India: Implementation of Clean Technology Through Coal Beneficiation
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Technical Assistance Consultant’s Report Project Number: 26095 October 1998 India: Implementation of Clean Technology through Coal Beneficiation Prepared by Montan-Consulting GMBH in association with International Economic and Energy Consultants, and CMPDI International Consultants, India This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. (For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project’s design. Asian Development Bank T.A. NO. 2266-IND Implementation of Clean Coal Technology through Coal Beneficiation, ., ..., India 4.. :!-'. !.. Final Report October 1998 Text File MONTAN- CONSULTING GMBH Asian Development Bank T.A.-Me. 2266-IND Implementation of Clean Coal Technology through Coal Beneficiation, India Final Report submitted by Montan-Consulting GmbH, Germany in association with International Economic & Energy Consultants, United Kingdom and CMPDl International Consultants, India October, 1998 MONTAN- CONSULTING GMBH Table of Contents page 0. Executive Summary 1-4 1.o Objectives of the Study and Introduction 5-7 1.1 Power Plant Capacity - Present and Future 7-8 1.2 Quality of Raw Coal supplied to Power Plants 8-10 1.3 Analysis of Data received from Power Plants 10- 16 2.0 Policy Framework 17 2.1 Introduction 17- 18 2.2 Policy Context for Coal and Energy Developments 18-23 2.3 Policy Concerning Use of Cleaned Coal 24 - 27 2.4 Market Assessment 27 - 28 2.5 Institutional Context 28 - 32 2.6 Organisational Options for Implementing Coal Washing 32 - 36 2.7 Other Supporting Measures 36 - 37 2.8 Conclusions and Recommendations 37 - 40 2.9 Market and Pricing Study 40 2.9.1 Introduction 40 - 41 2.9.2 Review of Current Policy and Practice 41 -44 2.9.3 Review of Alternative Systems 44 - 45 2.9.4 Implementation of Revised Pricing System 45 - 50 2.9.5 Conclusions and Recommendations 50 - 51 MONTAN- CONSULTING GMBH Daqe 3.0 Evaluation of Establishment of Coal Preparation Plants 52 3.1 Collections of Coal Samples and Testing 52 - 55 3.2 Computer Simulation 55 - 56 3.2.1 Selection of Flowsheets 56 3.2.2 Standard Flowsheet, Variant I 57 - 59 3.2.3 Standard Flowsheet, Variant II 59 - 60 3.2.4 Comments 61 -63 3.3 Conclusions 64 - 65 4.0 Effects on Use of Beneficiated Coal 66 4.1 Impacts at the Mine Site 66 - 67 4.2 Impacts on Infrastructure 68 - 69 4.3 Impacts on the Performance of Power Plants 70 4.3.1 Technical Effects 70 - 72 4.3.2 Environmental Effects 72 - 75 4.3.3 Synopsis of Effects on Infrastructure and Power Plant Site 75 - 76 4.4 Evaluation of Environmental Effects 76 - 81 5.0 Initial Environmental Examination 82 5.1 Description of the Project 82 - 86 5.2 Description of the Environment 86 - 87 5.3 Potential Environmental Impacts 87 - 88 5.4 Description of the Environment after Implementation of the Project 88 5.4.1 Physical Environment 88 5.4.2 Biological Environment 88 5.4.3 Socio-Cultural Environment 89 5.5 Institutional Requirement and Environmental Monitoring 89 5.6 Findings and Recommendations 89 MONTAN- CONSULTING GMBH page 6.0 Economic Analysis 90 6.1 Introduction 90 - 92 6.2 Computer Model for FinanciaVEconomic Analysis 92 - 93 6.3 Capital and Operating Cost of the Coal Preparation Plant 93 - 94 6.3.1 Capital Investment 94 - 96 6.3.2 Operating Cost 97 - 98 6.4 Economic Context of the Project 98 6.4.1 Coal and Electricity 98 - 99 6.4.2 Definition of Economic System 99 - 101 6.5 Economic Rationale for the Project 101 6.6 Project Objectives 102 6.7 Project Alternatives 102 6.7.1 Other Means of Improving Use of Coal in Power Generation 102 - 104 6.7.2 Improving the Use of Coal in other Applications 104 6.7.3 Implications of the Above Discussions 104 6.8 Project Costs in Economic Prices 104 - 108 6.9 Project Benefits in Economic Prices 109 - 112 6.10 Project Worth 112 6.10.1 Summary Results for Representative Mines 112-114 6.1 0.2 Composition of Economic Costs and Benefits 114-115 6.1 0.3 Key Factors in the Viable Projects 115-116 6.10.4 Conclusions 116- 117 6.1 1 Sectoral and Macroeconomic Effects 117 6.12 Financial Charges and Returns 118 6.12.1 Financial Internal Rate of Return (FIRR) 118-119 6.1 2.2 Weighted Average Cost of Capital (WACC) 119-124 6.1 2.3 Financial Appraisal: FIRR versus WACC 124 - 125 6.12.4 Accounting Statements 125 - 130 MONTAN- CONSULTING GMBH EiZE 6.13 Distribution of Project Effects 131 6.14 Project