To Examine the future Power Generation / Energy options for the India and the World

to ascertain the future Fuel trends - Feasibility -Availability -Pricing

Why Fuel Options ??

AIM FUELING INDIAs PROPOSED CAPACITY ADDITIONS TO ACHIEVE A PLUS 2,00,000 MW CAPACITY BY 2012. -APPROACH EXAMINE FUEL OPTIONS INTER-ALIA AVAILABILITY OF VARIOUS FUELS, THEIR TECHNICAL SUITABILITY / RELIABILITY, ITS ENVIORENMENT FREINDLINESS, ADEQUACY OF INFRASTRUCTURE, PRICE STABILITY / PREDICTABILITY AND ECONOMICS IN GEN.

What shall be Fuel Sources for India?

See Word pages 5
COMPARE THE OPTIONS See Word Page 6 Nuclear Gas- Hydro & Page 7 Coal Gas- Hydro Page- 8 &9 Gas & PetroleumProducts

Status of Coal based Power in INDIA

COAL RESERVES
211.6 Billion Tonnes. As on 1st Jan2000
(PROVED INDICATED INFERED 82.4 Bte, 89.5 Bte & 39.7 Bte)

AT PRESENT LEVEL OF CONSUMPTION :

ADEQUATE TO FUEL FOR ABOUT 240 YRs..

LOCATION About 77% of the Reserves Are Located In Three States i.e Bihar Orissa M.P -32%, -24% and 21%

PROSPECTIVE COALFIELDS ARE : NORTH KARANPURA IN BIHAR TALCHER & IB VALLEY IN ORISSA AND SINGRAULI / KORBA IN MP

PROJECTED COAL DEMAND & AVAILABILITY

- COMMITTEE CHARI COMMITTEE ) ON INTEGRATED COAL POLICY HAD MADE FOLLOWING DEMAND PROJECTIONS: PROJECTED COAL DEMAND (MT) 2006-2007 POWER 500.00 STEEL 80.00 OTHERS 136.00 TOTAL 716.00 - THERE IS A PROJECTED SHORTFALL TO THE EXTENT OF 20 TO 30 MT DEPENDING UPON ACTUAL MATERIALISATION OF THE UTILITIES.

World Coal Reserves

See Page 10 Word File

CAN LIGNITE SUPPLEMENT COAL ?

ABOUT 88% OF THE LIGNITE RESERVES ARE LOCATED IN THE STATE OF TAMILNADU. THE REST ABOUT 12% OF THE RESERVES ARE LOCATED IN RAJASTHAN, GUJARAT, J& K AND KERALA. AS PER AVAILABLE INFORMATION, on COST OF LIGNITE approx RS 1100/- TO RS 1200/- PER TONNE. CONSIDERING A GCV OF LIGNITE AS 2500 Kcals/kg, THE FUEL COST (VARIABLE COST) OF POWER GENERATION AT PIT-HEAD LOCATION WOULD BE ABOUT Rs 1.00 PER Kwh. (Var Cost ALMOST DOUBLE wrt DOMESTIC COAL) BUT: USE OF LIGNITE AT PITHEAD LOCATION MAY OFFER AN ECONOMIC PROPOSAL.

GAS AVAIALBILITY IN INDIA

- Word Page- 8

PETROLEUM PRODUCTS
AS FUEL FOR POWER GENERATION
PETROLEUM PRODUCTS LIKE LDO / DIESEL, NGL / CONDENSATES, NAPHTHA, FO AND LSHS CAN BE USED FOR POWER GENERATION LDO / DIESEL NOW PERMITTED BY THE GOVT FOR POWER DIESEL HAS BEEN USED AT DADRI POWER STATION AS ALTERNATE FUEL

NGL IS AVAILABLE AT ONGC HAZIRA AND HAS BEEN SUCESSFULLY USED AT KAWAS GPP. HOWEVER, WITH THE COMMISSIONING OF KEROSENE CRACKING UNIT, THIS IS NO MORE AVAILABLE.

Petroleum Products
Naphtha not used worldwide for power. - Deterrents- stringent safety requirements limited availability & volatile prices. Petroleum products as a fuel for power generation can be considered only as bridging fuel for the purpose of meeting the gap between demand and availability. Deterrence being prohibitive costs.

Fuel Qty how much ?

1,000 MW NEW - BUILD POWER PLANT GAS 175 mmcf / d* FUEL OIL 29,000 b /d COAL 9,000 tonnes /d

Fuel's low heat values - indicative only Fuel-Oil 9,700 Kcal/Kg Gas-Oil 10,200 Kcal/Kg Coal 6,150 Kcal/Kg

OTHER OPTIONS

Can we see beyond COAL - OIL- GAS ?

Nuclear option ?
There is very limited potential for new nuclear. Inflexible to run and difficult to compete in liberalised markets. Safety and waste disposal problems. However, they are good for meeting Kyoto objectives (no CO2); low fuel cost as a % of total cost; do not depend on imports once uranium is stockpiled; provide diversification of fuel risk; are not linked to crude oil price peaks.

