Thursday, 17 November 2011

Start a Wind Mills Farm Business


  

(220). Start a Wind Mills Farm Business

1. Energy Scenario in India
India is a power-starved country. The total installed power generation capacity in India stood at 1,05,714.29 MW as on 31 March 2002 including thermal, hydel, nuclear and renewables. The contribution of thermal, hydel, nuclear and renewable sources of power towards the total installed power generation capacity were 73%, 23.50%, 2% and 1.50% respectively. According to a recent estimate there is a demand gap of 8-10% and a peak load demand gap of 18-20% in the country. The problem is also accentuated by the fact that there is very little decentralized generation of power and vast areas in the rural segment is not connected by grid power. This is where tapping wind energy for generation of grid quality electricity on a decentralized manner can be of immense help to the country.
2. Present state and future potential for wind energy generation in India
Exploitation of wind energy has been in place from time immemorial but the development of technology for tapping the same for generation of grid quality electricity is of a recent origin. India has been quick to make a foray in this area. It has made its mark as one of the top ranking countries in the world in wind power generation. With an installed generation capacity of 1702.30 MW as on 31.3.2002 of wind power, India now ranks 5th in the world after Germany, USA, Denmark and Spain in wind power generation. According to a recent estimate, the gross wind power generation potential in the country is estimated at 45,195 MW at 50 Mtr. Hub Height. Hub height is defined as the height from the Ground Level (GL) at which the hub of the windmill or the hub of the propeller blades of the wind energy generator is situated. The state wise potential and installed capacity is given in the table below:
Table-1
 
State
Gross Potential in MW
                      Total Installed Capacity in MW


Demonstration Projects (MW)
Private Sector Projects(MW)
Total Capacity (MW)
Andhra Pradesh
8275
5.40
87.20
92.60
Gujarat
9675
17.30
149.60
166.90
Karnataka
6620
2.60
93.60
96.20
Kerala
875
2.00
0.00
2.00
Madhya Pradesh
5500
0.60
22.00
22.60
Maharashtra
3650
6.40
392.80
399.20
Orissa
1700
6.40
18.70
25.10
Rajasthan
5400
19.40
875.60
895.00
Tamil Nadu
3050
1.10
0.00
1.10
West Bengal
450
1.60
0.00
1.60
Total
45195
62.80
1639.50
1702.30
 
The present installed capacity of 1702.30 MW of wind power is around 3.78% of the total potential in the country. The achievement during the VIIIth Plan was significant.  860 MW of wind power capacity was added during the plan period as against the initial target of 100 MW and the revised target of 500 MW.
Ministry of Non Conventional Energy Sources (MNES); a full fledged Ministry of Govt. of India looking after the promotional and development policies of renewables in the country; has year marked a target of 5,000 MW from wind energy sources by 2012 i.e. the end of the XI th Five Year Plan. 

3. Wind resource potential
 The wind power generation in the country is influenced to a great extent by the wind speed and wind power density prevalent at a particular potential location at any given point of time. The wind speed is affected to a large extent by the strong southwesterly monsoons, starting in May-June, and at the same time by the weaker northeastern monsoons in the winter months. It has been generally observed that 60-70% of the total wind power generation in the country takes place during June- October when the southwest monsoons are prevalent through out the country. According to a latest study, locations having an annual mean wind power density greater than 150 watts/ square meter at 30 meter hub height have been found to be suitable for development of wind power projects. The details of these sites are available in the wind energy atlas of India.

4. Promotional policies and new initiatives for development of wind power
Govt. of India and state govts. have developed suitable policies and guidelines for providing technical help, financial support and various other incentives for development of wind power in the country. These include R&D activities for design and development of low cost indigenous wind energy harnessing technologies, dissemination of the developed technologies through demonstration projects, setting up of the commercial wind farms through central and state government subsidy, providing financial incentives to potential entrepreneurs etc.
The various incentives that are being provided by the central and the state governments are as per the details given below:
From Central Government
·        Income Tax Holiday
·        Accelerated Depreciation
·        Concessional Custom Duty/ Duty Free Import
·        Capital/ Interest Subsidy
 From State Governments
·        Energy buyback, power wheeling and banking facilities
·        Sales tax concession benefits
·        Electricity tax exemption
·        Demand cut concession offered to industrial consumers who establish power generating units from renewable energy sources
·        Capital Subsidy
The table given below depicts the initiatives provided by some of the state governments towards development of commercial wind power projects.
 
