BIOMASS MANAGEMENT & PRICING FOR POWER GENERATION

Policy Advisory Services in Biomass Gasification Technology in Pakistan BIOMASS MANAGEMENT & PRICING FOR POWER GENERATION VERSION (3) -FINAL Submitted to UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Submitted by DEVELOPMENT ENVIRONERGY SERVICES LTD 819, Antriksh Bhawan, 22 Kasturba Gandhi Marg, New Delhi -110001 Tel.: +91 11 4079 1100 Fax : +91 11 4079 1101; www.deslenergy.com MAY 2017

DISCLAIMERThis report (including any enclosures and attachments) has been prepared for the exclusive use andbenefit of the addressee(s) and solely for the purpose for which it is provided. Unless we provideexpress prior written consent, no part of this report should be reproduced, distributed orcommunicated to any third party. We do not accept any liability if this report is used for analternative purpose from which it is intended, nor to any third party in respect of this report.Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 2 of 69

ACKNOWLEDGEMENTThis document has been prepared for the United Nations Industrial Development Organization(UNIDO) under the project title “Policy advisory services (Biomass gasification technologies)” underthe SAP ID 100333: “Promoting sustainable energy production and use for biomass in Pakistan”.Development Environergy Services Ltd. (DESL) acknowledges the consistent support provided by thefollowing UNIDO officials:• Mr. Alois Mhlanga, Project Manager• Mr. Ali Yasir, National Project Manager, Sustainable Energy, Biomass - Pakistan• Mr. Masroor Ahmed Khan, National Project Manager, Sustainable Energy RE & EEStudy Team Dr. GC Datta Roy, DESL , India Mr. R Rajmohan, Biomass technology expert, DESL, IndiaTeam leader Mr. Qazi Sabir, PITCO, PakistanTeam member(s)Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 3 of 69

TABLE OF CONTENTSEXECUTIV E SUMMARY ............................................................................................................................................................81 INTRODUCTION .......................................................................................................................................................12 1.1 OVERVIEW............................................................................................................................................................... 12 1.2 SCOPE OF WORK ...................................................................................................................................................... 12 1.3 METHODOLOGY....................................................................................................................................................... 13 1.4 STRUCTURE OF THE REPORT...................................................................................................................................... 142 BIOMASS RESOURCE MANAGEMEN T-KEY CHALLENGES ...............................................................................15 2.1 BIOMASS RESOURCE ASSESSMENT............................................................................................................................. 15 2.2 BIOMASS SUPPLY CHAIN........................................................................................................................................... 22 2.3 BIOMASS ENERGY TECHNOLOGIES............................................................................................................................. 29 2.4 SUMMARIZING......................................................................................................................................................... 343 BIOMASS RESOURCE MANAGEMEN T – STATUS QUO IN PAKISTAN ........................................................... 35 3.1 BIOMASS RESOURCE AVAILABILITY SURVEY ................................................................................................................ 35 3.2 ESTIMATED ANNUAL BIOMASS PRODUCTION.............................................................................................................. 36 3.3 COMPETING USE OF AGRO-RESIDUE.......................................................................................................................... 37 3.4 SURPLUS AVAILABILITY FOR POWER GENERATION....................................................................................................... 37 3.5 BIOMASS POWER POTENTIAL .................................................................................................................................... 38 3.6 PROJECT MODELS.................................................................................................................................................... 39 3.7 SUMMARIZING......................................................................................................................................................... 404 RECOMMENDATIONS-POLICY FOR PROMOTION OF BIOMASS POWER GENERATION ........................... 41 4.1 MANAGEMENT OF BIOMASS RESOURCES................................................................................................................... 42 4.2 PROMOTING BIOMASS POWER PROJECTS................................................................................................................... 42 4.3 BIOMASS PRICING.................................................................................................................................................... 43 4.4 GLOBAL REVIEW....................................................................................................................................................... 47 4.5 PRICING OF BAGASSE BY NEPRA .............................................................................................................................. 51 4.6 MONETARY & FISCAL INCENTIVES............................................................................................................................. 58 4.7 TECHNOLOGY DEVELOPMENT.................................................................................................................................... 59 4.8 INSTITUTIONAL ARRANGEMENT................................................................................................................................. 595 ANNEXES...................................................................................................................................................................60 5.1 ANNEX-1: TERMS OF REFERENCE AND STAKEHOLDERS CONSULTED............................................................................. 60 5.2 ANNEX-2: LIST OF SUPPLIERS OF EQUIPMENT FOR BIOMASS HARVESTING EQUIPMENT (INDIA)..................................... 62 5.3 ANNEX-3: CHINA BIOMASS ENERGY POLICY -EXTRACT................................................................................................ 63 5.4 ANNEX-4: SCOPE OF WORK FOR BIOMASS ASSESSMENT SURVEY............................................................................... 68Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 4 of 69

LIST OF TABLESTABLE 1: RCR FOR MAIZE ............................................................................................................................................................ 16TABLE 2: CROP RESIDUE RATIOS ................................................................................................................................................... 17TABLE 3: BULK DENSITY OF DIFFERENT BIOMASS ........................................................................................................................... 22TABLE 4: TRANSPORTATION & STORAGE LOSS.............................................................................................................................. 23TABLE 5: PRIMARY TRANSPORTATION COST .................................................................................................................................. 28TABLE 6: FEEDSTOCK REQUIREMENT AND BIOMASS POWER TECHNOLOGY...................................................................................... 33TABLE 7: COMBUSTION VS. GASIFICATION .................................................................................................................................... 34TABLE 8: CROP TO RESIDUE RATIO................................................................................................................................................ 36TABLE 9 ESTIMATED ANNUAL BIOMASS PRODUCTION.................................................................................................................... 36TABLE 10: SURPLUS AVAILABILITY OF AGRO RESIDUE FOR POWER GENERATION .............................................................................. 38TABLE 11: SURPLUS AVAILABILITY OF AGRO-INDUSTRIAL RESIDUE FOR POWER GENERATION............................................................ 38TABLE 12: ENERGY POTENTIAL – COMBUSTION TECHNOLOGY ....................................................................................................... 38TABLE 13: ENERGY POTENTIAL – GASIFICATION TECHNOLOGY....................................................................................................... 39TABLE 14: DIFFERENT PROJECT MODELS FOR POWER GENERATION................................................................................................ 40TABLE 15: RE POLICY MATRIX-SELECT COUNTRIES......................................................................................................................... 41TABLE 16: FUEL PRICING OPTION EVALUATION.............................................................................................................................. 43TABLE 17: EQUIVALENT BIOMASS PRICE, DETERMINED FROM FOSSIL FUEL ALTERNATIVES.............................................................. 44TABLE 18: EQUIVALENT BIOMASS PRICE-FIREWOOD27................................................................................................................. 45TABLE 19: BIOMASS PRICE COMPARATIVE .................................................................................................................................... 46TABLE 20 : BIOMASS PRICE AS PER SURVEY ................................................................................................................................... 47TABLE 21: PRICES OF BIOMASS-DIFFERENT METHODOLOGIES ........................................................................................................ 47TABLE 22: BIOMASS PRICE FOR TARIFF-INDIA............................................................................................................................... 50TABLE 23: DETERMINATION OF BAGASSE PRICE FOR REFERENCE YEAR UNDER UPFRONT TARIFF.................................................... 52TABLE 24: ILLUSTRATIVE FUEL PRICE INDEXATION METHODOLOGY (UPFRONT TARIFF) ................................................................. 52TABLE 25: ILLUSTRATIVE FUEL PRICE DETERMINED FOR A BIOMASS POWER PLANT......................................................................... 53TABLE 26 : BAGASSE PRICE FOR ‘FIT’ ........................................................................................................................................... 54TABLE 27: DETERMINED PRICE OF BIOMASS.................................................................................................................................. 57TABLE 28: INSTITUTIONAL ARRANGEMENT.................................................................................................................................... 59Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 5 of 69

LIST OF FIG URESFIGURE 1: KEY CHALLENGES IN BIOMASS MANAGEMENT .................................................................................................................8FIGURE 2: AREAS OF INTERVENTION FOR POLICY MAKING.................................................................................................................9FIGURE 3: APPROACHES TO FUEL PRICING..................................................................................................................................... 10FIGURE 4: WORK METHODOLOGY................................................................................................................................................ 14FIGURE 5: BIOMASS RESOURCES .................................................................................................................................................. 15FIGURE 6: AGRO-RESIDUE RESOURCE ASSESSMENT ....................................................................................................................... 16FIGURE 7: AGRO-INDUSTRIAL BIOMASS RESOURCE ASSESSMENT.................................................................................................... 16FIGURE 8: COMPONENT OF MAIZE PLANT ..................................................................................................................................... 17FIGURE 9: TOOLS USED IN MANUAL HARVESTING .......................................................................................................................... 18FIGURE 10: GRAIN HARVESTING................................................................................................................................................... 18FIGURE 11: TYPES OF COMBINE HARVESTER.................................................................................................................................. 19FIGURE 12: PICK TYPE COTTON HARVESTER .................................................................................................................................. 19FIGURE 13: SUGARCANE HARVESTING.......................................................................................................................................... 19FIGURE 14: MECHANIZED HARVESTING OF WHEAT STRAW ............................................................................................................ 20FIGURE 15: COMPARATIVE HARVESTING EFFICIENCY ..................................................................................................................... 20FIGURE 16: COMPETITIVE DYNAMICS ........................................................................................................................................... 21FIGURE 17: ESTIMATION OF CHANGE IN COMPETITION OF STRAW UTILIZATION IN CHINA................................................................ 21FIGURE 18: SUPPLY CHAIN OF RICE STRAW ................................................................................................................................... 22FIGURE 19: FUEL COLLECTION SYSTEM ......................................................................................................................................... 25FIGURE 20: BIOMASS FUEL PROCESSING PLANT............................................................................................................................. 26FIGURE 21: MODEL OF ENERGY PLANTATION DEVELOPMENT ....................................................................................................... 27FIGURE 22: INNOVATIVE SYSTEM OF TRANSPORTATION................................................................................................................. 28FIGURE 23: COST COMPOSITION OF STRAW FOR A BIOMASS POWER PLANT IN CHINA 2013 ........................................................... 28FIGURE 24: SCHEMATIC REPRESENTATION OF RANKINE CYCLE ...................................................................................................... 30FIGURE 25: SCHEMATIC DIAGRAM OF GASIFIER COUPLED WITH PRODUCER GAS BASED GENERATOR SETS ..................................... 31FIGURE 26: BIO METHANATION-SCHEMATIC................................................................................................................................ 32FIGURE 27: SEQUENTIAL STEPS FOR THE ESTIMATION OF BIOMASS AVAILABLE FOR POWER GENERATION ......................................... 35FIGURE 28: COMPETING USE OF BIOMASS .................................................................................................................................... 37FIGURE 29: EVOLUTION OF ENERGY GENERATION SCENARIO ........................................................................................................ 43FIGURE 30: COAL PRICE VOLATILITY.............................................................................................................................................. 45FIGURE 31: BIOMASS PRICE BASED ON SURVEY ............................................................................................................................ 46FIGURE 32: VARIATIONS IN DELIVERED COST................................................................................................................................. 48FIGURE 33: HISTORICAL VARIATION IN PRICE OF COAL AND FIREWOOD........................................................................................... 55FIGURE 34: VARIATION IN PRICE OF BAGASSE ............................................................................................................................... 56FIGURE 35: RANGE OF FUEL PRICE................................................................................................................................................ 56FIGURE 36: REGIONAL VARIATION IN THE PRICE OF FIREWOOD27 ................................................................................................... 57Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 6 of 69

