PRIME Powering Rural India by Micro Electrification

1. PRIMEPowering Rural India by Micro Electrification Presented by: Prasoon Agarwal ( prasoon@iimahd.ernet.in) Indian Institute of Management , Ahmedabad ( India)

2. Meet my Team • Koushik MBA 2 Year • Experience in Finance • Maruthi MBA 2 Year • Experience in Operations • Maurya MBA 2 Year • Experience in Marketing • Dr. Chirag • Experience in Community Health

3. Electricity Scenario in India Electricity Consumption vs. Shortage 600000 13.9 % 12.3 % 500000 11.7 % 11.2 % 400000 300000 200000 100000 2003-04 2004-05 2005-06 2006-07 (Proj) Total Shortage 72925 GWh 30% of this is in the villages Revenue Opportunity (@ 8.25 cents/ KWh) $ 1.82 Billion

4. What lack of Electricity means • No Water for Irrigation

5. What lack of Electricity means • No electricity for Households

6. What lack of Electricity means • Poor Health Facilities

7. What lack of Electricity means • Firewood as main fuel • No industries • Environmental Issues

8. Our Dream Irrigation Concerns Development Concerns Health Concerns Clean Energy Access Biomass based Micro Electrification

9. What Power means for India

10. What is PRIME • Small power plants in Villages • Run on locally grown Bio Fuels • Community as a stakeholder • Each plant caters to 6-7 Villages

11. Implementation Plan Identification of Land Leasing and Develop the land Regulatory Approvals & Compliance Forming Village Cooperative Cultivation of Crops Power Plant and T&D Setup Distribution and Collection

12. Implementation Plan Identification of Land Leasing and Develop the land Regulatory Approvals & Compliance Forming Village Cooperative First Project: PRIME-1 Completed till this Stage Cultivation of Crops Power Plant and T&D Setup Distribution and Collection

13. What's in for Investors Key Parameters (per Plant ) $ 0.34 Million for a capacity of 1MW Capex (Net of Grants & loan) 29% IRR $ 0.8 Million ( over a 30 year horizon) NPV $ 0.165 Million per year PAT 26% over the Net Cost of Generation (excluding CER) Profit Margin 5.15 years Payback Period 6.55 cents/KwH (Rs 2.62/KwH) Cost per unit of electricity

14. Social Benefits ( SROI) Electricity for Irrigation 60 Pumpsets of 7.5 HP rating, per village Electricity for Household 700 Incandescent lamps per village (24 Hours) Employment Will lift 250-270 people per cluster above poverty line Income for Farmers from Wasteland Income benefits for farmers cultivating Bio Fuels for this plan Environment Benefits Carbon Neutral Fuel Used ; CERs gained for every unit Health/Education Benefits Will raise the standard of living for the people from these communities

15. Risks Feedstock Prices Price impact on input cost Leasing the land from Villagers Technology Obsolescence Emerging technology might make existing facilities inefficient Provision for Upgradation in 3 Years Government Support Policy reversal on subsidy on electricity Community Involvement Rural Cooperation Different villages might lead to different arrangements “Panchayat” As a stakeholder BioFuels ( Leased Land Cultivation) What if Plant is not able to generate power Other uses for Casuarina

16. We are not just Poweringbut EmPowering India!!!

17. Q & A Cost Breakup Load in Villages Why BioFuels Village Cooperatives Pricing Why Casuarina Implementation Flow Income Statement Gasification Process Government Cash Flow Vision Pilot- PRIME 1 NPV Calculations Management Future Plans T & D Costs Labour/Admin Cost

18. Power Requirement in Village Assumptions: A 10 Hp pump running for 6-8 hrs every alternate day would be sufficient for irrigation purposes. So, the average number of hours that a pump works for a day works out to be 4. The most commonly used pump set is of 5Hp. However one can find quite a few pump sets of 10 Hp and even a few of 15 Hp capacities in a typical village. So, taking an average of 7.5 Hp is a reasonably fair assumption. The consumption of electricity for domestic purposes is small compared to the power consumption for irrigation. So, the total consumption of electricity is kept at 1.5 times that required for irrigation. The final calculation of the Capacity takes into account a cushion of 4% downtime and a transmission efficiency of 90%. Back

19. Break-up of Costs Back

20. Labor and Admin Costs Total number of units delivered = 560000 So, labor cost /KWh = 0.20 Rs Back

21. Pricing

22. Cost Structure Farms Rs. 1.52/KWh Factory Rs. 0.49/KWh Total Cost Rs. 2.62/KWh Rs. 0.14/KWh Transmission Rs. 0.47/KWh Markup Rs 0.68/KWh + CER Rs 0.60/KWh Others Selling Price Rs. 3.3/KWh Consumers Back

23. Income Statement Back

24. Cash Flow Statement Back

25. T&D Setup Costs: Each village has approx. 160-180 households A 25 kVA transformer can cater to 60-70 households (at normal load) Thus a typical 6-7 village cluster would require 18 such transformers Each transformer costs around Rs.8 lakhs Thus total costs around Rs.1.5 crores Back