These calorific values or heat values indicate that bio-gas can perform works similar to fossil oil in domestic cooking, lighting etc., with better efficiency depending upon the methane content in it. The bio-gas has also the potential for use in internal combustion engines used for pumping water etc. for which research and development works are in progress. Biogas, therefore, has a bright future as an alternate renewable source of energy for domestic and farm use.
3. Bio-Gas, its Production Process and Composition
It would be useful to know what bio-gas is and what its properties are-
(i) Bio-gas:  Itmainly comprises of hydro-carbon which is combustible like any hydro-carbons and can produce heat and energy when burnt. The chemical formula of the hydro-carbon is CH4 where C stands for carbon and H for hydrogen and chemically the gas is termed as methane gas. The chemical formula of some other commonly used hydrocarbons derived from fossil oil viz. petrol, kerosene, diesel, etc. are C6H14 , C9H20 and C16H34 respectively. Unlike these hydro-carbons which are derived from direct chemical processes, bio-gas is produced through a bio-chemical process in which some bacteria convert the biological wastes into useful bio-gas comprising methane through chemical interaction. Such methane gas is renewable through continuous feeding of biological wastes and which are available in plenty in rural areas in the country. Since the useful gas originates from biological process, it has been termed as bio-gas in which methane gas is the main constituent.
(ii)  Production Process:The process of bio-gas production is anaerobic in nature and takes place in two stages. The two stages have been termed as acid formation stage and methane formation stage. In the acid formation stage, the bio-degradable complex organic compounds of solids and cellulose presents in the waste materials are acted upon by a group of acid forming bacteria present in the dung and reduce them into organic acids, CO2, H2, NH4 and H2S. Since the organic acids are the main products in this stage, it is known as acid forming stage and this serves as the substrates for the production of methane by methanogenic bacteria.
In the second stage, groups of methanogenic bacteria act upon the organic acids to produce methane gas and also reduce CO2 in the presence of H2 to form methane (CH4). At the end of the process the amount of oxygen demanding materials in the waste product is reduced to within the safe level for handling by human beings. There are four types of methano-genic bacteria; Methano-bacterium, Methano-spirillium, Methano-coccus and Methano-circina. These bacteria are oxygen sensitive and photo-sensitive and do not perform effectively in the presence of oxygen and light.
Constituents
The gas thus produced by the above process in a bio-gas plant does not contain pure methane and has several impurities. A typical composition of such gas obtained from the process is as follows:
 
Table –II
 
Items
Andhra Pradesh
Karnataka
Madhya Pradesh
Mahar-ashtra
Rajasthan
Tamil Nadu
West Bengal
Wheeling
2% of energy
2% of energy
2% of energy
2% of energy
2% of energy
2% of energy
2% of energy
Banking

12 months
2% p.m. for 12 months
-
12 Months
12 Months
12 Months
6 Months
Buy - Back

Rs. 2.25/ Kwh (5% escalation 1997-98)
Rs. 2.25/ Kwh (5% escalation 1994-95)
Rs. 2.25/ Kwh no escalation
Rs. 2.25/ Kwh (5% escalation 1994-95)
Rs. 2.75/ Kwh (5% escalation 1999-2000)
Rs. 2.25/ Kwh (5% escalation 1995-96)
On case to case basis
Third Party Sale
Not allowed
Allowed
Allowed
Allowed
Allowed
Not Allowed
Not Allowed
Capital Subsidy

20% Max. Rs. 25.00 Lakh
Max. Rs. 25.00 Lakh for backward areas
Same as other industries
30% Max. Rs. 30.00 Lakh
-
-
-
Other incentives
Industry status
No electricity duty for 5 years
-
100% sales tax exemption
No electricity duty for 5 years
No electricity duty
-
 
Apart from the same, MNES has set up an autonomous body called The Center for Wind Energy technology (C-WET) with assistance from the Danish Government. C-WET conducts research and development work for development of indigenous technology for wind power generation, preparation of technical standards for certification of wind power generators, award of certificates for the development as well as consultancy activities for development of market for wind power.
On similar lines to C-WET few other autonomous bodies namely Wind Energy Producers Association (WINPRO) and Indian Wind Turbine Manufacturers Association (IWTMA) have been created. The objective of WINPRO is to create awareness about the development of wind power in the country, creating consensus about solving technical problems and development of skilled manpower through organization of countrywide seminars, workshops etc. Similarly the function of IWTMA is to discuss/ take up issues concerning wind turbine manufacturers with central, state governmental and other concerned agencies, work towards an amicable solution to the issues so that development and penetration of wind power in the country can take place in a sustainable manner.
 