AED B ABB REV IA TIONSAFBC Alternative Energy Development BoardCERC Atmospheric Fluidized Bed CombustionCIF Central Electricity Regulatory Commission, IndiaDESL Cost, Insurance and Freight Development Environergy Services Ltd.ESMAP Energy Sector Management Assistance Program, World BankFi T Feed in TariffFO Furnace OilHFO Heavy Fuel Oil High Speed DieselHSD International Energy AgencyIEA International Renewable Energy AgencyIRENA Independent Power Plant Liquefied Natural GasIPP Ministry of Agriculture, PakistanLNG Ministry of Finance, PakistanMoA Ministry of New and Renewable Energy, IndiaMoF Ministry of Water & Power, Pakistan Net Calorific ValueMNR E National Development & Reform Commission, ChinaMW&P National Electric Power Regulatory Authority, PakistanNCV Residue to Crop RatioNDRC Residual Fuel Oil Re Gasified Liquefied Natural GasNEPR A State Electricity Regulatory Commission, IndiaRCR Units of MeasurementRFO Wholesale Price IndexRLNGSERCUOMWPI UNITS OF MEASUREMENTSParameters UOMPercentage %British Thermal Units per Kilogram BTU/ kgKilo calories per Kilogram kCa l /kgKilogram/ kilo watt hour kg/kWhKilogram/ cubic meter kg/m3Kil ometers kmKilo Watt kWKilo Watt hours kWhSquare meter m2One million British Thermal Units MMB TUMega Watt MW CURRENCYUnited States Dollars US$Indian Rupees INRPakistan Rupees RsClient Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 7 of 69

Executive SummaryBiomass resources meet a large percentage of the energy demand, particularly in resource richcountries in the Asian and African region. Forest and agriculture constitute the major source ofbiomasses followed by wastes from anthropological activities. While a likeness of a formal markethas developed for the forest-based biomass resources and to some extent for agro-industrialresidues, a formal system for agro-residues, which constitute the bulk of the available biomassresources, is still to emerge. The need for a biomass management system arises due to the fact thatresources are distributed over a large geographic area and available only for short durations of time,combined with the fact that many of the agro-residues have low bulk density. The combined impactis an increase in storage and transportation cost. Furthermore, energy conversion technologies arenot as well developed for residues such as straw and stalks as compared to woody biomass andagro-industrial residues. The overall impact is a wide variation between the actual price of biomassand the price determined by the regulator.Key challenges in biomass managementThe challenges in biomass management include the assessment of actual biomass availability, therequirement for investment in a supply chain and the impact of fuel characteristics on thetechnology selection.How much resource is available?The actual residueImportant for optimizing Biomass characteristics Absence of a supply chainavailable as surplus, isthe cost of fuel, of whichviz. moisture, calorific Impact of biomassnot the same as thetransportation cost is thevalue, ash content and characteristicsactual residue generatedhighest component.physical characteristics play a role on the Differences arise on Constraints faced: technology - both fuel account of : method of inadequate infrastructure preparation and energy harvesting (manual vs from field to roads - conversion mechanised), competing entailing high labor cost, uses, dynamic nature of low bulk density of agro Fuel preparation: key competing use residues, high cost of aspect os the energy cost densification, distance, losses occur during Conversion technology: transportation and multiple options - varying storage levels of technology maturity Figure 1: Key challenges in Biomass ManagementPurchase price of biomass is often only about 25% of the total delivered cost. A comprehensivestrategy for management of biomass resources, addressing these critical issues is critical forsupporting a biomass to energy market.Status Quo in PakistanA recent biomass mapping exercise carried out in Pakistan (with World Bank support), determinedthe quantity of surplus agro-residues and agro-industrial residues, after accounting for theircompeting usage. The main competing uses of biomass are as fodder, domestic fuel, use as fertilizeor sales (to industries/ biomass suppliers), with the degree of usage varying for different cropresidues. The estimated availability, discounting for competing usage is about 20,500 MT/year foragro residues and 18,850 MT/year for agro-industrial residues. This can support the generation ofClient Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 8 of 69

about 1,200 to 5,000 MW of power, depending on the choice of energy conversion technology.Different residues are suited to different energy conversion options. For example: • Rice husk is suitable for both biomass gasification and biomass combustion technology • Bagasse and other sugarcane residues (upto 20% co-fired) are suitable for high-end technologies and cogeneration projects • Maize cobs are a good resource for biomass gasification • Straw based residues (wheat stalk, cotton stalk, rice straw, maize straw and maize husk) are suited for biomass combustion technologyThe data available from Pakistan’s biomass atlas, provides a roadmap for development of anintegrated resource management and biomass power development strategy. Therefore, it isopportune to put in place an enabling policy and regulatory framework for attracting private sectorinvestment in biomass to energy conversion.Policy recommendationsPolicy recommendations proposed (figure below), address the immediate challenges. Biomass Promoting Biomass Monetary and Technology Institutional resource biomass pricing fiscal development arrangementmanagement power incentives generation Figure 2: Areas of intervention for policy making Intervention #1: Management of biomass resourcesIn order to develop a system for biomass management, we recommend initiation of actions for thefollowing: o Standardizing the methodology for biomass assessment: Prepare a manual on survey methodology, to be adopted for the establishment of biomass availability, determine competing uses and determination of residue to crop ratio. The manual should be finalized in consultation with all key stakeholders (industry, research institutions) and disseminated to project developers. o Providing support for the implementation of a biomass supply chain demonstration project, on public-private partnership model. This will help in developing a better understanding issues viz. collection (e.g. infrastructure enhancement needs), optimization of transportation costs, strategies for reduction of losses in transport of fuel and losses during storage. A few examples of developing such a model (e.g. biomass energy terminals, hub &spoke model and energy plantation) are discussed in detail in the following sections, which can provide a starting point for developing a business plan. Supporting a demonstration project can also help benchmarking various cost components in pricing of biomassClient Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 9 of 69

o Developing zonal plans for biomass resources can help boosting investor confidence by securing the fuel supply. The methodology of project registration for identified zones, on both solicited and unsolicited basis, can be finalized in consultation with provincial governments.o Capacity building to develop a competent pool of professions to undertake biomass assessment surveys (initially) and eventually extended to supply chain management. Intervention #2: Promotion of biomass power projectsIdentification of a list of priority projects for implementation from the Biomass Atlas and review theprovisions of the RE Policy, 2006, to develop these under both the solicited and unsolicited framework. While larger projects are recommended to be developed through private/ public sectorinvestment, we recommend AEDB directly spearheads the implementation of a few distributedgeneration projects based on gasification technology in rural areas. Intervention #3: Biomass pricingGlobally different approaches are adopted for fuel pricing (figure below), each of which has its ownmerits and demerits: Merit- Most transparent Merit- Takes care of all the Merit- Can be transparent local factors, better social if there is only one Demerit -Lowest or acceptability alternative highest marginal cost & rationale impact of Demerit - Lack of Demerit - Practical volatility transparency for difficulty as there are informally traded biomass always more than one alternative Higher cost of transactionsFuel Alternative Market Price Opportunity Price Figure 3: Approaches to fuel pricingIn the fuel alternative approach, biomass price is established by benchmarking on caloric basis toprices of alternatives. Biomass price benchmarked to coal is $51/MT, furnace oil, $81/MT, gas$140/MT and firewood $83/MT. The price of rice husk determined from field survey in Pakistan(2014) was $80/MT, while that of wood chips was $100/ MT.The current approach to fuel price determination, in the case of generic upfront tariff for bagasse isby linkage to imported coal and adjustment based on international price. A similar approach wasused for project specific tariff determination, with the price structure modified to include the pricefor inland transportation. While determining the generic upfront tariff, various alternatives wereconsidered, e.g. linkage to price of local coal and gas, where shortcomings were identified. The keyissue in fuel price linkage to imported fuel, is the difficulty in convincing farmers to link the price of alocal produce to international prices.Based on review of global best practice, study of historical variation of prices of alternatives, werecommend the following: o Principle of linkage to price of commercially traded fuel should be continued o Link to a local resource which is not subject to price volatilityClient Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 10 of 69

o Information for Fuel Wood, a transparently traded commodity is published by the Bureau of Statistics every month, for determination of WPI. A clear linkage between the prevalent fuel wood price and prices of biomass, which can be used as fuel for power plant can thus be established. o Price established for a pre-determined regulation period (2 to 5 years), with annual escalation factor either fixed or linked to price indices o Principles for logistic cost developed by NEPRA can be adopted to determine the landed cost of biomass to the projects o Adopt this methodology and test it out for few years for establishing the validity and then adjust for losses etc. Intervention #4: Monetary and Fiscal IncentivesIt is recommended that the monetary and fiscal incentives viz. custom duty exemption, income taxexemption, repatriation of dividends, etc., available in the RE Policy, 2006 are specifically extendedto all types of biomass to energy conversion projects (currently limited to high pressure bagassecogeneration and biomass power generation). Intervention #5: Technology developmentAEDB in collaboration with technical and agricultural universities may develop and implement a planfor increasing local manufacturing and servicing abilities for biomass to energy conversiontechnologies including supply chain. Intervention #6: Institutional arrangementAEDB may form different working groups of stakeholders to develop and implement the policyframework for biomass powerClient Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 11 of 69

1 Introduction1.1 OverviewPakistan is endowed with abundant availability of biomass resources, which can be economicallydeployed for developing a sustainable biomass energy system. The country has been perenniallyfacing power demand-supply gap, which is currently estimated at 4,500 to 5,500 MW 1. The system isbeing maintained by resorting to load shedding; often extending to 12 to 16 hours2. Pakistan hasplans to add 9,700 MW of electricity generation capacity by 2030 as per the Medium-TermDevelopment Framework (MTDF)2, which would partly take care of the current shortages. It wouldbe necessary to expand and diversify the resource base; particularly in the context of universalaccess to electricity in all regions of the country. Industries in Pakistan are currently dependent onliquid fuels for meeting their captive demand for electricity and heat. The situation is therefore,ideally suited for promoting biomass energy system as a sustainable and renewable alternative forindustries. Power generation through biomass can also play an important role in bridging the overalldemand-supply gap and universal energy access.Considering the potential contribution of biomass energy system to the power sector, the UnitedNations Industrial Development Organization (UNIDO) is providing technical assistance to andworking with Government of Pakistan for promoting biomass energy technologies in Pakistan. Smalland medium enterprises (SME) in Pakistan constitute 90% of the industrial enterprises andcontribute to 40% of GDP. Electricity supply to SME’s is also erratic and inadequate. Severalindustries have high demand for process heat too. Many SMEs are looking for alternative solutionsfor energy supply to achieve energy security, including biomass energy technologies.UNIDO has contracted the Consultant through an international competitive bidding process forproviding various services including: • recommendations on policy support, incentives, implementation rules and regulations under RE Policy 2006 (and amendment of 2013) for the Alternative Energy Development Board (AEDB) and capacity building; • recommendations on biomass pricing mechanism based on internationally accepted and successful practices; and • development of minimum quality standards for biomass combustion and gasification equipment for import and local manufacture1.2 Scope of workThe scope of work (detailed scope is included in Annex-1) included among other tasks, providingrecommendations biomass management and pricing. The need for policy and incentives for biomassmanagement and pricing arises from the following:Managing the supply chain for agro-residues is a formidable challenge because of the distributednature of the resources, availability over a short period of harvesting time and its physical1 National Power Policy 2013, Government of Pakistan2 Policy for development of renewable energy for power generation, Government of Pakistan, 2006Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 12 of 69