26. NPV Calculation Back

27. Gram Urjaa Samiti • Would comprise of heads of Gram Panchayats, officials from administrative bodies and representative from local NGO’s • Functions: • Ensure that there is steady flow of the biomass from fields • Steady collection of revenues, without any default • Prevention of electricity developments • Mode of communication between PRIME and the villagers

28. The Cooperative Model Subsidies/ Financing Grants and Exemptions GOVERNMENT Continuous Power PRIME POWER PLANT GRAM URJA SAMITI Assured Payments Back

29. Government /Policies Regulations (Electricity Act Provisions) FREE LICENSE: Will come under Universal Service Obligation Person exempted under eighth provision to Section 14 from licensing would be free from the licensing obligations and purview of the Appropriate Commissions in matters pertaining to determination of tariffs and universal supply obligations applicable to licensees. TARIFF SETTING: Based on Mutual Agreement The retail tariffs for electricity supply by persons exempt under eighth provison to Section 14 would be set, based on mutual agreement between such person and the consumers.

30. Government /Policies Remote Village Electrification Program Central Financial Assistance (CFA) upto 90% of the cost of the projects is provided as grant for electrification of remote unelectrified census villages and remote hamlets of electrified census villages under this Programme, with specific benchmarks as applicable in respect of the technologies adopted for electrification. The balance 10% cost of projects could be financed through sources such as Pradhan Mantri Gramodaya Yojana (PMGY), Minimum Needs Programme (MNP), Rural Infrastructure Development Fund (RIDF), Ministry of Tribal Affairs (MoTA), Member of Parliament Local Area Development Fund (MPLAD) / Member of Legislative Assembly Local Area Development Fund (MLALAD) and the corporate sector. The implementing agencies are free to raise funds from these and other sources, such as Rural Electrification Corporation (REC), Power Finance Corporation (PFC), etc., including users, to meet their share of the cost of project. Rajiv Gandhi Gramin Vidyutikaran Yojna RGGVY provides for 90% capital subsidy for creating/ augmenting a basic rural electrification backbone and village electrification infrastructure Back

31. Pilot- PRIME 1 Selection Criteria • Electricity Deficit • higher the deficit, more • apt is the location • Proportion of Villages • Un-Electrified • higher the proportion, • better is the location • Amount of Wastelands • higher the better Considering the three criteria, Madhya Pradesh best fits the bill initial plants

32. Pilot – PRIME 1 Where? Khandwa District Why? Biomass Plant How? From Casuarina equisetifolia using Gasification Technology

33. Location: Khandwa Back

34. Process Flow Casaurina stems Char Heat Pressure C + ½ O2 = CO Cutting Drying Air Collection & Preparation Introduction into Gasifier Pyrolysis Combustion Heat Steam Internal Combustion Engine Producer Gas Cooling & Cleaning Gasification Water CO + H2 + CH4 C + H2O = CO + H2 CO + H2O = CO2 + H2 Electricity Back

35. Why BioFuels B I O M A S S Local availability of raw materials Grows on waste/unused land High calorific value: 3000-4000 kCal Minimal amount of carbon emission Widely available throughout country Various sources: Casaurina, Eucalyptus, Prosopis Back

36. Why Casuarina Raw Material Tons / MW Cost of Raw Material / Ton Lease Cost Rs/ KWh Land reqd (hectares) 10000 Rs 700 1000 4 X 10000 Rs 700 250 X 10000 Rs 700 400 1.6X PROSOPIS CASUARINA SUBABUL Back

37. Implementation flow Wasteland details Min. of Rural Development Min. of Non Conventional Energy Resources State Electricity Regulatory Commission Identification of Land Leasing & Land Development Regulatory Compliance Un-electrified villages cluster State Wasteland Development Dept Manpower Training Gram Urja Samiti Central Location Power Plant and T&D setup Cultivation of Crops Gram Panchayat, Admin Bodies and NGOs Ensuring regular supply of Crops Latest IISc technology Provision of latest techniques Back

38. Vision “Tointegrate the vast rural populace into the mainstream by electrification, augmentation of their annual incomes and enhancement of employment opportunities; leading to the holistic development of rural India” Back

39. Management Chairman Mr. S P Singh Director Operations Director Finance Director Technology Director Liasoning Mr. M Pattanayak Dr. C M Adatia Mr. M Gowda Dr. R L Sawhney Director Geo Technology Director Public Relations Director East Zone Director Central Zone Mr. K Bhattacharyya Mr. R Balaji Back

40. Future Expansion Geographical Expansion Target Market Harda 1 Shoepur 2 Banka 2 3 Banka 3 Shoepur 4 Jamui 1 4 Jamui Harda Local Expansion More plants in Khandwa region Maximising output of each plant Back

41. Impact EMPLOYMENT • Direct employment at the factory and T&D centers • Driving out hidden employment by Casuarina farming . on wastelands and auxiliary jobs • Development of rural based small scale industries COMMUNITY Regular supply of electricity would lead to : • Improved quality of life • Provision of adequate health care facilities & clean . drinking water and improved education facilities • Improved connectivity with mainstream and increased . . access to information ENVIRONMENT • Carbon Neutral source of energy, leading to reduction . . in pollution and conservation of fossil fuels