Ministry to Set Benchmark Price for Biomass Pellets Used in Thermal Power Plants

The benchmark price mechanism will come into effect from January 1, 2024

June 28, 2023


The Ministry of Power has revised the Biomass Co-Firing Policy to benchmark the prices for biomass pellets utilized in co-firing at thermal power plants. The decision was prompted by the changing market conditions for biomass pellets and numerous requests from stakeholders such as thermal power plants, pellet manufacturers, farmers, bankers, and others.

The benchmark price will consider factors like economic viability, impact on electricity rates, and the efficient procurement of pellets by power utilities.

By implementing a benchmark price for pellets, the Ministry expects the thermal power plants and pellet vendors to help establish a sustainable supply mechanism for co-firing.

The final benchmark price, determined by the committee under the Central Electricity Authority (CEA), will come into effect from January 1, 2024.

Until the committee’s recommendations are implemented, power utilities can opt for short-term tenders to fulfill the immediate demand for biomass pellets in their thermal power plants.

According to the Union Power Minister, R.K. Singh, the government considers the co-firing of biomass in coal-based power plants as a crucial policy for enhancing energy security, reducing reliance on fossil fuels, and simultaneously increasing farmers’ income.

The revised policy is expected to accelerate the achievement of these objectives.

Due to the limited availability of torrefied biomass pellets in the country, the revised policy mandates power utilities to procure torrefied pellets only in exceptional scenarios and when it is technically unavoidable. Utilities that can use non-torrefied pellets should exclusively utilize them.

Torrefied pellets, also called black pellets, are a densified biofuel made from thermally treated solid biomass, with or without additives.

Under the biomass policy, which requires the co-firing of biomass with coal in thermal power plants, approximately 180,000 MT of biomass fuel has been co-fired in 47 thermal power plants across the country, with a combined capacity of 64,350 MW.

During the first two months of FY24, more than 50,000 MT has been co-fired, surpassing the previous record for annual quantity.

Furthermore, around 114 million MT of biomass pellets are currently at various stages of the tendering process, and thermal power plants have already placed purchase orders for approximately 6.9 million MT of biomass pellets.

With supportive policies in place and the Ministry of Power’s emphasis on the Sustainable Agrarian Mission on the use of Agro-residue in Thermal Power Plants (SAMARTH) mission, significant growth in biomass co-firing in thermal power plants throughout the country is anticipated.

The SAMARTH program helps tackle the challenges of stubble burning on Indian farms and the heavy carbon emissions in coal-fired power plants by biomass co-firing.

Last November, the Ministry of New and Renewable Energy notified the National Bioenergy Program, valid from FY 2021-22 to FY 2025-26. The program has been recommended for implementation in two phases. A budget outlay of ₹8.58 billion (~$104.66 million) has been approved for Phase-I.

In July last year, the Ministry noted that biomass co-firing in 35 thermal power plants across India had reduced CO2 emissions by 100,000 tons. About 80,525 tons of biomass had been co-fired in 35 thermal power plants with a cumulative capacity of 55,335 MW until July 24, 2022.

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