characteristics. “Fuel collection in majority of the cases in the biomass power plants is largelyunorganized. The major barrier indicated by the biomass power entrepreneurs is the fuel supplyparticularly during the summer months”3. (India). Annual fuel requirement of the energy plant has tobe procured in a very short period available for harvesting. Materials of very low bulk density haveto be collected from a large number of small farms, transported and stored.Energy conversion technologies for biomasses such as bagasse, rice husk and wood chips are welldeveloped. For other biomasses such straw and stalks (which are more abundantly available),technologies are still being perfected particularly to make them suitable for utilization of locallyavailable resources. Institutional mechanisms are required for overcoming the supply chain andtechnology barriers as has been seen from the successful development in some countries such asChina, India and Thailand.Various kinds of policy and regulatory supports are required for promotion of biomass energymarket. Feed-in-tariff has been the key regulatory tool that has been deployed in all the countries,which have succeeded in development of biomass energy. Mismatch in the prices paid by the projectdevelopers to the biomass supplier and the prices determined by the regulators often well below themarket prices (information asymmetry arising out of non-formal nature of the market) haveseriously affected the viability and sustainability of operation of such projects.“In recent years, the increasing costs for production caused by the growth in demand for fuel and thelack of standard to guide the fuel market make the biomass power plants’ profit decline and evencompletely loss, since the rising cost of fuel is out of the control for biomass power plants”4. (China)Monetary and fiscal incentives, development of market tools such as renewable purchaseobligations, tradable certificates etc. are amongst the array of other policy tools that are beingincreasingly deployed for promoting biomass energy globally.An extensive biomass resource assessment survey has recently been concluded in Pakistan withsupport from World Bank/ESMAP. This study has identified the biomass resources that can beharnessed for commercial energy production deploying appropriate energy conversion technologies.The rich information in the report provides the platform for attracting private sector investment inbiomass energy technologies. It is the opportune time for deployment of appropriate policy andregulatory tools for kick starting the investment market. Recommendations on various policy,regulatory and institutional mechanisms have been accordingly prepared based on review of globalscenario and status quo in Pakistan and taking into account information available in the surveyreport, public domain and Consultant’s database.1.3 MethodologyThe scope of work was accomplished in a sequential manner as illustrated below.3Fa ctors Influencing Grid Intera cti ve Bi omass Power Indus try – India , TERI,India4Dilemma & Stra tegy of Biomass Power Genera tion Indus try Development in China : A Perspecti ve of Indus try ChainClient Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 13 of 69

Preparation of •Desk research on global development the 1st draft •Preparation of the draft for consultation with UNIDO •Revision of draft and circulation to key stakeholdersStakeholders •Identification of key stakeholders & circulation of list for endorsement from UNIDOconsultation •Interaction meetings with individual stakeholders •Collation and circulation of report on inputs from stakeholdersPreparation of •Consultation with UNIDO & AEDB on feedback report 2nd draft •Finalisation of key points for inclusion in the revised report •Preparation of second draftStakeholders •Finalisation of stakeholders list for the national workshop workshop •Preparation of workshop agenda in consultation with UNIDO •Assist UNIDO in organising the workshop •Summarizing discussions and feedback from participants •Revision of report based on feedbackSubmission of •Submission of final report along with recommendations on implementation measures final report Figure 4: Work methodologyThe first draft of this report, on biomass management and pricing, was prepared and submitted inMay-16. Based on initial feedback from UNIDO and Alternative Energy Development Board (AEDB),the first draft was revised (Feb-Jun-16). The revised first draft was discussed with key stakeholdersthrough one-on-one consultations (Jul-Nov-16), and a final draft report was prepared (Dec-16)incorporating feedback received during consultations. A stakeholder consultation workshop wasorganized at Islamabad on 13th Apr-17 following this final report has been prepared.1.4 Structure of the reportThe structure of this report is as follows: • Section 2: Key challenges in biomass resource management • Section 3: Biomass resource management in Pakistan – Status Quo • Policy recommendations for biomass power generation • Annex-1: Terms of reference and stakeholders consulted • Annex-2: List of suppliers of equipment for biomass harvesting equipment (India) • Annex-3: Extracts from China’s biomass energy policy • Annex-4: Scope of work for biomass assessment survey, including forestry waste • BibliographyClient Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 14 of 69

2 Biomass resource management-key challengesUnlike other energy resources, the sources of major constituents of biomass resources are farmersand agriculture. A systematic approach is therefore required for understanding the issues involved inmanaging biomass resources. The critical components of a biomass resource management systeminclude:• Estimation of overall production of biomass residues• Estimation of actual availability considering harvesting efficiency & competitive usages• Biomass supply chain• Biomass characterization and energy technologies2.1 Biomass resource assessment2.1.1 Estimation of residue generationBiomass resource assessment study quantifies the existing or potential biomass material fromdifferent sources (illustrated example of sources in Figure 5 below) in a given area. Figure 5: Biomass resourcesPakistan is richly endowed with biomass resources with an energy potential of 0.5 MillionGWth/year5 from agro residues and agro industrial residues alone. Stalks and straws are the primaryagro-residues generated from the major crops such as wheat, paddy, maize and cotton in Pakistan6.In many countries, riverside greens can provide an attractive option as an energy crop. Punjabprovince in Pakistan is potentially suitable for development of such crops. Different methodologiesare used for assessment of different types of biomasses as illustrated by the following figures.Agro-residues5 Final Report on Bi omass Atlas for Pakis tan, Worl d Bank Biomass Ma pping for Pa kistan: Phase 1-3, Jul y 20166 Biomass atlas for Pakistan-April, 2016Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 15 of 69

•Crop mapping for different agricultural seasons (Summer & winter crops) •Estimation of crop area for different types of cropsSatelite survey- •validation through physical sample survey crop areaCrop yield •Sample survey and stakeholders interactionestimate •Historical trend analysis •Recoconciliation with available data on crop production from Governmental recordsEstimate of •Sample survey and stakeholders interactioncrop residue •Literature survey-research data and information on residue to crop ratios (RCR) for different types of crops in different regions ratio •Identification of variables impacting RCR •Freezing the RCR estimate Figure 6: Agro-residue resource assessmentAgro-industrial residuesProduction •Identification of key crops (Sugar cane, Paddy, Nuts) producing fuel residues estimate •Estimation of overall crop production •Estimation of overall industrial capacities for processing of crops •Estimate of crops processed in industries based on statistical analysisEstimate of •Sample survey for assessment of actual RCR based on data and information from surplus individual processing units •Historical and comparative analysis-regional, globalavailability •Freezing average RCR •Estimate of captive consumption based on historical analysis •Assessment of surplus Figure 7: Agro-industrial biomass resource assessmentActual availability of residues is usually less than the estimates as has been observed from projectspecific surveys7. These differences occur due to variations in residue to crop ratios (RCR) and theefficiency of harvesting. In case of maize for example, there are six components of residues. Onlystraw and stalk can be considered as residues available for use as fuel. Table 1: RCR for maize7 Consultant’s report on “Assessment of Options for Biomass Power Generation” to DfiD, Jun-11Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 16 of 69

Part of plant At Field Considered for RCR Female flower Left over No Grains Product No Husk Residue No Straw & stalk Residue Yes Root Left over No Cob Residue No Male flower Left over No Figure 8: Component of maize plantThe cob is also an important residue. However, cobs are usually not available at the farmer’s endand as such would not be available as fuel for the energy plant located in the crop area.Consultants have carried out literature survey as well as field research to assess the situations fordifferent crops such as wheat, paddy, cotton, sugar cane, jowar, bajra, tur and soybean. The resultsobtained from the field study were compared against the published data from different sources. Thefollowing table summarizes the findings.Table 2: Crop residue ratios Biomass portion as per RCR as per# Crop Other Biomass DESL IISc Other Biomass DESL* Bangalore Regenerabl IISc literature Regenerabl literature e Energy 0.651 Bangalore e Energy8 2 3.5 3.5 at % book 2 moisture9 0.456 2.5 0.561 Bajra Stalk Sta l k Sta l k 1.75 1.4 0.55 0.057 @15% 0.581 0.6132 Cotton Seeds + Sta l k Sta l k 1.77-3.74 Was te Sta l k Sta l k @12%3 Jowar Stalk Straw 1.25 1.4 @15%4 Maize Stalk Straw Straw Sta l k 2.08 1 Straw Straw5 Soy Straw 2.5@15% 2.1 Straw Tr a s hbean Straw Sta l k6 Sugar Bagasse Bagasse Straw 0.4 0.33+0.1 @48%cane + leaves + leaves 1.6 1.57 Tur Was te 1.6 1.75 1.38 Wheat Straw Straw @15%*Includes harvesting efficiencyThe gap between the assessed estimates based on survey and assumed RCR can be reduced bycarrying out regular satellite mapping and field survey. During the field study, sample survey shouldbe carried out to determine the actual amount of harvestable residues per unit of crop area. Theestimates derived from the mapping and field survey should be reconciled against the measuredvalue from sample survey for making more accurate estimate of residue production.8 Biomass- regenerable energy, edited by D.O Hall and R P Overend, John Wiley and Sons9 Paper presented at Regional Consultation on Modern Applications of Biomass Energy, KL, Jan-97Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 17 of 69

2.1.2 Harvesting efficiencyThe entire quantity of biomass generated by the crops is not harvestable. Depending upon the typesof crops and the harvesting methodology (manual and mechanized), the actual amount harvestedwould be less than the harvestable quantity.Manual harvesting: It includes plucking the ears of grain directly by hand, cutting the grain stalkswith a sickle, cutting them with a scythe, or with a modified type of scythe known as a grain cradle10.The different tools used in manual harvesting are shown in the figure below.Sickle: a short-handled farming Scythe: a tool used for cutting crops Grain Cr adle: A graintool with a semicircular blade, such as grass or corn, with a long- cradle or cradle is a modificationused for cutting corn, lopping, curved blade at the end of a long pole to a standard scythe to keep the or trimming attached to one or two short handles. Figure 9: Tools used in manual harvesting cut grain stems aligned.Mechanized harvesting: In the developed countries, only mechanized methodology is used forharvesting. Mechanized systems are being increasingly deployed in rest of the world too includingPakistan. Some of the mechanized harvesting techniques for rice, wheat, maize, cotton andsugarcane (major crops of Pakistan) are as follows.GRAIN HARVESTING MACHINE: This machine is used to harvest grains, example, rice, wheat, maize,barley and millets. A combine grain machine performs three separate operations comprising • Harvesting (Reaping) – process of cutting/ harvesting the crop from the land • Threshing – process of separation of grain from stalks and husks (biomass production) • Winnowing – blow a current of air through grain in order to remove the chaff Rice harvester, Reaper Wheat harvester, combine Maize harvester Figure 10: Grain harvestingDifferent types of combine harvesters are shown in the following figure.10 Source: http://www.agri cul turalproductsindia.com/agri cultural-machinery-equipments/agri cultural-ma chinery-ha rvesting-ma chi nery.htmlClient Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 18 of 69

Tractor mounted type Wheel type Crawler type Figure 11: Types of combine harvesterCOTTON HARVESTING MACHINE: It is a machine for harvesting cotton bolls. Mechanical cottonharvesters are of two basic types, strippers and pickers. Stripper-type harvesters strip the entireplant of both open and unopened bolls along with many leaves and stems. Special devices at the ginthen remove the unwanted material. Figure 12: Pick type cotton harvesterSUGAR CANE HARVESTING MACHINE: A sugar cane harvesting machine performs basal cutting, cleaning ofsugarcane through gravity (by fans/ blowers) and chopping of stalks into billets, unloading themonto a transport unit for transshipment11. Figure 13: Sugarcane harvestingAn illustrative list of suppliers of biomass harvesting machines is included as Annex-2.11 “The opera tion of mechanical suga rcane ha rvesters and the competence of opera tors : A ergonomi capproa ch”, Afri caJournal of Agri cul tural Research, Aca demi c Journals, Vol. 10 (15) pp 1832-1839, 9 April, 2015Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 19 of 69