Nuclear World Experience-1

UK has seen however a series of forced outages. China plans for 2 x 1000 MW in Jiangsu 2005. In Japan, Tepco's plant problems and subsequent shutdown in 2002 may inhibit further nuclear - which might help their cost base and the consumer Korea plans further nuclear plant; this may limit some aspects of its electricity and gas liberalisation Taiwan has a part-built plant, which may be the subject of a referendum. Germany phasing out, Turkey unlikely to go ahead. Brazil was reported as interested in one existing plant but only as hydro failed - 2001.

Nuclear World Experience-2

Finland is proposing a plant as diversification of risk from one fuel (gas) from one gas supplier, Russia. France. Nuclear plants forced to cut back in the hot summer of 2003, when regulatory limits were threatened by rising temperatures in input cooling water from rivers and inside nuclear plants. One quarter of its 58 nuclear stations were shutdown. USA. Problems over the renewal of the Price Anderson Act, which underlies specialist and subsidised insurance for the nuclear industry. March 2004.

Hydro ?
Serious political I environmental objections in India? Proving increasingly unreliable Unpredictable in many markets as rains and snow melt become uncertain. Very successful in driving Nordic prices down in 2000/2001 due to very heavy rainfall. Investment decisions become difficult. Unlikely to increase market share. Brazil is one of the best hydro markets:

Hydro- World Experience

LAOS. Theun Hinboun 1998. 21 O- MW. Hard currency electricity sales to Thailand, but reported fall in local fish stocks; erosion; deforestation; displacement of people. MALAYSIA

Bakun, Central Malaysia

Award of civil engineering contract to Malaysia-China Hydro Joint Venture Consortium 8 October 2002

NORWAY A 50 year low in water levels after a very dry summer and autumn resulted in the spot price of electricity rising from 166 NKr/MWh to 1686 NKr/MWh in December 2002. CHINA. Yangtse River. Cost >$24bn. Target 18,200MW. But electricity prices have dropped. Small cracks in structures and

Wind Power ?
Worldwide generating capacity is 25 GW. Key factors are technological improvement to bring costs down;
State subsidy; lack of constant wind power in much of the world, need for back-up from conventional sources

% of al! generation capacity Manufacturer Vestas forecast End 2002 8.5GW +25.0% End 2003 11.0GW +29.4% Asian demand is growing, but wind flow is not consistent enough in some key areas in Asia

Wind Power -2

.Irregular generation. Wind power is intermittent, so a 13MW windfarm onshore may produce an average 4MW. On a "good" site, the "right" amount of wind sufficient and steady to generate efficiently only blows 30% of the time. Trading systems like the UK's NETA heavily penalise failure to meet hourly generating commitments Technology at August 2002 Average newly installed windmill over 1 ,000 kW
70 meter rotors 5,000kW 98% availability

Target (unproven)

115 meter rotors

Off Shore Wind Prospects:

Offshore: construction and operation/maintenance costs can be some 40% higher than on land, but wind speeds are higher. Environmental objections are minimised

Wind Power around the World- 3

UK programme April 2001 up to 540 offshore units and upto 100m high, 1.5 to 10km out to sea. Current 3.8MW offshore Blyth, northeast coast, is the largest. American Wind Enerav Association, and Pacificorp at Stateline, Washington : Cost now 3 to 5c/kWh This was seen as expensive until the 2000/2001 rise in gas prices, and again looked expensive in 2002 ~ Germany. Wind power generation at 5 to 6c/kWh, but supported by "feed-in" tariffs that require electricity companies to buy all renewable power production, so that the average price is 9 c/kWh. Germany also heavily subsidises coal production

WAVE POWER'/ TIDAL CURRENT

Wave Power Comparison UK 21-11- 2000 Potential is in improving technology; onshore; offshore at wave level; and undersea (marine turbine); need is for government subsidy.

Remoteness from grid can limit scale. Potentially much more reliable than wind power.
15 year government-backed PPA with Scottish and Southern Electricity, and Scottish Power.
can generate 200kw, limited by local grid capacity. Yell Sound - steady 45kW, peaking 250kW from tidal flow, seabed 110 feet. Oscillatory movement of hydroplanes

SOLAR PANELS Technology: Conventional solar panels use silicon semi-conductors to

absorb sunlight and conduct the electric charge to current collectors. Titanium semiconductors would be cheaper, but are as yet less efficient. Ideal for remote locations, fridges, medicines, and for developed areas in the Mediterranean, like Cyprus. Legal requirement to install solar panels on house roofs, to provide water heating.

One cold, cloudy week in winter every two years in Israel results in households switching on 3 kW heaters and causing a peak demand surge.
Solar installations total 0.01 % of 30,000GW generating capacity worldwide; annual demand worldwide in 2003 is 600MW, 25% of it coming from Europe. Rajasthan Integrated Solar Combined Solar (ISCC) Project, with Solar Field of 220,000 m parabolic trough collectors steam raising, adding to waste heat recovery from 70 MW gas/naptha for 70 MW steam turbine = total 140 MW.