5. Wind power generator manufacturing technology available in the country
The wind turbines installed so far in the country are predominantly of the “fixed pitch” type.  The degree by which the Wind Energy Generator (WEG) propeller blades can be made to tilt through mechanical or electrical controls is called the pitch of the WEG. However, with technological advancement, the use of WEGs with better aerodynamic designs, lighter and larger blades made up of fibre glass material with epoxy coating, higher tubular towers, direct mesh drive and variable speed gearless operation using advanced power electronics is gaining momentum.
Technological advancement is being made nowadays for complete elimination or reduction in reactive power consumption by the WEGs. Reactive power is defined as the power required for cutting the electromagnetic field generated within the armature coil of the electrical generator of a WEG under static condition for it to rotate and generate electrical power. The unit size of the WEGs has also gone up from 55-100 KW to 400-750KW for commercial projects being implemented nowadays.
6. Barriers in wind power development
 Inspite of the availability of various financial incentives and availability of technological know-how, the development of wind power is very tardy in the country. The main bottlenecks for large-scale development of wind power in the country can be attributed to the following:
1.Distortions in the energy market
2.Stiff competition from subsidized conventional energy and its universal acceptability
3. Lack of awareness and organizational skill required for propagating the technology
4.Technological constraints for limited level of grid penetration (20% maximum)
5.  Inappropriate estimation of the power load that is to be served by the WEG
6.Lack of adequate capital at affordable cost
7.Laborious and tardy procedure for site allocation
7. Need of the hour
 The following are the need of the hour:
  1. Urgent efforts are required for the design and development of low cost, simple to use wind turbines. The manufacturers in India who have a tie up with foreign firms should see that the level of indenization of the WEGs is increased so that the plant and machinery cost is reduced.
  2. Suitable extension mechanism has to be devised wherein the benefitsof development of wind power can be disseminated to the rural communities, village panchayats so that collective organizational skills can be developed.
  3. Simple, easy to understand and lucid techniques should be devised which can help in correct estimation of power requirement at various power-consuming units.
  4. The various agencies providing institutional finance have got a key role to play by providing finance to the promoters at concessional rate of interest, repayment period matching to the level of annual revenue available for repayment of debt, provision of adequate grace period, rationalization of the process of creation of charge by the bankers on the securities of the promoters etc.
  5. Simplification of procedure for speedy land/ site allotment for the wind turbines.
Therefore, in order to bring the desired information in the knowledge of potential entrepreneurs and in order to properly guide them in establishment of projects on wind energy generators, the present model having an installed wind power generation capacity of 1.00 MW has been formulated.
8.  Investment components of project for installation of wind energy generators having an installed capacity of 1.00 MW
The various investment components are as follows:       
Land, layout plan and site development requirement:
The land requirement for installation of the wind energy generators will depend upon the total installed capacity of the wind farm. The site should have been identified by MNES or its state level sister agencies for its potentiality for development of wind power based on technical parameters such as avg. yearly wind speed, wind power density, wind direction etc. The site should find a mention in the wind energy atlas of India having potentiality for wind power development. The average yearly wind speed of the site should be greater than the minimum cut-in wind speed for the specific WEG proposed to be installed. Micro siting at the site should also have been done by  MNES or concerned state level agency. Non agricultural land should invariably be used for installation of the WEGs. A minimum distance of 7 times the  rotor diameter should be maintained between 2 adjacent WEGs installed in a single row, whereas a minimum row to row distance of  3 times the rotor diameter should be maintained between 2 WEGs. Therefore, approximately an area of 4.00 acre is required for installation of 1.00 MW capacity  wind power plant. The tentative cost of land and land development charges for the model project has been considered at Rs. 4.00 Lakh.
It has been observed from experience that the major WEG manufacturers generally purchase land in bulk from MNES/ State Nodal Agencies for installation of WEGs. Thereafter, the companies negotiate for establishment of WEGs with corporates, partnership firms, individuals etc. Once the contractual agreement is signed, the WEG manufacturing companies go in for installation and commissioning of the WEGs on a turn key basis. They also help in completing all the legal formalities and making arrangements for forward linkages viz. signing of the  power purchase agreement (PPA) with the concerned state electricity board (SEB) for sale of wind power, using the  power transmission and distribution infrastructure of the SEB for wheeling of power for captive use etc, third party sale, banking etc. The WEG manufacturing companies thereafter transfers the ownership of the projects to its true owners. However, they continue to operate the project on behalf of the corporates, partnership firms, individuals etc. as well as carry out annual repair and maintenance operations based on annual contractual agreement.
Civil construction:
As a thumb rule approximately 2.30% of the total project cost involved in a 1.00 MW capacity Wind Energy Farm is used  towards  meeting the cost of  civil infrastructure. 
The cost include construction of  sheds for installation of the control panel, metering unit, construction of foundation for the lattice/ tubular tower on top of which the WEGs is to be housed. A cost of  Rs. 3.00 Lakh /unit (WEG) has been considered for the model project . Thus the total cost amounts to Rs. 3.00 lakh x 4 = Rs. 12.00 Lakh.
Plant and Machinery:
In the proposed model project four number of WEGs are proposed to be installed. Some of the important technical specifications of the machines have been presented in the table given below:
 