Mechanized harvesting usually has a negative impact on harvesting efficiency of biomass resourcesfor a variety of reasons. DESL has been engaged in the field of biomass energy for close to twodecades. During the course of a large number of resource assessment studies, it has been observedthat harvested biomass is invariably less than the harvestable biomass. The extent of differencevaries widely influenced by local factors12.The efficiency is much higher for manual harvesting. Several factors such as unevenness of the landlevel, machine efficacy etc. have been found to have major impact on efficiency of mechanizedharvesting. The figure below shows one such challenge in improving reaping efficiency. Figure 14: Mechanized harvesting of wheat strawDuring the harvesting operation, quite a large quantity of residues is mowed down as indicated bychange in their orientation. This makes it difficult to cut these parts through the reaping operations.There are similar other problems that have been identified in carrying out harvesting operation ofdifferent types of residues. 100% Harvesting Efficiency 90% 80% Rice Wheat 70% 50% 88% 60% 30% 72% 50% 40% 30% 20% 10% 0% Manual Mechanized Figure 15: Comparative harvesting efficiency12 Consultant’s report on “Assessment of Options for Biomass Power Generation” to DfiD, Jun-11Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 20 of 69

Opportunity price for biomass also plays an important role as farmers take more interest inimproving the efficiency for resources having higher market price. Wheat straw fetches very highprice in the market because of its fodder value and as such farmers do not mind investing intechnologies and additional efforts for increasing the harvesting efficiency.The market price of a particular biomass can change dramatically as and when technologies aredeveloped for utilizing such biomasses for energy production or other commercial uses.2.1.3 Competitive useFarmers use residues for trash mulching of the fields as well as fodder and fuel and in some cases asconstruction material too. Agro-industries use residues as fuel, bagasse for cogeneration to meet thecaptive demand of power and steam in the sugar mills and the rice mills use husk as fuel forgeneration of steam and hot water for rice processing. The competitive scenarios are rapidlychanging due to various reasons as illustrated below12. Agro-residues •Optimisation of use for mulching-increased awareness •Increasing access to cleaner commercial fuel •Increased awareness about potential revenue from surplus biomassesAgro-industrial residues •Development of high efficiency & alternative technologies- High pressure bagasse cogen, husk gasification, bio technologies •Availability and cost of commercial fuels •Market opportunities from cleaner/carbon neutral energy production Figure 16: Competitive dynamicsThe following figure illustrates the dynamics of competitive use driven by market as well asbehavioral factors.60.0% 15.0%50.0%40.0% 4.6% 10.4% 10.0% 200530.0% 5.5% -9.1% 5.0% 201020.0% 0.0% 201510.0% -1.3% -5.0% CAGR 0.0% -10.0% -15.0% Feed Industry Edible Fungus Return to field + Energy waste Figure 17: Estimation of change in competition of straw utilization in China1313 Preparing national strategy for rural biomass renewable energy development, ADB (TA No. 4810-PRC), April2008Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 21 of 69

The macro picture shown above only tells us part of the story. In reality, change in usage can varywidely depending upon the local factors. As in case of production, the competitive use can alsochange from year to year and as such, the macro data can only be used as guide. Periodic surveysare required for establishing the trend and making projections on potential availability of surplusbiomass for energy production.2.2 Biomass supply chainAgro-residues are available for a very short period ranging from two to three months dependingupon the crop-harvesting period. Agro-industrial residues such as rice husk are usually availablethroughout the year whereas availability from other industrial operations fluctuates depending uponthe regional practices on processing of harvest. A biomass energy plant has to procure the fuelduring harvesting period and store it for meeting the fuel demand for the entire year. The followingfigure illustrates a state of the art supply chain system for paddy straw, which is currently the mostabundantly available resource for energy production. Figure 18: Supply chain of rice strawThe challenge starts with collection of the harvested mass from the field. As we move away from thefields located near roads, it becomes increasingly more difficult to collect the biomass. Cost of laborand primary transportation keeps on increasing often making the whole process non-remunerative.The cost of transport of biomass from the field to the power plant (including primary and secondary)is the highest among the other components and is a direct function of the distance of transportbetween them and the bulk density of the different fuels. The following table provides details of thebulk density of the different biomass:Table 3: Bulk density of different biomassType of biomass Bulk Density (kg/m3)Maize corn 510Rice husk 150Rice straw 125Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 22 of 69

Type of biomass Bulk Density (kg/m3)Cotton stalk 103Sugarcane trash 100Wheat straw 55Maize husk 55Maize stalk 40The low bulk density impacts both the storage and transportation cost directly. Densification helps inreducing such cost. Energy requirement for densification is quite high.Only liquid fuel driven devices can be used in remote areas, as electrical power would mostly not beavailable in such locations.Some amount of biomass is lost during transportation and storage. Similarly, quality of storedbiomass can degrade resulting in loss of calorific value. The extent of physical and calorie loss canvary depending upon the physical quality of the infrastructure (capital cost related) andmanagement practices. Following table illustrates the extent of variations observed from a studycarried out by DESL14 over a period of one year, tracking the transportation and storage loss in abiomass energy plant in India.Table 4: Transportation & storage lossParticulars UOM Heap-1 Heap-2 Heap-3 Heap-4Fuel type - Collection centre-1 Mustard crop residue Plant Uncovered Collection centre-2 Plant CoveredLocation of heap - 54 0.5 171Nature - 0.5 Uncovered Uncovered 0.5 3.7 0.2Duration of storage Days - 57 158 0.0 4.7 1.7Carpet loss (L2) % 0.5 0.5 2.4Transportation loss (L3) % 0.0 0.0Windage Loss (L4) % 2.0 9.5Degradation loss (L5) % - 1.7Total % 2.5 11.7Improper and poor quality storage infrastructure was mainly responsible for the high loss of 11.7% incase of heap 4. This has been the case despite close monitoring as the storage heap was in the openwithout cover and water table was high in the storage area. On the other hand, even under the bestof conditions, 2.4% was lost.On an average, about 5% of the fuel does get lost in transportation and storage. Losses can beminimized by constructing waterproof storage bins. However, the cost of constructing such facilitiesis high with poor payback in most cases. Some amount of optimization can be considered such asconstructing concrete floors with provision for covering of the stored mass by tarpaulins.14 DESL Study: Biomass Fuel Suppl y Study in the s ta te of Rajas than, RRECL, 2011Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 23 of 69

Different biomass supply chain business models are emerging in different countries with partnershipamongst farmers that are more progressive, biomass traders and logistics management companies.A few operating models are illustrated as follows.2.2.1 Direct purchase-cash and carry basisSmaller biomass energy plants (heat or power or both) usually purchases either from the ‘Mandis’(agricultural commodity markets) directly from the farmers or traders (Artiyas) registered with such‘Mandis’. Some of the traders maintain some minimum storage capacity to take care of thefluctuation in the daily arrival of fuel during both off-season and seasons. Marginal farmers usuallydispose all of their produce during the season whereas larger farmers store fuel to take advantage ofthe higher off-seasonal prices. In this model, the transaction takes place on parcel basis and on cashpayment.2.2.2 Direct purchase through contracts with individual farmersIn this model, biomass energy producer purchases fuel on a regular basis as per signed annualcontracts with farmers. Depending on the size of the holdings (fewer in high-income countries),there could be a large number of individual contracts with farmers. The energy plants usuallyappoint intermediaries on contract to manage the logistics. This is prevalent when the fuel isprocured from nearby locations and the requirement is small. (This concept is gaining popularity inChina and is called “Plant and Farms” model). Payment is made on cash as well as credit for whichestablished rural banks provide transaction services.2.2.3 Purchase through intermediariesIn this model, the energy plant purchases fuel under agreements with one or more fuel agencies ortraders, who in turn purchase biomass from the farms. They manage the entire operations includinglogistics and fuel preparation. Such intermediaries supply biomass fuels to multiple users within amanageable spatial distance (up to 100 km in India) as per their own business model. This system,named fuel agency model, has become quite popular in China. This is now a common practice inEurope too. This model is gradually finding greater acceptance in many markets including Sri Lanka,India etc. (illustrative case examples follow). Textbox 1: Case Study-Sri Lanka Support is being provided to replace 10% of the fossil fuels used in the industry by 2017 by biomass- derived energy. To this end, it is proposed to develop /revitalize six supply chains to deliver quality- assured and cost-effec tive wood fuel to industrial or commercial end users in a reliable way. Under this project, it is proposed to establish biomass energy ter minals as a pilot project. The expected outcome is to increase confidence in the biomass energy sector, increase benefit to the local economy and reduction in air pollution. The project intends to establish six biomass energy ter minals in the following districts; - Kurunegala - Galle - Ratnapura - Gampaha - Moneragala – Nuwaraeliya. The project will support the establishment of the biomass energy ter minals, which will adopt criteria and indicators developed for sustainable fuel wood production and source fuel wood accordingly. The processed biomass fuel output from the energy terminals would include the following: 1. Wood chips produced to the requirements of the industry or industries that it is supplying 2. Briquettes, and 3. Split logwood processed, dried and sized, to requirements of the industry or industries it is supplying. Source: GEF PRO DOC: Promoting Su stainable Biomass En ergy Production and Mod ern Bio-En ergy Technologies in Sri LankaClient Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 24 of 69

2.2.4 Corporate model – Case ExamplePunjab Renewable Energy Systems Pvt. Ltd., a private sector company in India has pioneeredestablishment of biomass depots and have signed long-term contracts to meet the fuel requirementof three (three biomass power plants in the catchment area)15. The model involves establishment ofsupply chain including fuel-processing plants based on a hub and spoke methodology illustratedbelow. Figure 19: Fuel collection systemFarmer supplies biomass to the nearest located collection center equipped with necessaryinfrastructure for receiving, unloading and loading of fuels. Larger collection centers (called mastercollection canters) are also equipped with processing facilities. Biomass collected in the smallercenters is transported to nearby large centers for processing. Processed biomass is then transportedto the consuming plants as per supply calendars.Master collection centers are responsible for managing the fuel quality and all accounts with theconsuming power plants. The power plant will pay the master collection center for biomass comingfrom any collection center. The master collection center will make payment to branch collectioncenter for their deliveries. This mode of payment is adopted to ensure the quality of biomass and tocheck the flow of biomass towards power plant only. This model has created a condition for farmersto innovate storage and transportation at their end tPoodweelirver maximum quantity of fuel to themaster collection centers, which are equipped with betPtelarnftacilities for quality management. Thishelps in reducing the discretion used by smaller collection centers on quality assessment.15 DESL report on Validation of fuel supply linkage model, MNRE, 2009Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 25 of 69

