flow Present value

T=0 -$100,000

T=1 $22,727

T=2 $20,661

T=3 $18,783

T=4 $17,075

T=5 $15,523

T=6 $14,112

The sum of all these present values is the net present value, which equals $8,881.52.
Since the NPV is greater than zero, it would be better to invest in the project than to do
nothing, and the corporation should invest in this project if there is no mutually exclusive
alternative with a higher NPV.
RECOMMENDATIONS

1) Reduce the gap between operation of TPPs and the Compensatory Afforestration
(CA):
The prime conditionality for any diversion of forestland is that they have to pay for
alternate non-forestland or double degraded land for a compulsory CA to be carried out.
We therefore, recommends that a policy framework should be changed such that the time
gap between the utilization of a particular forest land and developing a CA site by
concerned state forest department should be reduced, so as to reduce both the
environmental and biotic impact.
For this same purpose we would like to suggest that if possible private players should be
allowed either alone or through PPP model such that if forest land gets diverted for any
such purpose another set of such land would be available to avoid any carbon
sequestration loss to the environment.

2) Fly Ash Utilization

The options of ash utilization including the ash-based products are at developmental stage
and need to be made more environment friendly by bringing in ash revolution. Some of
the areas of application include:
 Brick/Block/Tiles Manufacturing
 Cement Manufacturing
 Roads and Embankment Construction
 Structural Fill for Reclaiming Low Lying Areas
 Mine-Filling
 Agriculture, Forestry and Waste-land
 Part Replacement of Cement in Mortar, Concrete and Ready Mix Concrete Hydraulic
 Structure (Roller Compacted Concrete)
 Ash Dyke Raising
 Building Components - Mortar, Concrete,
 Concrete Hollow Blocks, Aerated Concrete Blocks
 Other Medium and High Value Added Products (Ceramic Tiles, Wood, Paints)
References

www.google.com
www.wikepedia.com
www.teri.com
Ministry of environment and forests
http://cea.nic.in/thermal/Shelf_of_Thermal_Power_Projects_11th%20Plan.pdf.
6) Ministry of Power, http://powermin.nic.in/