Table-III
Technical specifications of the WEGs
 
Rated Capacity
250KW
Rotor Diameter
30m
Hub Height
50m
Rotor with Pitch Control

Type
Upwind rotor with active pitch control
Direction of  rotation
Clockwise
Number of blades
3
Length of blades
14m
Swept Area
707 m 2
Blade Material
Fiber glass ( reinforced epoxy) with integral lightening protection
Rotor Speed
Variable 18-50 rpm
Tip Speed
25-75 m/s
Pitch Control
Three synchronized blade pitch systems with battery back up
Generator
Rigid
Hub Bearings
Tapered  roller bearings
Grid Feeding
AC-DC-AC through converter- inverter
Braking System
3 independent aero brakes  with emergency backup supply
Yaw Control
Active through arrangement gears, friction damping etc.
Cut-in wind speed
2.5 m/s
Rated wind speed
13 m/s
Tower
Steel tubular
 
As a thumb rule 86% of the total cost for erection and commissioning a 1.00 MW capacity wind farm is incurred towards cost of  plant and machinery. Under the model project a cost of Rs. 104.00 Lakh  ( inclusive of packaging, handling, erection and commissioning charges etc.) has been considered for the supply of each WEG of 250 kW installed power generation capacity at the site. Thus the total cost amounts to Rs. 104.00 Lakh x 4nos. = Rs. 416.00 Lakh
Electricals:
Suitable step up transformers with 33 KV as output voltage are also required for stepping up the voltage of generated power for onward feeding the same to the state power grid. A cost @ Rs. 4.50 Lakh  per transformer unit totaling Rs. 18.00 Lakh has been considered for the model project. Apart from it, a cost of  Rs. 0.975 Lakh has also been considered towards cost of 33 KV OHT Line.    
Infrastructure development / miscellaneous charges:
A cost of Rs. 25.00 Lakh has been considered for the model project.
Project Cost:
The detailed item wise project cost considered are as follows:
Table -IV
Detailed project Cost
(Rs. Lakh)
 
S.No.
Description
Rate/unit (Rs.in Lakh)
Qty. or no. of units
       Amount
1
Purchase of land, land development and fencing charges
Lump sum amount
4.00 acres
4.00
2
Supply of WEG of 250 kW capacity  each
100.00
4
400.00
3
Packaging , handling, loading , transportation, unloading and insurance cover till erection of WEGs
1.00
4
4.00
4
Foundation and other civil structures
3.00
4
12.00
5
Electrical and Transformers 33 KV
4.50
4
18.00
6
Erection and Commissioning
3.00
4
12.00
7
Other project cost including charges for infrastructure development @ Rs. 25 Lakh per MW for 1.00 MW
25.00
1.00 MW
25.00
8
Cost of 33 KV OHT Line ( External and internal) 0.15 KM assumed approx. @ Rs. 6.50 lakhs per KM or as actual
  