Socio- Economic Impact of Biomass Supply Chain (Cotton Stalk) Step 1: Uprooting of Cotton stalk from Step 2: Processing/ Shredding of Step 3: Transportation & Storage to Storage Center / Plant Per Tractor Farm Field Cotton Stalk per Shredder : 6 Per 3 Acre : 10 Jobs per Day X 180 Jobs X 180 Days = 1080 trolley : 8 Jobs X 180 Days = 1440 Mandays Days (Harvest Season) = 1800 ManDays ManDays Total Mandays : 4320 Mandays Per Unit Shredder ( For 13 .2 MW Biomass Based Plant, Maharashtra) Average Job Created due to Biomass ( Cotton Stalk) SCM Mechanism For Biomass Based Plant having 120 Shredders = (Number Of Shredders X Total Mandays )/ 365 Days = (120 X 4320) / 365 = 1421 Green Jobs/Day Figure 20: Biomass fuel processing plant2.2.5 Energy plantation model- case studyEnergy plantations offer a reliable option for securing the fuel supply. Available wastelands can beused for development of different types of energy crop depending upon the soil characteristics andwater resources.A study on establishment of dedicated energy plantation on wastelands, involving techno-economicfeasibility for development of dedicated energy plantation in three locations in north-western Indiaand setting up of a small decentralized biomass power plants was undertaken. Field visits wereundertaken to collect SELECTION OF PLANTA TION SPECIESinformation on actualavailability of wasteland, Pros opis Juli flora was selected for energy planta tion for the following reasons  Can grow in all types of soil- alkaline/ saline/ sandy/ l oamy/ cla yey as i tsspecies suitable for plantation, roots a re deep and grow both hori zontall y and verti call y underground andsoil type, plantation practices bind the soil togetherin the region, biomass prices,  Can survi ve wi th as low annual rainfall as 200 m  The plant needs wa ter pri ma ril y during hot period from April to June (dripwater availability etc. Details i rri gation was proposed in the pilot planta tion to minimi ze the wa terof wasteland availability in the consumption of plant)  Pods from the plant a re ri ch source of proteins and can be used as cattleregion was obtained from the feed. Further, pods can be processed into value added products such asWasteland Atlas of India- 2011 coffee, ca ttle ra tion etc.  Pla ys an i mporta nt role in soil i mprovement both in sandy and saline/developed by Department of alkaline soils through nutrient recycling by rootlet decomposi tion. WithLand Resources, Ministry of time, organi c ca rbon, ni trogen and phosphorus increase in the soil andRural Development, thereby, improvi ng soil fertility.Government of India. The Pros opis Julifl ora takes 3 yea rs for devel opment and is ha rves ted a t the end of 3rd yea r and every yea r thereafter. The yea r keeps on increasing till end ofselected project area had a 10th yea r and is cons tant therea fter. In hi gh yield planta tion, about 1,000total wasteland availability of trees a re planted in one a cre. The a verage yield of Juliflora over peri od of 1084,929 km2. yea rs is about 8 MT/a cre.The district for energy plantation was selected based on a set of shortlisting criteria whichcomprised: elimination of districts near the river basin, minimum average annual rainfall,elimination of land based competitive use (for solar, wind), road connectivity, presence of biomassClient Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 26 of 69

plant nearby, tribal population, and political factors. The shortlisted district was analyzed based onits geographical features and distribution, month wise rainfall, irrigation scenario, type of industriesin the region, soil characteristics and distribution, to identify three potential sites.The dedicated energy plantation for the proposed decentralized biomass based power plant wasjustified on following grounds:• Fuel Availability The major biomass available was wood, which can be either available through pruning of branches and stems of existing trees such as kikar, Juliflora etc. The pruned material was sold to contractors who bring their own labour and machinery to cut, chip, load, unload and transport the wood from farm. The wood from these trees can be sold through auction. Other biomass available are agri residues which are given free of cost to the harvesting contractors who harvest the crop without any cost in lieu of agri residue. The surplus agri residues were sold in open market or to the contractors.• Waste Land Availability  All the waste lands selected (three potential sites) were suitable for low yield plantation such as Prosopis Juliflora. The wood from these plantations along with wood from pruning of existing trees and biomass from agri residue can be used as fuel.• Additional Income  Other products from the plantation such as pods can be processed into animal feed and sold to farmers in nearby villages providing an additional revenue stream.The above listed factors, establish the rationale for developing dedicated energy plantation for longterm fuel sustainability and availability at affordable costs for proposed decentralized powergeneration systems.The model for development of energy plantation proposed was as follows. Power plant Power Plant will pay the farm for fuel Farm will harvest and chip the biomass sent to the Factory Gate at pre- before transporting to the power plant determined rate Govt./ Energy Bank will provide long term BanksInstitutions plantation loan and working capital loan Support from government to the project organizations/bilateral agencies in the form of Farm will pay principal and subsidy towards capital interest to bank for the debt expenditure of the project taken Technology provider will provide plant saplings and technical inputs to the farms Technology suppliers Figure 21: Model of Energy Plantation DevelopmentClient Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 27 of 69

Summarizing:With the establishment of a sustainable biomass energy system, farmers’ cooperative can also play avery important role in managing the supply chain. Innovative system of transportations is also beingdeveloped by rural entrepreneurs responding to the emerging biomass market. Figure 22: Innovative system of transportationIt is common to see large capacity tractor trolleys carrying upto 8 MT of low-density biomass therebyincreasing the viability of biomass supply business.The transportation cost of reasonably densified biomass (baled) varies from 10 to 20% dependingupon the distance of transportation. The overall cost of transportation and handling for the primaryand secondary transportation could be two to three times this amount depending upon the type ofbiomass and extent of densification.Table 5: Primary transportation costTransportation Impact on delivered Trade margin,distance cost of fuel (Primary) Pretreatm 17.72% ent, 2.37%Up to 15 km 8% Purchase, Storage, 25.22%16 to 35 km 13% 10.81% Transporta36 to 50 km 18% tion,Above 50 km 20% 43.88% Figure 23: Cost composition of straw for a biomass power plant in China 2013 16For large capacity power plants, marginal cost of logistics (including primary and secondary) can beas high as 50% of the cost of fuel as fired to the boiler against the purchase cost of about 25% only.This shows the importance of logistics in the overall management framework for a biomass powerplant.16 DESL databaseClient Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 28 of 69

2.3 Biomass energy technologiesDifferent biomasses have their own unique physical and chemical characteristics. Bagasse, rice husketc. are very good fuel for boilers. They can be used for high efficiency power generation projects.Straw and husks on the other hand are difficult to use as fuel for boilers due to their low bulk densityand poor ash chemistry. Different types of pre-processing technologies are used for energygeneration from such biomasses. Biomass energy technologies can be broadly covered under thefollowing categories: • Fuel preparation • Energy conversion technologies • Biomass characteristics vis-à-vis energy conversion technologies2.3.1 Fuel preparationVarious methods of pre-processing are as follows17: • Drying: Gasification and pyrolysis generally requires drying. However, it is not necessary for direct combustion, but can result in the following benefits18: o Improved efficiency: 5%-15% o Increased steam production: 50%-60% o Reduced ancillary power requirements o Reduced fuel use o Lower emissions o Improved boiler operation • Shredding/threshing: Straw and stalks are reduced to smaller and uniform sizes for feeding to boiler furnaces. Paddy straw has high silica content, which causes rapid erosion of shredder blades. Different types of shredders with different material of constructions are being developed for reducing the erosion impact. • Briquetting: Screw extrusion is used to compact biomass into loose, homogeneous briquettes. Briquettes are becoming very popular fuel substitutes in various applications such as hotels and restaurants, micro and small-scale industries in the rural areas. Market value of straw and stalks is considerably enhanced by briquetting. • Pelletisation: Pelletizing is the process of compressing or molding of loose biomasses into the shape of a pellet. Pellets can be made from any one of five general categories of biomass: industrial waste and co-products, food waste, agricultural residues, energy crops, and virgin lumber. Pellets are excellent fuel for both combustion and gasification. Pellets are now widely traded globally as green fuel for CHP and heating fuel. • Torrefaction: Torrefaction of biomass, e.g., wood or grain, is a mild form of pyrolysis at temperatures typically between 200 and 320 °C. Torrefaction process removes the tars thereby improving the gas quality, when torrefied biomass is used as fuel for gasification plants.17 Source :[http://www.eai.in/ref/ae/bio/powr/biomass_power.html ]18 Biomass dryi ng technology upda te, Ma tt Worley, Ha rris Group; BioPro Expo & Ma rket Pla ce, Atlanta, 2011Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 29 of 69

The cost of pre-processing is impacted largely by the electrical energy requirement for the processand cost of the same. Sugar cane bagasse is one of the finest fuels for use in a steam power plant butcannot be used in gasifiers. Most of the low-density fuels such as straw and stalk are difficult to usein gasifiers but can be used in combustion-based power plants. Such fuels can be used in gasifier ifthese are densified.2.3.2 Energy conversion technologiesBiomass resources are amenable to application of a wide array of conversion technologies forproducing thermal and electrical energy. These can be broadly categorized under two differentmodels: • Centralized power generation system • Decentralized power generation systemCentralized power generation systemA centralized power generation system (CGS) can have two categories of power plants- independentpower plants (IPP) and merchant power plants (MPP). Both are typically in the range of 5– 20 MW.IPPs enter into long-term power purchase agreements (PPA) with the state utilities / single buyer orconsumers purchasing electricity through open access or facilities having captive power plants basedon conventional sources of energy (off-grid). On the other hand, MPPs enter either into short-termcontracts (daily or weekly contracts) and sell power on exchange.Both MPPs & IPPs are based on well-established combustion based Rankine cycle with a steamgenerator (boiler) and a steam driven TG set. Figure 24: Schematic Representation of Rankine CycleCGS is based on mature combustion technologies such as pile burning (which are nowadaysobsolete)/ travelling grate/ vibrating grate spreader stoker or atmospheric fluidized bed combustion(AFBC). The choice of combustion technology will depend upon the type of fuel i.e. size, uniformityof size, variations in moisture content, ash content, ash fusion temperature, etc. For example, if theprimary fuel is rice husk, AFBC is the most preferred technology and if the fuel is mustard husk, thentravelling grate is the most preferred technology.Decentralized Power Generation SystemAmongst the decentralized power generation plants, various categories of power plants present areas following:Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 30 of 69

• Industrial cogeneration/ CHP plants • Grid connected tail end power plant • Off -grid power plantIndustrial cogeneration/CHP plantsA large number of industries such as sugar, textile, paper, tea etc. requires power as well as thermalenergy for heating and drying applications. Similarly, industries like steel, cement, melting furnacesetc. produce large quantity of waste heat, which can be effectively utilized for power generation.Large-scale industries in these segments have already adopted such technologies. These are mostlybased on Rankine cycle. Opportunities exist for application of this technology for the small-scalesector too. These projects can be grid-connected for supplying surplus power to the grid.Grid connected tail end power plantsTail end power plants are typically in the range of 1-2 MW. The purpose of such plants is pumping ofenergy into local distribution system of grid (at village or district level) rather than pumping ofenergy into national/ state grid, as is the case with IPPs. Tail end power plant can also enter into longterm PPAs with distribution companies, single buyer or consumers purchasing electricity throughopen access. The various technologies available for tail end power plants are: i. Combustion based Rankine cycle ii. Biomass Gasifier coupled with gas based generator sets iii. Biomethanation based power generationThe combustion based Rankine cycle has already been explained in the preceding section oncentralized power generation.Biomass Gasification based power generationIn gasification process, biomasses such as rice husk, wood, cotton sticks etc. are gasified (incompletecombustion with air) to produce so called ´producer gas´ containing carbon monoxide, hydrogen,methane and some other inert gases. Gasification system consists of a gasifier unit, purificationsystem and energy converters - burner or engine as shown in the figure below. Figure 25: Schematic Diagram of Gasifier coupled with Producer Gas Based Generator SetsBio methanation based power generationBiomethanation is an important biological conversion process, which converts biomass in theabsence of oxygen to methane and carbon dioxide, popularly known as biogas and leaves aClient Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 31 of 69

stabilized residue, which makes excellent organic manure. The drawback of the model is that, thetime needed for start-up of a Biomethanation process is too long. If no specifically suitable biomassis available in sufficient quantities, start-up of the system may require up to several months. Thebiogas is stored in gas chamber and burnt inside internal combustion engine coupled with generatorto produce electricity. The gas can also be fired in a conventional boiler in a Rankine cycle basedpower plant. The gas can also be used for heating purposes such as cooking or heating water.Further, biogas can also be purified and bottled up and sold as commercial fuel such as LPG or CNG. Figure 26: Bio Methanation-SchematicOff Grid systemsThe second category of decentralized power generation is off grid power system, which is typically inthe range of a 50-500 kW and is generally used to meet demand of electricity in villages or cluster ofvillages. Off grid power plants have to install distribution system along with metering system tosupply the electricity to the end users and the payment is also directly collected by the power plant.The biomass based gasification system and bio-methanation are prevalent technologies for off gridpower plant.2.3.3 Biomass characteristics & energy technologiesPhysical and chemical characteristics of the different types of biomasses have important bearing onchoice of energy conversion technologies. The most important properties relating to thermalconversion of biomass are as follows. • Moisture content Thermal conversion requires low moisture content. However, Stoker and CFB boiler can accept higher moisture content than gasifiers. Bioconversion can accept high moistureClient Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 32 of 69