Risks and Sensitivity Analysis 131 - 133 6.15 Project Justification 133 - 134 6.16 Practical Measures to Achieve the Economic Benefits 134 6.16.1 Achieving Price Reform 134 6.16.2 Internalising Environmental Effects 135 6.16.3 Other Externalities 135 - 142 7.0 Need for Consultancy 143 7.1 Project Preparation Phase 143 - 144 7.2 Planning Phase 144 7.3 Implementation Phase 144 - 145 8.0 Manpower Development and Training Phase 146 8.1 Introduction 146 8.2 Training Programme 146 - 148 9.0 Conclusions and Recommendations 149 9.1 Technical Aspects 150 - 151 9.2 FinanciaVEconomic Aspects 151 - 152 9.3 Policy/lnstitutional Framework 152 - 154 9.4 Scope for Installation of Coal Washeries Modules for Existing and New Thermal Power Plants 154 - 155 9.5 Capital Requirement - ADB-Loan 155 9.6 Justification for ADB - Loan 155 - 157 9.7 Implementation Plan 157 MONTAN- CONSULTING GMBH List of Tables Table Page 1 .I List of Major Indian Coalfields 7 1.2 Future Requirement in Million Tonnes of Raw Coal 8 1.3 Power Station Supply 11 2.1 Present System of Grading 21 3.1 List of Major Indian Coalfields 53 3.2 List of Mines from which Coal was tested 55 3.3 Results of Computer Simulation, Variant I 58 3.4 Results of Computer Simulation, Variant II 60 3.5 Yield and Ash of Rejects likely to be obtained on Washing Coal to 34% Ash 62 3.6 Rejects suitable for FBC Technology 63 3.7 Selection of Flowsheets (Variants) 65 4.1 Annual Coal Requirement 68 4.2 Annual Freight Savings 69 4.3 Quantity of disposable Ash generated at different Ash Levels of RawWashed Coal 73 4.4 Land Requirement for disposable Ash at different Ash Levels of RawWashed Coal 74 4.5 Water Requirement for disposable Ash at different Ash Levels of Raw/Washed Coal 74 4.6 Annual C02-Emission at Stack of a 1,000 MW Power Plant at different Ash Levels 75 4.7 Synopsis of Effects 76 4.8 Potential Stressors and Impacts 77 MONTAN- CONSULTING GMBH Table Page 4.9 Screening Analysis 78 4.1 0 Omissions, Biases and Uncertainties 80 6.1 Project Cost Table, Variant I 94 6.2 Project Cost Table, Variant II 95 6.3 Calculation of Operating Cost, Variant I 98 6.4 Calculation of Operating Cost, Variant II 98 6.5 Screening Analysis 107 6.6 Derivation of Economic Cost for C02 108 6.7 Derivation of Economic Cost for SO2 110 6.8 Derivation of Economic Cost for Dust 111 6.9 Technical Data of Selected Mines 112 6.10 Economic IRR 113 6.1 1 Economic NPV 113 6.12 FlRR and FNPV before Tax 118 6.13 FlRR and FNPV with Tax 118 6.14 FlRR and FNPV with Tax under Existing and Proposed Pricing System 119 6.1 5 Possible Composition of Final Interest Rates 120 6.16 ADB/Private Sector Capital Composition 122 6.17 WACC (0% Tax) 122 6.18 WACC with 35% Income Tax 122 6.19 ADB/Private Sector/Government of India Capital Composition 123 6.20 WACC with 35% Income Tax 123 6.21 Comparison of FlRR to WACC 124 6.22 Income Statement, Hesalong 126 6.23 Sources and Application of Funds, Hesalong 127 6.24 Balance Sheet, Hesalong 127 6.25 Income Statement, Manuguru 128 MONTAN- CONSULTING GMBH Table Page 6.26 Sources and Application of Funds, Manuguru 129 6.27 Balance Sheet, Manuguru 129 6.28 Accounting Ratios without Tax 130 6.29 Accounting Ratios with Tax 130 6.30 Distribution of Project Effects 131 6.31 Sensitive Analysis for Hesalong, CPP Variant I 132 6.32 Sensitive Analysis for Manuguru, CPP Variant II 133 9.1 Distance wise Requirement of Thermal Coal 154 9.2 Implementation Bar Chart and Disbursement Plan for Washeries under Phase I 158 MONTAN- CONSULTING GMBH 0. Executive Summary Government of India has decided to expand the production of coal during the next years to cover the existing and future demand for energy. Whereas coal off-take during 1996/97 for thermal power plants was about 200 million tonnes it is expected that demand will increase by around 70 million tonnes by 2001/02 and will increase further. This growth in coal production and coal utilisation causes environmental effects at the mining sites and particularly on the power plant side due to the fact that in nearly all cases unwashed raw coal with high ash contents is used for power generation. There has been an intensive discussion over the past years in India about the advantages and disadvantages in using washed coal with lower ash contents for power generation. This Technical Assistance Project shall help the Government to address substantial financial, economic and environmental benefits of using washed coal.