Solar-2
Utility meter runs backwards while solar power is being generated at a customer's site, giving a full credit against the customer's electricity bill, which could be up to 15 c/kWh Solar power is still very expensive. Cypress Semiconductor invested $1.1 m on solar panels; and estimated savings at $300,000/year on peak daytime rates.

ORIMULSION:
An emulsion of heavy oil and water may be exported by ship. Handles as a liquid and saves on grinding plant in comparison with coal, which is its main competitor for generation market. Not a clean fuel, high sulphur content, hence requires investment e.g. FGD. Numerous trials around the world. Competitor for coastal coal rather than Gas. ENEL, Italy, a big fuel oil buyer, has used orimulsion on trial since 1998, Denmark, Canada and Japan are other markets. China is conducting trials. In January 2003, Italy Fiume power station switching back to coal; Venezuelan supply problems. Bitor trying to link the price of orimulsion to heavy fuel oil.

IGCC - Integrated Gasification Combined Cycle

1.Very high capital cost 2.Cost of electricity generated = gas x 1.5 3.20% more efficient than open cycle coal 4.Technically very complex 5.Most likely to displace other coal plant # Example: National Power, Puertollano, Spain 300MW

PFBC - Pressurised Fluid Bed Combustion

1.High capital cost but less than IGCC Example: ASS Carbon 400MW Japan + 4 other plants

NON CONVENTIONAL SOURCES OF GAS-1

COAL BED METHANE o ESTIMATED POTENTIAL IN INDIA 850 Billion Cubic Meter. EXISTING INDICATIONS ON CBM AVAILABILITY FROM VARIOUS COALFIELDS (Figs in BCM): STUDIES ARE STILL UNDER PROGRESS FOR ITS ECONOMIC EXTRACTION AND EXPLOITATION. CAN NOT BE CONSIDERED FOR THE PRESENT.

NON CONVENTIONAL SOURCES OF GAS

GAS HYDRATES o METHANE GAS FROM GAS HYDRATES IS ONE OF THE MOST PROMISING SOURCE OF ENERGY IN NEAR FUTURE. o NATURAL GAS HYDRATES ARE BEING PRODUCED IN WESTERN SIBERIA. POTENTIAL IN INDIA HAS NOT YET BEEN AUTHENTICATED.

 FGD : costly but already installed in some countries ( e.g. Japan, Germany) If no FGD = burn clean coal - or suffer pollution - or install new, very expensive FGD (flue Gas Desulphuririsation ) Coal scrubber technology is better and more reliable Blend imported clean coal with domestic coal; or China : Limited by transportation systems - Use domestic via inland or coastal supply routes.

Few issues on COAL World Scenario .

Status of Coal based Power Efficiency:

Coal fuel efficiency improving Advanced technology State of the art OECD average Non OECD Average global 45 % limited applications 40 % 36 % 26 % 25 %

Coal World Scenario

Coal historically has been much cheaper than gas on marginal generation cost, and on life cycle non NPV. Differential has reduced. In North America and Europe, high gas prices have brought coal prices up and also helped demand by widening the price differential

Is Coal always steady ? See the price changes in International Market

:

2003 25 Year low in price after sustained price decline in real terms 2004 20 year highs March 2004 $45/tonne
May 2004 Spot prices reaching over $60/tonne, some trades at $150/tonne.

Why such fluctuations in Prices ?

China explosion of demand 20002 to 2003 completely unforecast

The value of the US dollar US financing and carry trades

What is Carry trade ?: Dollars were incredibly cheap to borrow at 1 %. I can borrow dollars very cheaply and trade in commodities like oil, oil products, coal etc that are dollar denominated and rising rapidly. Effect ?"

Coal World Scenario

Commodity boom and freight shortages leading to high freight charges - significant component of coal pricing

limited number of spot trades can result in significant price effects when business is done North America Almost all new power generation was gas-fired, far above planning and financing assumptions. Coal US prices benchmark were . $/tonne 27.50 January 2003 37.50 January 2004 60.00 approx current

change of attitude.
72 new coal plants are proposed: 59,000MW $69bn. Won't happen but indicative of 6 due to come on stream 2006/2007. Coal friendly Bush government predicting 148 new plants by 2025

Coal Predictions
East Mediterranean, Israel August 2001, the Minister for National Infrastructures announced a new coal plant to be built for first power by 2007/2008, assumed to be 1,100MW. The reasons appear to be political rather than economic, with powerful pro-coal, anti-gas unions and management in the state monopoly electricity industry THAILAND. 1,364 MW IPP BLPC Power project Banpen Coal. $1.34bn : Target October 2006. ITALY. March 2003 ENEL proposal to convert an oilfield plant to coal - reasons: diversification and fuel cost.

ASIA - COAL DEMAND AND PRICING

Price forecat I Year Billion Tonnes 4 / tonne 1995 231 40.85 1996 43.07 2000 337 49.76 2005 60.50. Prices are for steam coal . Demand is for internationally traded steam coal, largely driven by S. E. Asian demand
Forecast by AME Mineral Economics, Sydney