biomass19. High moisture content reduces the energy value of the feedstock, consequently affecting the specific fuel consumptions.• Calorific value Calorific value is the heating value of the fuel in energy terms per amount of matter. The higher heating value (HHV) is the total energy content released when the fuel is burnt in air, including the latent heat contained in the water vapor and therefore represents the maximum amount of energy potentially recoverable from a given biomass source. The actual amount of energy recovered will vary with the conversion technology, as will the form of that energy i.e. combustible gas, oil, steam, etc.• Ash content It is the inorganic component within the biomass. Grasses, bark and field crop residues typically have higher amounts of ash than wood. Ash can form deposits known as “slagging’ or “fouling”. It can be minimized by keeping combustion temperature low enough to prevent ash from fusing. Alternatively, high temperature combustion could be designed to encourage the formation of clinkers (hardened ash) which can be easily disposed of. Biomass like rice husks needs special combustion system due to silica content of the husks.• Shape, size, density The size and density of biomass is important as it affects the rate of heating and drying. Larger particles would heat up slowly and produce more char and less tar. In fixed bed gasifier, fine grains or fluffy grains might cause flow problem in bunker section, resulting in unacceptable pressure in reduction zone and high proportion of dust particles in the gas.The suitability of different types of biomasses and the feedstock requirement (size and moisturecontent) for various biomass power technologies has been summarized in the table below.Table 6: Feedstock requirement and biomass power technology 20Biomass Commonly used fuel types Particle size Moisture content Capacity requirement (wet rangeconversion requirement basis) 3 to 20 MWtechnology 10-50% 3 to 50 MWStoker grate Sawdust, chips, bagasse, rice 6-50 mm < 60% 30-1000boilers husk, straw and stalks <20% KWFluidized bed Rice husk, wood chips, pellets < 50 mm < 15% 25-100 kWcombustor 15-50% 5-10 MWFixed bed Chipped wood, rice husk, 6-100 mmupdraft gasifier pelletsDowndraft Wood chips, pellets, wood < 50 mmgasifier scrapes, corn cobs and stalksCirculating bed Most wood and chipped 6-50 mmgasifier agricultural residuesA comparison of combustion and gasification technology is given in the table below.19 Energy production from Biomass, P McKendry, Bioresource Technology 82 (2002) 37-46, 2001[http ://fa cul ty.wa s hi ngton.edu/s tev eha r/Bi oma ss -Overvi ew.pdf]20 IRENA working paper on Renewable Energy Technologies : Cos t Anal ysis Series- Vol ume -1: Bi omass for PowerGenera tion, June 2012Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 33 of 69

Table 7: Combustion vs. gasification Combustion Gasification Conversion of biomass into aProcess Burning of biomass in air to combustible gas mixture by the partial oxidation of biomass at high convert the chemical energy temperatures. The low calorific value (CV) gas produced can be burnt directly stored in biomass into heat, or used as a fuel for gas engines and gas turbines. The product gas can be used mechanical power, or electricity as a feedstock (syngas) in the production of chemicals (e.g. methanol) using various items of process Fixed bed gasifier, fluidized bed gasifier equipment, e.g. stoves, furnaces, Low Uniform boilers, steam turbines, turbo- Small scale generators, etc Less Lower NOx, CO, and particulateTechnology Stoker grate boiler, fluidized bed emissions combustorFuel moisture contentFuel size HighScale FlexibleEfficiency Small scale to large scale plantsEmissions Upto 3000 MW More Greater NOx, CO, and particulate emissions2.4 SummarizingIt is important to develop a comprehensive strategy for management of biomass resources. Thisshould address all the critical issues such as:• Development and deployment of standard methodology for assessment of overall generation of biomass• Biomass supply chain from the farmers to the factories• Physical infrastructure for managing logistics &• Preparation of technology matrixSatellite and field surveys are required at regular intervals for establishing the accuracy of the surveyresults as well as capturing the changes in the cropping pattern and competitive usage scenarios.The crop residue ratios and harvesting efficiencies are to be established for every geographic areafor making accurate assessment of the overall availability and surpluses for energy conversion.The purchase price of biomass often constitutes only about 25% of the overall delivered cost. Thecost of primary and secondary transportation and storage accounts for higher percentage of overallcost. An integrated biomass supply chain with well-established logistics system has therefore, to bemade an integral part of biomass resource development.Certain biomass energy technologies such as bagasse cogeneration, rice husk boilers are wellestablished and normally require policy support only in respect of feed-in-tariff. Much larger policyframework is required for development of a biomass energy market for other types of biomasses,particularly agro-residues.Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 34 of 69

3 Biomass resource management – Status quo in Pakistan3.1 Biomass resource availability survey An extensive biomass resource assessment study has been carried out in Pakistan covering the entire country with support from World Bank/ESMAP. The objective of the mapping exercise was macro-assessment of biomass feedstock availability and the potential use of biomass feedstock for energy in Pakistan through a biomass atlas. The study covered the following types of biomass resources: • Agro residues • Agro-industrial residues • Livestock residue • Municipal Solid Waste (MSW) • Forest harvesting and wood processing residues However, the survey has covered mainly the agro and agro-industrial residues for which the following methodology has been used. •Satellite mapping using Landsat 8 images for landuse classification with seven image datasets covering the area to be analyzed within Pakistan and distributed over one year Estimated annual covering the Kharif and Rabi cropping seasons in Pakistan for one year crop production •Considering national level average values of residue to crop ratio (RCR) derived from farmer survey and previous studies conducted by various institutions and validated withEstimated annual the values in the FAO’s Bioenergy and Food Security (BEFS) Rapid Appraisal Tool for crop residues assessmentbiomassproduction •Agro residues: Considering competing use derived from farmer survey •Agro-industrial residues: All the resources were considered based on secondary dataEstimated annual available for indutries and few sample surveyssurplus biomass Estimated •Agro residues: Considering willingness of farmers to sell biomass to energy plants derived from farmer surveyavailability for energy •Agro-industrial residues: All the resources except for maize husk and cobs have been considered for power generation production Figure 27: Sequential steps for the estimation of biomass available for power generationClient Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 35 of 69

3.2 Estimated annual biomass productionThe average values of residue to crop (RCR) ratios have been determined based on survey inputs andfurther validation from data available from other sources including. The following table shows theRCR values.Table 8: Crop to residue ratio RCR, average RCR, minimum RCR, maximum 3.4 2.76 4.25Crop Residue 1 0.5 1.3 1 0.42 1.3Cotton Stalk 0.2 0.15 0.36 0.12 0.1 0.2Wheat Straw 0.3 0.26 0.32 1.25 1 2.25Rice Straw 0.22 0.2 0.3 0.33 0.2 0.86 HuskSugar cane Trash BagasseMaize Stalk Husk CobThe wide range of variation is generally in line with what is generally experienced all over the world.The residue production has been estimated accordingly as shown in the following table.Table 9 Estimated annual biomass productionType of crop Type of residue RCR (average) Estimated annual biomass production (‘000 t)Agro-residue 49,405 34,581Cotton Cotton stalk 3.40 16,754 7,831Wheat Wheat stalk 1.00 5,325 113, 896Rice Rice straw 1.00 1,700 to 3,35121Sugarcane Sugarcane trash 0.12 17,100 to 19,577 1,406Maize Maize stalk 1.25 937 21,193 to 25,271Sub-total 135,089 to 139,167Agro-industrial residueRice Rice husk 0.20Sugarcane Bagasse 0.30Maize Maize cob 0.33Maize Maize husk 0.22Sub-totalGrand TotalThe estimated annual surplus biomass production was arrived by assessing the competing use ofbiomass through the field surveys.21 The World Bank report considered the lower values for biomass generation while estimating energypoten ti alClient Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 36 of 69

3.3 Competing use of agro-residueThe competitive use of biomass was determined by undertaking a structured survey solicitingfarmer’s response on prevailing practices in the following specific areas in few selected districts inthe Punjab province. • Fodder • Domestic fuel (cooking) • Sale to industries • Sale to biomass suppliers • Use as fertilizer • Field burningThe following graph summarizes the crop wise competing uses, as gathered for the districts inPunjab province in Pakistan under the survey:100% 4.4%90% 19.3% 21.9% 21.9% 2.8% 42.7%80% 3.6% 6.2% 5.4%70% 1.2% 0.5% 16.2% 51.9% 4.0% 23..19%% 13.5%60% 5.0%50% 14.1%40% 64.1% 9.7% 0.3%30% 2.0% 19.1% 61.5% 15.9%20% 24.6% 20.3% Wheat 32.5% Maize Sugar Cane Rice10% 7.9% 0% Cotton Fodder Domestic burning (Cooking) Sale to industries Sale to biomass suppliers Use as fertiliser Field burning Figure 28: Competing use of biomass3.4 Surplus availability for power generationThe estimated annual biomass availability for power generation has been arrived by assessing thewillingness of the farmers to participate in the proposed system of biomass supply chain forutilization of the surplus resources for energy production. A survey of industries using / generatingbiomass was also conducted to assess the generation, utilization and disposal methods.Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 37 of 69

Table 10: Surplus availability of agro residue for power generation Estimated annual technical potential of residuesType of crop Type of residue Estimated annual technical potential of residues (Discounting willingness of farmer) ('000 t) (Discounting competing use) ('000 t) 5,039 5,689Agro-residue 6,534 2,552Cotton Cotton stalk 6,013 680 20,494Wheat Wheat stalk 6,488Rice Rice straw 8,314Sugarcane Sugarcane trash 3,516Maize Maize stalk 799Sub-total 25,130Table 11: Surplus availability of agro-industrial residue for power generationType of agro- Estimated annual technical Asssumptionindustrial potential of residuesresource ('000 t)Rice husk 1,750 100% residue available for power generationBagasse 17,100 100% of bagasse generation available for high- pressure boiler technology. From present low- pressure boiler technology, only 10% of the residue is available as surplusSub-total 18,8503.5 Biomass power potentialAs discussed in the preceding section, depending upon the availability and quality of the fuel,different conversion technologies can be used for both centralized and decentralized powergeneration projects. Biomass power potential in Pakistan has been estimated taking intoconsideration the surplus availability and their suitability as fuel for different power generationtechnologies.Table 12: Energy potential – Combustion technology Fuel Surplus PLF Potential # MT % MWFuel NCV SFC* 5,039, 000 75% 711 kcal/kg MW/T 5,689, 000 75% 733 6,534, 000 75% 731Cotton stalk 3583 0.93 1,750, 000 75% 212Wheat stalk 3440 0.85 2,552, 000 75% 288 17,100,000 50% 1976Rice straw 2986 0.74 680,000 75% 79 937,000 75% 97Rice husk 3225 0.79 1,406, 000 75% 176Sugarcane straw 3010 0.74 5,003Bagasse 1792 0.51Maize straw 3106 0.76Maize husk 2771 0.68Maize cob 3344 0.82Estimated power potential* Calculated using boiler efficiency of 75%# Calculated considering PLF of 75%Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 38 of 69