  
0.975
9
Total
  
  
475.98
 
9. Marketing
The wind power generated can be:
i.                     Used for captive use through wheeling using the power grid of the concerned state electricity board.
ii.                   Can be directly sold to the State Electricity Board
The banks are requested to make themselves familiar with the wind power development policies brought out by IREDA and it's sister concern at the state level for financing WEG installation project proposals.
10. Insurance:
The wind energy generators should be adequately insured.
11. Eligibility of the borrowers:
The borrowers can be proprietary and partnership firms, cooperatives, joint stock companies, joint sector companies etc
12. Repayment:
The repayment schedule has been calculated considering the tenure of the term loan of 5 years without any grace period. However, banks are free to decide upon the repayment schedule depending upon the net cash flow assessed.
13. Interest rate for ultimate borrowers:
Banks are free to decide the rate of interest within the overall RBI guidelines . However, for working out the financial viability and bankability of the model project we have assumed the rate of interest as 12% p.a.
14. Interest rate for refinance from NABARD:
As per circulars of  NABARD issued from time to time.
15. Security:
Banks may take a decision as per RBI guidelines.
Results of  financial analysis are as under:
The financial analysis of the investment on installation of Wind Energy Generators for generation of wind power has been attempted for two different scenarios.
1. Power is wheeled through the power grid of the concerned state electricity board for  captive use.
2. Wind power generated is directly sold to the  to the  state electricity board. 
The results are place in annexures I(a) to VIII(a) and I(b) to VIII(b) respectively. The project has a margin money component of 25% with the rate of interest on term loan and working capital as 12% p.a. and 13% p.a. respectively. The financial indicators for two different investment scenarios are as under:
I. Power is wheeled through the power grid of the concerned state electricity board for  captive use.
1.Net present  value @ 15% DF (NPV)                  : Rs. 471.845 Lakh
2.Internal Rate of return (IRR)                                 : 27.37%
3.Benefit Cost Ratio (BCR)                                      : 1.79: 1
4.Average Debt Service Coverage Ratio (DSCR): 1.75:1
II. Wind power generated is directly sold to the  state electricity board. 
1. Net present  value @ 15% DF (NPV)                  : Rs. 333.369 Lakh
2. Internal Rate of return (IRR)                                  : 21.92 %
3. Benefit Cost Ratio (BCR)                                      : 1.55:1
4. Average Debt Service Coverage Ratio (DSCR)    : 1.61:1
Annexures
 
Project on Installation of Wind Energy Generators for captive use of wind power
Installed capacity: 1.00 MW   
Detailed Project Cost  Annexure-I (a)
    (Rs. Lakh)
S.No.DescriptionRate/unit (Rs.in Lakh)Qty. or no. of unitsAmount
1Purchase of land, land development and fencing chargesLump sum amount4.00 acres4
2Supply of WEG of 250 kW capacity   each1004400
3Packaging , handling, loading , transportation, unloading and insurance cover till erection of WEGs144
4Foundation and other civil structures3412
5Electrical and Transformers 33 KV4.5418
6Erection and Commissioning3412
7Other project cost including charges for infrastructure development @ Rs.25.00 Lakh per MW for 1.00 MW25125
8Cost of 33 KV OHT Line ( External and internal) 0.15 KM assumed approx. @ Rs. 6.50 lakh per KM or as actual0.98
9Total  475.98
 
 
Project on Installation of Wind Energy Generators for commercial use of wind power
 
Annexure-I (b) Detailed Project Cost
Installed capacity: 1.00 MW
 
 (Rs. Lakh)
S.No.DescriptionRate/unit (Rs.Lakh)Qty. or no. of unitsAmount
1Purchase of land, land development and fencing chargesLump sum amount4.00 acres4.00
2Supply of WEG of 250 kW capacity each100.004400.00
3Packaging , handling, loading , transportation, unloading and insurance cover till erection of WEGs1.0044.00
4Foundation and other civil structures3.00412.00
5Electrical and Transformers 33 KV4.50418.00
6Erection and Commissioning3.00412.00
7Other project cost including charges for infrastructure development @ Rs. 25.00 Lakh per MW for 1.00 MW25.00125.00
8Cost of 33 KV OHT Line ( External and internal) 0.15 KM assumed approx. @ Rs. 6.50 lakh per KM or as actual  0.98
9Total  475.98
 

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