Table 13: Energy potential – Gasification technology SFC* Fuel Surplus Potential #Fuel NCV kCal/kg MW/T MT MWCotton stalk 3440 0.59 5,689, 000 Not suitableWheat stalk 544@Rice straw Not suitableRice husk 3225 0.63 1,750, 000 178Sugarcane straw 3010 0.67 2,552, 000 278@Bagasse 1792 Not suitableMaize straw 3106 0.65 680,000 72Maize husk Not suitableMaize cob 3344 0.60 1,406, 000 138Estimated powerpotential 1,211*The SFC for other fuels for gasification has been pro-rated based on data available for rice huskreceived from a biomass gasifier supplier during rice husk based gasification project in Pakistan for arice mill# Calculated considering PLF of 70%@ The biomass would require densification as a pre-requisiteThe estimated power potential for Pakistan using agro residues and agro industrial residues rangesfrom 1,211 MW to 5,003 MW considering the variation in the choice of biomass combustion andbiomass gasification technologies.3.6 Project ModelsThe survey report has recommended different project configurations (both combustion andgasification) taking into account surplus availability, farmers willingness and logistics considerations.Combustion technology for bagasse and rice husk and gasification technology for wood and rice huskhave reached matured status. As such, large capacity and high technology projects can be developedbased on these two fuels. Large numbers of smaller capacity rice mills are located all over thecountry. Building large capacity rice mills based on pooled resources from these mills may not offerbest economic option considering the cost of logistics. Gasification based distributed powergeneration units can be an attractive option for these mills. Further, such units can also be equippedwith waste heat recovery boiler/hot water generator required for par boiling process, therebyimproving the utilization efficiency of husks.Large numbers of straw-fired projects are now operating in China and India based on combustiontechnologies. It should be possible to develop such projects of 5 to 10 MW capacities in Pakistan too.Such projects can be set up under both captive and IPP models.Maize stalks and cobs are good fuel for gasification. Such projects have been operating in China forover two decades supplying clean cooking fuel as well as power. Rice husk gasification based powergeneration units are also operating as off-grid solution for providing energy access in rural areas inmany countries including China, India, and Thailand etc. It should be possible to replicate theseglobal experiences in Pakistan and set up different types of biomass power projects based on thelocally available resources as illustrated in the following table.Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 39 of 69

Table 14: Different project models for power generationType of residue Project model Project model (Option #2) (Option #1) -Straw based projects Biomass combustion Biomass combustion technology based(Wheat stalk, Cotton technology based projects projects with other locally availablestalk, Rice straw, Maize for Independent, captive and biomass as supplementary fuelstalk and Maize husk) cogeneration power plants -Rice husk Biomass gasification - technology based projects around rice millsMaize cobs Biomass gasification technology based projectsBagasse & Sugarcanetrash High technology cogeneration projects in sugar mills using bagasse as main fuel and cane trash as supplementary fuels (upto 20% supplementation possible on caloric basis)3.7 SummarizingRecently conducted biomass resource assessment survey in Pakistan clearly shows a roadmap fordevelopment of an integrated resource management and biomass power development strategy. Theauthors of the survey report have highlighted the need and strategy for improving the survey qualitywith a view to prepare more accurate estimate of surplus availability. The report has also includedrecommendations on biomass supply chain and technologies. Time is opportune to put in place anenabling policy and regulatory framework for attracting private sector investment for developing athriving biomass power industry in Pakistan.A set of policy recommendations have been formulated taking into consideration the global scenarioand status quo in Pakistan.Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 40 of 69

4 Recommendations-policy for promotion of biomass power generation In 2014, KPMG had carried out a study of incentive policies for promotion of renewable energy technologies covering thirty-one (31) countries across the globe22. The following table shows the extent of policy support provided by the select few countries including Pakistan for the same. Table 15: RE policy matrix-select countriesCountry RE Targets FIT/Premiu m RPO/RPS Net Metering REC Tenderi ng Heat Obligation Biofuel Obligation Capital Subsidy Investment tax credit VAT/Tax Concessions Energy pro ducti on Investment /GrantPakistan    China      Brazil     Malaysia     Thailand    India    Sri Lanka      Kenya    - indicates policy is in placeChina and India have deployed largest number of policy tools as would be seen above. This hashelped in rapidly scaling up the private sector investment in RE technologies including biomasspower generation. China has made spectacular progress in developing different biomass energytechnologies including combustion of straw and stalks, waste to energy projects as well asdistributed power, heat and cogeneration projects based on gasification of husks, stalks and wastes.“By the end of 2009, China had 61 biomass power projects put into operation (20 national energyprojects among them), in which the proportion of straw direct-fired power generation plantsaccounted for more than 80%23.Various promotional policies in practice in China have been summarized and annexed (Annex-3).Government of India through the Ministry of New & Renewable Energy (MNRE) have been providingsupports for promotion of Biomass / bagasse cogeneration, Non-bagasse cogeneration, Biomassgasifier and projects based on Urban & Industrial wastes.Such policies have covered all aspects of biomass power system including resource management,promotion of projects, development of technologies, incentives and institutional arrangements formonitoring so that laid out targets are achieved. It is recommended to adopt a similarcomprehensive policy in Pakistan too for developing biomass power in the country. The outlines ofvarious such policies have been prepared as follows.22 Taxes & incentives for renewable energy-KPMG International, 201423 Development goal of 30 GW for China’s biomass power generation: Will it be achieved? Renewable andSustainable Energy Reviews Journal 25 (2013) 310-317Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 41 of 69

4.1 Management of biomass resourcesThe objective of a national policy is to ensure that the biomass resources are optimally utilized forderiving maximum economic benefits from these resources, which are otherwise wasted.4.1.1 Development of standardized methodology for biomass assessment surveyBased on the recommendations in the World Bank supported survey report, a manual may beprepared on the survey methodologies at the level of individual districts and for individual project tobe developed in a particular area.The variation in the RCR figures can hugely distort the availability figures thereby putting questionmark on the fundamental premise on which the project has been configured. This issue needs to bewidely deliberated at various levels-fields & academic institutions-and methodology for establishingRCR for different crops in different geographic areas developed. The survey manual so developedshould be made available to prospective project developers and other stakeholders involved indevelopment of biomass power generation projects. A recommended scope of work for a periodicsurvey is included as Annex-4.4.1.2 Implementing one demonstration biomass supply chain projectOne demonstration supply chain project may be developed under PPP mode with involvement ofone of the operating biomass/cogeneration plant with support from AEDB. Successful operation ofthe model would help in removing the major barrier against investment in biomass power projects.4.1.3 Preparing zonal plans for optimum utilization of biomass resources In order to achieve long-term fuel availability, the catchment area or biomass collection zone for apower plant should be well defined prior to allotment of any project. It should be possible toprepare a biomass power development map based on the information available in the World Banksurvey report. A policy document can be prepared on methodology for registration of projects ineach zone (under different categories and including both solicited and unsolicited projects) inconsultation with Provincial Governments. Appropriate regulatory framework should be developedempowering Provincial Governments to administer the registration process to ensure continuedavailability of biomass for the operating projects.4.1.4 Capacity buildingA plan for developing a cadre of professionals, who can undertake the biomass assessment survey isimperative, which can be developed and implemented by AEDB.4.2 Promoting biomass power projectsAEDB in collaboration with Government of Punjab province should identify a list of priority projectsbased on the survey report. These projects then can be offered for private sector bidding undersolicited category.As per RE policy, 2006, AEDB had developed transparent methodology for bidding of projects underboth solicited and unsolicited categories. This should be reviewed taking into consideration therecommendations in the survey report and the list of priority projects. It is also recommended thatAEDB directly implement a few distributed generation projects based on gasification technology asdemonstration projects in the identified rural areas. Such projects can be implemented throughfarmer’s cooperatives or social entrepreneurs working in the rural areas.Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 42 of 69

4.3 Biomass pricingThe overall cost of fuel as delivered to a consuming plant consist of the base price and logistics cost.In the absence of an operating and formal biomass market, regulators adopt different principles witha view to establish the fair price of biomass for determination of feed-in-tariff. In principle, followingthree different methodologies can be considered for determination of fair base prices of biomass: • Price of fuel alternative • Market price • Opportunity price of biomass disposal alternativeThe merits and demerits of the three alternatives are:Table 16: Fuel pricing option evaluationAlternative Merits DemeritsPrice of fuel Most transparent Lowest or highest marginal cost & rationale Impact of volatilityalternative Lack of transparency for informally traded biomassMarket price Takes care of all the local factors Higher cost of transactions Practical difficulty as there are always more Better social acceptability than one alternativeOpportunity price Can be transparent if there is only one alternativeConsidering the status quo in Pakistan, either fuel alternative or market price of biomass can beconsidered.4.3.1 Fuel alternativesThe fossil fuel options for benchmarking biomass price are gas, furnace oil and coal. The present(2014)24 and future power generation25 scenario in Pakistan is as follows: 2014 2020 32% 26% 46% 25% 18% 14% 1% 24% 3% 3% 0% 6% 0% 2% HYDEL GAS FO + HSD COAL NUCLEAR RE IMPORTS Figure 29: Evolution of Energy Generation ScenarioMost of the future gas based growth will be on imported LNG (share of domestic gas in fuel-mix isforecast to decrease from 21% to 12% while LNG is forecast to grow from 4% to 13%). Similarly,most of the liquid fuel generation is currently based on imported furnace oil, and the contribution tothe fuel mix is marginally decreasing. Coal is projected to change the fuel mix significantly withgrowth of both local (4%) and imported coal (20%). The methodology for coal based benchmarking is24 Power Systems Statistics, 2013-14, 39th Edition, NTDC25 Presentation on Power Sector in Pakistan to OICCI, Secretary, Ministry of Water and Power, Dec-2015Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 43 of 69

well established. NEPRA has also determined the upfront tariff for LNG base power plants. A numberof RFO based power plants are operating in Pakistan, for whom fuel adjustments are regularly madeby NEPRA.The equivalent biomass prices considering these three alternatives have been determined as shownin the table below.Table 17: Equivalent Biomass Price, determined from fossil fuel alternativesS. Alternatives UOM Value RemarksNo .1 Imported Coal CIF price of Coal US$/MT 96.21 NEPRA Determination of Upfront Tariff for Bagasse Cogeneration, 2015 NCV of Coal kCal/kg 6000 NEPRA Determination of Upfront NCV of Bagasse kCal/kg 1740 Tariff for Bagasse Cogeneration, 2013 Equivalent bagasse price US$/MT 27.90 NCV of other biomasses kCal/Kg 3300 Equivalent biomass price US$/MT 50.722 RLNG RLNG Price US$/MMB 10 NEPRA Determination of Upfront TU tariff for RLNG Projects, 2015 Conversion Factor MMBTU 1.06 LNG NCV to GJ 950 NEPRA Determination of Upfront BTU/ft3 tariff for RLNG Projects, 2015 Bagasse NCV kCal/kg 1740 NEPRA determination of upfront tariff for bagasse cogeneration, 2013 MJ/kg 7.28 Equivalent bagasse price US$/MT 76.91 Other biomasses CV kCal/Kg 3300 Equivalent biomass price US$/MT 139.833 Furnace Oil RFO Cost (GCV Basis) Rs/MT 25,167.4 NEPRA fuel price adjustment for Hub 5 Power Company, March 2016 NCV to GCV Adjustment 1.05 NEPRA Tariff determination for Hub Factor Power Company, May-2008 RFO Cost (NCV Basis) Rs/MT 26,425.8 2 NCV of RFO BTU/kg 40792 NEPRA Tariff determination for Hub Power Company, May-2008 NCV of Bagasse BTU/kg 6905 NEPRA determination of upfront tariff for bagasse cogeneration, 2013 Biomass price Rs/MT 4,473.19 Exchange Rate Rs/USD 105 Current Exchange rate Equivalent bagasse price US$/MT 42.60 Other biomasses CV BTU/Kg 13068 Equivalent biomass price US$/MT 80.62Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 44 of 69

Thus, coal offers the lowest cost option for biomass at US$ 50.72 against the highest of US$ 139.83US$/MT (SOUTH AFRICAN COAL)against RLNG.Coal price is highly volatile in the international market. It has dropped from high of $119/T in 2011 toa low of about $49/T in Dec-15 as would be seen from the following figure26. 120 110 100 90 80 70 60 50 40 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Figure 30: Coal price volatility4.3.2 Biomass alternative-firewoodIn addition to power, it is also in national interest to provide market trigger for diverting biomassfrom cooking to power generation with a view to promote efficiency over the entire value chain.Based on the data for March 201627, the equivalent biomass price is determined as US$ 83/MT asshown in the following table.Table 18: Equivalent Biomass Price-firewood27S. No. Particulars UOM Value Remarks 601.97 Pakistan Bureau of Statistics1 Firewood price (Wholesale Rs./40 kg Price)2 NCV of firewood kCal/kg 3010 Assumption 1740 NEPRA determination of upfront3 Biomass NCV kCal/kg tariff for bagasse cogeneration, 2013 8,7004 Biomass price Rs./MT 105 Current Exchange rate 143.335 Exchange rate Rs/USD 82.856 Firewood price US$/MT7 Equivalent Biomass price US$/MT26 FOB price of South African Coal: http://www.indexmundi.com/commodities/?commodity=coal-south-a fri ca n&months =6027 Source: Monthly review of price indices, Pakistan Bureau of Statistics, March, 2016Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 45 of 69

4.3.3 Biomass prices in Pakistan-Status quoThe Consultants were engaged in carrying out a feasibility study for developing biomass gasificationbased power project in two MSME industrial units in the Punjab province in Pakistan in 2014-15.Field survey was carried out to assess the biomass fuel price and price variation trend for rice huskand woodchips. The prevailing prices of biomass and the coal equivalent have been tabulated below.Table 19: Biomass price comparativeBiomass CV Market price Price as per fuel equivalent (Table 18 US$/T kCal/Kg above) US$/T 80 100 Coal RLNG FORice husk 3300 50.72 139.83 82.85Wood chips 3800 55.03 151.71 89.89It is seen that the market price of biomass is more closely linked to FO. This is also logical as most ofthe industrial captive power plant runs on FO. During the study, it was also observed that the pricesof biomasses were escalating by about 8% annually.An extensive biomass resource assessment survey has recently been concluded under a WorldBank/ESMAP support program. The survey included field survey of farmers (12,450) covering allprovinces (44 districts) as well as survey of end user industries (178 industries). We reviewed thedata from the farmer survey in the Punjab Province (4,650 farmers) as well as data from industries toassess the selling price/ purchase price of biomasses including the commercially traded one such asrice husk and wheat straw and informally traded ones such as rice and maize straw and stalks. Thesurvey has also addressed the issue of the prices at which farmers would be willing to sell biomassesto energy production plants. The price range of different biomasses at different location as per thesurvey report is as follows: NO. OF SAMPLES 1200 1000 800 600 400 200 0 0-2,500 2,500-5,000 5,000-7,500 7,500-10,000 > 10,000 BIOMASS PRICE RS./MT Cotton Stalk Maize Stalk Rice Straw Rice Husk Wheat Straw Figure 31: Biomass price based on SurveyNearly 70% of the sample, indicated a selling price greater than Rs 5,000/MT. The average sellingprice of various types of biomass is as follows:Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 46 of 69

Table 20 : Biomass price as per survey Average Price % of samplesCotton Stalk Rs./MT US$/MT 40%Maize Stalk 60%Rice husk 6,703 64 91%Rice straw 43%Wheat Straw 6,897 66 71% 9,093 87 6,710 64 6,905 66The survey indicates that the largest end use of cotton stalks is domestic fuel while maize stalk, ricestraw and wheat straw find largest end use as animal fodder. Nearly 38% of rice straw and 25% ofmaize stalk is burnt in the field. The market for rice husk appears to be well developed, with 92 outof 178 industries surveyed using rice husk as fuel. The price of rice husk is also consistent with theprice determined by a field survey as ranging between Rs 6/kg during season to Rs 8/kg during off-season28.SummarizingThe prices of biomass determined from different principles are shown in the following table.Table 21: Prices of biomass-different methodologiesMethodology Average price (US $/T)Linkage to Coal 50.72Linked to FO 80.62Linkage to RLNG 139.83Linkage to firewood 82.85DESL survey (Rice husk) 80.0DESL survey (Wood chips) 100.0ESMAP survey (Rice husk) 87.0ESMAP survey (Others) 65.0The survey-based prices also seem to have closer linkage to FO and fuel wood prices.4.4 Global review4.4.1 Mauritius-BagasseMauritius pioneered developing a methodology for biomass pricing. Government of Mauritius hadformulated a bagasse energy development program in partnership with the private sector over a 6-month period in 1991 following the recommendations of a High Powered Committee29. The Ministryof Energy set up a Technical Committee for addressing the prices and other PPA related issues. TheCommittee developed an avoided cost model taking into account the cost of generation from a 2228 Feasibility Study for 3 MW Combined Heat and Power Biomass Gasification Plant in Pakistan, UNIDO, Jan-14(by DESL)29 Sugar Cane Bagasse Energy Cogeneration – Lessons from Mauritius, Mauritius Sugar Authority, Oct 2005Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 47 of 69

MW diesel power plant proposed by the Central Electricity Board (CEB). The World Bank providedsupport to the Committee to work out the principles and the guidelines.This tariff was determined for export of power from cogeneration plant using this avoided costprinciple. Bagasse was priced at Rs 100 (or US$3.7) per ton30. This made a big impact and in about 3years time (1997-2000), almost all the sugar mills invested in cogeneration projects exporting largeamount of power to the grid.A transfer fund was also created to compensate growers, for the price realization by the sugar millfor bagasse used for purposes other than the manufacture of sugar. Amount so determined wasdirectly credited by the Central Electricity Board for distribution to the beneficiaries of the fund. Thishas been one of the most successful policy interventions on biomass prices considering the impact ithad in growing the bagasse cogeneration industry in the country.4.4.2 New Zealand-Wood chipsA study documented by IEA31 compared the prices for collection and delivery of forestry residues toa bio-energy plant. Several models for delivery were developed as part of the project planning,yielding a wide variation in the delivered cost of biomass (US$/GJ) as shown in the figure below: Figure 32: Variations in delivered costResidues taken from a single forest site, purchased for USD 4/dry ton, then delivered 80km over anidentical route to a proposed Bio-Energy processing plant gate, using 7 different options (A-G) forcollection and transport systems result in a wide range of costs. A few reasons for the variations areas follows:• Harvesting and chipping: The range of equipment used for harvesting and preparation before transportation is a function of the type of biomass. This includes mowers and balers for straws and special harvesters for woody biomass, which are more expensive. Where size of holdings are smaller, the cost of collection can be higher• Handling: Gaining access for heavy machines and trailers in different weather conditions, requiring advance planning of layout in case of plantations to enable access and maneuvers30 Currently Rs 1225 (US$ 35) per ton – Source: Newsclip : Island Crisis Media Network, 15 December, 201531 IEA Good Practice Guide -Bio-energy project development and Biomass supplyClient Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 48 of 69

• Transport: Logistic planning for availability of trailers to collect biomass, distance from main roads/ access points• Storage: availability of space for temporary stock pilingThis case illustrates the impact of variation in other costs, the source price of biomass remainingconstant in all cases, as would be the case with plantation-based biomasses in most of the countriesincluding Pakistan.4.4.3 Europe-Wood pelletsIn Europe, two market indices, the APX – ENDEX and Argus biomass have helped establishtransparency in the wood chip and pellet market. The APX ENDEX, introduced in 2008, is anindustrial wood pellet index, determined based on a pricing panel comprising a number marketparticipant contributed references prices for 3-month forward contracts, 3 quarter forwardcontracts and 12-month forward contract32. In 2011, APX-ENDEX launched the World’s first biomassexchange. The exchange envisages transitioning from bilateral transactions in the first phasebetween counterparties to the implementation of clearing services for wood pellets, contract,thereby providing further security to market participants.Similarly, the ARGUS biomass index33 comprises a “volume -weighted average of deals done fordelivery within a rolling 90-day period”. An Asia- Pacific specific index, keeping in view thespecification of South Korean generators for wood pellets manufactured from wood fiber is alsomaintained.Such practice may not have much of relevance in informal market like Pakistan. However, it isinteresting to note that even in a century old market like Europe, a formal exchange has beencreated only in 2011.4.4.4 ChinaChina, a late starter in the biomass energy field has made rapid stride in growing the market in thelast decade. Beginning with 2006, it had installed over 6000 MW capacity by 2010, 65% of this beingbased on straw. It has set the target of 20000 MW capacity by 2020. Instead of fixing biomass prices,China has fixed the overall feed-in tariff nationally allowing the individual provinces to do so for theprovince. The tariff has been determined considering avoided cost of power generation fromdesulphurised domestic coal plus an additional incentive under renewable energy program34. Unlikeelsewhere, the concern in China is that the farmers may not be getting remunerative prices for thebiomass, as there is no open and transparent trading market for biomass.The establishment of a crop straw pricing advisory committee in order to guarantee thetransparency of straw’s price and protect farmers' interests in transactions with the large powerplants under the absence of competition in market is planned to overcome this.32 Methodology & Specifications Guide, Argus Biomass Markets, Last updated April 201633 Argus Biomass Markets – Methodology and Specification Guide34 Development goal of China’s 30 GW Biomass power generation etc-Science Direct, Sept 2013Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 49 of 69

Textbox 2: Straw incentive ChinaStraw subsidy: For th e en terprise with the registered capital of more than 10 million Yuan, whose strawenergy u tilization complies with the local straw comp rehensive utilization planning and the amount ofannual consumption of stra w ex ceeds 10,000 MT (in cluding 10,000 MT) and straw energy produ cts havebeen on sale and which has stable users, the subsidy of about 140 Yuan will be granted fo r the stra w perton in energy u tilization to the enterp rise a cco rding to th e types and quantities of straw energy p roductswhich are actually sold every year, as well as types and quantities of straw fo r converting the consumption.However, straw grid-connected power g enera tion project does not enjoy the special subsidy.(More detailed p resentation on China Biomass Energy Policy annexed)4.4.5 IndiaAs elsewhere, India too has been facing challenges in fixing biomass prices. This is more so as Poweris a concurrent subject in India and Provincial Regulators are free to develop their own methodologyfor tariff determination including fuel pricing. Even then, a reasonable and fair system has now beendeveloped and the same has been working satisfactorily since last two years. In 1994, MNRE issued apolicy guideline fixing the overall tariff and providing for automatic annual escalation of 5% for thewhole country. Many of the biomass resource rich States adopted the MNRE guideline and tariffnotifications issued by SERC’s. However, biomass prices started escalating soon making many of theprojects financially unviable. Taking cognizance of the situations, SERC’s started adopting thepractice of issuing short-term regulations and determining biomass prices through a process ofstakeholder’s consultation. This process too failed to rectify the situation. In the year 2011, MNREcommissioned several studies with a view to establish a rationale and methodology for biomasspricing. Based on the findings from these studies, MNRE prepared a recommendation report on tariffguideline for biomass power and forwarded the same to CERC. In the year 2014, CERC issued a newregulation on renewable energy in which the biomass pricing principles were clearly articulated.Base price was determined for individual States considering the inputs from MNRE and other reportsand through a process of public consultations as follows.Table 22: Biomass price for Tariff-India35Province Biomass Price (Rs/T) Bagasse price (Rs./T) 1585.19Andhra Pradesh 2807.74 2254.67 2221.93Haryana 3195.86 1984.22 -Maharashtra 3268.62 1707.69 1768.33Punjab 3342.60 1919.93Rajasthan 2789.54Tamil Nadu 2761.64Uttar Pradesh 2856.25Other States 3003.01Following steps for reviewing and revisions of prices have been provided in the Regulation.35 CERC: Determination of levelised generic tariff for FY 2016-17 under Regulation 8, March, 2016 (IUS$ - 67Indian Rupees)Client Name UNIDO DESL Project No. 9A0000005647Project Name Policy advisory services in Biomass gasification technology in Pakistan Version 3 (Final)Report Title Biomass management and pricing for power generation Page 50 of 69